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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-29944
INFOWAVE SOFTWARE, INC.
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(Exact name of registrant as specified in its charter)
BRITISH COLUMBIA, CANADA 98 0183915
- ------------------------------------ ------------------------------------
(Jurisdiction of incorporation) (I.R.S. Employer Identification No.)
SUITE 188 -- 4664 LOUGHEED HIGHWAY
BURNABY, BRITISH COLUMBIA,
CANADA V5C 5T5
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER: (604) 473-3600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which registered
--------------------------- -----------------------------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Shares
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(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the Registrant's Common Stock held by non-affiliates
as of December 31, 1999 was approximately US$156,000,000. The number of shares
of the Registrant's Common Shares outstanding as of December 31, 1999, was
18,297,470.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ITEM 1: BUSINESS..................................................................................... 1
ITEM 2: PROPERTIES...................................................................................15
ITEM 3: LEGAL PROCEEDINGS............................................................................16
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........................................16
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......................17
ITEM 6: SELECTED FINANCIAL DATA......................................................................19
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........20
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK....................................26
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................................................26
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.........26
ITEM 10: DIRECTORS AND OFFICERS OF THE REGISTRANT.....................................................27
ITEM 11: EXECUTIVE COMPENSATION.......................................................................29
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............................31
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................................33
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.............................34
</TABLE>
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FORWARD-LOOKING STATEMENTS
All statements, trend analysis and other information contained in this report
relative to markets for the Corporation's services and software products and
trends in revenue, gross margin and anticipated expense levels, as well as other
statements about anticipated future events or results constitute forward-looking
statements. Forward-looking statements often, but not always, are identified by
the use of words such as "seek," "anticipate," "believe," "plan," "estimate,"
"expect" and "intend" and statements that an event or result "may," "will,"
"should," "could" or "might" occur or be achieved and other similar expressions.
Forward-looking statements are subject to business and economic risks and
uncertainties and other factors that could cause actual results of operations to
differ materially from those contained in the forward-looking statements.
Forward-looking statements are based on estimates and opinions of management at
the date the statements are made. Some of these risks, uncertainties and other
factors are described in Item 1 of this report under the heading "Risk Factors."
The Corporation does not undertake any obligation to update forward-looking
statements even if circumstances or management's estimates or opinions should
change. Investors should not place undue reliance on forward-looking statements.
CURRENCY
All currency contained in this report is expressed in United States dollars,
unless otherwise stated.
TRADEMARKS
Infowave has trademarks for or has applied for a trademark for "Infowave,"
"Infowave for Exchange," "Infowave for the Net," "Symmetry," "PowerPrint" and
"StyleScript." All other trademarks or service marks appearing in this annual
report are trademarks or service marks of the companies that use them.
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PART I
ITEM 1: BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Founded in 1984, Infowave Software, Inc. (the "Corporation" or "Infowave")
develops, markets and sells software solutions for wireless mobile computing and
for printing. The Corporation has two operating divisions. The Wireless Division
was founded in 1993 and provides software solutions that leverage wireless
mobile data communications networks to enable mobile access to information such
as email, Internet content, corporate intranets and web-based applications. The
Imaging Division is the Corporation's legacy business and provides software
solutions for Apple Macintosh computers that improve print quality and expand
printing options.
The Corporation was formed on February 21, 1997 by the amalgamation of GDT
Softworks Inc., Infowave Wireless Messaging Incorporated and G.W. McIntosh
Holdings Ltd. under the laws of the Province of British Columbia, Canada. The
registered and records office of the Corporation is located at Suite 2600 - 595
Burrard Street, Vancouver, British Columbia, V7X 1L3.
In October 1999, the Corporation opened its temporary United States headquarters
at Suite F/105, 22125 - 17th Avenue SE, Bothell, WA, 98021. Effective April 1,
2000, Infowave's permanent U.S. headquarters will be located at 21520 - 30th
Avenue S.E., Bothell, WA, 98021.
The Corporation has been investigating opportunities to divest the Imaging
Division in order to focus its resources, including management time, on the
development of the Wireless Division.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Corporation has two reportable segments based on its two distinct product
lines, being the Wireless Division and Imaging Division software products. Refer
to Note 11(a) of the financial statements for segmented financial information.
WIRELESS DIVISION
INTRODUCTION - WIRELESS
Infowave's Wireless Division develops software that leverages wireless mobile
data communication networks to enable mobile access to information that is
normally available only from a desktop computer connected to a local area
network.
The Corporation believes that the convergence of several trends is creating a
significant market opportunity for wireless mobile computing solutions. These
trends include the proliferation of portable computing devices that are
data-centric and wireless-capable such as laptop and notebook computers,
palm-sized and handheld digital assistants, two-way pagers and digital mobile
phones; wireless carriers deploying faster digital wireless data networks with
expanded geographical coverage; outsourced service providers offering efficient
channels to deliver applications and services to enterprises and individuals;
Internet portals and software vendors offering content and applications
customized for mobile requirements; and significant investments by prominent
technology leaders that are validating the promise of wireless mobile computing.
Infowave believes that the primary adoption pattern and scale of wireless mobile
computing will be similar to that of wireless voice communications, beginning in
the enterprise market and then extending to the consumer market. Consequently,
Infowave's technology and marketing strategy is to initially target enterprise
requirements. In creating software products for the enterprise market, the
Corporation is creating solutions that it believes can also be applied to the
consumer market.
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SOFTWARE PRODUCTS AND TECHNOLOGY - WIRELESS
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ARCHITECTURE OF CURRENT AND PLANNED INFOWAVE WIRELESS ENTERPRISE SOLUTIONS
- --------------------------------------------------------------------------------
[FIGURE]
The graphic above illustrates the architecture that enables mobile computing
devices - laptop computers, handheld computers, mobile phones etc. - to
communicate over wireless mobile data networks to connect to information
normally available only from a desktop computer connected to a local area
network. Infowave's server software is designed to be installed behind the
firewall of a corporation and enables wireless access to information such as
email and intranet content or applications such as enterprise resource planning
and customer relationship management. The server software is also designed to be
hosted by a service provider so that the service provider is able to deliver
information or applications over a wireless mobile data network to mobile
computing devices used by its subscribers.
Infowave's wireless software currently consists of three major product
offerings: Infowave for Exchange, Infowave for the Net and Symmetry. These
software products represent a suite of applications that provide mobile workers
with wireless access to important information using a broad range of mobile
computing devices that can communicate over a number of wireless mobile data
networks.
In the years ended December 31, 1999, 1998 and 1997 research and development
expenditures by the Corporation's Wireless Division were $1.37 million, $1.0
million and $0.79 million, respectively. Infowave's wireless software can be
separated into two categories: server-based software and desktop software.
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1. SERVER-BASED SOFTWARE PRODUCTS
INFOWAVE WIRELESS ENGINE
Infowave's server-based software products are built on the Infowave Wireless
Engine. The Infowave Wireless Engine forms the foundation for Infowave's current
and future server-based software product offerings.
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- --------------------------------------------------------------------------------
INFOWAVE'S WIRELESS ENGINE SERVES AS A WIRELESS PLATFORM. THE MODULAR
ARCHITECTURE ENABLES SERVER APPLICATION MODULES TO BE CONNECTED AND ENABLED
WIRELESSLY.
- --------------------------------------------------------------------------------
[ FIGURE ]
The Infowave Wireless Engine serves as a platform into which server application
modules can be connected. The Wireless Engine acts as an interface between
wireless mobile data devices communicating over wireless data networks and the
applications or information that is located at an enterprise or outsourced
service provider. The Wireless Engine introduces encryption, authentication,
speed optimization, and session management and each application that is
connected to the Wireless Engine leverages these capabilities. The Corporation
entered into an indefinite non-exclusive licensing agreement with Certicom Corp.
on December 5, 1997 under which Certicom encryption and decryption technology is
integrated into the Corporation's wireless computing software products.
The Wireless Engine is currently compatible with mobile devices that use a
Microsoft Windows operating system and with Mobitex and Cellular Digital Packet
Data ("CDPD") wireless data networks. In addition to the core functionality
provided by the Wireless Engine, the server application modules include
application-specific business logic, functionality and other customized wireless
optimizations such as device formatting. Because all of the features of the
Wireless Engine extend to any application or information that is connected to
the Wireless Engine, this enables Infowave to develop additional server
application modules and target new strategic markets.
The Infowave Wireless Engine can be deployed directly by enterprises or can be
hosted by service providers such as application service providers, service
bureaus, Internet service providers, and Internet portals. The Wireless Engine
currently operates on the Windows NT operating system.
INFOWAVE FOR EXCHANGE
The Corporation's Infowave for Exchange software is a server application module
that enables wireless mobile access to Microsoft Exchange server using the
Microsoft Outlook client software installed on a mobile device. As a result,
users are able to use the Microsoft Outlook application on a mobile device in
the same manner that they would on a desktop computer. An important timesaving
feature of Infowave for Exchange is that it does not wait until the traditional
synchronization procedure is completed before enabling communication. The server
immediately forwards new incoming email to the mobile device. Similarly, the
mobile device is able to immediately send new outgoing email to the server for
distribution. All data transmission is encrypted and compressed. The Infowave
for Exchange server software runs on Windows NT and the client software runs
with Microsoft Outlook 98 or higher versions and works on mobile devices running
Windows 95/98/CE/NT.
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INFOWAVE FOR THE NET
The Corporation's Infowave for the Net software is a server application module
that provides wireless mobile access to the Internet, corporate intranets and
web-based applications using standard Internet browsers on mobile devices.
Corporations are rapidly adopting intranets to host a wide variety of
information such as sales data, service records and human resources information.
Traditional applications such as customer relationship management, sales force
automation and enterprise resource planning are moving from client/server
platforms to web-based platforms. As a result, corporations are relying on
information stored on intranets and in web-based applications to communicate
both internally and externally and provide up-to-date information. Infowave for
the Net provides wireless access to this information. Infowave for the Net's
server software runs on Windows NT and works with various Web servers including
Microsoft's Internet Information Server (IIS).
2. DESKTOP SOFTWARE PRODUCTS
SYMMETRY
The Corporation's Symmetry software delivers email, calendar, contacts and task
information stored in Microsoft Outlook to any wireless mobile device capable of
receiving text messages, including pagers and digital mobile phones. All
information sent to the wireless device is formatted for the specific device.
Symmetry allows users to forward email using specific rules such as sender
information and priority messages. It will send a user his or her calendar and
task information everyday at a pre-determined time set by the user. If a
calendar event is changed during the day, Symmetry will notify the user that the
event has changed. When meeting reminders are sent from Outlook, they are also
sent to the wireless device. If the wireless mobile device is capable of two-way
messaging the user can retrieve information, such as telephone numbers, directly
from his or her desktop.
The Symmetry software is installed on a user's desktop computer. The desktop
computer requires a Windows 98 or higher version operating system and Microsoft
Outlook 98 or higher version application software. The desktop computer must be
connected to an Exchange server through a local area network. No software is
required to be installed on the wireless mobile device.
PRODUCT DEVELOPMENT - WIRELESS
The Corporation is currently developing its next releases of Infowave for
Exchange and Infowave for the Net. It is anticipated that these next releases
will add compatibility with GSM and CDMA wireless data networks.
The Corporation is also currently developing a new server-based wireless
software solution to enable mobile devices utilizing the Wireless Application
Protocol (WAP) to access and view data from back-office databases and
applications such as Microsoft Exchange. It is expected that this software
product, Infowave for WAP, will support most major microbrowser-based interfaces
and will work with most wireless devices, such as PCS and GSM phones.
CUSTOMERS AND PARTNERS - WIRELESS
In collaboration with its channel partners, Infowave both licenses and rents its
wireless software solutions to the enterprise market. The Corporation is
building a direct sales force that is working with its marketing alliance
partners to establish reference accounts and generate demand for the reseller
channel. The Corporation has entered into marketing alliances with companies
that offer complementary software products or services to potential enterprise
customers. These include:
o Wireless data network carriers such as Rogers AT&T Wireless in Canada;
BellSouth Wireless Data LP, Bell Atlantic Mobile and AT&T Wireless Services
in the United States; and ST Mobile Data PTE Ltd. in Singapore.
o Hardware developers such as Glenayre Technologies Inc., Sierra Wireless
Inc. and Nokia Networks.
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o Enterprise software developers such as Pivotal Corporation.
Infowave intends to expand distribution of its wireless software solutions to
the enterprise market worldwide by using international, national and regional
systems integrators and value-added resellers ("VAR"). The Corporation has
entered into non-exclusive national reseller agreements with RAM Mobile Data
Ltd. in the United Kingdom and GE Capital IT Solutions in Canada. The
Corporation has also entered into non-exclusive regional agreements with
approximately 14 resellers in Canada and the United States.
The Corporation also intends to partner with a variety of service providers who
will host Infowave's Wireless Engine and server application modules and provide
wireless mobile computing services for a monthly fee. The Corporation intends to
target service bureaus, application service providers, Internet service
providers and Internet portals or content providers. To date, the Corporation
has entered into agreements with Mi8 Corporation, an application service
provider, and Investment.com, an Internet content provider. Each of these
companies intends to offer Infowave's wireless software solutions on a
subscription basis.
Infowave intends to distribute its Symmetry desktop product primarily through
agreements with wireless carriers and device manufacturers in the paging and
digital phone markets. The Corporation has formed an alliance with Glenayre
Technologies Inc., currently the world's largest paging infrastructure provider.
Glenayre intends to bundle Symmetry with each of its AccessLink II two-way
pagers and to resell Symmetry to paging carriers through its extensive global
sales channel. The Corporation has also received an order for a branded version
of Symmetry from Rogers AT&T Wireless.
In addition to working with wireless data carriers on various marketing
initiatives described above, Infowave expects to collect a portion of the
airtime revenue generated by licensees or subscribers of its wireless mobile
computing software.
During the past two years, no single Wireless Division customer accounted for
greater than 10% of consolidated sales.
COMPETITION - WIRELESS
The market for business and consumer users of wireless mobile data solutions is
in its early stage and distinct categories for solutions are still evolving. In
the Business-to-Business market, two models are emerging. The Enterprise Server
model requires servers and application software to be installed onsite by the
enterprise. The Service Provider model uses servers and applications that are
housed offsite at the Service Provider's data center. In the Business to
Consumer market, two models are emerging: the Service Provider model and the
Desktop model, the latter requiring no server software. Infowave competes in
each of the Enterprise Server, Service Provider and Desktop markets.
To the extent known by the Corporation, competitors in the Enterprise Server
market include Ericsson Inc., Telesis North Inc., Research in Motion Limited and
Aether Systems Inc. In addition, a variety of custom application vendors who
specialize in developer tools and niche applications pose a potential threat to
Infowave should they leverage their middleware and developer tools to create
applications that are competitive to those of Infowave.
To the extent known by the Corporation, competitors in the Service Provider
market include Wireless Telecom, Inc. and GoAmerica Communications Corp.
Messaging outsourcers, application service providers, and other forms of service
providers may also compete with Infowave depending on which wireless mobile
software products they use for their offerings. Infowave will sell its
commercial server software products to these outsourcers and will therefore
compete with those that choose other wireless software for their offerings.
To the extent known by the Corporation, competitors in the Desktop market
include Research in Motion Limited and Roku Technologies.
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Indirect competition for the Corporation also comes from other companies
operating in the wireless communications sector but targeting alternative market
segments. As the Corporation is expecting to expand its business to cover a
broader spectrum of wireless mobile data solutions, it is possible that it may
compete directly with these companies.
In addition, the wireless mobile data communications industry is subject to
rapid technological change and evolving industry standards. New competition may
arise from new technologies or new approaches to the market. See "Risk Factors -
Reliance on New Technologies" and "-Competition."
Many of the Corporation's present and potential competitors have substantially
greater financial, marketing, technical and other resources than the Corporation
and may succeed in establishing technology standards or strategic alliances in
the wireless mobile data communications market, obtain more rapid market
acceptance for their software products or otherwise gain a competitive
advantage. See "Risk Factors - Competition."
IMAGING DIVISION
INTRODUCTION - IMAGING
The Imaging Division of the Corporation develops, markets and sells the
Corporation's printer driver software products.
Computer operating systems such as Microsoft Windows ("Windows") and the Apple
Macintosh operating system ("Mac OS") use printer drivers to communicate to
printers. The printer driver is an independent software component that the
system software uses to exchange information between the computer and printer.
Windows supports thousands of different printers through printer drivers
included as part of the operating system. In contrast, the Mac OS includes only
printer drivers for a limited number of Apple compatible printers. Other printer
drivers are not included in the Mac OS and may be supplied either with the
printer or by a third-party.
Most printers use a parallel port to receive print data from the host computer.
Most operating systems, including Windows, transmit print data from the
computer's parallel port. In contrast, Apple computers use a serial or USB port
to transmit data to the printer. As a result, Apple computers are physically
incompatible with most other printers, resulting in users having fewer printer
models to choose from.
Only a few printer manufacturers like Hewlett-Packard and Epson have developed
Macintosh compatible printer models. These models are compatible with the Mac OS
because they include the printer drivers and appropriate cabling in the printer
box.
The Corporation has developed printer drivers and cable products to increase the
printer choices available to users of Macintosh computers.
Just as there are many different human languages, printers also communicate with
their own languages and protocols. Some of the more popular printer languages
are PostScript (Adobe Systems), PCL (Hewlett-Packard), and ESC/P2 (Epson).
PostScript is owned by Adobe Systems and was first released in 1985. PostScript
is both a printer language and a computer language. Printers and software
applications use it to describe the appearance of a page, including elements
such as text, graphics, and scanned images, to a printer or other output device.
Generally, PostScript is the standard printing language in the industry. The
advantages of PostScript over other printer languages include higher quality
printing, better color management, performance, and cross platform
compatibility.
PostScript requires interpretation, as do all printer languages. The
interpretation is done by the printer or computer (host). In most cases,
particularly with PostScript, the printer does the interpretation. However,
Adobe Systems has developed configurable PostScript interpreter ("CPSI"), which
allows PostScript to be interpreted in the computer (host) as opposed to the
printer. CPSI is, therefore, referred to as host-based PostScript.
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PostScript's quality, power and compatibility has made it a standard requirement
for graphic designers, desktop and professional publishers. PostScript is also
the basis for Adobe's cross platform electronic document format, popularized by
Adobe Acrobat. Companies use Acrobat for publishing high quality, complex
documents on the Internet.
OVERVIEW OF OPERATIONS - IMAGING
The Corporation has developed its own Apple Macintosh printer driver products
and has expanded by acquiring and licensing other companies' technologies. The
Corporation has been selling Macintosh printer connectivity solutions since 1985
and, as a result, has experience with most aspects of the computer software
retail market.
According to its 2000 first quarter results, Apple has shipped over 35 million
Macintosh systems worldwide since 1984. The Corporation has sold over 440,000
PowerPrint products, representing about 1.5% of the installed base of Macintosh
computers. The sale of the Corporation's printer driver products is highly
dependent on the sale of Apple computers. See "Risk Factors - Reliance on Sales
of Apple Macintosh Computers."
Currently, Apple supplies the majority of all Macintosh printer drivers bundled
with the Mac OS. In early 1998, the Corporation and Apple entered into a source
code license agreement (the "Source Code License Agreement") under which Apple
licensed to the Corporation its source code for a three year period to develop
printer connectivity solutions for designated Hewlett-Packard printers, and
granted the Corporation a three-year exclusive license to distribute these
printer connectivity solutions. The exclusivity provided for under the terms of
the agreement expires in November 2000, following which the Corporation retains
a non-exclusive license. Under the Source Code License Agreement, the
Corporation granted to Apple a non-exclusive license of its PowerPrint,
StyleScript and PowerPlot software products. Apple may use such programs only to
develop a software development kit of programming tools to be used by third
parties to create printer drivers. The Source Code License Agreement was
conditioned upon the Corporation entering into a software development agreement
with Hewlett-Packard satisfactory to Apple. In March 1998, the Corporation and
Hewlett-Packard entered into an umbrella development agreement (the "Development
Agreement") to develop printer driver software for Hewlett-Packard printers
based upon the Apple source code as modified by the Corporation. Under the
Development Agreement, the companies have agreed to execute individual software
development agreements to develop printer drivers for specified Hewlett-Packard
color inkjet printers.
On March 13, 2000 the Corporation entered into a non-exclusive licensing
agreement with Acticon Technologies, a division of General Patent Corporation
International, under which the Corporation has licensed certain patented
technology related to the cable that is packaged with some versions of the
Corporation's PowerPrint software.
The Corporation currently performs the majority of its research and development
internally and sub-contracts certain small projects. In the years ended December
31, 1999, 1998 and 1997 research and development expenditures by the
Corporation's Imaging Division were $1.55 million, $1.17 million and $0.54
million, respectively. All shrink-wrapped product is currently assembled by a
Vancouver-based third-party fulfillment Corporation. The Corporation also
sub-contracts the manufacturing of its hardware components.
PRODUCTS - IMAGING
The Corporation has developed a line of Macintosh printer drivers, which are
available for virtually all printers and plotters. The products connect either
directly or through a network. The Corporation's goal is to provide Mac OS users
with support for new printers and provide the graphic design and multimedia
markets with inexpensive PostScript solutions.
The Corporation's printer driver products are sold in over forty countries
throughout the world. The Corporation has also established an original equipment
manufacturer ("OEM") business, supplying printer manufacturers such as Brother,
Hewlett-Packard, Lexmark, Ricoh and Samsung. The Corporation also has an OEM
relationship with Adobe Systems, the developer of PostScript. The Corporation
supplies its OEM partners with printer driver technology for a wide range of
products and services.
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The following is a list of the Corporation's current printer driver products:
PRODUCT DESCRIPTION
- ------- -----------
PowerPrint Serial PowerPrint is a set of non-PostScript printer
drivers with a serial to parallel converter cable to
allow Macintosh computers to print to almost any
parallel printer including color ink jets and low cost
laser printers.
PowerPrint USB PowerPrint USB is a USB version of the PowerPrint
software that allows Apple's new line of Universal
Serial Bus ("USB") computers to print to almost any
non-USB printer. USB is the emerging new standard for
connecting computers to peripherals.
PowerPrint for Networks PowerPrint for Networks is a network version of the
PowerPrint software. PowerPrint for networks enables
Macintosh computers to connect to virtually any PC
printer over an Ethernet network.
StyleScript StyleScript is a host-based PostScript interpreter for
the Macintosh that supports a wide range of inkjet
printers from Hewlett-Packard, Epson, Canon and Apple.
SALES AND MARKETING - IMAGING
The Corporation previously focused its PowerPrint selling efforts by marketing
into the installed base, selling to customers who have both Windows and
Macintosh computers, and Macintosh laptop owners. The Corporation has now
extended its marketing efforts to new purchasers of Macintosh computers through
promotional campaigns at the point of sale, for example, through CompUSA. The
Corporation sells the StyleScript product into the graphic design and small
office/home office market, to provide consumers with an inexpensive PostScript
printing solution. The Corporation released a Japanese language version of
PowerPrint in the fall of 1999.
The Corporation currently uses a variety of sales channels for its printer
driver products. The majority of its products are sold through distributors and
resellers. The following is a list of the Corporation's major sales channels for
its printer driver products:
o OEMs - Hewlett-Packard, Canon, Brother, Lexmark, Co-Star, Ricoh and
Samsung
o Distributors - Ingram Micro, Inc. and Pinacor (US), Merisel Canada
(Canada) and Computer 2000 (International)
o Resellers - CompUSA, Fry's, MicroCenter, ComputerWare
o Mail Order Companies - MacWarehouse, MacZone, MacMall, MacConnection
and a network of Apple authorized VARs
o Channel Force - a representation firm focusing on retail stores in
the U.S.
o Direct Sales - via 800 telephone service
o Internet Web Marketing - through the Corporation's web site,
Cyberian Outpost, Software.net, Beyond.com and Buy.com
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During the past two years, no single Imaging Division customer accounted for
greater than 10% of consolidated sales, with the exception of (i) Ingram Micro,
which accounted for approximately 33% of sales in 1999 and 22% of sales in 1998
and (ii) Hewlett-Packard, which accounted for 17% of sales in 1999 and 45% of
sales in 1998.
PRODUCT DEVELOPMENT - IMAGING
The Corporation plans to continue to enhance the features and applications of
its printer driver products. It intends to expand its product offering to
include support of additional printers and form co-marketing relationships with
strategic printer manufacturers.
COMPETITION - IMAGING
The Corporation sells its printer driver software products into the "QuickDraw"
and "PostScript" markets. The Corporation sells its PowerPrint products into the
QuickDraw market. The Corporation is not aware of any significant competition
for PowerPrint at this time.
The Corporation sells its StyleScript product in the PostScript market.
StyleScript competes against iProof Systems' PowerRip product and Adobe Systems'
Adobe PressReady product.
The Corporation has established OEM agreements with Brother, Canon, Co-Star,
Hewlett-Packard, Lexmark, Ricoh and Samsung. Under the terms of these
agreements, the Corporation develops software that enables specified printers to
work with Apple Computers. The Corporation intends to negotiate similar
agreements with other printer manufacturers but there can be no assurance that
any such agreements will be successfully consummated. There can be no assurance
that any of these printer manufacturers will not develop their own Macintosh
printer drivers in-house.
PROPRIETARY PROTECTION
All Corporation software is protected by a combination of certain intellectual
property rights. The Corporation relies principally upon a combination of
copyright, trademark and trade secret laws, non-disclosure agreements and other
contractual provisions to establish and maintain its rights. As part of its
confidentiality procedures, the Corporation generally enters into a
non-disclosure and confidentiality agreement with each of its consultants and
specifically with any third-party that would have access to the source code for
the Corporation's software products. As well, the Corporation strictly limits
access to and distribution of its software in executable code form.
Infowave has trademarks for or has applied for a trademark for "Infowave,"
"Infowave for Exchange," "Infowave for the Net," "Symmetry," "PowerPrint" and
"StyleScript."
There can be no assurance that the measures taken by the Corporation to protect
its intellectual property rights will adequately protect those rights.
Although the Corporation believes that it has the right to use all of the
intellectual property incorporated in its products, third parties may claim that
the Corporation's products violate their proprietary rights, including
copyrights and patents. If any such claims are made and found to be valid, the
Corporation may have to reengineer its products or obtain licenses from third
parties to continue offering its products. Any efforts to reengineer its
products or obtain licenses from third parties may not be successful and could
substantially increase the Corporation's costs and have a material adverse
effect on the business, financial condition and results of operations of the
Corporation. See "Risk Factors - Intellectual Property Protection."
EMPLOYEES
As at December 31, 1999, the Corporation employed 115 employees at its head
office in Burnaby, British Columbia and at its U.S. headquarters in Bothell,
Washington in the following capacities:
10
<PAGE> 14
<TABLE>
<CAPTION>
WIRELESS IMAGING TOTAL
--------------------- --------------------- -------------------
Burnaby Bothell Burnaby Bothell Burnaby Bothell
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Management & Administration 8 - 6 - 14 -
Research & Development 29 - 28 - 57 -
Sales & Marketing 13 10 21 - 34 10
TOTAL 50 10 55 - 105 10
</TABLE>
RISK FACTORS
In addition to the other information contained in this report, readers should
carefully consider the following risk factors, some of which apply to the
Corporation in general and some of which are specific to the Wireless Division
or Imaging Division, which may have a material adverse effect on the
Corporation's business, financial condition or results of operation.
GENERAL
History of Losses and Possible Divestiture of Imaging Division
The Corporation is not currently profitable and incurred losses of $3,288,251
and $1,206,266 for the years ended December 31, 1999 and 1998, respectively. In
particular, the Wireless Division is not profitable and incurred operating
losses of $3,891,727 and $2,724,899 for the years ended December 31, 1999 and
1998, respectively. The Corporation expects to continue to incur losses in the
near future and possibly longer. The Corporation anticipates that its expenses
will increase substantially in the foreseeable future as it expands the Wireless
Division and the Corporation continues to increase its research and development,
sales and marketing and general and administrative expenses. The Corporation
cannot predict if it will ever achieve profitability and, if it does, it may not
be able to sustain or increase profitability.
The Corporation has been investigating opportunities to divest the Imaging
Division in order to focus its resources, including management time, on the
development of the Wireless Division. Substantially all of the historical
revenue of the Corporation has been from the Imaging Division. In 1999, the
Imaging Division had revenue of $7,175,330 and the Wireless Division had revenue
of $355,001. Accordingly, if the Corporation divests itself of the Imaging
Division, it will be entirely reliant upon possible increased revenues from the
Wireless Division. There is no assurance that increased revenues from the
Wireless Division will materialize.
Reliance on New Technologies
The Corporation is focused upon growth from its Wireless Division. The wireless
data communications market is characterized by rapidly changing technology and
evolving industry standards. Therefore, it is difficult to predict the rate at
which the market for the Corporation's wireless software products will grow, if
at all. If the market fails to grow, or grows more slowly than anticipated, the
Corporation will be materially adversely affected. Even if the market does grow,
there can be no assurance that the Corporation's products will achieve
commercial success. The Corporation may find itself competing in the market for
wireless mobile computing software against other companies with significantly
greater financial, marketing and other resources. Such competitors may be able
to institute and sustain price wars, or imitate the features of the
Corporation's wireless mobile computing software, reducing prices and the
Corporation's revenues and share of the market.
In addition, the Corporation's competitors may develop alternative technologies
that gain broader market acceptance than the Corporation's software solutions.
As a result, the life cycle of the Corporation's software solutions is difficult
to estimate. The Corporation may need to develop and introduce new products and
enhancements to its
11
<PAGE> 15
existing solutions on a timely basis to keep pace with technological
developments, evolving industry standards, changing customer requirements and
competitive technologies that may render its solution obsolete. These research
and development efforts may require the Corporation to expend significant
capital and other resources. In addition, as a result of the complexities
inherent in the Corporation's solutions, major enhancements or improvements will
require long development and testing periods. If the Corporation fails to
develop products and services in a timely fashion, or if it does not enhance its
products to meet evolving customer needs and industry standards, including
security technology, it may not remain competitive or sell its solutions.
Product Improvements
The Corporation will be at risk if it is unable to continually upgrade and
improve its software products, or to develop new software products. The software
industry is characterized by a constant flow of new or improved products, which
quickly render existing software products obsolete. The Corporation's
competitors may develop technically superior and comparably priced or lower
priced software that would have a material adverse effect on the Corporation.
Additional Financing
The Corporation may not have sufficient capital to fund its operations. In
particular, additional financing may be required in the near term to develop,
commercialize and market the Corporation's wireless mobile computing software
products and services. No assurance can be given that any additional financing
required will be available, or that additional financing will be available on
terms that may be advantageous to existing shareholders. Such financings, to the
extent they are available may result in substantial dilution to shareholders. To
the extent such financing is not available, the Corporation may not be able to
or may be delayed in being able to commercialize its software products and
services.
Management of Growth
The Corporation has been expanding, and intends to continue to expand, its
Wireless Division. This growth has placed, and any further growth is likely to
continue to place, a significant strain on the Corporation's resources. The
Corporation's ability to achieve and maintain profitability will depend on its
ability to manage growth effectively, to implement and expand operational and
customer support systems, and to hire additional personnel. The Corporation may
not be able to augment or improve existing systems and controls or implement new
systems and controls to respond to any future growth. In addition, future growth
may result in increased responsibilities for management personnel, which may
limit their ability to effectively manage the Corporation's business.
Reliance on Key Personnel and Consultants
The Corporation is currently dependent upon its senior management, board of
directors, consultants, and strategic alliances, the loss of any of which may
significantly affect the performance of the Corporation and its ability to carry
out the successful development and commercialization of its software products
and services. Failure to retain management, directors and consultants or to
attract and retain additional key employees with necessary skills could have a
material adverse impact upon the Corporation's growth and profitability. The
Corporation is expecting significant growth in both revenue and employees as a
result of the commercialization of its wireless mobile computing software
products. This growth will place substantial demands on the Corporation. The
Corporation's ability to assimilate new personnel will be critical to its
performance. The Corporation will be required to recruit additional software
development personnel, expand its direct sales force, expand its customer
support functions and train, motivate and manage its employees. Competition for
qualified software development personnel is intense and expected to increase.
There can be no assurance that the Corporation will be able to recruit the
personnel required to execute its programs or to manage these changes
successfully.
Reliance on Key Third-Party Relationships
The Corporation relies on key third-party relationships, including its
relationships with VARs, resellers and OEMs, for marketing and sales of its
software products. These third parties are not within the control of the
Corporation, are
12
<PAGE> 16
not obligated to purchase software products from the Corporation and may also
represent and sell competing software products. The loss of any of these
third-party relationships, the failure of such parties to perform under
agreements with the Corporation or the inability of the Corporation to attract
and retain new VARs, resellers or OEMs with the technical, industry and
application experience required to market and sell the Corporation's software
products successfully could have a material adverse effect on the Corporation.
Competition
The Corporation experiences competition in the markets for both its wireless
mobile computing software and printer driver software. See "Competition -
Wireless" and "Competition - Imaging". As the market for the Corporation's
software products continues to develop, additional competitors with
substantially greater financial, technical and marketing resources than the
Corporation may enter the market and competition may intensify. Current or
future competitors may develop software products that are superior to the
Corporation's software products or achieve greater market acceptance.
Product Defects
Software products as complex as those offered by the Corporation may contain
undetected errors or defects when first introduced or as new versions are
released. There can be no assurance that, despite testing by the Corporation and
by current and potential customers, errors will not be found in new software
products after commencement of commercial shipments resulting in product recalls
and market rejection of the Corporation's software products and resulting in
damage to the Corporation's reputation, as well as lost revenue, diverted
development resources and increased support costs.
Intellectual Property Protection
The Corporation considers its software products and trademarks to be of value
and important to its business. The Corporation relies principally upon a
combination of copyright, trademark and trade secret laws, non-disclosure
agreements and other contractual provisions to establish and maintain its
rights. The Corporation does not have any patents or patent applications
pending. Despite the Corporation's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy or obtain and use information that the
Corporation regards as proprietary. There can be no assurance that the steps
taken by the Corporation to protect its proprietary information will prevent
misappropriation of such information. The cost of litigation necessary to
enforce the Corporation's proprietary rights may be prohibitive. Such steps may
not preclude competitors from developing confusingly similar brand names or
promotional materials or developing software products and services similar to
those of the Corporation.
Although the Corporation believes that it has the right to use all of the
intellectual property incorporated in its software products, third parties may
claim that the Corporation's software products violate their proprietary rights,
including copyrights and patents. If any such claims are made and found to be
valid, the Corporation may have to reengineer its software products or obtain
licenses from third parties to continue offering its software products. Any
efforts to reengineer its software products or obtain licenses from third
parties may not be successful and could substantially increase the Corporation's
costs and have a material adverse effect on the business, financial condition
and results of operations of the Corporation.
Lack of Backlog
Because the Corporation generally ships software products within a short period
after receipt of an order, the Corporation typically does not have a material
backlog of unfilled orders, and revenues in any quarter are substantially
dependent on orders booked in that quarter. The Corporation's expense levels are
based in part on its expectations as to future revenues. Therefore, the
Corporation may be unable to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. Accordingly, any significant shortfall of
demand in relation to the Corporation's expectations or any material delay of
customer orders would have an almost immediate adverse impact on the
Corporation's results of operations.
13
<PAGE> 17
Reliance on Export Sales
The Corporation's export sales to the United States and Europe represented 97%
of its total sales in the year ended December 31, 1999. There can be no
assurance that the Corporation will be able to maintain or increase
international demand for the Corporation's software products or that the
Corporation's distributors will be able to effectively meet that demand.
Additional risks inherent in the Corporation's international business activities
generally include unexpected changes in regulatory requirements, tariffs and
other trade barriers, costs and risks of localizing software products for
foreign countries, longer accounts receivable payment cycles, difficulties in
managing international distributors, potentially adverse tax consequences,
repatriation of earnings, the burdens of complying with a wide variety of
foreign laws and changes in demand resulting from fluctuations in exchange
rates. In addition, the laws of certain foreign countries do not provide
protection for the Corporation's intellectual property to the same extent as do
the laws of Canada and the United States.
Foreign Exchange Rate Exposure
The majority of the Corporation's revenue is denominated in U.S. dollars (the
currency in which the Corporation's financial statements are stated) or
currencies other than Canadian dollars and in the future may be denominated in
currencies other than Canadian or U.S. dollars. The Corporation does not engage
in currency hedging activities to limit the risks of exchange rate fluctuations.
As a result, changes in the relative value of the U.S. dollar to the Canadian
dollar and other foreign currencies will affect the Corporation's revenues and
operating margins. The impact of future exchange rate fluctuations between the
U.S. dollar and the Canadian dollar or other foreign currencies on revenues and
operating margins cannot be accurately predicted and could have a material
adverse effect on the Corporation.
Enforcement of Civil Liabilities
The Corporation is a corporation incorporated under the laws of British
Columbia, Canada. Certain of the directors and the Corporation's professional
advisors are residents of Canada or otherwise reside outside of the U.S. All or
a substantial portion of the assets of such persons are or may be located
outside of the U.S. It may be difficult to effect service of process within the
United States upon the Corporation or upon such directors or professional
advisors or to realize in the U.S. upon judgments of U.S. courts predicated upon
civil liability of the Corporation or such persons under U.S. federal securities
laws. The Corporation has been advised that there is doubt as to whether
Canadian courts would (i) enforce judgments of U.S. courts obtained against the
Corporation or such directors or professional advisors predicated solely upon
the civil liabilities provisions of U.S. federal securities laws, or (ii) impose
liabilities in original actions against the Corporation or such directors and
professional advisors predicated solely upon such U.S. laws. However, a judgment
against the Corporation predicated solely upon civil liabilities provisions of
such U.S. federal securities laws may be enforceable in Canada if the U.S. court
in which such judgment was obtained has a basis for jurisdiction in that matter
that would be recognized by a Canadian court.
WIRELESS DIVISION
Wireless Industry Growth
The overall market for wireless data communications devices has experienced
significant growth in recent years. There can be no assurance that the market
for the Corporation's existing or proposed wireless software products will
continue to grow, that firms within the industry will adopt the Corporation's
software products for integration with their wireless data communications
solutions, or that the Corporation will be successful in independently
establishing product markets for its wireless software products. If the various
markets in which the Corporation's software products compete fail to grow, or
grow more slowly than the Corporation currently anticipates, or if the
Corporation were unable to establish product markets for its new software
products, the Corporation's business, results of operation and financial
condition would be materially adversely affected.
14
<PAGE> 18
Reliance on Microsoft
Some of the Corporation's wireless software products wirelessly enable the
functionality of Microsoft Exchange. The Corporation is aware that Microsoft has
developed its own wireless functionality for Microsoft Exchange that may compete
with software products of the Corporation. Also, United States federal and state
regulatory authorities have initiated broad antitrust actions against Microsoft.
The Corporation cannot predict to what extent these antitrust actions may affect
Microsoft or the Corporation's relationship with Microsoft.
IMAGING DIVISION
Reliance on Sales of Apple Macintosh Computers
The majority of the Corporation's revenues are currently derived from the sale
of the Corporation's printer driver products. The sale of these software
products currently relies on the sale of computers that use the Apple Macintosh
operating system. Any reduction in sales of computers using the Macintosh
operating system may have an immediate and material adverse effect on the
Corporation's revenues.
In addition, the Corporation's strategy of developing printer driver products
compatible with the Apple Macintosh operating system is substantially dependent
on the Corporation's ability to gain pre-release access to, and to develop
expertise in, current and future Macintosh product developments by Apple. There
can be no assurance that Apple will continue to cooperate with the Corporation,
and the inability of the Corporation to maintain and further develop its
relationship with Apple would have a material adverse affect on the
Corporation's results of operations from its Imaging Division.
Reliance on Independent VARs, Resellers and OEMs ("Distributors")
A significant portion of the Corporation's revenue from its Imaging Division is
derived from sales of printer driver products to Distributors that are not under
the direct control of the Corporation. These Distributors carry multiple product
lines and could reduce their support of the Corporation's software products in
favor of a competitor's software products or for any other reason. The loss of
any of the Corporation's major Distributors for its Imaging Division would have
a material adverse affect on the Corporation's results of operations from its
Imaging Division. Under certain conditions, the Corporation offers stock
balancing and price protection programs to its Distributors. Therefore, the
Corporation is exposed to the risk of product returns from Distributors. There
can be no assurance that the Corporation's recorded allowances for returns from
its Imaging Division will be adequate and a material increase in returns over
historical rates would have a material adverse affect on the Corporation's
results of operations from its Imaging Division. In 1999, Ingram Micro Inc. and
Hewlett-Packard were the Corporation's only significant Distributors, accounting
for 33% and 17% of the Corporation's sales, respectively.
ITEM 2: PROPERTIES
The Corporation owns no real property. Pursuant to a lease agreement that
expires on March 31, 2003, the Corporation leases 18,084 square feet of office
space in Burnaby, British Columbia, which the Corporation uses as its principal
executive offices. The Corporation also leases office space in Bothell,
Washington on a temporary basis until improvements are completed on new leased
premises on March 31, 2000. The new Bothell office lease includes 7,329 square
feet of office space and expires on March 31, 2005. Combined monthly lease
commitments for the Burnaby office and the new Bothell office are approximately
$26,600 per month.
The Corporation is currently in negotiations to assume an additional 18,000
square feet of office space at the Burnaby location and 2,100 square feet of
office space in Bothell. The additional office space in both locations will be
used to accommodate the expansion of the Wireless Division.
15
<PAGE> 19
ITEM 3: LEGAL PROCEEDINGS
As of the date hereof, there is no material litigation pending against the
Corporation.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
16
<PAGE> 20
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
COMMON SHARES
The Common Shares are currently traded on The Toronto Stock Exchange (the "TSE")
under the symbol "IW". The Common Shares were listed on the TSE on October 14,
1999. Prior to listing on the TSE, the Common Shares were listed on the
Vancouver Stock Exchange (the "VSE") on October 14, 1997 and were delisted from
the VSE on November 26, 1999. The Common Shares do not currently trade on any
exchange in the United States. The following table sets forth the high and low
closing sale prices, as reported by the TSE and VSE, of the Common Shares for
the calendar quarters indicated.
PRICE RANGE OF COMMON SHARES
All prices are quoted in Canadian dollars.
<TABLE>
<CAPTION>
HIGH LOW
(CDN.$) (CDN.$) STOCK EXCHANGE
------- ------- --------------
<S> <C> <C> <C>
1999
Fourth Quarter 16.15 3.00 TSE; VSE
Third Quarter 4.26 3.07 VSE
Second Quarter 4.80 1.38 VSE
First Quarter 2.04 1.00 VSE
1998
Fourth Quarter 1.60 0.95 VSE
Third Quarter 2.00 0.88 VSE
Second Quarter 3.50 1.70 VSE
First Quarter 3.30 1.40 VSE
</TABLE>
As of December 31, 1999, there were 18,297,470 Common Shares issued and
outstanding. At such date, there were approximately 41 shareholders of record, 4
of whom had addresses in the United States who collectively held 395,249 Common
Shares, or approximately 2.2% of the total number of issued and outstanding
Common Shares.
DIVIDENDS
The Corporation did not pay any dividends in the past fiscal year and it does
not foresee the declaration or payment of any dividends on the Common Shares in
the near future. Any decision to pay dividends on the Common Shares will be made
by the board of directors on the basis of the Corporation's earnings, financial
requirements and other conditions existing at such future time.
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<PAGE> 21
WARRANTS
The Corporation issued 2,224,647 special warrants (the "Special Warrants") at a
price of Cdn.$3.25 per Special Warrant in two tranches on June 30, 1999 and July
8, 1999. The Special Warrants were issued in reliance upon the exemption from
registration provided by Rule 506 of Regulation D and the exclusion from
registration provided by Rule 903 of Regulation S. Each Special Warrant entitled
the holder, upon exercise and without payment of additional consideration, to
acquire one Common Share and one-half of one Common Share purchase warrant (the
"Purchase Warrants"). Each Purchase Warrant entitles the holder to purchase one
Common Share at a price of Cdn.$3.75 per Common Share until expiry on June 30,
2000. In connection with this financing, the Corporation issued Agents' Warrants
(the "Agents' Warrants") to Canaccord Capital Corporation, Yorkton Securities
Inc., Sprott Securities Limited and Taurus Capital Markets Ltd. (in exchange for
services as agent in connection with the Special Warrant financing) entitling
the agents in the financing to purchase an aggregate of up to 212,465 Common
Shares at a price of Cdn.$3.25 per Common Share on or before June 30, 2000.
A final prospectus was receipted in British Columbia, Alberta and Ontario on
September 23, 1999 qualifying the distribution of 2,224,647 common shares and
1,112,324 Purchase Warrants upon the exercise of the 2,224,647 previously issued
Special Warrants. All of the Special Warrants were deemed exercised for Common
Shares and Purchase Warrants on September 28,1999. As at December 31, 1999 there
were 811,747 Purchase Warrants and 143,414 Agents' Warrants outstanding.
STOCK OPTIONS
STOCK OPTION PLAN
The shareholders and Board of Directors have approved and adopted a Stock Option
Plan (the "Plan"). The principal purposes of the Plan are to promote a
proprietary interest in the Corporation among its directors and employees; to
retain, attract and motivate the qualified managers the Corporation requires; to
provide a long-term incentive element in overall compensation; and to promote
the long-term profitability of the Corporation.
The board of directors of the Corporation administers the Plan. Common share
options may be granted at any time to any director, senior officer, full-time
employee or consultant of the Corporation, taking into consideration the present
and potential contribution of a particular director, senior officer, full-time
employee or consultant to the success of the Corporation and any other factors
which the board of directors may deem proper and relevant, provided that a
director to whom any option may be granted may not participate in the discussion
of the board to grant such option.
The number of Common Shares that may be issued pursuant to the Plan to any one
person shall not exceed 5% of the Common Shares issued and outstanding on a
non-diluted basis. The price at which Common Shares may be issued under the Plan
will be determined from time to time by the board of directors and shall, in any
event, be in accordance with the rules and policies of any stock exchange upon
which the Common Shares may be listed. The terms of the Plan, as amended October
6, 1999 and subject to shareholder approval, provide that the number of Common
Shares that may be reserved for issuance pursuant to the Plan is set to not
exceed 3,552,540 Common Shares.
As at December 31, 1999 the total number of Common Shares underlying all stock
options held by the directors and officers of the Corporation was 2,206,658. The
options have been granted as incentive and not in lieu of any compensation for
services, and are subject to cancellation should the optionee cease to act in a
designated capacity.
The Corporation filed a Form S-8 registration statement for its employee stock
option plan on December 15, 1999. During the period from January 1, 1999 to
December 14, 1999 the Corporation granted a total of 1,698,263 unregistered
options. During this same period the Corporation issued 577,278 Common Shares
upon the exercise of options and cancelled options to purchase 221,895 Common
Shares.
18
<PAGE> 22
ITEM 6: SELECTED FINANCIAL DATA
Set forth below is certain selected financial information of the Corporation for
each year in the five-year period ended December 31, 1999. The selected
financial information for the three years ended December 31, 1999 is derived
from the Corporation's audited financial statements for such periods included in
"Item 14. Financial Statements". The selected financial information for the
years ended December 31, 1996 and 1995 is derived from the audited financial
statements for such periods. The Corporation's financial statements are prepared
in accordance with Canadian generally accepted accounting principals ("GAAP"),
which are not materially different from United States GAAP except as explained
in "Item 14. Financial Statements - Financial Statements - Note 13." The
information below should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto.
UNITED STATES GAAP
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales - Imaging Division ............ 7,175,330 9,683,398 3,771,245 6,271,185 6,036,098
Sales - Wireless Division ........... 355,001 176,509 94,496 70,497 7,228
----------- ----------- ----------- ----------- -----------
Total Sales ......................... 7,530,331 9,859,907 3,865,741 6,341,682 6,043,326
Net Income (loss) ................... (3,344,326) (1,440,052) (1,970,792) (210,717) 48,917
Net Income (loss) per share
(0.21) (0.12) (0.24) (0.04) 0.01
BALANCE SHEET DATA
Total Assets ........................ 8,020,392 6,546,596 1,508,802 2,349,819 2,701,091
Long Term Debt ...................... -- -- -- 218,700 698,152
Share Capital ....................... 13,325,591 7,416,454 2,515,083 658 585
Retained Earnings (Deficit) ......... (6,250,800) (2,906,473) (1,466,421) 578,279 788,997
Dividends per Common Share .......... -- -- 103,306 -- --
----------- ----------- ----------- ----------- -----------
</TABLE>
CANADIAN GAAP
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales - Imaging Division ............ 7,175,330 9,375,897 3,410,878 5,586,641 5,411,119
Sales - Wireless Division ........... 355,001 170,911 85,471 62,726 6,534
----------- ----------- ----------- ----------- -----------
Total Sales ......................... 7,530,331 9,546,808 3,496,349 5,649,367 5,417,653
Net Income (loss) ................... (3,288,251) (1,206,266) (1,677,032) (187,713) 43,853
</TABLE>
19
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C> <C>
Net Income (loss) per share (0.21) (0.09) (0.19) (0.03) 0.01
BALANCE SHEET DATA
Total Assets ........................ 8,054,492 6,687,941 1,625,326 2,102,781 2,409,369
Long Term Debt ...................... -- -- -- 195,714 622,769
Share Capital ....................... 12,526,949 6,798,707 2,456,847 587 536
Retained Earnings (Deficit) ......... (5,776,773) (2,488,522) (1,282,256) 534,467 722,181
Dividend per Common Share ........... -- -- 91,476 -- --
----------- ----------- ----------- ----------- -----------
</TABLE>
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial information included in the above table of selected financial data
and in the audited financial statements of the Corporation for the years ended
December 31, 1999, 1998 and 1997 are presented in United States dollars, and
have been translated from the functional currency of the Corporation, Canadian
dollars, at the following rates:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------------- --------------- ---------------- ---------------- ---------------
I/S B/S I/S B/S I/S B/S I/S B/S I/S B/S
------ ------ ------ ------ ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Canadian GAAP 0.6732 0.6929 0.6534 0.6534 0.6534 0.6534 0.6534 0.6534 0.6534 0.6534
US GAAP 0.6732 0.6929 0.6748 0.6534 0.7224 0.6997 0.7335 0.7301 0.7288 0.7325
</TABLE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS IS BASED ON THE CORPORATION'S AUDITED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 AND FROM UNAUDITED INFORMATION FOR
THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998. THE AUDITED FINANCIAL
STATEMENTS OF THE CORPORATION ARE INCLUDED IN "ITEM 14. FINANCIAL STATEMENTS".
THE CORPORATION'S FINANCIAL STATEMENTS ARE PREPARED IN ACCORDANCE WITH CANADIAN
GENERALLY ACCEPTED ACCOUNTING PRINCIPALS ("GAAP"), WHICH ARE NOT MATERIALLY
DIFFERENT FROM UNITED STATES GAAP EXCEPT AS EXPLAINED IN "ITEM 14. FINANCIAL
STATEMENTS - FINANCIAL STATEMENTS - NOTE 13."
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
CORPORATE SUMMARY
For the year ended December 31, 1999 net sales decreased 21% to $7.53 million
compared to $9.55 million for the prior year. This decrease is attributable to a
decline in sales in the Imaging Division, offset slightly by increased sales in
the Wireless Division. Gross margin increased to 64% in 1999 from 53% in 1998
due to a shift in product sales toward higher margin software products and a
change in the structure of OEM sales.
Total operating expenses increased 28% to $8.16 million from $6.35 million in
1998. This increase is largely due to higher research and development and
administrative costs. Research and development costs increased 35% to $2.92
million due to new and ongoing projects in both the Imaging and Wireless
Divisions. The Corporation invested $0.18 per share in research and development
in 1999 compared to $0.17 per share in 1998. Administration costs increased 52%
to $2.11 million due to higher staff levels to support the growth of the
Corporation as well as due to finance-related projects pursued during the year.
This included the Corporation's listing of its Common Shares on the TSE and
ongoing Canadian and United States investor relations and reporting issuer
requirements. In addition, the Corporation increased sales and marketing
expenditures by 12% as a result of the increase in the Wireless Division sales
force to support the growth initiatives of the Corporation.
20
<PAGE> 24
Other income decreased to $0.03 million in 1999 from $0.10 million in the prior
year. Interest income earned on higher cash balances was offset by foreign
exchange losses incurred as a result of the effect of the increase in value of
the Canadian dollar during the year on foreign currency denominated cash and
accounts receivable balances.
The combination of a decline in Imaging Division sales and higher operating
costs resulted in a loss of $3.29 million, or $0.21 per share for the year ended
December 31, 1999 compared to a loss of $1.21 million, or $0.09 per share for
the year ended December 31, 1998.
WIRELESS DIVISION
<TABLE>
<CAPTION>
Three months ended Twelve months ended
December 31 December 31
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales ............................. $ 106,145 $ 37,233 $ 355,001 $ 170,911
Cost of Goods Sold ................ 6,881 13,837 28,703 48,536
----------- ----------- ----------- -----------
Gross Profit ...................... 99,264 23,396 326,298 122,375
Research and Development .......... 530,004 203,573 1,371,007 994,670
Sales and Marketing ............... 569,869 319,991 1,531,348 1,185,289
Administration .................... 467,276 246,613 1,315,670 667,315
----------- ----------- ----------- -----------
Total Operating Expenses .......... 1,567,149 770,177 4,218,025 2,847,274
----------- ----------- ----------- -----------
Operating Income (Loss) ........... (1,467,885) (746,781) (3,891,727) (2,724,899)
----------- ----------- ----------- -----------
Total depreciation expense included
in above .......................... 68,270 45,905 160,390 89,900
----------- ----------- ----------- -----------
</TABLE>
During 1999 the Wireless Division completed the development of its suite of
wireless software products with the shipping of two new software products,
Symmetry and Infowave for the Net, and a new version of Infowave for Exchange
that added support for a second wireless network, CDPD. During 1999, management
implemented an aggressive sales and marketing strategy to build the distribution
channels and branding for its wireless software products. In late 1999 and early
2000 Infowave completed strategic agreements with AT&T Wireless Services, Inc.,
Bell Atlantic Mobile, GE Capital IT Solutions, Nokia Networks, Pivotal
Corporation, RAM Mobile Data Ltd. and Sierra Wireless, Inc.
Sales revenue for the Wireless Division in 1999 was $0.36 million, which
represented an increase of 107% from 1998. This is the second successive year
that the Wireless Division has posted year-over-year revenue growth in excess of
100%. Approximately 65% of 1999 Wireless revenue was derived from software
license fees, 23% from technical services and engineering fees, and 12% from the
sale of third-party hardware.
The Wireless Division's gross profit margin for 1999 was 92%, increasing from
72% in 1998. The cost of goods sold consists primarily of the cost of
third-party hardware components. The increase in the gross profit margin
reflects the mix of software license revenue and sales of third-party hardware
components.
The Wireless Division's expenses in 1999 grew 48% from 1998, with research and
development spending increasing by 38% to $1.37 million and sales and marketing
expenses increasing by 29% to $1.53 million. Research and development salaries
and contract development increased to $1.08 million from $0.84 million in 1998
with the number of employees in Wireless research and development increasing
from 23 to 29. Research and development activities during 1999 focused on the
development of the first release of Symmetry and Infowave for the Net, and the
CDPD version of Infowave for Exchange. Sales and marketing salaries increased
30% to $0.65 million in 1999 from $0.50 million in 1998. General marketing
expenses for travel, trade-shows and advertising were $0.67 million in 1999, an
increase of 37% over $0.49 million incurred in 1998. During the year the
Corporation attended over twenty wireless trade shows and conferences. Wireless
administration costs increased to $1.32 million in 1999, reflecting an increase
in infrastructure and finance-related expenses incurred during the year. These
finance-related costs have been allocated to the Wireless Division.
21
<PAGE> 25
IMAGING DIVISION
<TABLE>
<CAPTION>
Three months ended Twelve months ended
December 31 December 31
----------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales ............................. $ 1,660,464 $ 4,535,918 $ 7,175,330 $ 9,375,897
Cost of Goods Sold ................ 483,369 2,135,042 2,663,757 4,455,458
----------- ----------- ----------- -----------
Gross Profit ...................... 1,177,095 2,400,876 4,511,573 4,920,439
Research and Development .......... 465,817 429,430 1,547,565 1,168,944
Sales and Marketing ............... 464,779 659,907 1,594,288 1,608,937
Administration .................... 256,785 270,378 796,918 724,408
----------- ----------- ----------- -----------
Total Operating Expenses .......... 1,187,381 1,359,715 3,938,771 3,502,289
----------- ----------- ----------- -----------
Operating Income (Loss) ........... (10,286) 1,041,161 572,802 1,418,150
----------- ----------- ----------- -----------
Total depreciation expense included
in above .......................... 53,328 39,560 162,904 119,126
----------- ----------- ----------- -----------
</TABLE>
Sales revenue for the Imaging Division in 1999 was $7.18 million, which
represented a decrease of 23% from a record high of $9.38 million in 1998. This
decline was primarily attributable to a decrease in sales to Original Equipment
Manufacturers ("OEM") and StyleScript retail sales. OEM sales decreased 54% to
$2.30 million in 1999 from $4.90 million in 1998. The Corporation diversified
its OEM relationships and entered into new licensing and development agreements
with Brother, Samsung, Canon and New Motion. However, the average revenue for
each OEM project in 1999 was significantly less than in 1998. Additionally,
gross sales for the year were affected by the migration in the structure of OEM
agreements from higher revenue private-label printing solutions (with cable) to
lower revenue royalty-based solutions. The Imaging Division also recorded
engineering fees of $0.18 million in 1999 compared to $0.33 million in the prior
year.
The Imaging Division recorded growth in the overall sale of retail software
products in 1999. Total 1999 retail shipments increased 11% to over 66,000
units. Retail shipments of Infowave's best-selling PowerPrint packages increased
sharply by 36% for the year and annual sales increased 35% to $4.62 million.
Sales of PowerPrint represented 65% of total Imaging revenue in 1999 versus 36%
of total revenue in 1998. The increase in sales of PowerPrint was partially
offset by low sales of StyleScript, which decreased 52% compared to 1998.
StyleScript unit shipments in 1999 declined throughout the year as no new
versions of the product were released and the printers that the current version
supports lost market share. A new version of StyleScript is currently scheduled
for release in the first half of 2000.
Imaging Division gross margins were 63% in 1999 compared to 53% in 1998,
reflecting the increase in the proportion of higher margin PowerPrint retail
sales as well as the migration in structure of OEM sales toward higher margin
royalties versus package sales. The Corporation also realized the benefit of
decreased component costs for PowerPrint due to cable changes implemented in the
fourth quarter of 1998. The cost of goods sold for retail and OEM sales includes
the media on which the software is reproduced, documentation, packaging, and in
some cases the cable which connects the computer to the printer and a royalty
payable to a third party in accordance with various licensing agreements. The
cost of sales for the Imaging business in 1999 was $0.90 million for OEM sales
and $1.44 million for retail sales.
Total Imaging Division expenses in 1999 increased 12% to $3.94 million with
research and development spending up 32% to $1.55 million and sales and
marketing expenses relatively unchanged at $1.59 million. Research and
development salaries and contract development increased from $0.87 million in
1998 to $1.01 million in 1999 with the number of employees in Imaging research
and development increasing from 22 to 28. During 1999 Infowave released three
major versions of its PowerPrint software: PowerPrint USB, PowerPrint for
Networks and PowerPrint with multi-function peripheral support. The Corporation
also developed various customized OEM printing kits. Sales and marketing
salaries for the Imaging Division in 1999 decreased to $0.63 million in 1999
from $0.72 million in 1998. General marketing expenses during the year -
advertising, trade shows, brochures etc. - increased to $0.69 million in 1999
from $0.67 million in 1998.
22
<PAGE> 26
QUARTER ENDED DECEMBER 31, 1999
Wireless Division sales of $0.11 million for the fourth quarter of 1999
represented an increase of 185% over the corresponding quarter in 1998. Wireless
Division sales in the fourth quarter of 1999 included recurring license fees
from hosted services and license sales to Glenayre Electronics, Inc. and several
new pilot customers.
Imaging Division sales of $1.66 million in the fourth quarter decreased 63% over
the fourth quarter of 1998 due to decreased OEM and retail sales. OEM sales of
$0.62 million decreased 80% from the prior year and retail sales decreased from
$1.5 million to $1.1 million. Imaging Division retail sales were affected by the
delayed release of PowerPrint 5.0, which did not reach the reseller channel
until mid-December.
The impact of the overall decrease in sales was offset slightly by an increase
in gross margins to 71% compared to 53% in the corresponding quarter in 1998.
This increase is attributable to decreased component costs and an increase in
the proportion of higher margin retail and OEM sales in the Imaging Division.
Total operating expenses in the fourth quarter of 1999 were $2.75 million
compared to $2.13 million in the comparable 1998 period. Research and
development expenditures increased 57% to $1.0 million principally due to new
product initiatives in the Wireless Division. Administrative expenses increased
37% to $0.72 million due to a buildup in infrastructure to support the growth
initiatives of the Corporation. Total sales and marketing expenses remained flat
at $1.03 million due to the fact that a $0.25 million increase in sales and
marketing expenditures in the Wireless Division was offset by a corresponding
decrease in the Imaging Division.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
The Corporation experienced significant growth in 1998. Rapid growth continued
into the fourth quarter and enabled the Corporation to post annual and quarterly
records for unit shipments and revenues. Fourth quarter sales of $4.6 million
were up 441% over the fourth quarter of 1997 and up 82% over the previous
quarter. Total 1998 sales of $9.5 million were up 173% over 1997. Fourth quarter
unit shipments of Infowave's printing solutions were nearly double the previous
quarter -- a record quarter itself -- and were up nearly 12 times over the
fourth quarter of 1997. Annual shipments quadrupled to over 200,000 units.
Demand for Infowave's printing solutions translated into earnings of $0.33
million, or $0.02 per share, in the fourth quarter, the first profitable quarter
for the Corporation since the first quarter of 1996. This compares to a loss of
$0.21 million, or $0.01 per share, in the previous quarter and a loss of $0.58
million, or $0.05 per share, in the fourth quarter of 1997. Infowave cut annual
losses to $1.21 million, or $0.09 per share, in 1998 from $1.68 million, or
$0.19 per share, in 1997. The Corporation invested $2.16 million, or $0.17 per
share, in research and development in 1998.
Annual operating expenses were up 68% to $6.35 million with head count
increasing from 48 to 59. Infowave increased total research and development
spending 64% and total sales and marketing spending by 65%. More expense detail
is provided with the analysis of the operating divisions.
Infowave's performance in 1998 was fuelled by growth of its Imaging Division.
Fourth quarter retail sales of Infowave's best-selling PowerPrint package were
up 188% over 1997. Year to date sales were up 81%. StyleScript was Infowave's
fastest-growing retail product in 1998 with annual sales up 83% over 1997. Total
1998 shipments through Infowave's various retail distribution channels increased
52% to over 60,000 units.
Demand for Infowave's private-label printing solutions from OEMs continued in
the fourth quarter. OEM sales of $2.94 million were up 124% over the third
quarter. Total annual OEM sales of $4.57 million was new business for Infowave
in 1998 and was generated primarily by licensing and development agreements
negotiated during the first half of the year with Apple Computer and
Hewlett-Packard. Infowave also recorded $0.33 million revenue from engineering
fees in 1998. Imaging Division gross margins for 1998 were 53%, compared with
62% in 1997. The decline is a result of the mix between retail and OEM business
as the Corporation charges lower prices to its OEM customers. The cost of goods
sold for retail and OEM sales may include the media on which the software is
23
<PAGE> 27
reproduced, documentation, packaging, and in some cases the cable which connects
the computer to the printer and a royalty payable to a third party in accordance
with various licensing agreements. The cost of sales for the Imaging business in
1998 was $2.29 million for OEM sales and $2.16 million for retail sales.
Total Imaging Division expenses in 1998 grew 65% to $3.50 million, with research
and development ("R&D") spending up 117% to $1.17 million and sales and
marketing expenses up 35% to $1.60 million. R&D salaries and contract
development were up from $0.37 million in 1997 to $0.87 million in 1998. During
the year the Imaging Division completed development of a custom chip for
PowerPrint, developed various customized OEM printing kits and introduced six
new retail product releases. Sales and marketing salaries in 1998 were up from
$0.31 million in 1997 to $0.70 million. General marketing expenses during the
year - advertising, trade shows, brochures etc. - were down slightly from $0.70
million in 1997 to $0.65 million.
Wireless sales during the fourth quarter were $0.04 million with annual sales of
$0.17 million up 100% over 1997. During the fourth quarter, two customers
extended their pilot programs and an existing customer added more seats. During
the course of 1998 Infowave received orders for its wireless software from a
total of 14 corporations and ended the year with four active customers, two
active pilots and two beta programs in place. Wireless gross profit margins were
72% with the cost of sales comprised primarily of the cost of third-party
hardware components.
Total Wireless Division expenses in 1998 grew 71%, with R&D spending up 27% to
$0.99 million and sales and marketing expenses up 139% to $1.17 million. R&D
salaries and contract development were up from $0.55 million in 1997 to $0.84
million in 1998. Infowave introduced two new versions of its wireless software
during the year that added increasing functionality and security--in particular,
Windows NT authentication and Certicom encryption. Infowave also incorporated
source code and architectural design elements derived from the source code
license acquired from Wynd Communications in April. Infowave Office Enabler
earned Microsoft BackOffice and Windows CE certification in 1998.
Sales and marketing salaries in 1998 were up from $0.16 million in 1997 to $0.50
million. General 1998 marketing expenses for travel, trade-shows and advertising
were $0.49 million, up 136% over $0.20 million in 1997.
Total administration expenses were up 79% to $1.39 million. 1998 salaries of
$0.33 million were up from $0.29 million in 1997. Professional fees increased
from $0.24 million in 1997 to $0.45 million in 1998 due to SEC Form 20-F
registration and various development and licensing agreements that were
negotiated during the year. Infowave was not a publicly traded company until
October 14th of 1997; therefore related costs of $0.30 million in 1998 were up
from $0.04 million in 1997. Travel expenses of $0.05 million and recruiting
expense of $0.03 million were up over 1997.
In fiscal 1997 the Corporation recorded amalgamation costs of $0.07 million and
dividends of $0.07 million in connection with the amalgamation of GDT Softworks
Inc., G.W. McIntosh Holdings Ltd. and Infowave Wireless Messaging Incorporated.
No such amounts were recorded in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Using the comparative balances at December 31, 1998 and December 31, 1999,
working capital increased from $3.33 million to $5.85 million and net tangible
assets increased from $4.17 million to $7.01 million. Infowave's cash position
increased from $1.05 million in 1998 to $4.36 million in 1999.
During the year the Corporation satisfied its operating cash requirements from
cash reserves and equity financing. Infowave's cash position increased primarily
from the private placement of 2,224,647 special warrants at Cdn.$3.25 for total
net proceeds of $4.28 million. Each special warrant entitled the holder to
receive one common share and one-half of a common share purchase warrant
expiring June 30, 2000. During the year 300,577 share purchase warrants were
exercised at Cdn.$3.75 and 69,051 agents' warrants were exercised at Cdn.$3.25
for combined net proceeds of $0.92 million. At December 31, 1999 there were a
total of 811,747 share purchase warrants and 143,414
24
<PAGE> 28
agents' warrants outstanding. In total, financing activities, including the
exercise of stock options, generated $5.76 million.
The Corporation used $1.93 million in operations in 1999, primarily due to the
loss for the period, as discussed previously. The effect of the loss on the
Corporation's cash position was partially offset by the net effect of a combined
decrease of $2.36 million in accounts receivable and inventories and a decrease
of $1.46 million in accounts payable, all of which are directly attributable to
the decline in Imaging Division sales in the fourth quarter of 1999.
Net cash used in investing activities during 1999 was $0.64 million, which
consisted primarily of the purchase of computer equipment.
On March 28, 2000, Infowave announced that it entered into an agreement with
CIBC World Markets Inc. and Canaccord Capital Corporation (the "Underwriters")
for an underwritten offering of 924,000 special warrants of Infowave (the
"Special Warrants") at a price of Cdn.$32.50 per Special Warrant for aggregate
gross proceeds of approximately $20.55 million. Each Special Warrant will
entitle the holder to acquire, for no additional consideration, one Common
Share. If Infowave does not obtain receipt (the "Receipts") from certain
securities regulatory authorities in Canada for a (final) prospectus qualifying
for distribution the Common Shares issuable upon exercise of the Special
Warrants on or before 90 days from the Closing Date or such later date as the
Underwriters may approve (the "Clearance Date"), then each Special Warrant will
be exercisable for 1.1 Common Shares. A total of 75% of the gross proceeds of
the offering will be released to Infowave on closing and the balance will be
held in trust to be released to Infowave at the time the Receipts are received.
The Underwriters may terminate the Offering at their discretion in the event of
a material adverse change in Infowave or certain other stated events. Subject to
the foregoing, closing of the Offering is expected to occur on or about April
13, 2000.
OUTLOOK
At December 31, 1999 the Corporation's primary source of liquidity consisted of
cash and cash equivalents of $4.36 million.
The Corporation intends to increase its number of employees in 2000 to continue
its growth in the Wireless Division. Additional resources will be allocated to
sales and marketing and research and development in the Wireless Division. These
additional resources will be used to pursue existing and new market development
opportunities and to continue to enhance and expand the range and features of
its wireless software products. The Corporation expects to leverage and develop
existing and new strategic relationships. The Corporation expects these
developments to have a positive impact on the sales of its wireless software
products in 2000. See "Note Regarding Forward-looking Statements."
Management believes that its current cash position will be insufficient to
finance its growth plans for 2000. To finance these anticipated increased
expenditures as well as to further strengthen the Corporation's financial
position, facilitate growth, and provide the Corporation with additional
flexibility to take advantage of business opportunities that may arise, the
Corporation intends to raise additional capital in 2000 through additional
equity financing. There can be no assurance that additional financing will be
available on terms favorable to the Corporation or its shareholders, or on any
terms at all. The inability to obtain such financing would have a material
adverse impact on the Corporation's operations. To the extent that such
financing is available, it may result in substantial dilution to existing
shareholders.
The Corporation has been investigating opportunities to divest its Imaging
Division in order to focus its resources, including management time, on the
development of the Wireless Division.
YEAR 2000
Many computer applications have been written using two digits rather than four
to define the applicable year and some date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. The year 2000 issue
could result in system failures or miscalculations that could disrupt the
operations of the Corporation.
25
<PAGE> 29
The Corporation, to its knowledge, has not experienced any systems failures or
disruptions of its operations resulting from the year 2000 issue.
To date, the Corporation has spent less than $100,000 on year 2000 compliance.
At this time, the Corporation does not expect to incur future expenditures
relating to year 2000 compliance matters.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Corporation conducts the majority of its transactions in Canadian dollars
and therefore uses the Canadian dollar as its base currency of measurement.
However, most of the Corporation's revenues and some of its expenses are
denominated in United States dollars which results in an exposure to foreign
currency gains and losses on the resulting US dollar denominated cash, accounts
receivable, and accounts payable balances. As of December 31, 1999, the
Corporation has not engaged in any derivative hedging activities on foreign
currency transactions and/or balances. Although foreign currency gains and
losses have not been material in the fiscal years 1997, 1998 and 1999,
fluctuations in exchange rates between the United States dollar and other
foreign currencies and the Canadian dollar could materially affect the
Corporation's results of operations. To the extent the Corporation implements
hedging activities in the future with respect to foreign currency exchange
transactions, there can be no assurance that the Corporation will be successful
in such hedging activities.
While the Corporation believes that inflation has not had a material adverse
effect on its results of operations, there can be no assurance that inflation
will not have a material adverse effect on the Corporation's results of
operations in the future.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements listed under the heading "(a)(1)
Financial Statements" of Item 14 herein, which financial statements are
incorporated herein by reference in response to this Item 8.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
26
<PAGE> 30
PART III
ITEM 10: DIRECTORS AND OFFICERS OF THE REGISTRANT
The following table sets forth certain current information regarding the
executive officers, directors and key employees of Infowave:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jim McIntosh................. 35 President, Chief Executive Officer, and Director
Bijan Sanii.................. 41 Chief Operating Officer
Todd Carter.................. 39 Chief Financial Officer
Sal Visca.................... 33 Chief Technology Officer
Robert Heath................. 53 General Manager, Imaging Division
Kevin Jampole................ 40 Vice President, Sales and Marketing, Imaging Division
Ron Jasper................... 36 Vice President, Marketing, Wireless Division
Jin Pak...................... 38 Vice President, Sales, Wireless Division
Morgan Sturdy (1)(2)......... 48 Director
Scot Land (1)(2)............. 45 Director
Gary McIntosh (1)(2)......... 61 Director
David Neale.................. 47 Director
</TABLE>
- ----------------
(1) Member of the audit committee
(2) Member of the compensation committee
Jim McIntosh has served as President, Chief Executive Officer, and a director
since June 1991.
Bijan Sanii has served as Chief Operating Officer since September 1998. From
December 1997 to September 1998, Mr. Sanii served as General Manager of the
Imaging Division of Infowave. From May 1997 to December 1997, Mr. Sanii served
as Vice President of Sales of Infowave. From May 1994 to May 1997, Mr. Sanii
served as Vice President of Sales and Marketing of INETCO Systems Limited.
Todd Carter has served as Chief Financial Officer since October 1998. Mr. Carter
originally provided financial consulting services to Infowave beginning in
September 1997 pursuant to an independent contractor agreement with Capital
Ridge Communications Inc. (formerly Channel One Systems Corp.). Mr. Carter has
served as President of Channel One, formerly a division of Nexus Engineering
Corp., since July 1986 to November 1990. He was appointed Managing Director for
European operations in December 1990 (based in the UK) and Vice President of
Operations in January 1992. Mr. Carter took private control of Channel One in
November 1992 after Nexus was acquired by Scientific Atlanta Inc.
Sal Visca has served as Chief Technology Officer since November 1999. From July
1996 to November 1999, Mr. Visca served as Senior Manager of the e-business
Solution Development Business Unit for IBM Canada. Prior to July 1996, Mr. Visca
served as Lead Architect and Strategic Program Manager for IBM Canada from
January 1995 to July 1996. From July 1993 to January 1995 Mr. Visca served as
Development Manager for IBM Canada.
Robert Heath has served as General Manager of the Imaging Division since January
2000. From August 1998 to January 2000, Mr. Heath served as Director of Business
Development (e-Commerce) with MacDonald Dettwiler and Associates. Prior to
August 1998, Mr. Heath served as Vice President, Sales and Marketing for Triant
Technologies
27
<PAGE> 31
from October 1997 to August 1998. From February 1993 to October 1997, Mr. Heath
served as Executive Vice-President of Cymbolic Sciences International.
Kevin Jampole has served as Vice President, Sales and Marketing for the Imaging
Division since October 1998. From October 1996 to October 1998, Mr. Jampole
served as General Manager of Vertigo Technology. Prior to October 1996, Mr.
Jampole served as a Senior Account Manager for Adobe Systems from March 1991 to
September 1996.
Ron Jasper has served as Vice President, Marketing for the Wireless Division
since October 1998. From October 1997 to October 1998, Mr. Jasper served as
Director of Product Management of the Wireless Division of Infowave. Prior to
October 1997, Mr. Jasper served as a Product Manager for Chancery Software Ltd.
from February 1996 to October 1997. From September 1993 to February 1996, Mr.
Jasper served as a Senior Systems Engineer for Chancery Software Ltd.
Jin Pak has served as Vice President, Sales for the Wireless Division since July
1999. From January 1999 to July 1999, Mr. Pak served as the Director of Sales
Development of Wireless Access for Glenayre Electronics, Inc. Prior to January
1999, Mr. Pak served as Vice President and General Manager of Asia North for
Glenayre Electronics Inc. from August 1995 to January 1999. From February 1994
to August 1995, Mr. Pak served as Director, Sales of Korea and Japan for
Glenayre Electronics Inc.
Morgan Sturdy has served as Chairman and a director since October 1999. Since
September 1997, Mr. Sturdy has served as Executive Vice President and Chief
Operating Officer of NICE Systems Ltd. Prior to September 1997, Mr. Sturdy
served as President of Dees Communications Engineering Ltd. from January 1985 to
August 1997.
Scot Land has served as a director since October 1997. Since September 1997, Mr.
Land has served as a Managing Director of EnCompass Ventures. Prior to joining
EnCompass, Mr. Land was a Senior Technology Analyst with Microsoft Corporation
from April 1994 to September 1997. Mr. Land also founded InVision Technologies,
Inc. in 1989 and served as its President and Chief Executive Officer until 1993.
Mr. Land also serves as a director of BSQUARE Corporation.
Gary McIntosh has served as a director since October 1984. Mr. McIntosh retired
in June 1991. From October 1984 to June 1991, Mr. McIntosh served as President
and Secretary of Infowave.
David Neale has served as a director since May 1998. Since November 1999, Mr.
Neale has served as Vice President, New Product Development for Rogers AT&T
Wireless Inc. (formerly, Rogers Cantel Inc.). From January 1998 to November
1999, Mr. Neale served as the Vice President of Data and Emerging Technologies
for Rogers AT&T Wireless Inc. From September 1995 to January 1998, Mr. Neale
served as the Vice President of Marketing and Planning for Rogers AT&T Wireless
Inc. Mr. Neale served as the Vice President of Sales and Marketing for Westel
Communications Ltd. from December 1993 to September 1995. Mr. Neale is currently
the Chairman of the Paging Executive Council, Chairman of the International
Mobitex Operators Association and an Executive Board member of the Portable
Computer and Communications Association.
Each director is elected for a period of one year at the annual general meeting
of shareholders and serves until the next annual general meeting or until his or
her successor is duly elected and qualified. The board limits the length of
directorship to three years at which time the directorship can be extended by
mutual consent of both parties. The executive officers serve at the discretion
of the board. The only family relationship involving the executive officers and
the board involves Gary McIntosh and Jim McIntosh who are father and son,
respectively.
Infowave is a foreign private issuer and, as such, its insiders are not required
to file reports under Section 16(a).
BOARD COMMITTEES
The board of directors has established three board committees -- an audit
committee, a compensation committee and a nominating committee.
28
<PAGE> 32
Audit Committee. The responsibilities of the audit committee include reviewing
the Corporation's audited financial statements and presenting them to the Board
for approval, reviewing internal accounting procedures and consulting with and
reviewing the services provided by the Corporation's auditors. The audit
committee currently consists of Gary McIntosh, Morgan Sturdy and Scot Land.
Compensation Committee. The responsibilities of the compensation committee
include reviewing and recommending to the board of directors the compensation
and benefits of all the executive officers of the Corporation, and establishing
and reviewing general policies relating to compensation and benefits of the
employees of the Corporation. The compensation committee currently consists of
Gary McIntosh, Morgan Sturdy and Scot Land. Except as described in Item 13 -
"Certain Relationships and Related Transactions," no interlocking relationships
exist between the board of directors or compensation committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
Nominating Committee. The board of directors approved the establishment of the
nominating committee as part of a corporate governance policy on March 20, 2000.
The responsibilities of the nominating committee are expected to include
evaluating the contribution of each director on an individual basis, assessing
the collective performance of the board, proposing new nominees to the board and
analyzing the existing structure of the board. The members of the committee have
not yet been appointed.
DIRECTOR COMPENSATION
The Corporation does not currently pay cash compensation to directors for
serving on its board, but does reimburse directors for out-of-pocket expenses
for attending board and committee meetings. The Corporation does not provide
additional compensation for committee participation or special assignments of
the board of directors. All directors except for Gary McIntosh and Jim McIntosh
have received stock options for their participation on the board of directors.
Scot Land received options to purchase 100,000 common shares at a price of
Cdn.$1.00 per share, David Neale received options to purchase 100,000 common
shares at a price of Cdn.$2.55 per share and Morgan Sturdy received options to
purchase 100,000 common shares at a purchase price of Cdn.$3.57 per share.
EMPLOYMENT AGREEMENTS
The Corporation's policy is to require all employees, including its executive
officers, as a condition to their employment with the Corporation, to enter into
agreements requiring the non-disclosure of confidential information of the
Corporation, and the assignment and confirmation of the Corporation's ownership
of all intellectual property rights created in the course of such employee's
employment with the Corporation.
ITEM 11: EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to our Chief Executive
Officer and two other most highly compensated executive officers earning more
than $100,000 for the years ended December 31, 1998 and December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- --------------------------- -------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Jim McIntosh........................ 1999 $ 74,052 $51,657 250,000 $12,925
President, Chief Executive 1998 74,229 53,985 -- 315
Officer, and a director
Bijan Sanii......................... 1999 74,052 99,414 290,000 --
Chief Operating Officer 1998 65,664 118,766 -- 4,559
</TABLE>
29
<PAGE> 33
<TABLE>
<S> <C> <C> <C> <C> <C>
Todd Carter ........................ 1999 74,052 60,588 150,000 --
Chief Financial Officer 1998 67,481 33,740 60,000 --
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock option grants
to our Chief Executive Officer and two other most highly compensated executive
officers during the year ended December 31, 1999. The potential realizable value
is calculated based on the assumption that the common stock appreciates at the
annual rate shown, compounded annually, from the date of grant until the
expiration of its term. These numbers are calculated based on Securities and
Exchange Commission requirements and do not reflect our projection or estimate
of future stock price growth. Potential realizable values are computed by:
o multiplying the number of Common Shares subject to a given option by
the exercise price;
o assuming that the aggregate stock value derived from that
calculation compounds at the annual 5% or 10% rate shown in the
table for the entire five-year term of the option; and
o subtracting from that result the aggregate option exercise price.
30
<PAGE> 34
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE FOR OPTION TERM
OPTIONS FISCAL YEAR PRICE (PER EXPIRATION --------------------------
NAME GRANTED (1) SHARE)(2) DATE 5% 10%
- ---- --------- ------------ ---------- ---------------- --------- ------------
CDN.$
<S> <C> <C> <C> <C> <C> <C>
Jim McIntosh................. 250,000 14.75 13.20 December 10, 2004 631,701 1,395,893
Bijan Sanii.................. 250,000 14.75 13.20 December 10, 2004 631,701 1,395,893
40,000 2.36 1.56 January 21, 2004 11,945 26,395
Todd Carter.................. 150,000 8.85 13.20 December 10, 2004 379,020 837,536
</TABLE>
- ------------
(1) During 1999, options to purchase a total of 1,694,584 common shares were
issued to employees.
(2) The exercise price per share was equal to the fair market value of the
Common Shares on the date of grant as determined by the board of directors.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth for the Chief Executive Officer and two other
most highly compensated executive officers earning over $100,000 the number of
shares acquired upon exercise of stock options during the year ended December
31, 1999 and the number of shares subject to exercisable and unexercisable stock
options held at December 31, 1999.
AGGREGATED OPTION EXERCISES IN 1999
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jim McIntosh.................... -- -- 258,158 341,885 2,709,840 1,475,485
Bijan Sanii..................... 86,451 159,795 -- 320,770 -- 1,238,325
Todd Carter..................... 30,000 156,178 73,258 196,742 743,705 783,137
</TABLE>
- ------------
(1) The value of unexercised in-the-money options at December 31, 1999 is based
on Cdn.$16.15 per share, the closing price of the Common Shares at such
time, less the exercise price per share.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of its Common Shares as of December 31,
1999, by (i) each person known by the Company to be the beneficial owner
31
<PAGE> 35
of more than 5% of the outstanding Common Shares, (ii) each director of the
Company, (iii) each Named Executive Officer, and (iv) all directors and officers
as a group. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Shares listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
DIRECTORS, EXECUTIVE OFFICERS EARNING MORE THAN $100,000 AND 5% BENEFICIALLY OWNED TOTAL SHARES
SHAREHOLDERS (1) OWNED (2)
- ---------------------------------------------------------------- ------------------ ------------
<S> <C> <C>
Jim McIntosh (3) (4) (5) (6).............................................. 2,775,170 14.96
Gary McIntosh (6) (7)
4651 Fairlawn Drive, Burnaby, British Columbia V5C 3R5................ 1,808,613 9.88
Morgan Sturdy
NICE Systems Ltd., #180-6651 Fraserwood Place, Richmond, 13,890 0.08
British Columbia V6W 1J3...............................................
David Neale
Rogers AT&T, 1 Mount Pleasant Road, Toronto, Ontario, M4Y 2Y5.......... 31,116 0.17
Scot Land
Encompass Ventures, 777-108th avenue NE, Ste 2300, Bellevue, 73,750 0.40
Washington 98004.......................................................
Todd Carter (3)........................................................... 88,092 0.48
Bijan Sanii (3)........................................................... 17,000 0.09
All Directors and Executive Officers as a group (7 persons)............... 4,807,631 25.63
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, based on factors including voting and
investment power with respect to shares. Common Shares subject to options
currently exercisable, or exercisable within 60 days after December 31,
1999, are deemed outstanding for computing the percentage ownership of the
person holding such options, but are not deemed outstanding for computing
the percentage ownership for any other person.
(2) Applicable percentage ownership is based on aggregate Common Shares
outstanding as of December 31, 1999 together with the applicable options of
such shareholder.
(3) Unless otherwise indicated, the address of each beneficial owner is that of
the Company.
(4) Includes 140,625 Common Shares held on behalf of a trust established with
the company's Employee Incentive Plan. Jim McIntosh is the Trustee of and
has the power to vote the Common Shares held by this trust.
(5) Includes 1,784,876 Common Shares beneficially owned by 529452 B.C. Ltd. See
note (5).
(6) 529452 B.C. Ltd. is the beneficial owner of 3,499,756 common shares. The
issued share capital of 529452 B.C. Ltd. consists of 100 Class A voting
shares and 100 Class B non-voting shares and 1,000 Class C preferred shares
and 1,000 Class D preferred shares. Gary McIntosh holds 49 Class A voting
shares, 49 Class B non-voting shares and all 1,000 of the Class C preferred
shares. Jim McIntosh holds 51 of the Class A voting shares, 51 of the Class
B non-voting shares and all 1,000 of the Class D preferred shares.
(7) Includes 1,714,880 Common Shares beneficially owned by 529452 B.C. Ltd. See
note (5).
32
<PAGE> 36
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director, senior officer or principal shareholder of the Corporation, or
associate or affiliate of any of the foregoing, has any other material interest,
direct or indirect, in any transaction or in any proposed transaction which has
materially affected or will materially affect the Corporation from January 1,
1999 through March 28, 2000, except as disclosed herein or as follows:
(1) The Corporation completed a private placement of 2,224,647 Special
Warrants in two tranches on June 30, 1999 and July 8, 1999 (see Item 5
- `Warrants'). Denise McIntosh, the spouse of Jim McIntosh (the
President, Chief Executive Officer and a Director of the Corporation)
acquired an aggregate of 100,000 Special Warrants for an aggregate
purchase price of $218,790. These Special Warrants were deemed
exercised for 100,000 Common Shares and 50,000 Purchase Warrants on
September 28,1999.
(2) Pursuant to a Consulting Agreement dated as of July 4, 1997 between
the Corporation and GWM Enterprises Ltd. ("GWM"), a company controlled
by Gary McIntosh (a Director of the Corporation), GWM provides
management services to the Corporation for $2,693 per month. Pursuant
to the Consulting Agreement, the Corporation paid GWM a total of
$32,316 in 1999.
(3) The Corporation entered into an Independent Contractor Agreement dated
as of October 26, 1998 with Capital Ridge Communications Inc., a
company controlled by Todd Carter. Pursuant to this agreement, Capital
Ridge Communications Inc. provided services to the Corporation for
$10,098 per month. Todd Carter provided services specifically in the
role of Chief Financial Officer. The agreement terminated September
15, 1999 and was replaced by employee agreements with Infowave.
Pursuant to the Independent Contractor Agreement, the Corporation paid
a total of $133,584 to Mr. Carter in 1999.
(4) David Wedge, who resigned as a Director of the Corporation on October
6, 1999, is the founder and proprietor of David J. Wedge Computer Law,
a law firm focused on the information technology industry. David J.
Wedge Computer Law has been acting as corporate counsel to the
Corporation since 1994. In 1999 the Corporation paid approximately
$90,000 for legal services to David J. Wedge Computer Law. David Wedge
is the secretary of the Corporation.
(5) On March 16, 2000, the Corporation announced that Rogers AT&T Wireless
Inc. placed an order for a branded version of the Corporation's
Symmetry software. David Neale is Vice-President, Product Development
and Deployment of Rogers AT&T Wireless Inc. and a director of the
Corporation. The total value of the March 16, 2000 order is $60,000,
none of which to date has been paid to the Corporation.
33
<PAGE> 37
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following financial statements of the Registrant and the Report of
Independent Accountants thereon are included herewith in Item 8 above.
(a) 1. Financial Statements
Auditors' Report to the Shareholders
Comments by Auditor for U.S. Readers on Canada-U.S.
Reporting Difference
Balance Sheets
Statements of Operations and Deficit
Statements of Cash Flows
Notes to the Financial Statements
2. Consolidated financial statement schedules and Report of Independent
Accountants in those schedules are included as follows:
Schedule II: Valuation and Qualifying Accounts
3. Exhibits:
The following Exhibits are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
3.1* Memorandum and Articles of registrant
4.1* Employee Incentive Plan dated April 28, 1997, as supplemented September 25,
1997
4.2* Special Warrant Indenture dated April 20, 1998 between the Corporation and Montreal Trust
Company of Canada
4.3 Special Warrant Indenture dated June 30, 1999 between the Corporation and Montreal Trust
Company of Canada
4.4 Stock Option Plan, as amended (incorporated by reference to the Corporation's Form 6-K dated
October 21, 1999)
10.1* Investor Relations Agreement dated September 1, 1998 between the Corporation and IRG Investor
Relations Group Ltd.
10.2* Investor Relations Agreement dated September 1, 1998 between the Corporation and Staff
Financial Group Ltd. and 549452 BC Ltd.
10.3* Loan Facility dated October 29, 1998 with a Canadian chartered bank
10.4 Lease Agreement dated February 12, 1998 between Riocan Holdings Inc. and the Corporation
10.5 Lease Agreement dated November 23, 1999 between Bedford Property Investors, Inc. and the
Corporation
+10.6* Corporate Development Agreement dated October 26, 1998 between the Corporation and Capital
Ridge Communications Inc. (formerly "Channel One Systems Corp.")
10.7* Strategic Partnership Agreement dated March 6, 1998 between the Corporation and BellSouth
Wireless Data
</TABLE>
34
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
10.8* Development Agreement dated March 4, 1998 between the Corporation
and Hewlett-Packard 10.9* Source Code License Agreement dated March 31,
1998 between the Corporation and DTS 10.10* Source Code License Agreement
dated June 9, 1998 between the Corporation and Wynd
Communications Corporation
10.11* Source Code License Agreement dated November 13, 1997 between the Corporation and Apple
Computers
10.12* OEM License Agreement dated December 5, 1997 between the Corporation and Certicom Corp.
10.13* Letter Agreement dated April 20, 1998 between the Corporation and Lexmark International, Inc.
+10.14* Employment Agreement dated May 2, 1991 between the Corporation and
Jim McIntosh
+10.15* Employment Agreement dated May 23, 1997 between the
Corporation and Bijan Sanii
+10.16 Employment Agreement dated September 16, 1999 between the Corporation and Todd Carter
10.17* Agency Agreement dated March 31, 1998 between the Corporation, Canaccord Capital Corporation
and Yorkton Securities Inc.
10.18* Consulting Agreement dated July 4, 1997 between the Corporation and GWM Enterprises Ltd.
10.19 Agency Agreement dated June 18, 1999 between the Corporation, Canaccord Capital Corporation,
Yorkton Securities , Inc., Sprott Securities Limited and Taurus Capital Markets Ltd.
23.1 Consent of KPMG LLP, independent accountants
27.1 Financial Data Schedule
</TABLE>
* Incorporated by reference to the Corporation's Registration Statement on
Form 20-F (No. 0-29944).
+ Indicates management contract.
35
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Infowave Software, Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
March 28, 2000.
INFOWAVE SOFTWARE, INC.
By: /s/ Jim McIntosh
----------------------
Jim McIntosh,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report to be signed by the following persons on behalf of Infowave Software,
Inc. in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President, Chief Executive Officer and March 28, 2000
/s/ Jim McIntosh Director (Principal Executive Officer)
- ---------------------------------------------
Jim McIntosh
Chief Financial Officer (Principal Financial March 28, 2000
/s/ Todd Carter and Accounting Officer)
- ---------------------------------------------
Todd Carter
March 28, 2000
/s/ Morgan Sturdy Director
- ---------------------------------------------
Morgan Sturdy
March 28, 2000
/s/ Gary McIntosh Director
- ---------------------------------------------
Gary McIntosh
March 28, 2000
/s/ Scot Land Director (Authorized U.S. Representative)
- ---------------------------------------------
Scot Land
March 28, 2000
/s/ David Neale Director
- ---------------------------------------------
David Neale
</TABLE>
<PAGE> 40
INFOWAVE SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
Financial Statements
Auditors' Report to the Shareholders..................... F-2
Comments by Auditor for U.S. Readers on Canada-U.S
Reporting Difference..................................... F-3
Balance Sheets........................................... F-4
Statements of Operations and Deficit..................... F-5
Statements of Cash Flows................................. F-6
Notes to the Financial Statements........................ F-8
Schedule II: Valuation and Qualifying Accounts........... F-25
<PAGE> 41
Financial Statements of
INFOWAVE SOFTWARE INC.
(expressed in U.S. dollars)
Years ended December 31, 1999, 1998 and 1997
<PAGE> 42
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the balance sheets of Infowave Software Inc. as at December 31,
1999 and 1998 and the statements of operations and deficit and cash flows for
each of the years in the three year period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1999 and 1998
and the results of its operations and its cash flows for each of the years in
the three year period ended December 31, 1999 in accordance with Canadian
generally accepted accounting principles. As required by the Company Act
(British Columbia), we report that, in our opinion, these principles have been
applied on a consistent basis.
Canadian generally accepted accounting principles vary in certain significant
respects with accounting principles generally accepted in the United States.
Application of accounting principles generally accepted in the United States
would have affected results of operations and cash flows for each of the years
in the three year period ended December 31, 1999 and balance sheet items as at
December 31, 1999 and 1998 to the extent summarized in note 13 to the financial
statements.
KPMG LLP (SIGNED)
Chartered Accountants
Vancouver, Canada
February 4, 2000
F-2
<PAGE> 43
COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
note 1(a) to the financial statements. Our report to the shareholders dated
February 4, 2000 is expressed in accordance with Canadian reporting standards
which do not permit a reference to such events and conditions in the auditors'
report when these are adequately disclosed in the financial statements.
KPMG LLP (SIGNED)
Chartered Accountants
Vancouver, Canada
February 4, 2000
F-3
<PAGE> 44
INFOWAVE SOFTWARE INC.
Balance Sheets
(expressed in U.S. dollars)
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,359,090 $ 1,047,319
Accounts receivable, net of allowance for bad debts and
sales returns of $53,739 (1998 - $39,204) 1,916,961 3,343,031
Inventory (note 2) 588,981 1,315,061
Prepaid expenses and deposits 170,662 215,564
-------------- --------------
7,035,694 5,920,975
Capital assets (note 3) 984,698 625,621
Deferred charges, net of amortization of $196,747 (1998 - $116,724) 34,100 141,345
-------------- --------------
$ 8,054,492 $ 6,687,941
============== ==============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,014,673 $ 2,377,756
Shareholders' equity:
Share capital (note 6):
Authorized: 100,000,000 voting common shares
without par value
Issued: 18,297,470 (1998 - 15,236,500) common shares 12,526,949 6,798,707
Deficit (5,776,773) (2,488,522)
Cumulative translation account 289,643 -
-------------- --------------
7,039,819 4,310,185
Continuing operations (note 1(a))
Lease obligations (note 8)
Contingencies (note 9)
Subsequent events (note 12)
-------------- --------------
$ 8,054,492 $ 6,687,941
============== ==============
</TABLE>
See accompanying notes to financial statements.
On behalf of the Board:
"MORGAN STURDY" (SIGNED) Director
- --------------------------------------
Morgan Sturdy
"JIM MCINTOSH" (SIGNED) Director
- --------------------------------------
Jim McIntosh
F-4
<PAGE> 45
INFOWAVE SOFTWARE INC.
Statements of Operations and Deficit
(expressed in U.S. dollars)
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Sales $ 7,530,331 $ 9,546,808 $ 3,496,349
Cost of goods sold 2,692,462 4,503,994 1,435,314
-------------- -------------- --------------
4,837,869 5,042,814 2,061,035
Expenses:
Research and development 2,918,572 2,163,614 1,323,106
Sales and marketing 3,125,635 2,794,226 1,688,996
Administration 2,112,587 1,391,723 776,426
-------------- -------------- --------------
8,156,794 6,349,563 3,788,528
-------------- -------------- --------------
Loss from operations 3,318,925 1,306,749 1,727,493
Other income (expenses):
Interest expense - (23,917) (22,377)
Interest income 118,204 73,427 28,361
Gain on sale of marketable securities - - 15,665
Foreign exchange (87,530) 50,973 26,092
-------------- -------------- --------------
30,674 100,483 47,741
-------------- -------------- --------------
Loss before income taxes 3,288,251 1,206,266 1,679,752
Income tax expense (recovery):
Current - - -
Deferred - - (2,720)
-------------- -------------- --------------
- - (2,720)
-------------- -------------- --------------
Loss for the year 3,288,251 1,206,266 1,677,032
Deficit (retained earnings), beginning of year 2,488,522 1,282,256 (534,467)
Amalgamation costs - - 74,250
Dividend - - 65,441
-------------- -------------- --------------
Deficit, end of year $ 5,776,773 $ 2,488,522 $ 1,282,256
============== ============== ==============
Loss per share $ 0.21 $ 0.09 $ 0.19
============== ============== ==============
Weighted average number of shares outstanding 15,963,036 12,912,578 8,861,473
============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 46
INFOWAVE SOFTWARE INC.
Statements of Cash Flows
(expressed in U.S. dollars)
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss for the year $ (3,288,251) $ (1,206,266) $ (1,677,032)
Items not involving cash:
Depreciation 323,294 209,026 172,243
Amortization of deferred charges 80,023 65,651 51,073
Deferred income taxes - - (2,720)
Gain on sale of marketable securities - - (15,665)
Changes in non-cash operating working capital:
Accounts receivable 1,581,881 (2,873,594) 34,745
Corporation taxes recoverable - - 62,959
Inventory 782,688 (1,132,654) 175,269
Prepaid expenses and deposits 56,284 (202,253) 9,680
Accounts payable and accrued liabilities (1,464,010) 1,927,021 64,684
Bonus payable - - (24,834)
-------------- --------------- --------------
(1,928,091) (3,213,069) (1,149,598)
Cash flows from investing activities:
Purchase of capital assets, net of investment
tax credits (635,454) (387,837) (198,420)
Proceeds from disposal of marketable securities - - 1,960
Decrease in advances to affiliate - - 2,365
Proceeds on disposal of capital assets - - 433
-------------- --------------- --------------
(635,454) (387,837) (193,662)
Cash flows from financing activities:
Issuance of shares for cash, net of issue costs 1,475,923 405,235 1,995,763
Issuance of special warrants for cash,
net of issue costs 4,284,797 3,946,115 -
Repayment of shareholder loan - - (106,269)
Redemption of shares - - (65)
Dividend - - (65,441)
Repayment of operating loan - - (450,833)
Amalgamation costs - - (74,250)
-------------- --------------- --------------
5,760,720 4,351,350 1,298,905
Foreign exchange gain on cash and cash equivalents
held in a foreign currency 114,596 - -
-------------- --------------- --------------
Increase (decrease) in cash and cash equivalents 3,311,771 750,444 (44,355)
Cash and cash equivalents, beginning of year 1,047,319 296,875 341,230
-------------- --------------- --------------
Cash and cash equivalents, end of year $ 4,359,090 $ 1,047,319 $ 296,875
============== =============== ==============
</TABLE>
F-6
<PAGE> 47
INFOWAVE SOFTWARE INC.
Statements of Cash Flows, Continued
(expressed in U.S. dollars)
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
Supplementary information:
Interest paid $ - $ 23,917 $ 22,377
Interest received 118,204 73,427 28,361
Income taxes paid - - -
Non-cash transactions:
Cancellation of shares pursuant to
termination of employment contracts (32,478) (9,490) -
Exchange of marketable securities for
settlement of due to shareholders - - 400,776
Issue of shares to trust - - 267,567
Issue of shares for settlement of due to
shareholders - - 192,994
========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 48
INFOWAVE SOFTWARE INC.
Notes to Financial Statements
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
The Company was formed on February 21, 1997, following the amalgamation of
GDT Softworks Inc., Infowave Wireless Messaging Incorporated and G.W.
McIntosh Holdings Ltd. (the "combining companies") and is incorporated
under the laws of the Province of British Columbia. The principal business
activities of the Company are software development and sales.
1. SIGNIFICANT ACCOUNTING POLICIES:
(a) Continuing operations:
These financial statements have been prepared on a going concern basis
notwithstanding the fact that the Company has experienced operating
losses during the years ended December 31, 1999, 1998 and 1997.
Continued operations of the Company depend upon the attainment of
profitable operations and successful completion of external financing
arrangements.
It is the Company's intention to raise additional financing in the
year 2000, which, together with its existing working capital and the
exercise of options and warrants is expected to be sufficient to meet
the Company's projected working capital and cash requirements beyond
December 31, 2000. However, unanticipated costs and expenses or lower
than anticipated revenues could require additional financing. To the
extent financing is not available, the Company may not be able to or
be delayed in being able to commercialize its products and services.
The Company will continue to evaluate its projected expenditures
relative to its available cash and to evaluate additional means of
financing in order to satisfy its working capital and other cash
requirements.
(b) Basis of presentation:
Prior to their amalgamation, the combining companies were under common
control and, consequently, these financial statements have been
compiled on a continuity of interest basis similar to a
pooling-of-interests. Under this basis of accounting, the assets,
liabilities, shareholders' equity and results of operations of the
Company for all periods presented reflect the combined book values and
results of operations previously reported in the combining companies'
financial statements.
These financial statements are prepared in accordance with generally
accepted accounting principles in Canada. Material differences between
these principles and accounting principles generally accepted in the
United States are disclosed in note 13.
(c) Cash and cash equivalents:
Cash and cash equivalents include short term investments with
maturities of ninety days or less when acquired.
(d) Inventory:
Inventory is valued at the lower of cost and net realizable value.
Cost is determined using the weighted average cost method.
F-8
<PAGE> 49
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 2
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(e) Deferred charges:
Shares issued to employees and service providers are measured and
recorded at the estimated fair value of the shares, taking into
account escrow restrictions, at the time of issue. The related stock
compensation expense is deferred on the balance sheet and charged to
income on a pro-rata basis as the related stock is released from
escrow.
(f) Capital assets:
Capital assets are recorded at cost. Depreciation is provided using
the following methods and annual rates:
<TABLE>
<CAPTION>
Asset Basis Rate
------------------------------------------- ----------------- ----------------
<S> <C> <C>
Computer equipment and system software Declining balance 30%
Computer software Declining balance 100%
Leasehold improvements Straight-line shorter of lease
term or 20%
Office equipment Declining balance 20%
Software licences and purchased source code Declining balance 30%
</TABLE>
(g) Deferred income taxes:
The Company follows the deferral method of income tax allocation.
Deferred income taxes arise from timing differences in the recognition
of income and expense for accounting and income tax purposes.
(h) Translation of foreign currency:
These consolidated financial statements are presented in U.S. dollars
although the Company uses the Canadian dollar as its functional
currency. The Canadian dollar functional currency financial statements
are translated into U.S. dollars using the current rate method. Under
this method, assets and liabilities are translated at rates of
exchange in effect at the balance sheet date. Revenues and expenses
are translated at rates in effect at the time of the transaction. Any
gains or losses from this translation are included in a separate
cumulative translation adjustment account in shareholders' equity on
the balance sheet.
Prior to 1999, these financial statements were presented in Canadian
dollars. Prior years' comparative figures have been translated into
U.S. dollars using the exchange rate at December 31, 1998.
(i) Revenue recognition:
Revenue from the sale of software products is recognized when the
product is shipped. An allowance for future returns is recorded at the
time revenue is recognized based on estimated future returns including
returns of older product versions. Revenue on software development
contracts is recognized when engineering milestones are satisfied
which represents the stage of completion. All development contracts
are less than one year in length. Payment in advance for license and
development fees are deferred and amortized over the term of the
contract.
F-9
<PAGE> 50
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 3
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(j) Research and development:
Research costs are expensed as incurred. Development costs are
expensed as incurred unless certain criteria for deferral have been
met. These criteria include establishing the technological feasibility
of new software products which normally occurs when the Company has
completed all planning, designing, coding and testing activities
required to establish that the products can be produced to meet its
design specifications including functions, features and technical
performance requirements. To December 31, 1999, no development costs
have been deferred. During the year ended December 31, 1999, the
Company received government assistance totalling $87,102 (1998 -
$102,914; 1997 - $nil) related to research and development
expenditures which has been recorded as a reduction of research and
development expenditures.
(k) Stock-based compensation plans:
The Company has a stock-based compensation plan, which is described in
note 6(d). No compensation expense is recognized for this plan when
stock options are issued to employees as the exercise price of the
options is equal to the price of the underlying common shares on the
date of grant. Any consideration paid by employees on exercise of
stock options or purchase of stock is credited to share capital.
(l) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. In particular,
management estimates are required in the determination of provisions
for doubtful accounts receivable, sales returns and obsolete
inventory. Actual results could differ from those estimates.
(m) Loss per share:
Basic loss per share has been calculated using the weighted average
number of common shares outstanding including shares held in escrow.
Fully diluted loss per share amounts have not been presented as the
effect of outstanding options and warrants is anti-dilutive.
(n) Comparative figures:
Certain comparative figures have been reclassified to conform with the
presentation adopted in the current year.
F-10
<PAGE> 51
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 4
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
2. INVENTORY:
Inventory consists of:
<TABLE>
<CAPTION>
1999 1998
------------ --------------
<S> <C> <C>
Raw materials $ 503,646 $ 1,308,253
Finished goods 126,907 55,852
------------ --------------
630,553 1,364,105
Less allowance for obsolete stock (41,572) (49,044)
------------ --------------
$ 588,981 $ 1,315,061
============ ==============
</TABLE>
3. CAPITAL ASSETS:
<TABLE>
<CAPTION>
Accumulated Net book
1999 Cost depreciation value
--------------- -------------- --------------
<S> <C> <C> <C>
Computer equipment and system software $ 1,308,989 $ 687,697 $ 621,292
Computer software 212,739 183,180 29,559
Leasehold improvements 196,522 137,727 58,795
Office equipment 261,794 124,780 137,014
Software licenses and purchased source code 365,069 227,031 138,038
--------------- -------------- --------------
$ 2,345,113 $ 1,360,415 $ 984,698
=============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Accumulated Net book
1998 Cost depreciation value
--------------- -------------- --------------
<S> <C> <C> <C>
Computer equipment and system software $ 834,716 $ 483,061 $ 351,655
Computer software 144,867 138,673 6,194
Leasehold improvements 103,875 93,729 10,146
Office equipment 167,016 95,350 71,666
Software licenses and purchased source code 344,267 158,307 185,960
--------------- -------------- --------------
$ 1,594,741 $ 969,120 $ 625,621
=============== ============== ==============
</TABLE>
4. OPERATING LOAN:
The Company has an operating loan facility with a credit limit of $225,200.
The facility is repayable on demand, bears interest at the prime rate plus
1.0% and is secured by a general security agreement including the
assignment of accounts receivable trade indemnity insurance. At December
31, 1999 and 1998, no amounts were outstanding under this loan facility.
F-11
<PAGE> 52
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 5
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
5. RELATED PARTY TRANSACTIONS:
Pursuant to a consulting agreement dated July 4, 1997 and an independent
contractor agreement dated January 1, 1997, the Company paid $54,000 (1998
- $120,000; 1997 - $120,000) in management fees to companies controlled by
Directors of the Company. The Company also paid management fees of $85,833
(1998 - $109,739; 1997 - $29,403) to a corporate shareholder pursuant to an
independent contractor agreement dated October 26, 1998.
Pursuant to a Debt Exchange Agreement dated as of February 21, 1997,
between the Company and a shareholder, an interest bearing loan to
shareholder of $192,994, was settled in exchange for an aggregate of
349,397 common shares.
Pursuant to the amalgamation agreement dated February 21, 1997, the Company
disposed of certain assets previously held by G.W. McIntosh Holdings Ltd.,
including cash and marketable securities in settlement of the non-interest
bearing shareholder loan of $507,050 and a dividend of $65,441 (net of
refundable taxes) as follows:
<TABLE>
<S> <C>
Liabilities settled:
Shareholder loan $ 507,050
Dividend payable (net of refundable taxes) 65,441
------------
$ 572,491
============
Fair value of assets exchanged to settle liabilities:
Cash $ 171,715
Marketable securities 400,776
------------
$ 572,491
============
</TABLE>
The dividend was declared and payable to the sole shareholder of G.W.
McIntosh Holdings Ltd. prior to the amalgamation.
F-12
<PAGE> 53
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 6
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
6. SHARE CAPITAL:
The share capital of the Company is as follows:
(a) Authorized:
100,000,000 voting common shares without par value (1998 -
100,000,000).
(b) Issued:
<TABLE>
<CAPTION>
Number
of shares Amount
---------- ------------
<S> <C> <C>
Balance, December 31, 1996 5,570,603 $ 587
Share redemption pursuant to Amalgamation Agreement (100,000) (65)
Share issuance for cash to a former employee 10,000 1
Share issuance pursuant to Debt Exchange Agreement (note 5) 349,397 192,994
Share issuance to trust pursuant to employment contracts 670,000 153,222
Share issuance to trust pursuant to an Employee
Performance Incentive Plan 500,000 114,345
Share issuance for cash pursuant to a private placement,
net of issue costs 2,153,000 630,501
Share issuance for cash pursuant to an initial public offering,
net of issue costs 2,500,000 1,365,262
---------- ------------
Balance, December 31, 1997 11,653,000 2,456,847
Share issuance pursuant to exercise of agent's warrants 625,000 405,235
Share cancellation pursuant to termination of employment
contracts (41,500) (9,490)
Share issuance pursuant to issue and conversion of
special warrants, net of issue costs of $710,459 3,000,000 3,946,115
---------- ------------
Balance, December 31, 1998 15,236,500 6,798,707
Share issuance pursuant to exercise of share options 604,535 560,576
Share issuance pursuant to exercise of purchase warrants 300,577 763,011
Share issuance pursuant to exercise of agent's warrants 69,051 152,336
Share cancellation pursuant to termination of employment
contracts (137,840) (32,478)
Share issuance pursuant to issue and conversion of
special warrants, net of issue costs of $623,070 2,224,647 4,284,797
---------- ------------
Balance, December 31, 1999 18,297,470 $ 12,526,949
========== ============
</TABLE>
F-13
<PAGE> 54
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 7
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
6. SHARE CAPITAL (CONTINUED):
(c) Escrow shares:
Pursuant to certain employment contracts and an Employee Performance
Incentive Plan, the Company issued shares to certain employees which
were held in escrow. As at December 31, 1999, no shares (1998 -
223,333; 1997 - 446,666) issued pursuant to employment contracts
remain in escrow and 140,625 (1998 - 394,750; 1997 - 500,000) shares
issued pursuant to the Employment Performance Incentive Plan remain in
escrow. The escrow shares are being released at rates ranging from
8.25% to 25% every quarter with the balance being released by October
14, 2000. No performance criteria must be met in order for the shares
to be released other than that the employee remain with the Company
during the period these shares are released from escrow.
The amounts related to the employment contracts and the Employee
Performance Incentive Plan have been included in deferred charges
(note 1(d)) on the balance sheet. For the fiscal year ended December
31, 1999, $80,023 (1998 - $65,651; 1997 - $51,073) of the deferred
charges were amortized to income.
(d) Share purchase options:
The Company has reserved common shares, to a maximum of 20% of the
total number of outstanding from time-to-time, pursuant to an Employee
Stock Option Plan. The purpose of the Plan is to assist eligible
employees to participate in the growth and development of the Company.
Options to purchase common shares of the Company under the Plan may be
granted by the Board of Directors to certain full-time employees of
the Company. These options vest over a period of three years and
expire five years from the date of grant. To December 31, 1999, all
stock options granted by the Company are exercisable in Canadian
dollars.
A summary of the status of the Company's stock option plan as of
December 31, 1999, 1998 and 1997 and changes during the years ending
on those dates is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- ---------------------------- --------------------------
Weighted Weighted Weighted
average average average
Shares exercise price Shares exercise price Shares exercise price
--------- -------------- --------- -------------- --------- --------------
U.S.$/Cdn.$ U.S.$/Cdn.$ U.S.$/Cdn.$
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year 2,087,921 $ 0.82/1.26 1,589,751 $ 0.65/1.00 - $ - /-
Granted 1,829,584 5.37/7.75 912,458 1.41/2.16 1,618,755 0.66/1.01
Exercised (604,535) 0.94/1.36 - - /- - - /-
Cancelled (221,895) 0.93/1.34 (414,288) 0.82/1.25 (29,004) 0.66/1.01
--------- ----------- --------- ----------- --------- -----------
Outstanding,
end of year 3,091,075 $ 3.52/5.08 2,087,921 $ 0.82/1.26 1,589,751 $ 0.65/1.00
========= =========== ========= =========== ========= ===========
Options exercisable,
end of year 841,462 $ 0.87/1.25 797,958 $ 0.75/1.15 82,500 $ 0.65/1.00
========= =========== ========= =========== ========= ===========
</TABLE>
F-14
<PAGE> 55
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 8
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
6. SHARE CAPITAL (CONTINUED):
(d) Share purchase options (continued):
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
---------------------------------------------- -----------------------------
Number Weighted Weighted Number
outstanding, average average exercisable, Weighted
Range of December 31, remaining exercise December 31, average
exercise prices 1999 contractual life price 1999 exercise price
------------ ---------------- ------------ ------------ --------------
U.S.$(Cdn.$) U.S.$/Cdn.$ U.S.$/Cdn.$
<S> <C> <C> <C> <C> <C>
$0.69 to $1.38
($1.00 to $1.99) 1,307,500 3.03 years $ 0.79/1.14 772,272 $ 0.78/1.12
$1.39 to $2.07
($2.00 to $2.99) 123,668 3.32 1.79/2.58 60,856 1.79/2.58
$2.08 to $2.76
($3.00 to $3.99) 704,360 4.63 2.60/3.76 8,334 2.47/3.57
$2.77 to $3.46
($4.00 to $4.99) 3,223 4.83 2.77/4.00 - - /-
$3.47 to $5.54
($5.00 to $7.99) 146,003 4.84 3.78/5.45 - - /-
$7.62 to $9.56
($11.00 to $13.80) 806,321 4.92 8.96/12.93 - - /-
--------- ---- ----------- ------- -----------
$0.69 to $9.56
($1.00 to $13.80) 3,091,075 3.99 $ 3.52/5.08 841,462 $ 0.87/1.25
========= ==== =========== ======= ===========
</TABLE>
(e) Share purchase warrants:
In June and July 1999, the Company issued a total of 2,224,647 special
warrants at a price of $2.21 (Cdn. $3.25) per special warrant which
were exercisable into 2,224,647 common shares and 1,112,324 common
share purchase warrants. Each purchase warrant entitles the holder
thereof to purchase one common share at a price of $2.56 (Cdn. $3.75)
per common share until the expiration date of the purchase warrants on
June 30, 2000. As at December 31, 1999, all of the special warrants
have been exercised and 811,747 share purchase warrants remain
outstanding.
In accordance with an agency agreement dated June 18, 1999, the
Company issued an additional 212,465 non-transferable purchase
warrants to the agents as partial compensation for services rendered
in connection with the Company's offering of special warrants. Each
purchase warrant is exercisable into one common share at $2.21 (Cdn.
$3.25) per share and expires on June 30, 2000. As at December 31,
1999, 143,414 of these share purchase warrants remain outstanding.
7. INCOME TAXES:
The Company has non-capital losses carried forward of approximately
$4,677,000 which are available to reduce future years' income for income
tax purposes to 2006. The Company also has available unclaimed Scientific
Research and Experimental Development Expenditures of $1,766,900 that may
be carried forward indefinitely and used to reduce future taxable income.
The benefit of these losses and unclaimed expenditures have not been
recorded in the accounts.
F-15
<PAGE> 56
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 9
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
8. LEASE OBLIGATIONS:
The Company has entered into lease agreements for premises and equipment.
These leases have been treated as operating leases for accounting purposes.
The annual payment commitments are as follows:
<TABLE>
<S> <C>
2000 $ 303,379
2001 331,283
2002 333,643
2003 179,421
2004 127,233
$ 1,274,959
</TABLE>
During the year ended December 31, 1999, the Company made operating lease
payments totalling approximately $160,000 (1998 - $117,900; 1997 -
$124,400).
9. CONTINGENCIES:
The Company has been notified of certain claims. No legal action has yet
proceeded on these claims and, in the opinion of management, these claims
are without substantial merit and no provision has been made for them in
the accounts.
10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:
(a) Fair values:
The carrying amounts of cash and cash equivalents, accounts receivable
and accounts payable and accrued liabilities approximate fair values
due to their ability for prompt liquidation and short-term to
maturity.
(b) Credit risk:
The Company is exposed to credit risk only with respect to
uncertainties as to timing and amount of collectibility of accounts
receivable. At December 31, 1999, three customers (1998 - two)
represented approximately 78% (1998 - 75%) of accounts receivable.
These receivables are from large reputable customers with an
established credit history with the Company. Trade receivables are
covered by trade indemnity insurance.
(c) Foreign currency risk:
Foreign currency risk is the risk to the Company's earnings that
arises from fluctuations in foreign currency exchange rates, and the
degree of volatility of these rates. A substantial portion of the
Company's sales are derived in United States dollars and accordingly
the majority of the Company's accounts receivable is denominated in
United States dollars. The Company has not entered into foreign
exchange contracts to hedge against gains or losses from foreign
exchange fluctuations.
F-16
<PAGE> 57
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 10
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
11. SEGMENTED INFORMATION:
(a) Industry segments:
The Company has two reportable segments based on its two distinct
product lines, being the Company's wireless and imaging products.
<TABLE>
<CAPTION>
Total all
reporting
1999 Wireless Imaging segments Corporate Total
---------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Customer sales 355,001 7,175,330 7,530,331 - 7,530,331
Research and development 1,371,007 1,547,565 2,918,572 - 2,918,572
Depreciation expense 160,390 162,904 323,294 - 323,294
Operating profit (loss) (3,891,727) 572,802 (3,318,925) - (3,318,925)
Segment assets 843,842 2,817,460 3,661,302 4,393,190 8,054,492
Capital expenditures 406,387 229,067 635,454 - 635,454
</TABLE>
<TABLE>
<CAPTION>
Total all
reporting
1999 Wireless Imaging segments Corporate Total
---------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Customer sales 170,911 9,375,897 9,546,808 - 9,546,808
Research and development 994,670 1,168,944 2,163,614 - 2,163,614
Depreciation expense 89,900 119,126 209,026 - 209,026
Operating profit (loss) (2,724,899) 1,418,150 (1,306,749) - (1,306,749)
Segment assets 298,963 5,200,314 5,499,277 1,188,664 6,687,941
Capital expenditures 262,235 125,602 387,837 - 387,837
</TABLE>
<TABLE>
<CAPTION>
Total all
reporting
1999 Wireless Imaging segments Corporate Total
---------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Customer sales 85,471 3,410,878 3,496,349 - 3,496,349
Research and development 785,447 537,659 1,323,106 - 1,323,106
Depreciation expense 88,732 83,511 172,243 - 172,243
Operating profit (loss) (1,693,913) (33,580) (1,727,493) - (1,727,493)
Segment assets 118,574 993,434 1,112,008 513,368 1,625,376
Capital expenditures 109,222 89,198 198,420 - 198,420
</TABLE>
(b) Geographic information:
All of the Company's assets are located in Canada. The Company earned
revenues attributed to the following countries based on the location
of the customer:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- --------------
<S> <C> <C> <C>
United States $ 6,822,623 $ 8,684,657 $ 2,640,598
Europe 444,337 732,255 497,051
Canada and other 263,371 129,896 358,700
--------------- --------------- --------------
$ 7,530,331 $ 9,546,808 $ 3,496,349
=============== =============== ==============
</TABLE>
F-17
<PAGE> 58
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 11
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
11. SEGMENTED INFORMATION (CONTINUED):
(c) Major customers:
For the year ended December 31, 1999, revenue from two customers of
the Company's imaging products represents approximately $3,776,233
(1998 - $6,465,393; 1997 - $875,556) of the Imaging products' total
revenue. No other customer represents in excess of 10% of total
revenue.
12. SUBSEQUENT EVENTS:
(a) The Company issued 251,327 common shares at $2.56 (Cdn. $3.75) per
share and 37,000 common shares at $2.21 (Cdn. $3.25) per share
pursuant to the exercise of share purchase and agents warrants,
respectively.
(b) The Company issued 210,220 common shares at prices ranging from $0.69
(Cdn. $1.00) to $1.77 (Cdn. $2.55) pursuant to the exercise of
employee stock options.
(c) Pursuant to the Company's Employee Stock Option Plan, 236,313 share
options were issued with exercise prices ranging between $11.19 (Cdn.
$16.15) and $19.09 (Cdn. $27.55).
13. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in Canada. These
principles differ in the following material respects from those in the
United States:
(a) Net loss and loss per share:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net loss in accordance with Canadian GAAP $ (3,288,251) $ (1,206,266) $ (1,677,032)
Adjustment for foreign currency translation
differences on net loss calculated in
accordance with Canadian GAAP (g) - (39,561) (177,179)
Adjustment for amalgamation costs (f) - - (82,094)
Adjustment for stock based compensation
relating to stock options issued to
non-employees (e)(i) (21,782) (165,166) (10,287)
Adjustment for stock based compensation
relating to escrow shares (e)(ii) (34,293) (29,059) (24,200)
-------------- -------------- --------------
Net loss in accordance with
United States GAAP $ (3,344,326) $ (1,440,052) $ (1,970,792)
============== ============== ==============
</TABLE>
F-18
<PAGE> 59
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 12
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
13. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(CONTINUED):
(a) Net loss and loss per share (continued):
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Weighted average number of shares
outstanding in accordance with Canadian
GAAP 15,963,036 12,912,578 8,861,473
Adjustment for weighted average number of
contingently issued shares
pursuant to employee incentive plan (h) (249,188) (444,877) (338,356)
Adjustment for weighted average number of
contingently issued shares
pursuant to employment agreement (h) - (335,000) (453,703)
------------- ------------- -------------
Weighted average number of shares
outstanding in accordance with US GAAP 15,713,848 12,132,701 8,069,414
============= ============= =============
Net loss per share $ (0.21) $ (0.12) $ (0.24)
============= ============= =============
</TABLE>
Comprehensive income (loss) for the years ended December 31, 1999, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net loss in accordance with U.S. GAAP $ (3,344,326) $ (1,440,052) $ (1,970,792)
Other comprehensive income (loss):
Foreign currency translation adjustment 272,067 (318,563) (41,586)
-------------- -------------- --------------
Comprehensive income (loss) $ (3,072,259) $ (1,758,615) $ (2,012,378)
============== ============== ==============
</TABLE>
F-19
<PAGE> 60
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 13
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
13. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(CONTINUED):
(b) Balance sheet:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
Canadian United States Canadian United States
GAAP GAAP GAAP GAAP
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Deferred charges
((e)(ii)) $ 34,100 $ - $ 141,349 $ -
============= ============= ============ =============
SHAREHOLDERS' EQUITY
Share capital 12,526,949 13,070,216 6,798,707 7,341,974
Additional paid in capital from
stock based compensation
relating to stock options
issued to non-employees
((e)(i)) - 206,303 - 206,303
Additional paid in capital from
stock based compensation
relating to escrow shares
((e)(ii)) - 107,348 - 122,287
Deferred compensation
related to stock options
issued to non-employees
((e)(i)) - (7,480) - (30,854)
Deferred compensation
related to shares held in
trust pursuant to Employee
Incentive Plan ((e)(ii)) - (50,796) - (142,586)
Deferred compensation related
to shares held in escrow
pursuant to employment
contracts ((e)(ii)) - - - (80,670)
Deficit (5,776,773) (6,250,800) (2,488,522) (2,906,473)
Accumulated other
comprehensive income (loss):
Cumulative translation
amount 289,643 (69,072) - (341,145)
------------- ------------- ------------ ------------
$ 7,039,819 $ 7,005,719 $ 4,310,185 $ 4,168,836
============= ============= ============ ============
</TABLE>
F-20
<PAGE> 61
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 14
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
13. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(CONTINUED):
(c) Cash flow statement:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash used by operating activities
in accordance with Canadian GAAP $ (1,928,091) $ (3,213,069) $ (1,149,598)
Adjustment for foreign currency
translation (g) - (105,376) (121,456)
-------------- -------------- --------------
Cash flows used by operating activities
in accordance with U.S. GAAP (1,928,091) (3,318,445) (1,271,054)
Cash flows from investing activities:
Cash used by investing activities in
accordance with Canadian GAAP (635,454) (387,837) (193,662)
Adjustment for foreign currency
translation (g) - (12,719) (20,460)
-------------- -------------- --------------
Cash flows used by investing activities
in accordance with U.S. GAAP (635,454) (400,556) (214,122)
Cash flows from financing activities:
Cash used by investing activities in
accordance with Canadian GAAP 5,760,720 4,351,350 1,298,905
Adjustment for foreign currency
translation (g) - 280,469 113,306
-------------- -------------- --------------
Cash flows used by investing activities
in accordance with U.S. GAAP 5,760,720 4,631,819 1,412,211
Effect of exchange gains on cash and cash
equivalents held in a foreign currency
in accordance with U.S. GAAP 114,596 (183,439) 9,588
-------------- -------------- --------------
Increase (decrease) in cash and cash
equivalents in accordance with U.S.
GAAP 3,311,771 729,379 (63,377)
Cash and cash equivalents, beginning of year 1,047,319 317,940 381,317
-------------- -------------- --------------
Cash and cash equivalents, end of year $ 4,359,090 $ 1,047,319 $ 317,940
============== ============== ==============
</TABLE>
(d) Income taxes:
United States accounting principles require the use of the asset and
liability method of accounting for income taxes whereby deferred tax
assets or liabilities are recognized for estimated future tax effects
attributable to differences between the financial statement carrying
amount of existing assets and liabilities and their respective tax
bases, measured using the provisions of enacted tax laws expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment dates.
A net deferred tax asset is reduced by a valuation allowance to the
extent that it is not more likely than not that the deferred tax asset
will be realized during the carry forward period. As the net
calculated deferred tax asset of the Company would be fully reduced by
a valuation allowance, the application of United States accounting
principles does not result in a material difference from Canadian
accounting principles.
F-21
<PAGE> 62
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 15
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
13. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(CONTINUED):
(d) Income taxes (continued):
The tax effect of the significant temporary differences which would
comprise tax assets and liabilities, at December 31, 1999 and 1998 for
United States GAAP purposes are as follows:
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
Deferred tax assets:
Amalgamation costs $ 14,368 $ 20,325
Capital assets, principally due to differences
in depreciation - 26,255
Net operating loss and scientific research and
development expenditures carry forwards 2,939,707 1,313,344
-------------- -------------
Total gross deferred tax assets 2,954,075 1,359,924
Less valuation allowance (2,850,033) (1,359,924)
-------------- -------------
Total deferred tax asset 104,042 -
Deferred tax liability:
Capital assets, principally due to differences in
depreciation (104,042) -
-------------- -------------
Net deferred tax asset $ - $ -
============== =============
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent on the generation of
future income during the periods in which those temporary differences
become deductible.
(e) Stock-based compensation:
(i) Stock options:
The Company has adopted the disclosure only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("FAS 123") for stock options
granted to employees and has elected to continue measuring
compensation costs using the intrinsic value based method of
accounting under APB Opinion 25.
Under the intrinsic value based method, employee stock option
compensation is the excess, if any, of the quoted market value of
the stock at the date of the grant over the amount an optionee
must pay to acquire the stock. As the exercise price of the
options has been determined in accordance with the applicable
regulations of the Toronto Stock Exchange which approximates the
market value at the date of grant, the Company has determined
that this accounting policy has no significant effect, with
respect to employee stock options, on its results of operations.
F-22
<PAGE> 63
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 16
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
13. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(CONTINUED):
(e) Stock-based compensation (continued):
(i) Stock options (continued):
Had compensation cost for employee stock options been determined
based on fair value at the grant dates of the stock options and
charged to earnings over the vesting period of the options
consistent with the measurement provision of FAS 123, net loss
under United States GAAP would have been charged an additional
$382,689 for the year ended December 31, 1999 (1998 - $270,685;
1997 - $11,126) . Net loss would have been $3,727,015 (1998 -
$1,710,737; 1997 - $1,981,918) and net loss per share in
accordance with U.S. GAAP would have been $0.24 (1998 - $0.14;
1997 - $0.25). The fair value of these options has been
determined using the Black-Sholes option pricing formula with the
following factors: expected dividend yield - 0%; expected stock
price volatility - 175% (1998 - 117%; 1997 - 82%); risk fee
interest rate - 5.01% (1998 - 5.1%; 1997 - 5%); expected life of
options - 5 years.
For United States GAAP purposes, stock options issued to
non-employees for services rendered would be considered
compensation expense and charged to earnings over the expected
service period which normally is the period during which the
options vest. The amount of compensation costs is calculated
based on the fair value of the options at the grant date as
calculated using the Black-Sholes option pricing formula as
described above. Using this method of measuring compensation
costs would result in additional compensation expense of $21,782
for the year ended December 31, 1999 (1998 - $165,166; 1997 -
$10,287) and deferred compensation of $7,480 as at December 31,
1999 (1998 - $30,854).
(ii) Shares held in escrow:
Certain shares held in escrow pursuant to the employee incentive
program and employment contracts were recorded as compensation
expense under Canadian GAAP at a deemed value of $0.23 (Cdn.
$0.35) per share based on their fair market value at the time of
issue discounted for escrow restrictions. The total compensation
cost was recorded as deferred charges on the balance sheet and is
being amortized as the shares are released from escrow. For
United States GAAP purposes, deferred stock based compensation
would be shown as a deduction in the shareholders' equity section
of the balance sheet. Accordingly, deferred charges of $34,100
and $141,349 as at December 31, 1999 and 1998, respectively,
would be included as deferred compensation in the shareholders'
equity section of the balance sheet.
For United States GAAP purposes, any restrictions on the
employee's right to receive these shares would not be taken into
account for purposes of calculating compensation costs and would
result in additional compensation costs. As a result, additional
compensation expense of $34,293 would be recorded for the year
ended December 31, 1999 (1998 - $29,059; 1997 - $24,200) and the
resulting balance of deferred compensation expense of $50,796
(1998 - $223,256) would be reflected as a deduction in
shareholders' equity which is being amortized over the period the
shares are released from escrow.
F-23
<PAGE> 64
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 17
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
13. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(CONTINUED):
(e) Stock-based compensation (continued):
(iii) Weighted average fair value:
Financial statements prepared in accordance with U.S. GAAP
require the disclosure of weighted average grant date fair value
of stock options granted in the year by the Company. Weighted
average grant date fair values for options granted during the
years ended December 31, 1999, 1998 and 1997 are $5.49 (Cdn.
$7.92), $1.24 (Cdn. $1.90), and $0.35 (Cdn. $0.53) respectively.
(f) Amalgamation costs:
United States GAAP requires that expenses incurred to affect a
business combination accounted for using the pooling of interests
method be accounted for as a charge against income of the combining
entities in the period the costs were incurred. The amount to be
expensed under U.S. GAAP of $82,094 differs from that charged under
Canadian GAAP as recognized in the statement of deficit due to
differences in methods of foreign currency translation as described in
(g).
(g) Foreign currency translation:
These financial statements are in U.S. dollars. Prior to 1999, these
financial statements were reported in Canadian dollars. In accordance
with Canadian GAAP, the comparative figures presented for 1998 and
1997 have been translated at the rate in effect on December 31, 1998.
For U.S. GAAP, the prior year's comparative figures should be restated
retroactively as if the Company had always reported in U.S. dollars.
As a result, net loss and cash flows from operating, investing and
financing activities for the years ended December 31, 1998 and 1997
would be adjusted to translate the Canadian dollar functional currency
financial statements to U.S. dollars at the rates in effect on the
transaction dates with offsetting adjustments to the cumulative
translation account.
For U.S. GAAP purposes, foreign exchange gains or losses on
translation of foreign currency denominated transactions and resulting
assets and liabilities into the Canadian dollar functional currency
are included in loss from operations. Accordingly, loss from
operations for the years ended December 31, 1999, 1998 and 1997 would
be $3,406,455, $1,296,961 and $1,881,155, respectively.
(h) Earnings (loss) per share:
The Company has adopted Statement of Financial Accounting Standards
No. 128 ("FAS 128") Earnings per Share for United States GAAP
purposes. Under FAS 128, basic earnings (loss) per share, similar to
Canadian GAAP, is based on the weighted average number of shares
outstanding during the year. Diluted earnings (loss) per share is
based on the weighted average number of shares outstanding during the
year plus common stock equivalents.
F-24
<PAGE> 65
INFOWAVE SOFTWARE INC.
Notes to Financial Statements, page 18
(expressed in U.S. dollars)
Years ended December 31, 1999 and 1998
13. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(CONTINUED):
(h) Earnings (loss) per share (continued):
For United States GAAP purposes, 140,625 shares held in escrow
pursuant to the employment contracts and employee incentive plan (note
6(c)) as at December 31, 1999 (1998 - 618,083; 1997 - 966,666) are
considered contingently issuable. Accordingly, these shares are
excluded from the weighted average number of shares for purposes of
loss per share calculations. Shares released from escrow during the
year are included in the calculation of weighted average shares
outstanding for purposes of the calculation of loss per share from the
beginning of the month during which the shares were released resulting
in adjustments for contingently issued shares pursuant to employee
incentive plan of 249,188, 444,877 and 338,756 shares for the years
ended December 31, 1999, 1998 and 1997, respectively, and adjustments
for contingently issued shares pursuant to employment contracts of
nil, 335,000 and 453,703 shares for the years ended December 31, 1999,
1998 and 1997, respectively.
Schedule II: Valuation and Qualifying Accounts
INFOWAVE SOFTWARE INC.
STATEMENT OF VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1999
USD
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Effect of
Foreign
Charged Exchange
Beginning to costs on End of
of Year and Conversion Year
Description Balance Expenses Deductions to USD Balance
Allowance for Doubtful Accounts
Year ended December 31, 1999 0 11,819 0 345 12,164
Year ended December 31, 1998 0 0 0 0 0
Year ended December 31, 1997 16,335 0 16,335 0 0
Sales Returns Allowance
Year ended December 31, 1999 39,204 0 0 2,372 41,575
Year ended December 31, 1998 16,335 22,869 0 39,204
Year ended December 31, 1997 16,335 0 0 16,335
Reserve for Redundant Stock
Year ended December 31, 1999 49,044 11,570 21,709 2,667 41,572
Year ended December 31, 1998 81,673 49,044 81,673 49,044
Year ended December 31, 1997 88,860 0 7,187 81,673
</TABLE>
INFOWAVE SOFTWARE INC.
STATEMENT OF VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1999
CAD
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Effect of
Foreign
Charged Exchange
Beginning to costs on End of
of Year and Conversion Year
Description Balance Expenses Deductions to USD Balance
Allowance for Doubtful Accounts
Year ended December 31, 1999 0 17,556 17,556
Year ended December 31, 1998 0 0 0 0 0
Year ended December 31, 1997 25,000 0 25,000 0 0
Sales Returns Allowance
Year ended December 31, 1999 60,000 60,000
Year ended December 31, 1998 25,000 35,000 60,000
Year ended December 31, 1997 25,000 25,000
Reserve for Redundant Stock
Year ended December 31, 1999 75,062 17,186 32,248 60,000
Year ended December 31, 1998 125,000 75,062 125,000 75,062
Year ended December 31, 1997 136,000 11,000 125,000
</TABLE>
F-25
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
3.1* Memorandum and Articles of registrant
4.1* Employee Incentive Plan dated April 28, 1997, as supplemented September 25,
1997
4.2* Special Warrant Indenture dated April 20, 1998 between the Corporation and Montreal Trust
Company of Canada
4.3 Special Warrant Indenture dated June 30, 1999 between the Corporation and Montreal Trust
Company of Canada
4.4 Stock Option Plan, as amended (incorporated by reference to the Corporation's Form 6-K dated
October 21, 1999)
10.1* Investor Relations Agreement dated September 1, 1998 between the Corporation and IRG Investor
Relations Group Ltd.
10.2* Investor Relations Agreement dated September 1, 1998 between the Corporation and Staff
Financial Group Ltd. and 549452 BC Ltd.
10.3* Loan Facility dated October 29, 1998 with a Canadian chartered bank
10.4 Lease Agreement dated February 12, 1998 between Riocan Holdings Inc. and the Corporation
10.5 Lease Agreement dated November 23, 1999 between Bedford Property Investors, Inc. and the
Corporation
+10.6* Corporate Development Agreement dated October 26, 1998 between the Corporation and Capital
Ridge Communications Inc. (formerly "Channel One Systems Corp.")
10.7* Strategic Partnership Agreement dated March 6, 1998 between the Corporation and BellSouth
Wireless Data
10.8* Development Agreement dated March 4, 1998 between the Corporation
and Hewlett-Packard 10.9* Source Code License Agreement dated March 31,
1998 between the Corporation and DTS 10.10* Source Code License Agreement
dated June 9, 1998 between the Corporation and Wynd
Communications Corporation
10.11* Source Code License Agreement dated November 13, 1997 between the Corporation and Apple
Computers
10.12* OEM License Agreement dated December 5, 1997 between the Corporation and Certicom Corp.
10.13* Letter Agreement dated April 20, 1998 between the Corporation and Lexmark International, Inc.
+10.14* Employment Agreement dated May 2, 1991 between the Corporation and Jim McIntosh
+10.15* Employment Agreement dated May 23, 1997 between the
Corporation and Bijan Sanii
+10.16 Employment Agreement dated September 16, 1999 between the Corporation and Todd Carter
10.17* Agency Agreement dated March 31, 1998 between the Corporation, Canaccord Capital Corporation
and Yorkton Securities Inc.
10.18* Consulting Agreement dated July 4, 1997 between the Corporation and GWM Enterprises Ltd.
10.19 Agency Agreement dated June 18, 1999 between the Corporation, Canaccord Capital Corporation,
Yorkton Securities , Inc., Sprott Securities Limited and Taurus Capital Markets Ltd.
23.1 Consent of KPMG LLP, independent accountants
27.1 Financial Data Schedule
</TABLE>
* Incorporated by reference to the Corporation's Registration Statement on
Form 20-F (No. 0-29944).
+ Indicates management contract.
<PAGE> 1
EXHIBIT 4.3
SPECIAL WARRANT INDENTURE
PROVIDING FOR THE ISSUE OF
SPECIAL WARRANTS
BETWEEN
INFOWAVE SOFTWARE, INC.
- AND -
MONTREAL TRUST COMPANY
OF CANADA
DATED AS OF JUNE 30, 1999
BLAKE, CASSELS & GRAYDON
Suite 2600, 595 Burrard Street
Vancouver, British Columbia
V7X 1L3
SWINTON & COMPANY
1000 - 840 Howe Street
Vancouver, British Columbia
V6Z 2M1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
INTERPRETATION
1.1 Definitions.............................................................................. 1
1.2 Gender and Number........................................................................ 5
1.3 Interpretation not Affected by Headings, etc............................................. 5
1.4 Day not a Business Day................................................................... 5
1.5 Time of the Essence...................................................................... 5
1.6 Currency................................................................................. 5
1.7 Applicable Law........................................................................... 5
ARTICLE II
ISSUE OF SPECIAL WARRANTS
2.1 Issue of Special Warrants................................................................ 5
2.2 Terms of Special Warrants................................................................ 5
2.3 Warrant Holder not a Shareholder......................................................... 6
2.4 Special Warrants to Rank Pari Passu...................................................... 6
2.5 Form of Special Warrants................................................................. 6
2.6 Signing of Warrant Certificates.......................................................... 6
2.7 Certification by the Trustee............................................................. 6
2.8 Issue in Substitution for Warrant Certificates Lost, etc................................. 7
2.9 Exchange of Warrant Certificates......................................................... 7
2.10 Transfer of Special Warrants............................................................. 7
2.11 Charges for Exchange or Transfer......................................................... 8
2.12 Cancellation of Surrendered Special Warrants............................................. 8
2.13 U.S. Legends............................................................................. 8
2.14 Certain Transfers........................................................................ 9
ARTICLE III
EXERCISE OF SPECIAL WARRANTS
3.1 Method of Exercise of Special Warrants................................................... 10
3.2 Effect of Exercise of Special Warrants................................................... 10
3.3 Partial Exercise of Special Warrants; Fractions.......................................... 11
3.4 Expiration of Special Warrants........................................................... 12
3.5 Accounting and Recording................................................................. 12
3.6 Deemed Exercise.......................................................................... 12
3.7 Securities Restrictions.................................................................. 12
ARTICLE IV
ESCROW AND DIVIDEND FUNDS
4.1 Deposit of Escrow Funds with Trustee..................................................... 13
4.2 Administration of Escrow Funds........................................................... 13
</TABLE>
<PAGE> 3
-ii-
<TABLE>
<S> <C>
4.3 Deposit of Escrow Funds.................................................................. 13
4.4 Conditions to Release of Escrow Funds.................................................... 13
4.5 Conditions to Release of Dividend Funds and Property..................................... 14
4.6 Administration of Dividend Funds and Property............................................ 14
ARTICLE V
ADJUSTMENT OF NUMBER OF COMMON SHARES
5.1 Adjustment of Number of Common Shares.................................................... 15
5.2 Entitlement to Shares on Exercise of Special Warrant..................................... 16
5.3 No Adjustment for Stock Options.......................................................... 17
5.4 Determination by Corporation's Auditors.................................................. 17
5.5 Proceedings Prior to any Action Requiring Adjustment..................................... 17
5.6 Certificate of Adjustment................................................................ 17
5.7 Notice of Special Matters................................................................ 17
5.8 No Action after Notice................................................................... 17
5.9 Protection of Trustee.................................................................... 18
ARTICLE VI
RIGHTS AND COVENANTS OF THE CORPORATION
6.1 Optional Purchases by the Corporation.................................................... 18
6.2 General Covenants........................................................................ 18
6.3 Trustee's Remuneration and Expenses...................................................... 20
6.4 Securities Qualification Requirements.................................................... 20
6.5 Performance of Covenants by Trustee...................................................... 20
ARTICLE VII
ENFORCEMENT
7.1 Suits by Warrant Holders................................................................. 20
7.2 Immunity of Shareholders, etc............................................................ 21
7.3 Limitation of Liability.................................................................. 21
7.4 Waiver of Default........................................................................ 21
ARTICLE VIII
MEETINGS OF WARRANT HOLDERS
8.1 Right to Convene Meetings................................................................ 21
8.2 Notice................................................................................... 22
8.3 Chairman................................................................................. 22
8.4 Quorum................................................................................... 22
8.5 Power to Adjourn......................................................................... 22
8.6 Show of Hands............................................................................ 22
8.7 Poll and Voting.......................................................................... 23
8.8 Regulations.............................................................................. 23
8.9 Corporation and Trustee May be Represented............................................... 24
</TABLE>
<PAGE> 4
-iii-
<TABLE>
<S> <C>
8.10 Powers Exercisable by Extraordinary Resolution........................................... 24
8.11 Meaning of Extraordinary Resolution...................................................... 25
8.12 Powers Cumulative........................................................................ 26
8.13 Minutes.................................................................................. 26
8.14 Instruments in Writing................................................................... 26
8.15 Binding Effect of Resolutions............................................................ 26
8.16 Holdings by Corporation Disregarded...................................................... 26
ARTICLE IX
SUPPLEMENTAL INDENTURES
9.1 Provision for Supplemental Indentures for Certain Purposes............................... 27
9.2 Successor Corporations................................................................... 27
ARTICLE X
CONCERNING THE TRUSTEE
10.1 Trust Indenture Legislation.............................................................. 28
10.2 Rights and Duties of Trustee............................................................. 28
10.3 Indemnification.......................................................................... 29
10.4 Evidence, Experts and Advisers........................................................... 29
10.5 Actions by Trustee to Protect Interest................................................... 30
10.6 Trustee Not Required to Give Security.................................................... 30
10.7 Protection of Trustee.................................................................... 30
10.8 Replacement of Trustee; Successor by Merger.............................................. 30
10.9 Conflict of Interest..................................................................... 31
10.10 Acceptance of Trust...................................................................... 31
10.11 Trustee Not to be Appointed Receiver..................................................... 31
ARTICLE XI
GENERAL
11.1 Notice to the Corporation and the Trustee................................................ 32
11.2 Notice to Warrant Holders................................................................ 32
11.3 Ownership of Special Warrants............................................................ 33
11.4 Counterparts............................................................................. 33
11.5 Satisfaction and Discharge of Indenture.................................................. 33
11.6 Provisions of Indenture and Special Warrants for the Sole Benefit of Parties and
Warrant Holders.......................................................................... 34
11.7 Common Shares or Special Warrants Owned by the Corporation or its Subsidiaries -
Certificate to be Provided............................................................... 34
11.8 Events of Default........................................................................ 35
</TABLE>
<PAGE> 5
THIS SPECIAL WARRANT INDENTURE is made as of the 30th day of June,
1999.
BETWEEN:
INFOWAVE SOFTWARE, INC., a corporation incorporated under the laws
of British Columbia, with its registered and records office in the
City of Vancouver, British Columbia (hereinafter referred to as the
"Corporation")
OF THE FIRST PART
AND:
MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated under
the laws of Canada and authorized to carry on business in all
Provinces of Canada (hereinafter referred to as the "Trustee")
OF THE SECOND PART
WHEREAS:
A. the Corporation is proposing to issue a minimum of 1,230,770 and up
to 2,750,000 Special Warrants in the manner herein set forth;
B. all acts and deeds necessary have been done and performed to make
the Special Warrants, when issued as provided in this Indenture, legal, valid
and binding upon the Corporation with the benefits and subject to the terms of
this Indenture; and
C. the foregoing recitals are made as representations and statements of
fact by the Corporation and not by the Trustee;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS
In this Indenture, including the recitals and schedules hereto, and in all
indentures supplemental hereto:
(a) "Agency Agreement" means the agency agreement dated as of June 18,
1999, between the Corporation and the Agents relating to the
offering of Special Warrants;
(b) "Agents" means Canaccord Capital Corporation, Yorkton Securities
Inc., Sprott Securities Limited and Taurus Capital Markets Ltd.;
(c) "Applicable Legislation" means the provisions of the Company Act
(British Columbia), as from time to time amended, and any statute of
Canada or a province thereof, and the
<PAGE> 6
-2-
regulations and rules under any such named or other statute,
relating to trust indentures or to the rights, duties and
obligations of trustees and of corporations under trust indentures,
to the extent that such provisions are at the time in force and
applicable to this Indenture;
(d) "Business Day" means a day which is not Saturday or Sunday or a
legal holiday in the City of Vancouver, British Columbia;
(e) "Closing Date" means June 30, 1999;
(f) "Common Shares" means common shares of the Corporation as presently
constituted;
(g) "Corporation's Auditors" means a firm of chartered accountants duly
appointed as auditors of the Corporation;
(h) "Counsel" means a barrister or solicitor or a firm of barristers and
solicitors retained by the Trustee or retained by the Corporation
and acceptable to the Trustee;
(i) "Current Market Price" of the Common Shares at any date means the
weighted average closing price for such shares for the period of 20
Trading Days ending immediately prior to such date on the VSE (or if
there is not a closing price on any such days, the average of the
bid and ask prices) or, if on any such days the Common Shares are
not listed on the VSE, on such stock exchange upon which such shares
are listed and as selected by the directors, or, if such shares are
not listed on any stock exchange, then on such over-the-counter
market as may be selected for such purpose by the directors;
(j) "Designated Provinces" means the provinces of British Columbia,
Alberta and Ontario;
(k) "director" means a director of the Corporation for the time being
and, unless otherwise specified herein, reference to action "by the
directors" means action by the directors of the Corporation as a
board or, whenever duly empowered, action by any committee of such
board;
(l) "Dividend Funds" means all cash dividends and other distributions
deposited with the Trustee pursuant to subsection 6.2(i);
(m) "Escrow Funds" means an amount equal to 40% of the gross proceeds
from the sale of Special Warrants less the Agents' commission and
expenses;
(n) "Exercise Date" means, with respect to any Special Warrant, the date
on which the Warrant Certificate representing such Special Warrant
is surrendered for exercise in accordance with Section 3.1 and
includes the date upon which Special Warrants are deemed to be
exercised pursuant to Section 3.6;
(o) "Expiry Date" means, with respect to any Special Warrant, the date
which is the earlier of:
(i) five Business Days after the Qualification Date;
(ii) 330 days after the Closing Date; and
<PAGE> 7
-3-
(iii) the date on which all of the Special Warrants have been
exercised.
(p) "extraordinary resolution" has the meaning set forth in Section
8.11;
(q) "person" means an individual, body corporate, partnership, trust,
trustee, executor, administrator, legal representative or any
unincorporated organization;
(r) "Preliminary Prospectus" means the preliminary prospectus to be
filed with the Securities Commissions and any amendments thereto, in
respect of the distribution of Common Shares upon the exercise of
Special Warrants;
(s) "Property" means all property and securities deposited with the
Trustee pursuant to subsection 6.2(i);
(t) "Prospectus" means the (final) prospectus to be filed with the
Securities Commissions and any amendments thereto, in respect of the
distribution of Common Shares upon the exercise of Special Warrants;
(u) "Purchase Warrants" means non-transferable Common Share purchase
warrants of the Corporation in the form attached hereto as Schedule
"B", with each whole Purchase Warrant entitling the holder to
purchase one Common Share until 4:00 p.m. (Vancouver time) on or
before the date which is one year from the Closing Date at a price
of $3.75 per Common Share, after which time such Purchase Warrants
will expire;
(v) "Qualification Date" means the date that the last of the Securities
Commissions issues a receipt for the Prospectus;
(w) "Qualification Deadline" means 90 days following the Closing Date or
such later date as may be agreed to by the Agents and the
Corporation with notice to the Trustee;
(x) "Receipts" means the receipts for the Prospectus to be issued by
each of the Securities Commissions;
(y) "Securities Commissions" means the securities regulatory authorities
in the Designated Provinces;
(z) "Shareholder" means a holder of record of one or more Common Shares;
(aa) "Special Warrants" means the transferable warrants issued and
certified hereunder and for the time being outstanding entitling the
holder to acquire Common Shares and Purchase Warrants;
(bb) "this Special Warrant Indenture", "this Indenture", "herein",
"hereby", "hereof' and similar expressions mean and refer to this
Indenture and any indenture, deed or instrument supplemental hereto;
and the expressions "Article", "Section", "subsection" and
"paragraph" followed by a number, letter or both mean and refer to
the specified article, section, subsection or paragraph of this
Indenture;
<PAGE> 8
-4-
(cc) "Subscription Funds" means the aggregate amount of the funds paid by
purchasers of the Special Warrants for such Special Warrants equal
to the number of such Special Warrants issued hereunder multiplied
by $3.25;
(dd) "Time of Expiry" means 4:00 p.m. (Vancouver time) on the Expiry
Date;
(ee) "Trading Day" means, with respect to a stock exchange, a day on
which such exchange is open for the transaction of business;
(ff) "United States" means the United States of America, its territories
and possessions, any State of the United States, and the District of
Columbia;
(gg) "Unit" means a unit consisting of one Common Share and one half of
one Purchase Warrant issuable upon exercise or deemed exercise of
one Special Warrant.
(hh) "U.S. Person" means U.S. Person as that term is defined in
Regulation S under the U.S. Securities Act;
(ii) "U.S. Securities Act" means the United States Securities Act of
1933, as amended;
(jj) "VSE" means the Vancouver Stock Exchange;
(kk) "Voting Shares" means shares of the capital stock of any class of
any corporation carrying voting rights under all circumstances,
provided that, for the purposes of such definition, shares which
only carry the right to vote conditionally on the happening of an
event shall not be considered Voting Shares, whether or not such
event shall have occurred, nor shall any shares be deemed to cease
to be Voting Shares solely by reason of a right to vote accruing to
shares of another class or classes by reason of the happening of any
such event;
(ll) "Warrant Agency" means the principal office of the Trustee in the
City of Vancouver and/or such other place or places as may be
designated in accordance with subsection 3.1(c);
(mm) "Warrant Certificate" means a certificate issued on or after the
Closing Date to evidence Special Warrants;
(nn) "Warrant Holders", "Warrantholders" or "holders" without reference
to Common Shares, means the persons who are registered owners of
Special Warrants;
(oo) "Warrant Holders' Request" means an instrument signed in one or more
counterparts by Warrant Holders entitled to acquire in the aggregate
not less than 25% of the aggregate number of Common Shares which
could be acquired pursuant to the exercise of all Special Warrants
then unexercised and outstanding, requesting the Trustee to take
some action or proceeding specified therein: and
(pp) "written order of the Corporation", "written request of the
Corporation", "written consent of the Corporation" and "certificate
of the Corporation" mean, respectively, a written order, request,
consent and certificate signed in the name of the Corporation by its
Chairman, President or a Vice-President, and may consist of one or
more instruments so executed.
<PAGE> 9
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1.2 GENDER AND NUMBER
Unless herein otherwise expressly provided or unless the context otherwise
requires, words importing the singular include the plural and vice versa and
words importing gender include both genders.
1.3 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Indenture into Articles and Sections, the provision
of a table of contents and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Indenture.
1.4 DAY NOT A BUSINESS DAY
In the event that any day on or before which any action is required to be
taken hereunder is not a Business Day, then such action shall be required to be
taken at or before the requisite time on the next succeeding day that is a
Business Day.
1.5 TIME OF THE ESSENCE
Time shall be of the essence of this Indenture.
1.6 CURRENCY
Except as otherwise stated, all dollar amounts herein are expressed in
Canadian dollars.
1.7 APPLICABLE LAW
This Indenture and the Warrant Certificates shall be construed in
accordance with the laws of the Province of British Columbia and the federal
laws applicable therein and shall be treated in all respects as British Columbia
contracts.
ARTICLE II
ISSUE OF SPECIAL WARRANTS
2.1 ISSUE OF SPECIAL WARRANTS
A minimum of 1,230,770 and up to 2,750,000 Special Warrants are hereby
created and authorized to be issued at a price of $3.25 for each Special
Warrant.
2.2 TERMS OF SPECIAL WARRANTS
(a) Each Special Warrant shall entitle the holder thereof, upon exercise
or deemed exercise and at no additional cost to the holder, to
acquire, subject to adjustment in accordance with Article 5 hereof,
one Unit;
(b) No fractional Special Warrants shall be issued or otherwise provided
for hereunder.
<PAGE> 10
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2.3 WARRANT HOLDER NOT A SHAREHOLDER
Except as provided for in subsection 6.2(i), nothing in this Indenture or
in the holding of a Special Warrant or Warrant Certificate or otherwise, shall,
in itself, confer or be construed as conferring upon a Warrant Holder any right
or interest whatsoever as a Shareholder or as any other security holder of the
Corporation, including, but not limited to, the right to vote at, to receive
notice of, or to attend, meetings of shareholders or any other proceedings of
the Corporation, or the right to receive dividends and other distributions.
2.4 SPECIAL WARRANTS TO RANK PARI PASSU
All Special Warrants shall rank pari passu, whatever may be the actual
date of issue thereof.
2.5 FORM OF SPECIAL WARRANTS
The Warrant Certificates (including all replacements issued in accordance
with this Indenture) shall be substantially in the form set out in Schedule "A"
hereto, shall be dated as of the Closing Date, shall bear such distinguishing
letters and numbers as the Corporation may, with the approval of the Trustee,
prescribe, and shall be issuable in any denomination excluding fractions.
2.6 SIGNING OF WARRANT CERTIFICATES
The Warrant Certificates shall be signed by any one of the directors and
officers of the Corporation and need not be under the seal of the Corporation.
The signatures of any such director or officer may be mechanically reproduced in
facsimile and Warrant Certificates bearing such facsimile signatures shall be
binding upon the Corporation as if they had been manually signed by such
director or officer. Notwithstanding that any person whose manual or facsimile
signature appears on any Warrant Certificate as a director or officer may no
longer hold office at the date of such Warrant Certificate or at the date of
certification or delivery thereof, any Warrant Certificate signed as aforesaid
shall, subject to Section 2.7, be valid and binding upon the Corporation and the
holder thereof shall be entitled to the benefits of this Indenture.
2.7 CERTIFICATION BY THE TRUSTEE
(a) The Trustee shall certify Warrant Certificates upon the written
direction of the Corporation. No Warrant Certificate shall be issued
or, if issued, shall be valid for any purpose or entitle the holder
to the benefit hereof until it has been certified by manual
signature by or on behalf of the Trustee substantially in the form
of the certificate set out in Schedule "A" hereto, and such
certification by the Trustee upon any Warrant Certificate shall be
conclusive evidence as against the Corporation that the Warrant
Certificate so certified has been duly issued hereunder and that the
holder is entitled to the benefits hereof.
(b) The certification of the Trustee on Warrant Certificates issued
hereunder shall not be construed as a representation or warranty by
the Trustee as to the validity of this Indenture or the Warrant
Certificates (except the due certification thereof by the Trustee)
and the Trustee shall in no respect be liable or answerable for the
use made of the Warrant Certificate or any of them or of the
consideration therefor except as otherwise specified herein.
<PAGE> 11
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2.8 ISSUE IN SUBSTITUTION FOR WARRANT CERTIFICATES LOST, ETC.
(a) If any Warrant Certificate becomes mutilated or is lost, destroyed
or stolen, the Corporation, subject to applicable law, shall issue
and thereupon the Trustee shall certify and deliver, a new Warrant
Certificate of like tenor as the one mutilated, lost, destroyed or
stolen in exchange for and in place of and upon cancellation of such
mutilated Warrant Certificate, or in lieu of and in substitution for
such lost, destroyed or stolen Warrant Certificate, and the
substituted Warrant Certificate shall be in a form approved by the
Trustee and the Special Warrants evidenced thereby shall be entitled
to the benefits hereof and shall rank equally in accordance with its
terms with all other Special Warrants issued or to be issued
hereunder.
(b) The applicant for the issue of a new Warrant Certificate pursuant to
this Section 2.8 shall bear the cost of the issue thereof and in
case of loss, destruction or theft, shall, as a condition precedent
to the issue thereof, furnish to the Corporation and to the Trustee
such evidence of ownership and of the loss, destruction or theft of
the Warrant Certificate so lost, destroyed or stolen as shall be
satisfactory to the Corporation and to the Trustee, in their sole
discretion, and such applicant may also be required to furnish an
indemnity and a surety bond in amount and form satisfactory to the
Corporation and the Trustee, in their sole discretion, and shall pay
the reasonable charges of the Corporation and the Trustee in
connection therewith.
2.9 EXCHANGE OF WARRANT CERTIFICATES
(a) Any one or more Warrant Certificates representing any number of
Special Warrants may, upon compliance with the reasonable
requirements of the Trustee, be exchanged for one or more other
Warrant Certificates representing the same aggregate number of
Special Warrants as represented by the Warrant Certificate or
Warrant Certificates so exchanged.
(b) Warrant Certificates may be exchanged only at the Warrant Agency or
at any other place that is designated by the Corporation with the
approval of the Trustee. Any Warrant Certificate tendered for
exchange shall be cancelled and surrendered by the Warrant Agency to
the Trustee.
2.10 TRANSFER OF SPECIAL WARRANTS
The Special Warrants may only be transferred on the register kept at the
Warrant Agency by the holder or its legal representatives or its attorney duly
appointed by an instrument in writing in form and execution satisfactory to the
Trustee, upon surrendering to the Trustee the Warrant Certificates representing
the Special Warrants to be transferred and upon compliance with:
(a) the conditions herein;
(b) such reasonable requirements as the Trustee may prescribe;
(c) all applicable securities legislation and requirements of regulatory
authorities including without limitation, any undertaking given to
the VSE as confirmed by the Transferor and Transferee by their
execution of the transfer form attached to the Warrant Certificate;
and
(d) Sections 2.13 and 2.14 hereof, if applicable;
<PAGE> 12
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2.11 CHARGES FOR EXCHANGE OR TRANSFER
Except as otherwise herein provided, a reasonable charge shall be levied
by the Trustee in respect of the exchange of any Warrant Certificate or the
issue of a new Warrant Certificate(s) pursuant hereto provided that the
reimbursement of the Trustee or the Corporation for any and all transfer, stamp
or similar taxes or other governmental charges required to be paid shall be made
by the holder requesting such transfer or exchange as a condition precedent to
such transfer or exchange.
2.12 CANCELLATION OF SURRENDERED SPECIAL WARRANTS
All Warrant Certificates surrendered pursuant to Sections 2.8, 2.9, 2.10,
3.1, 3.3, 3.6 or 6.1 shall be returned to the Trustee for cancellation, shall be
cancelled by the Trustee and, after the expiry of any period of retention
prescribed by law, shall be destroyed by the Trustee or delivered to the
Corporation if it so requests. Upon request by the Corporation, the Trustee
shall furnish to the Corporation a destruction certificate identifying the
Warrant Certificates so destroyed, the number of Special Warrants evidenced
thereby, the number of Common Shares and Purchase Warrants issued pursuant to
such Special Warrants and the details of any Warrant Certificates issued in
substitution or exchange for such Warrant Certificates destroyed.
2.13 U.S. LEGENDS
(a) The Trustee understands and acknowledges that the Special Warrants
and the Common Shares and Purchase Warrants issuable upon exercise
of the Special Warrants have not been and will not be registered
under the U.S. Securities Act.
(b) Each Warrant Certificate originally issued to a U.S. Person or
person in the United States, and each Warrant Certificate issued in
exchange therefor or in substitution thereof, shall bear the
following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "U.S. SECURITIES ACT") OR UNDER ANY STATE SECURITIES
LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES
FOR THE BENEFIT OF THE CORPORATION THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH
RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (C)
PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE U.S.
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE,
OR (D) IN COMPLIANCE WITH CERTAIN OTHER PROCEDURES
SATISFACTORY TO THE CORPORATION. DELIVERY OF HIS CERTIFICATE
MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE,
BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY", MAY BE OBTAINED FROM MONTREAL TRUST COMPANY OF
CANADA UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED
<PAGE> 13
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DECLARATION, IN A FORM SATISFACTORY TO MONTREAL TRUST COMPANY
OF CANADA AND THE CORPORATION, TO THE EFFECT THAT THE SALE OF
THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE
WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT",
provided, that if the Special Warrants or Common Shares issuable upon exercise
of Special Warrants or Common Shares issuable upon exercise of Purchase Warrants
are being sold in accordance with Rule 904 of Regulation S under the U.S.
Securities Act, the legend may be removed if the holder provides a declaration
to the Trustee to the following effect (or as the Corporation may prescribe from
time to time):
"The undersigned (a) acknowledges that the sale of the securities of
Infowave Software, Inc. (the "Corporation") to which this
declaration relates is being made in reliance upon Rule 904 of
Regulation S under the United States Securities Act of 1933, as
amended (the "U.S. Securities Act") and (b) certifies that (1) the
undersigned is not an "affiliate" (as defined in Rule 405 under the
U.S. Securities Act) of the Corporation as defined in the U.S.
Securities Act, (2) the offer of such securities was not made to a
person in the United States and either (i) at the time the buy order
was originated the buyer was outside the United States, or the
seller and any person acting on its behalf reasonably believe that
the buyer was outside the United States or (ii) the transaction was
executed on or through the facilities of the Vancouver Stock
Exchange and neither the seller nor any person acting on its behalf
knows that the transaction has been prearranged with a buyer in the
United States, (3) neither the seller nor any affiliate of the
seller nor any person acting on any of their behalf has engaged or
will engage in any directed selling efforts in the United States in
connection with the offer and sale of such securities. Terms used
herein have the meanings given to them by Regulation S.";
2.14 CERTAIN TRANSFERS
(a) If a Warrant Certificate tendered for transfer bears the legend set
forth in subsection 2.13(b) hereof and the holder thereof has not
obtained the prior written consent of the Corporation, the Trustee
shall not register such transfer unless the holder thereof provides
a declaration to the Trustee to the effect set forth in subsection
2.13(b) hereof.
(b) If a Warrant Certificate tendered for transfer does not bear the
legend set forth in subsection 2.13(b) hereof, the Trustee shall not
register such transfer if it has reason to believe that the
transferee is a U.S. Person, is in the United States or is acquiring
the Special Warrants evidenced thereby for the account or benefit of
a U.S. Person or a person in the United States.
<PAGE> 14
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ARTICLE III
EXERCISE OF SPECIAL WARRANTS
3.1 METHOD OF EXERCISE OF SPECIAL WARRANTS
(a) The holder of any Special Warrant may exercise the right conferred
on such holder to acquire Units by surrendering, after the Closing
Date and prior to the Time of Expiry, to the Warrant Agency the
Warrant Certificate with a duly completed and executed exercise
form. Subject to section 3.6(b), a Warrant Certificate with the duly
completed and executed exercise form referred to in this subsection
3.1(a) shall be deemed to be surrendered only upon personal delivery
thereof or, if sent by mail or other means of transmission, upon
actual receipt thereof at, in each case, the Warrant Agency.
(b) Any exercise form referred to in subsection 3.1(a) shall be signed
by the Warrant Holder and shall specify:
(i) the number of Units which the holder wishes to acquire (being
not more than those which the holder is entitled to acquire
pursuant to the Warrant Certificate(s) surrendered);
(ii) the person or persons in whose name or names such Common
Shares and Purchase Warrants are to be issued;
(iii) the address or addresses of such persons; and
(iv) the number of Units to be issued to each such person if more
than one person is so specified.
If any of the Units subscribed for are to be issued to a person or
persons other than the Warrant Holder, the Warrant Holder shall pay
to the Corporation, or the Warrant Agency, on behalf of the
Corporation, all applicable transfer or similar taxes and the
Corporation shall not be required to issue or deliver certificates
evidencing Common Shares or Purchase Warrants unless or until such
Warrant Holder shall have paid to the Corporation, or the Warrant
Agency on behalf of the Corporation, the amount of such tax or shall
have established to the satisfaction of the Corporation that such
tax has been paid or that no tax is due.
(c) In connection with the exchange of Warrant Certificates and exercise
of Special Warrants and compliance with such other terms and
conditions hereof as may be required, the Corporation has appointed
the Warrant Agency as the agency at which Warrant Certificates may
be surrendered for exchange or transfer or at which Special Warrants
may be exercised. The Corporation may from time to time designate
alternate or additional places as the Warrant Agency and shall give
notice to the Trustee of any change of the Warrant Agency.
3.2 EFFECT OF EXERCISE OF SPECIAL WARRANTS
(a) Upon the exercise of Special Warrants pursuant to Section 3.1 or
upon a deemed exercise pursuant to Section 3.6, and subject to
Section 3.3, the Common Shares and Purchase Warrants subscribed for
or, in the case of a deemed exercise pursuant to Section 3.6, all
<PAGE> 15
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of the Common Shares and Purchase Warrants issuable pursuant to the
Special Warrants deemed to be exercised, shall be deemed to have
been issued and the person or persons to whom such Common Shares and
Purchase Warrants are to be issued shall be deemed to have become
the holder or holders of record of such Common Shares and Purchase
Warrants on the Exercise Date, unless the transfer registers of the
Corporation shall be closed on such date, in which case the Common
Shares and Purchase Warrants subscribed for shall be deemed to have
been issued and such person or persons deemed to have become the
holder or holders of record of such Common Shares and Purchase
Warrants on the date on which such transfer registers are reopened.
(b) Subject to Section 3.6, within five Business Days after the Exercise
Date with respect to a Special Warrant, the Corporation shall cause
the Trustee to mail to the person or persons in whose name or names
the Common Shares and Purchase Warrants so subscribed for have been
issued, as specified in the subscription at the address specified in
such subscription or, if so specified in such subscription, cause to
be delivered to such person or persons at the Warrant Agency where
the Warrant Certificate was surrendered, certificates for the
appropriate number of Common Shares and Purchase Warrants subscribed
for.
3.3 PARTIAL EXERCISE OF SPECIAL WARRANTS; FRACTIONS
(a) The holder of any Special Warrants may acquire a number of Common
Shares and Purchase Warrants less than the number which the holder
is entitled to acquire pursuant to the surrendered Warrant
Certificate(s). In the event of any exercise of a number of Special
Warrants less than the number which the holder is entitled to
exercise, the holder of the Special Warrants upon such exercise
shall, in addition, be entitled to receive, without charge therefor,
a new Warrant Certificate(s) in respect of the balance of the
Special Warrants represented by the surrendered Warrant
Certificate(s) and which were not then exercised.
(b) Notwithstanding anything herein contained including any adjustment
provided for in Article 5, the Corporation shall not be required,
upon the exercise of any Special Warrants, to issue fractions of
Common Shares or to distribute certificates which evidence
fractional Common Shares. In lieu of fractional Common Shares, the
Corporation shall pay to the holder who would otherwise be entitled
to receive fractional Common Shares upon an exercise of Special
Warrants, within ten Business Days after the date upon which the
fractional Common Shares would otherwise have been deemed to have
been issued pursuant to Section 3.2, an amount in lawful money of
Canada equal to the Current Market Price of the Common Shares
multiplied by an amount equal to the fractional interest of Common
Shares such holder would otherwise be entitled to receive upon such
exercise, provided that the Corporation shall not be required to
make any payment, calculated as aforesaid, that is less than $5.00.
The Corporation shall have no obligation or liability to any holder
who would have been, absent the provisions of this Section, entitled
to receive a fractional Purchase Warrant upon the exercise of
Special Warrants held by such holder.
<PAGE> 16
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3.4 EXPIRATION OF SPECIAL WARRANTS
Immediately after the Time of Expiry, all rights under any Special Warrant
in respect of which the right of acquisition herein and therein provided for
shall not have been exercised shall cease and terminate and such Special Warrant
shall be void and of no further force or effect.
3.5 ACCOUNTING AND RECORDING
(a) The Trustee shall promptly account to the Corporation with respect
to Special Warrants exercised. Any securities or other instruments,
from time to time received by the Trustee shall be received in trust
for, and shall be segregated and kept apart by the Trustee in trust
for, the Corporation.
(b) The Trustee shall record the particulars of Special Warrants
exercised, which particulars shall include the names and addresses
of the persons who become holders of Common Shares and Purchase
Warrants on exercise and the Exercise Date in respect thereof. The
Trustee shall provide such particulars in writing to the Corporation
within five Business Days of any request by the Corporation
therefor.
3.6 DEEMED EXERCISE
(a) Immediately prior to the Time of Expiry, all Special Warrants
outstanding shall be deemed to be exercised without any further
action by the Warrant Holders and the Common Shares and Purchase
Warrants shall be issued and made available to the Warrant Holders.
(b) Upon the issuance of Common Shares upon the deemed exercise of the
Special Warrants, the Warrant Certificates will be deemed to have
been surrendered and cancelled without further action on the part of
the Holder, the Trustee or the Corporation. Unless otherwise
directed by the Warrant Holder, the Trustee will then mail the
Common Shares and Purchase Warrants to the Warrant Holder in
accordance with the register maintained at the Warrant Agency.
3.7 SECURITIES RESTRICTIONS
Notwithstanding anything herein contained, Common Shares and Purchase
Warrants will only be issued upon exercise of the Special Warrants in compliance
with the securities laws of any applicable jurisdiction, and without limiting
the generality of the foregoing, in the event that the Special Warrants are
exercised pursuant to Section 3.1 prior to the issuance of the Receipts, the
certificates representing the Common Shares and Purchase Warrants thereby issued
will bear such legend as may, in the opinion of counsel to the Corporation, be
necessary in order to avoid a violation of any securities laws of any province
in Canada or to comply with the requirements of any stock exchange on which the
Common Shares are listed, provided that if, at any time, in the opinion of
counsel to the Corporation, such legends are no longer necessary in order to
avoid a violation of any such laws, or the holder of any such legended
certificate, at the holder's expense, provides the Corporation with evidence
satisfactory in form and substance to the Corporation (which may include an
opinion of counsel satisfactory to the Corporation) to the effect that such
holder is entitled to sell or otherwise transfer such Common Shares or Purchase
Warrants in a transaction in which such legends are not required such legended
certificate may thereafter be surrendered to the Corporation in exchange for a
certificate which does not bear such legend.
<PAGE> 17
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ARTICLE IV
ESCROW AND DIVIDEND FUNDS
4.1 DEPOSIT OF ESCROW FUNDS WITH TRUSTEE
On the Closing Date and upon issuance of the Special Warrants, the Agents
will deliver or cause to be delivered the Escrow Funds to the Trustee by cheque
payable to the Trustee in Vancouver, British Columbia.
4.2 ADMINISTRATION OF ESCROW FUNDS
All Escrow Funds shall be held at or administered through the Warrant
Agency. The Trustee shall not be entitled to deal with the Escrow Funds except
in accordance with the terms of this Special Warrant Indenture.
4.3 DEPOSIT OF ESCROW FUNDS
Immediately upon receipt of the Escrow Funds on the Closing Date, the
Trustee shall deposit the Escrow Funds in one or more of a daily
interest-bearing term deposit or Government of Canada treasury bills or banker's
acceptances, or in an interest bearing trust account with the Trustee, as
specified by the Corporation, provided that the Escrow Funds will only be
invested in securities having a maturity date of 60 days or less and in the case
of any deposit other than in the Government of Canada treasury bills, such
deposit shall be with one of Royal Bank of Canada, Canadian Imperial Bank of
Commerce, Bank of Montreal, Bank of Nova Scotia, Toronto-Dominion Bank, the
trust account of the Trustee or in such other investment or account as specified
in writing by the Corporation and the Agents. Subject to Section 4.4, interest
accruing on the Escrow Funds shall accrue to the benefit of the Corporation and
shall be disbursed by the Trustee in accordance with the provisions of Section
4.4 of this Agreement.
4.4 CONDITIONS TO RELEASE OF ESCROW FUNDS
The Escrow Funds shall be released in the following manner:
(a) In the event that any Special Warrants are exercised prior to the
Expiry time, the Trustee shall release from the Escrow Funds to the
Corporation an amount equal to the product of (i) $3.25 multiplied
by a fraction the numerator of which is equal to the initial amount
of the Escrow Funds and the denominator of which is equal to the
amount of the subscription funds, multiplied by (ii) the number of
Special Warrants so exercised, together with the proportion of the
interest accrued on the Escrow funds relating to the Special
Warrants so exercised up to the date of exercise;
(b) Upon receipt by the Corporation for the last of the Receipts, the
Trustee shall immediately release all unreleased Escrow Funds and
interest accrued thereon to the Corporation;
(c) The Trustee shall release any remaining unreleased Escrow Funds and
interest accrued thereon to the Corporation immediately after the
Time of Expiry; and
(d) Any portion of the Escrow Funds and interest accrued thereon to be
released pursuant to this Section shall be released by delivery of a
trust cheque or bank draft payable at par in
<PAGE> 18
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the City of Vancouver representing such released portion of the
Escrow Funds and interest accrued thereon.
4.5 CONDITIONS TO RELEASE OF DIVIDEND FUNDS AND PROPERTY
(a) If any Warrant Holder, at any time prior to the Time of Expiry,
elects to exercise Special Warrant(s) held by it, the Trustee shall
within five Business Days:
(i) pay to such Warrant Holder from Dividend Funds and interest
earned by the Trustee thereon an amount equal to the product
obtained by multiplying the amount of Dividend Funds held by
the Trustee thereon to the date immediately preceding the date
of payment (less any Dividend Funds and interest thereon paid
out by the Trustee pursuant to this Agreement prior to the
date of payment) by a fraction of which the numerator is the
number of Special Warrants tendered to the Trustee by such
Warrant Holder and the denominator is the number of Special
Warrants outstanding on the date of payment (such number to be
the number of Special Warrants outstanding immediately prior
to the deemed exercise pursuant to Section 3.6 if such date of
payment is the Expiry Date); and
(ii) deliver to such Warrant Holder its pro rata share of the
Property determined on the same basis as the calculation set
forth in (i) above;
(b) The Trustee shall within five Business Days after a deemed exercise
of Special Warrants pursuant to Section 3.6:
(i) pay to each Warrant Holder, in respect of Special Warrants
held by it deemed to be exercised, from Dividend Funds and
interest earned by the Trustee thereon an amount equal to the
product obtained by multiplying the amount of Dividend Funds
and interest earned by the Trustee thereon to the date
immediately preceding the date of payment (less any Dividend
Funds and interest thereon paid out by the Trustee pursuant to
this Indenture prior to the date of payment) by a fraction of
which the numerator is the number of Special Warrants deemed
to be exercised held by the Warrant Holder and the denominator
is the number of Special Warrants deemed to be exercised; and
(ii) deliver to such Warrant Holder its pro rata share of the
Property determined on the same basis as the calculation set
forth in (i) above;
(c) Provided that the Trustee shall have paid and delivered, or set
aside for payment and delivery, all Dividend Funds, interest earned
thereon and Property required to be paid or delivered to Warrant
Holders pursuant to subsections 4.5(a) and (b), the Trustee shall
pay to the Corporation all remaining Dividend Funds together with
all interest accrued thereon to the date of payment and shall
deliver to the Corporation all remaining Property held by the
Trustee.
4.6 ADMINISTRATION OF DIVIDEND FUNDS AND PROPERTY
All Dividend Funds and Property shall be held by the Trustee and
administered through the Warrant Agency. The Trustee shall not be entitled to
deal with the Dividend Funds and Property
<PAGE> 19
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except in accordance with the terms of this Indenture. The Trustee is hereby
specifically authorized, and granted such powers as are necessary, to deal with
the Property as it shall determine in its sole discretion to be in the best
interests of the Warrant Holders. In the event that the Trustee determines the
necessity for the approval of the Warrant Holders of any matter, an
extraordinary resolution of the Warrant Holders shall provide sufficient
authority upon which the Trustee may act and the Trustee shall not be
responsible for any loss occasioned by so doing.
ARTICLE V
ADJUSTMENT OF NUMBER OF COMMON SHARES
5.1 ADJUSTMENT OF NUMBER OF COMMON SHARES
The acquisition rights in effect at any date attaching to the Special
Warrants shall be subject to adjustment from time to time as follows:
(a) if the last of the Receipts has not been issued on or before the
Qualification Deadline, the Warrant Holder shall, notwithstanding
section 2.2, be entitled, upon exercise, to acquire 1.1 Units
(which, for greater certainty, in such case shall comprise 1.1
Common Shares and 0.55 Purchase Warrants) per Special Warrant
exercised or deemed exercised by such holder, subject to adjustment
in accordance with the following provisions of this Article 5, at
any time after the Qualification Deadline until the Time of Expiry
at no additional cost to the Warrant Holder;
(b) if and whenever at any time from the Closing Date until the Time of
Expiry, the Corporation shall:
(i) subdivide, redivide or change its outstanding Common Shares
into a greater number of shares; or
(ii) reduce, combine or consolidate its outstanding Common Shares
into a smaller number of shares;
the number of Units obtainable under each Special Warrant shall be
adjusted immediately after the effective date of such subdivision,
redivision, change, reduction, combination or consolidation, by
multiplying the number of Units theretofore obtainable on the
exercise thereof by a fraction of which the numerator shall be the
total number of Common Shares outstanding immediately after such
date and the denominator shall be the total number of Common Shares
outstanding immediately prior to such date. Such adjustment shall be
made successively whenever any event referred to in this subsection
shall occur;
(c) if and whenever at any time from the Closing Date and prior to the
Time of Expiry, there is a reclassification of the Common Shares or
a capital reorganization of the Corporation other than as described
in subsection 5.1(b) or a consolidation, amalgamation or merger of
the Corporation with or into any other body corporate, trust,
partnership or other entity, or a sale or conveyance of the property
and assets of the Corporation as an entirety or substantially as an
entirety to any other body corporate, trust, partnership or other
entity, any Warrant Holder who has not exercised its right of
acquisition, as to the effective date of such reclassification,
capital reorganization, consolidation, amalgamation, merger, sale or
conveyance, upon the exercise of such right thereafter, shall be
entitled to receive and shall accept, in lieu of the number of Units
such Warrant
<PAGE> 20
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Holder would otherwise be entitled to acquire, the number of shares
or other securities or property of the Corporation or of the body
corporate, trust, partnership or other entity resulting from such
merger, amalgamation or consolidation, or to which such sale or
conveyance may be made, as the case may be, that such Warrant Holder
would have been entitled to receive on such reclassification,
capital reorganization, consolidation, amalgamation, merger, sale or
conveyance, if, on the record date or the effective date thereof, as
the case may be, the Warrant Holder had been the registered holder
of the number of Common Shares sought to be acquired by it. If
determined appropriate by the Trustee to give effect to or to
evidence the provisions of this subsection 5.1(c), the Corporation,
its successor, or such purchasing body corporate, partnership, trust
or other entity, as the case may be, shall, prior to or
contemporaneously with any such reclassification, capital
reorganization, consolidation, amalgamation, merger, sale or
conveyance, enter into an indenture which shall provide, to the
extent possible, for the application of the provisions set forth in
this Indenture with respect to the rights and interests thereafter
of the Warrant Holders to the end that the provisions set forth in
this Indenture shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, with respect to any shares, other
securities or property to which a Warrant Holder is entitled on the
exercise of its acquisition rights thereafter. Any indenture entered
into between the Corporation and the Trustee pursuant to the
provisions of this subsection 5.1(c) shall be a supplemental
indenture entered into pursuant to the provisions of Article 9
hereof. Any indenture entered into between the Corporation, any
successor to the Corporation or such purchasing body corporate,
partnership, trust or other entity and the Trustee shall provide for
adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided in this Section 5.1 and
which shall apply to successive reclassification, reorganizations,
amalgamations, consolidations, mergers, sales or conveyances; and
(d) the adjustments provided for in this Article 5 in the number of
Units and classes of securities which are to be received on the
exercise of Special Warrants are cumulative. After any adjustment
pursuant to this Section, the term "Common Shares" and "Purchase
Warrants" where used in this Indenture shall be interpreted to mean
securities of any class or classes which, as a result of such
adjustment and all prior adjustments pursuant to this Section, the
Warrant Holder is entitled to receive upon the exercise of its
Special Warrant, and the number of Units indicated by any exercise
made pursuant to a Special Warrant shall be interpreted to mean the
number of Units or other property or securities a Warrant Holder is
entitled to receive, as a result of such adjustment and all prior
adjustments pursuant to this Section, upon the full exercise of a
Special Warrant.
5.2 ENTITLEMENT TO SHARES ON EXERCISE OF SPECIAL WARRANT
All shares of any class or other securities which a Warrant Holder is at
the time in question entitled to receive on the exercise of its Special Warrant,
whether or not as a result of adjustments made pursuant to this Article 5,
shall, for the purposes of the interpretation of this Indenture, be deemed to be
shares which such Warrant Holder is entitled to acquire pursuant to such Special
Warrant.
<PAGE> 21
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5.3 NO ADJUSTMENT FOR STOCK OPTIONS
Notwithstanding anything in this Article 5, no adjustment shall be made in
the acquisition rights attached to the Special Warrants if the issue of Common
Shares is being made pursuant to this Indenture or pursuant to any stock option
or stock purchase plan in force from time to time for directors, officers or
employees of the Corporation.
5.4 DETERMINATION BY CORPORATION'S AUDITORS
In the event of any question arising with respect to the adjustments
provided for in this Article 5, such question shall be conclusively determined
by the Corporation's Auditors who shall have access to all necessary records of
the Corporation, and such determination shall be binding upon the Corporation,
the Trustee, all Warrant Holders and all other persons interested therein.
5.5 PROCEEDINGS PRIOR TO ANY ACTION REQUIRING ADJUSTMENT
As a condition precedent to the taking of any action which would require
an adjustment in any of the acquisition rights pursuant to any of the Special
Warrants, including the number of Common Shares which are to be received upon
the exercise thereof, the Corporation shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Corporation or a
successor corporation has unissued and reserved in its authorized capital and
may validly and legally issue as fully paid and non-assessable all the shares
which the holders of such Special Warrants are entitled to receive on the full
exercise thereof in accordance with the provisions hereof.
5.6 CERTIFICATE OF ADJUSTMENT
The Corporation shall from time to time immediately after the occurrence
of any event which requires an adjustment or readjustment as provided in this
Article 5, deliver a certificate of the Corporation to the Trustee specifying
the nature of the event requiring the same and the amount of the adjustment
necessitated thereby and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
5.7 NOTICE OF SPECIAL MATTERS
The Corporation covenants with the Trustee that, so long as any Special
Warrant remains outstanding, it will send notice to the Trustee and to the
Warrant Holders of its intention to fix a record date that is prior to the
Expiry Date for the issuance of rights, options or warrants (other than the
Special Warrants) to all or substantially all the holders of its outstanding
Common Shares or for determining the shareholders of record who would be
entitled to vote on a special resolution of shareholders respecting or affecting
in any way the Corporation's share capital. Such notice shall specify the
particulars of such event and the record date for such event, provided that the
Corporation shall only be required to specify in the notice such particulars of
the event as shall have been fixed and determined on the date on which the
notice is given. The notice shall be sent in each case not less than 14 days
prior to such applicable record date.
5.8 NO ACTION AFTER NOTICE
The Corporation covenants with the Trustee that it will not close its
transfer books or take any other corporate action which might deprive the holder
of a Special Warrant of the opportunity to
<PAGE> 22
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exercise its right of acquisition pursuant thereto during the period of 14 days
after the giving of the certificate or notices set forth in Section 5.7.
5.9 PROTECTION OF TRUSTEE
The Trustee shall not:
(a) be under any duty or responsibility to any Warrant Holder to
determine whether any facts exist which may require any adjustment
contemplated by this Article 5, or with respect to the nature or
extent of any such adjustment when made, or with respect to the
method employed in making the same;
(b) be accountable with respect to the validity or value (or the kind or
amount) of any Common Shares, any Purchase Warrants or of any shares
or other securities or property which may at any time be issued or
delivered upon the exercise of the rights attaching to any Special
Warrant;
(c) be responsible for any failure of the Corporation to issue, transfer
or deliver Common Shares, or Purchase Warrants or certificates for
the same upon the surrender of any Special Warrants for the purpose
of the exercise of such rights or to comply with any of the
covenants contained in this Article; and
(d) incur any liability or responsibility whatsoever or be in any way
responsible for the consequences of any breach on the part of the
Corporation of any of the representations, warranties or covenants
herein contained or of any acts of the directors, officers,
employees, agents or servants of the Corporation.
ARTICLE VI
RIGHTS AND COVENANTS OF THE CORPORATION
6.1 OPTIONAL PURCHASES BY THE CORPORATION
The Corporation may from time to time purchase by private contract or
otherwise any of the Special Warrants. Any Warrant Certificates representing the
Special Warrants purchased pursuant to this Section 6.1 shall forthwith be
delivered to and cancelled by the Trustee. No Special Warrants shall be issued
in replacement thereof.
6.2 GENERAL COVENANTS
The Corporation covenants with the Trustee that so long as any Special
Warrants remain outstanding:
(a) it will reserve and keep available a sufficient number of Common
Shares for the purpose of enabling it to satisfy its obligations to
issue Common Shares upon the exercise of the Special Warrants and
the Purchase Warrants in the event that the Corporation does not
have an unlimited number of Common Shares authorized;
(b) it will cause the Common Shares, the Purchase Warrants and the
certificates representing the Common Shares and the Purchase
Warrants from time to time acquired pursuant to
<PAGE> 23
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the exercise of the Special Warrants to be duly issued and delivered
in accordance with the Warrant Certificates and the terms hereof;
(c) all Common Shares which shall be issued upon exercise of the right
to acquire provided for herein and in the Warrant Certificates shall
be fully paid and non-assessable;
(d) it will maintain its corporate existence and will carry on and
conduct its business in accordance with industry standards and good
business practice;
(e) it will ensure that all Common Shares outstanding or issuable from
time to time (including without limitation the Common Shares
issuable on the exercise of the Special Warrants) continue to be or
are listed and posted for trading on the VSE or on another Canadian
stock exchange;
(f) it will maintain its status as a reporting issuer in the province of
British Columbia and it will make all requisite filings under
applicable Canadian securities legislation and stock exchange rules
to report the exercise of the right to acquire Common Shares
pursuant to Special Warrants;
(g) it will use its commercially reasonable efforts to have the Receipts
issued by the Securities Commissions on or before the Qualification
Deadline and will, in the event that the Receipts are not issued on
or before the Qualification Deadline, continue to use its
commercially reasonable efforts to obtain the Receipts thereafter;
(h) it will send a written notice to the Trustee and to each holder of
Special Warrants of the issuance of the Receipts, together with a
commercial copy of the Prospectus, as soon as practicable but, in
any event, not later than five Business Days after the issuance of
such Receipts (and, in the case of the Trustee, copies of such
Receipts together with confirmation that there has not been any
adjustment to the number of shares issuable pursuant to Article 5);
(i) if the Corporation pays a dividend or makes any other distribution
in cash or property or securities of the Corporation (including
rights, options or warrants to acquire Common Shares or securities
convertible into or exchangeable for Common Shares and including
evidences of its indebtedness) to all or substantially all of the
holders of Common Shares prior to the Expiry Date, the Corporation
agrees that it will pay the same amount of such dividend or make the
same distribution of cash, property or securities as a deposit to
the Trustee, as if the Warrant Holders were the holders of the
number of Common Shares which the Warrant Holders are entitled to
receive upon the exercise of the Special Warrants and such payments
or other distributions shall be held and dealt with by the Trustee
in accordance with Sections 4.5 and 4.6;
(j) it will send a written notice to each Warrant Holder specifying the
particulars of each payment or distribution made in accordance with
subsection 6.2(i), within two Business Days of such payment or
distribution; and
(k) generally, it will well and truly perform and carry out all of the
acts or things to be done by it as provided in this Indenture.
<PAGE> 24
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6.3 TRUSTEE'S REMUNERATION AND EXPENSES
The Corporation covenants that it will pay to the Trustee from time to
time reasonable remuneration for its services hereunder and will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in the administration
or execution of the trusts hereby created (including the reasonable compensation
and the disbursements of its Counsel and all other advisers and assistants not
regularly in its employ) both before any default hereunder and thereafter until
all duties of the Trustee hereunder shall be finally and fully performed, except
any such expense, disbursement or advance as may arise out of or result from the
Trustee's negligence or fraud.
6.4 SECURITIES QUALIFICATION REQUIREMENTS
(a) If, in the opinion of Counsel, any instrument (not including a
prospectus, except as required by subsection 6.2(g)) is required to
be filed with, or any permission is required to be obtained from the
Securities Commissions or the VSE or any other step is required
under the laws of the Designated Provinces before any Common Shares
and Purchase Warrants which a Warrant Holder is entitled to acquire
pursuant to the exercise of any Special Warrant may properly and
legally be issued upon due exercise thereof and thereafter traded,
without further formality or restriction, the Corporation covenants
that it will take such required action.
(b) The Corporation or, if required by the Corporation, the Trustee will
give notice of the issue of Common Shares and Purchase Warrants
pursuant to the exercise of Special Warrants, in such detail as may
be required, to the Securities Commissions and the VSE.
6.5 PERFORMANCE OF COVENANTS BY TRUSTEE
If the Corporation shall fail to perform any of its covenants contained in
this Warrant Indenture, the Trustee may notify the Warrant Holders of such
failure on the part of the Corporation or may itself perform any of the
covenants capable of being performed by it but, subject to Section 10.2, shall
be under no obligation to perform said covenants or to notify the Warrant
Holders of such performance by it. All sums expended or advanced by the Trustee
in so doing shall be repayable as provided in Section 6.3. No such performance,
expenditure or advance by the Trustee shall relieve the Corporation of any
default hereunder or of its continuing obligations under the covenants herein
contained.
ARTICLE VII
ENFORCEMENT
7.1 SUITS BY WARRANT HOLDERS
All or any of the rights conferred upon any Warrant Holder by any of the
terms of the Warrant Certificates or of this Indenture, or of both, may be
enforced by the Warrant Holder by appropriate proceedings but without prejudice
to the right which is hereby conferred upon the Trustee to proceed in its own
name to enforce each and all of the provisions herein contained for the benefit
of the Warrant Holders.
<PAGE> 25
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7.2 IMMUNITY OF SHAREHOLDERS, ETC.
The Trustee and, by the acceptance of the Warrant Certificates and as part
of the consideration for the issue of the Special Warrants, the Warrant Holders
hereby waive and release any right, cause of action or remedy now or hereafter
existing in any jurisdiction against any incorporator or any past, present or
future shareholder, director, officer, employee or agent of the Corporation or
any successor Corporation (as defined in Section 9.2) on any covenant,
agreement, representation or warranty by the Corporation herein or in the
Warrant Certificates contained.
7.3 LIMITATION OF LIABILITY
The obligations hereunder are not personally binding upon, nor shall
resort hereunder be had to, the private property of any of the past, present or
future directors or shareholders of the Corporation or any successor Corporation
or any of the past, present or future officers, employees or agents of the
Corporation or any successor Corporation, but only the property of the
Corporation or any successor Corporation shall be bound in respect hereof.
7.4 WAIVER OF DEFAULT
Upon the happening of any default hereunder:
(a) the holders of not less than 51% of the Special Warrants then
outstanding shall have the power (in addition to the powers
exercisable by extraordinary resolution) by requisition in writing
to instruct the Trustee to waive any default hereunder and the
Trustee shall thereupon waive the default upon such terms and
conditions as shall be prescribed in such requisition; or
(b) the Trustee shall have the power to waive any default hereunder upon
such terms and conditions as the Trustee may deem advisable if, in
the Trustee's opinion, the same shall have been cured or adequate
provision made therefor;
provided that no delay or omission of the Trustee or of the Warrant Holders to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver of any such default or
acquiescence therein and provided further that no act or omission either of the
Trustee or of the Warrant Holders in the premises shall extend to or be taken in
any manner whatsoever to affect any subsequent default hereunder of the rights
resulting therefrom.
ARTICLE VIII
MEETINGS OF WARRANT HOLDERS
8.1 RIGHT TO CONVENE MEETINGS
The Trustee may at any time and from time to time, and shall on receipt of
a written request of the Corporation or of a Warrant Holders' Request and upon
being indemnified and provided with security to its reasonable satisfaction by
the Corporation or by the Warrant Holders signing such Warrant Holders' Request
against the cost which may be incurred in connection with the calling and
holding of such meeting, call and hold a meeting of the Warrant Holders. In the
event of the Trustee failing to so call and hold a meeting within seven days
after receipt of such written request of the Corporation or such Warrant
Holders' Request and indemnity and security given as aforesaid, the Corporation
or such Warrant Holders, as the case may be, may call and hold such meeting.
Every such
<PAGE> 26
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meeting shall be held in the City of Vancouver or at such other place as may be
approved or determined by the Trustee.
8.2 NOTICE
At least ten days' prior notice of any meeting of Warrant Holders shall be
given to the Warrant Holders in the manner provided for in Section 11.2 and a
copy of such notice shall be sent by mail to the Trustee (unless the meeting has
been called by the Trustee) and to the Corporation (unless the meeting has been
called by the Corporation). Such notice shall state the time when and the place
where the meeting is to be held, shall state briefly the general nature of the
business to be transacted thereat and shall contain such information as is
reasonably necessary to enable the Warrant Holders to make a reasoned decision
on the matter, but it shall not be necessary for any such notice to set out the
terms of any resolution to be proposed or any of the provisions of this Article
8.
8.3 CHAIRMAN
An individual (who need not be a Warrant Holder) designated in writing by
the Trustee shall be chairman of the meeting and if no individual is so
designated, or if the individual so designated is not present within 15 minutes
from the time fixed for the holding of the meeting, the Warrant Holders present
in person or by proxy shall choose some individual present to be chairman.
8.4 QUORUM
Subject to the provisions of Section 8.11, at any meeting of the Warrant
Holders a quorum shall consist of Warrant Holders present in person or by proxy
and entitled to purchase at least 10% of the aggregate number of Common Shares
which could be acquired pursuant to the exercise of all of the then outstanding
Special Warrants, provided that at least two persons entitled to vote thereat
are personally present. If a quorum of the Warrant Holders shall not be present
within 30 minutes from the time fixed for holding any meeting, the meeting, if
summoned by Warrant Holders or on a Warrant Holders' Request, shall be
dissolved; but in any other case the meeting shall be adjourned to the same day
in the next week (unless such day is not a Business Day, in which case it shall
be adjourned to the next following Business Day) at the same time and place and
no notice of the adjournment need be given. Any business may be brought before
or dealt with at an adjourned meeting which might have been dealt with at the
original meeting in accordance with the notice calling the same. No business
shall be transacted at any meeting unless a quorum be present at the
commencement of business. At the adjourned meeting the Warrant Holders present
in person or by proxy shall form a quorum and may transact the business for
which the meeting was originally convened, notwithstanding that they may not be
entitled to acquire at least 10% of the aggregate number of Common Shares which
may be acquired pursuant to the exercise of all of the then outstanding Special
Warrants.
8.5 POWER TO ADJOURN
The chairman of any meeting at which a quorum of the Warrant Holders is
present may, with the consent of the meeting, adjourn any such meeting, and no
notice of such adjournment need be given except such notice, if any, as the
meeting may prescribe.
8.6 SHOW OF HANDS
Every question submitted to a meeting shall be decided in the first place
by a majority of the votes given on a show of hands except that votes on an
extraordinary resolution shall be given in the
<PAGE> 27
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manner hereinafter provided. At any such meeting, unless a poll is duly demanded
as herein provided, a declaration by the chairman that a resolution has been
carried or carried unanimously or by a particular majority or lost or not
carried by a particular majority shall be conclusive evidence of the fact.
8.7 POLL AND VOTING
On every extraordinary resolution, and on any other question submitted to
a meeting and after a vote by show of hands when demanded by the chairman or by
one or more of the Warrant Holders acting in person or by proxy and entitled to
acquire in the aggregate at least 5% of the aggregate number of Common Shares
which could be acquired pursuant to the exercise of all the Special Warrants
then outstanding, a poll shall be taken in such manner as the chairman shall
direct. Questions other than those required to be determined by extraordinary
resolution shall be decided by a majority of the votes cast on the poll.
On a show of hands, every person who is present and entitled to vote,
whether as a Warrant Holder or as proxy for one or more absent Warrant Holders,
or both, shall have one vote. On a poll, each Warrant Holder present in person
or represented by a proxy duly appointed by instrument in writing shall be
entitled to one vote in respect of each whole Common Share which he is entitled
to acquire pursuant to the Special Warrant or Special Warrants then held or
represented by it. A proxy need not be a Warrant Holder. The chairman of any
meeting shall be entitled, both on a show of hands and on a poll, to vote in
respect of the Special Warrants, if any, held or represented by him.
8.8 REGULATIONS
The Trustee, or the Corporation with the approval of the Trustee, may from
time to time make and from time to time vary such regulations as it shall think
fit for:
(a) the setting of the record date for a meeting for the purpose of
determining Warrant Holders entitled to receive notice of and to
vote at the meeting;
(b) the issue of voting certificates by any bank, trust company or other
depositary satisfactory to the Trustee stating that the Warrant
Certificates specified therein have been deposited with it by a
named person and will remain on deposit until after the meeting,
which voting certificate shall entitle the persons named therein to
be present and vote at any such meeting and at any adjournment
thereof or to appoint a proxy or proxies to represent them and vote
for them at any such meeting and at any adjournment thereof in the
same manner and with the same effect as though the persons so named
in such voting certificates were the actual bearers of the Warrant
Certificates specified therein.
(c) the deposit of voting certificates and instruments appointing
proxies at such place and time as the Trustee, the Corporation or
the Warrant Holders convening the meeting, as the case may be, may
in the notice convening the meeting direct;
(d) the deposit of voting certificates and instruments appointing
proxies at some approved place or places other than the place at
which the meeting is to be held and enabling particulars of such
instruments appointing proxies to be mailed or telecopied before the
meeting to the Corporation or to the Trustee at the place where the
same is to be held and for the voting of proxies so deposited as
though the instruments themselves were produced at the meeting;
<PAGE> 28
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(e) the form of the instrument of proxy; and
(f) generally for the calling of meetings of Warrant Holders and the
conduct of business thereat.
Any regulations so made shall be binding and effective and the votes given
in accordance therewith shall be valid and shall be counted. Save as such
regulations may provide, the only persons who shall be recognized at any meeting
as a Warrant Holder, or be entitled to vote or be present at the meeting in
respect thereof (subject to Section 8.9), shall be Warrant Holders or their
counsel, or proxies of Warrant Holders.
8.9 CORPORATION AND TRUSTEE MAY BE REPRESENTED
The Corporation and the Trustee, by their respective directors and
officers, the counsel for the Corporation and the Counsel for the Trustee may
attend any meeting of the Warrant Holders, but shall not be entitled to vote
thereat, whether in respect of any Special Warrants held by them or otherwise.
8.10 POWERS EXERCISABLE BY EXTRAORDINARY RESOLUTION
In addition to all other powers conferred upon them by any other
provisions of this Indenture or by law, the Warrant Holders at a meeting shall,
subject to the provisions of Section 8.11, have the power, exercisable from time
to time by extraordinary resolution:
(a) to agree to any modification, abrogation, alteration, compromise or
arrangement of the rights of Warrant Holders or the Trustee in its
capacity as trustee hereunder or on behalf of the Warrant Holders
against the Corporation whether such rights arise under this
Indenture or the Warrant Certificates or otherwise;
(b) to amend, alter or repeal any extraordinary resolution previously
passed or sanctioned by the Warrant Holders;
(c) to direct or to authorize the Trustee to enforce any of the
covenants on the part of the Corporation contained in this Indenture
or the Warrant Certificates or to enforce any of the rights of the
Warrant Holders in any manner specified in such extraordinary
resolution or to refrain from enforcing any such covenant or right:
(d) to waive, and to direct the Trustee to waive, any default on the
part of the Corporation in complying with any provisions of this
Indenture or the Warrant Certificates either unconditionally or upon
any conditions specified in such extraordinary resolution;
(e) to restrain any Warrant Holder from taking or instituting any suit,
action or proceeding against the Corporation for the enforcement of
any of the covenants on the part of the Corporation in this
Indenture or the Warrant Certificates or to enforce any of the
rights of the Warrant Holders;
(f) to direct any Warrant Holder who, as such, has brought any suit,
action or proceeding to stay or to discontinue or otherwise to deal
with the same upon payment of the costs, charges and expenses
reasonably and properly incurred by such Warrant Holder in
connection therewith;
<PAGE> 29
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(g) to assent to any change in or omission from the provisions contained
in the Warrant Certificates and this Indenture or any ancillary or
supplemental instrument which may be agreed to by the Corporation,
and to authorize the Trustee to concur in and execute any ancillary
or supplemental indenture embodying the change or omission;
(h) with the consent of the Corporation, not to be unreasonably
withheld, to remove the Trustee or its successor in office and to
appoint a new trustee or trustees to take the place of the Trustee
so removed; and
(i) to assent to any compromise or arrangement with any creditor or
creditors or any class or classes of creditors, whether secured or
otherwise, and with holders of any shares or other securities of the
Corporation.
8.11 MEANING OF EXTRAORDINARY RESOLUTION
(a) The expression "extraordinary resolution" when used in this
Indenture means, subject as hereinafter provided in this Section
8.11 and in Section 8.14, a resolution proposed at a meeting of
Warrant Holders duly convened for that purpose and held in
accordance with the provisions of this Article 8 and passed by the
affirmative votes of Warrant Holders entitled to acquire not less
than two-thirds of the aggregate number of Common Shares which may
be acquired pursuant to the exercise of all of the then outstanding
Special Warrants represented at the meeting and voted on the poll
upon such resolution.
(b) If, at the meeting at which an extraordinary resolution is to be
considered, Warrant Holders entitled to acquire at least 10% of the
aggregate number of Common Shares which may be acquired pursuant to
the exercise of all of the then outstanding Special Warrants are not
present in person or by proxy within 30 minutes after the time
appointed for the meeting, then the meeting, if convened by Warrant
Holders or on a Warrant Holders' Request, shall be dissolved; but in
any other case it shall stand adjourned to such day, being not less
than 15 or more than 60 days later, and to such place and time as
may be appointed by the chairman. Not less than 10 days' prior
notice shall be given of the time and place of such adjourned
meeting in the manner provided for in Section 11.2. Such notice
shall state that at the adjourned meeting the Warrant Holders
present in person or by proxy shall form a quorum but it shall not
be necessary to set forth the purposes for which the meeting, was
originally called or any other particulars. At the adjourned meeting
the Warrant Holders present in person or by proxy shall form a
quorum and may transact the business for which the meeting was
originally convened and a resolution proposed at such adjourned
meeting and passed by the requisite vote as provided in subsection
8.11(a) shall be an extraordinary resolution within the meaning of
this Indenture notwithstanding that Warrant Holders entitled to
acquire at least 10% of the aggregate number of Common Shares which
may be acquired pursuant to the exercise of all of the then
outstanding Special Warrants are not present in person or by proxy
at such adjourned meeting.
(c) Votes on an extraordinary resolution shall always be given on a poll
and no demand for a poll on an extraordinary resolution shall be
necessary.
<PAGE> 30
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8.12 POWERS CUMULATIVE
Any one or more of the powers or any combination of the powers in this
Indenture stated to be exercisable by the Warrant Holders by extraordinary
resolution or otherwise may be exercised from time to time and the exercise of
any one or more of such powers or any combination of powers from time to time
shall not be deemed to exhaust the right of the Warrant Holders to exercise such
power or powers or combination of powers then or thereafter from time to time.
8.13 MINUTES
Minutes of all resolutions and proceedings at every meeting of Warrant
Holders shall be made and duly entered in books to be provided from time to time
for that purpose by the Trustee at the expense of the Corporation, and any such
minutes as aforesaid, if signed by the chairman or the secretary of the meeting
at which such resolutions were passed or proceedings had shall be prima facie
evidence of the matters therein stated and, until the contrary is proved, every
such meeting in respect of the proceedings of which minutes shall have been made
shall be deemed to have been duly convened and held, and all resolutions passed
thereat or proceedings taken shall be deemed to have been duly passed and taken.
8.14 INSTRUMENTS IN WRITING
All actions which may be taken and all powers that may be exercised by the
Warrant Holders at a meeting held as provided in this Article 8 may also be
taken and exercised by Warrant Holders entitled to acquire at least two-thirds
of the aggregate number of Common Shares which may be acquired pursuant to the
exercise of all of the then outstanding Special Warrants by an instrument in
writing signed in one or more counterparts by such Warrant Holders in person or
by attorney duly appointed in writing, and the expression "extraordinary
resolution" when used in this Indenture shall include an instrument so signed.
8.15 BINDING EFFECT OF RESOLUTIONS
Every resolution and every extraordinary resolution passed in accordance
with the provisions of this Article 8 at a meeting of Warrant Holders shall be
binding upon all the Warrant Holders, whether present at or absent from such
meeting, and every instrument in writing signed by Warrant Holders in accordance
with Section 8.14 shall be binding upon all the Warrant Holders, whether
signatories thereto or not, and each and every Warrant Holder and the Trustee
(subject to the provisions for indemnity herein contained) shall be bound to
give effect accordingly to every such resolution and instrument in writing.
8.16 HOLDINGS BY CORPORATION DISREGARDED
In determining whether Warrant Holders holding Warrant Certificates
evidencing the entitlement to acquire the required number of Common Shares are
present at a meeting of Warrant Holders for the purpose of determining a quorum
or have concurred in any consent, waiver, extraordinary resolution, Warrant
Holders' Request or other action under this Indenture, Special Warrants owned
legally or beneficially by the Corporation or any Subsidiary of the Corporation
shall be disregarded in accordance with the provisions of Section 11.7.
<PAGE> 31
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ARTICLE IX
SUPPLEMENTAL INDENTURES
9.1 PROVISION FOR SUPPLEMENTAL INDENTURES FOR CERTAIN PURPOSES
From time to time the Corporation (when authorized by action of the
directors) and the Trustee may, subject to the provisions hereof, and they
shall, when so directed in accordance with the provisions hereof, execute and
deliver by their proper officers, indentures or instruments supplemental hereto,
which thereafter shall form part hereof, for any one or more or all of the
following purposes:
(a) setting forth any adjustments resulting from the application of the
provisions of Article 5;
(b) adding to the provisions hereof such additional covenants and
enforcement provisions as, in the opinion of Counsel, are necessary
or advisable, provided that the same are not in the opinion of the
Trustee, based on the advice of Counsel, prejudicial to the
interests of the Warrant Holders;
(c) giving effect to any extraordinary resolution passed as provided in
Article 8;
(d) making such provisions not inconsistent with this Indenture as may
be necessary or desirable with respect to matters or questions
arising hereunder or for the purpose of obtaining a listing or
quotation of the Special Warrants on any stock exchange, provided
that such provisions are not, in the opinion of the Trustee, based
on the advice of Counsel, prejudicial to the interests of the
Warrant Holders;
(e) adding to or altering the provisions hereof in respect of the
transfer of Special Warrants, making provision for the exchange of
Warrant Certificates, and making any modification in the form of the
Warrant Certificates which does not affect the substance thereof;
(f) modifying any of the provisions of this Indenture, including
relieving the Corporation from any of the obligations, conditions or
restrictions herein contained, provided that such modification or
relief shall be or become operative or effective only if, in the
opinion of the Trustee, based on the advice of Counsel, such
modification or relief in no way prejudices any of the rights of the
Warrant Holders or of the Trustee, and provided further that the
Trustee may in its sole discretion decline to enter into any such
supplemental indenture which in its opinion, based on the advice of
Counsel, may not afford adequate protection to the Trustee when the
same shall become operative; and
(g) for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any
ambiguities, defective or inconsistent provisions, errors, mistakes
or omissions herein, provided that in the opinion of the Trustee,
based on the advice of Counsel, the rights of the Trustee and of the
Warrant Holders are in no way prejudiced thereby.
9.2 SUCCESSOR CORPORATIONS
In the case of the consolidation, amalgamation, merger or transfer of the
undertaking or assets of the Corporation as an entirety or substantially as an
entirety to another Corporation ("successor Corporation"), the successor
Corporation resulting from such consolidation, amalgamation, merger or transfer
(if not the Corporation) shall expressly assume, by supplemental indenture
satisfactory in form to
<PAGE> 32
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the Trustee and executed and delivered to the Trustee, the due and punctual
performance and observance of each and every covenant and condition of this
Indenture to be performed and observed by the Corporation.
ARTICLE X
CONCERNING THE TRUSTEE
10.1 TRUST INDENTURE LEGISLATION
(a) If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with a mandatory requirement of the
Applicable Legislation, such mandatory requirement shall prevail.
(b) The Corporation and the Trustee agree that each will, at all times
in relation to this Indenture and any action to be taken hereunder,
observe and comply with and be entitled to the benefits of the
Applicable Legislation.
10.2 RIGHTS AND DUTIES OF TRUSTEE
(a) In the exercise of the rights and duties prescribed or conferred by
the terms of this Indenture, the Trustee shall exercise that degree
of care, diligence and skill that a reasonably prudent trustee would
exercise in comparable circumstances. In the absence of negligence
or fraud, the Corporation shall indemnify and save harmless the
Trustee from all loss, costs or damages it may suffer in
administering the trusts of this Indenture. No provision of this
Indenture shall be construed to relieve the Trustee from liability
for its own negligent action, its own negligent failure to act, or
its own negligence or fraud.
(b) The obligation of the Trustee to commence or continue any act,
action or proceeding for the purpose of enforcing any rights of the
Trustee or the Warrant Holders hereunder shall be conditional upon
the Warrant Holders furnishing, when required by notice by the
Trustee, sufficient funds to commence or to continue such act,
action or proceeding and an indemnity reasonably satisfactory to the
Trustee to protect and to hold harmless the Trustee against the
costs, charges and expenses and liabilities to be incurred thereby
and any loss and damage it may suffer by reason thereof. None of the
provisions contained in this Indenture shall require the Trustee to
expend or to risk its own funds or otherwise to incur financial
liability in the performance of any of its duties or in the exercise
of any of its rights or powers unless indemnified and funded as
aforesaid.
(c) The Trustee may, before commencing or at any time during the
continuance of any such act, action or proceeding, require the
Warrant Holders at whose instance it is acting to deposit with the
trustee the Special Warrants held by them, for which Special
Warrants the Trustee shall issue receipts.
(d) Every provision of this Indenture that by its terms relieves the
Trustee of liability or entitles it to rely upon any evidence
submitted to it is subject to the provisions of the Applicable
Legislation, of this Section 10.2 and of Section 10.4.
<PAGE> 33
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10.3 INDEMNIFICATION
Without limiting any protection or indemnity of the Trustee under any
other provisions hereof, or otherwise at law, the Corporation hereby agrees to
indemnify and hold harmless the Trustee from and against any and all
liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses
and disbursements, including reasonable legal or advisor fees and disbursements,
of whatever kind and nature which may at any time be imposed on, incurred by or
asserted against the Trustee in connection with the performance of its duties
and obligations hereunder, other than such liabilities, losses, damages,
penalties, claims, actions, suits, costs, expenses and disbursements arising by
reason of the negligence or fraud of the Trustee. This provision shall survive
the resignation or removal of the Trustee, or the termination of the Indenture.
The Trustee shall not be under any obligation to prosecute or to defend any
action or suit in respect of the relationship which, in the opinion of its
counsel, may involve it in expense or liability, unless the Company shall, so
often as required, furnish the Trustee with satisfactory indemnity and funding
against such expense or liability.
10.4 EVIDENCE, EXPERTS AND ADVISERS
(a) In addition to the reports, certificates, opinions and other
evidence required by this Indenture, the Corporation shall furnish
to the Trustee such additional evidence of compliance with any
provision hereof, and in such form, as may be prescribed by the
Applicable Legislation or as the Trustee may reasonably require by
written notice to the Corporation.
(b) In the exercise of its rights and duties hereunder, the Trustee may,
if it is acting in good faith, rely as to the truth of the
statements and the accuracy of the opinions expressed in statutory
declarations, opinions, reports, written requests, consents, or
orders of the Corporation, certificates of the Corporation or other
evidence furnished to the Trustee pursuant to a request of the
Trustee, provided that such evidence complies with the Applicable
Legislation and that the Trustee complies with the Applicable
Legislation and that the Trustee examines the same and determines
that such evidence complies with the applicable requirements of this
Indenture.
(c) Whenever it is provided in this Indenture or under the Applicable
Legislation that the Corporation shall deposit with the Trustee
resolutions, certificates, reports, opinions, requests, orders or
other documents, it is intended that the trust, accuracy and good
faith on the effective date thereof and the facts and opinions
stated in all such documents so deposited shall, in each and every
such case, be conditions precedent to the right of the Corporation
to have the Trustee take the action to be based thereon.
(d) The Trustee may employ or retain such Counsel, accountants,
appraisers or other experts or advisers as it may reasonably require
for the purpose of discharging its duties hereunder and may pay
reasonable remuneration for all services so performed by any of
them, without taxation of costs of any Counsel, and shall not be
responsible for any misconduct or negligence on the part of any such
experts or advisers who have been appointed with due care by the
Trustee.
<PAGE> 34
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10.5 ACTIONS BY TRUSTEE TO PROTECT INTEREST
The Trustee shall have power to institute and to maintain such actions and
proceedings as it may consider necessary or expedient to preserve, protect or
enforce its interests and the interests of the Warrant Holders.
10.6 TRUSTEE NOT REQUIRED TO GIVE SECURITY
The Trustee shall not be required to give any bond or security in respect
of the execution of the trusts and powers of this Indenture or otherwise in
respect of the premises.
10.7 PROTECTION OF TRUSTEE
By way of supplement to the provisions of any law for the time being
relating to trustees it is expressly declared and agreed as follows:
(a) the Trustee shall not be liable for or by reason of any statements
of fact or recitals in this Indenture or in the Warrant Certificates
(except the representation contained in Section 10.9 or in the
certificate of the Trustee on the Warrant Certificates) or be
required to verify the same, but all such statements or recitals are
and shall be deemed to be made by the Corporation;
(b) nothing herein contained shall impose any obligation on the Trustee
to see to or to require evidence of the registration or filing (or
renewal thereof) of this Indenture or any instrument ancillary or
supplemental hereto; and
(c) the Trustee shall not be bound to give notice to any person or
persons of the execution hereof.
(d) the Trustee shall be protected in acting upon any written notice,
request, waiver, consent, certificate, receipt, statutory
declaration or other paper or document furnished to it hereunder,
not only as to its due execution and the validity and the
effectiveness of its provisions but also as to the truth and
acceptability of any information therein contained which it in good
faith believes to be genuine and what it purports to be.
10.8 REPLACEMENT OF TRUSTEE; SUCCESSOR BY MERGER
(a) The Trustee may resign its trust and be discharged from all further
duties and liabilities hereunder, subject to this Section 10.8, by
giving to the Corporation not less than 90 days' prior notice in
writing or such shorter prior notice as the Corporation may accept
as sufficient. The Warrant Holders by extraordinary resolution shall
have power at any time to remove the existing Trustee and to appoint
a new Trustee. In the event of the Trustee resigning or being
removed as aforesaid or being dissolved, becoming bankrupt, going
into liquidation or otherwise becoming incapable of acting
hereunder, the Corporation shall forthwith appoint a new trustee
unless a new trustee has already been appointed by the Warrant
Holders; failing such appointment by the Corporation, the retiring
Trustee or any Warrant Holder may apply to a justice of the Supreme
Court of British Columbia on such notice as such justice may direct,
for the appointment of a new trustee; but any new trustee so
appointed by the Corporation or by the Court shall be subject to
removal as aforesaid by the Warrant Holders. Any new trustee
appointed under any provision of this
<PAGE> 35
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Section 10.8 shall be a corporation authorized to carry on the
business of a trust company in the Designated Provinces and, if
required by the Applicable Legislation for any other provinces, in
such other provinces. On any such appointment the new trustee shall
be vested with the same powers, rights, duties and responsibilities
as if it had been originally named herein as Trustee hereunder.
(b) Upon the appointment of a successor trustee, the Corporation shall
promptly notify the Warrant Holders thereof in the manner provided
for in Section 11.2 hereof.
(c) Any corporation into or with which the Trustee may be merged or
consolidated or amalgamated, or any corporation resulting therefrom
to which the Trustee shall be a party, or any corporation succeeding
to the trust business of the Trustee shall be the successor to the
Trustee hereunder without any further act on its part or any of the
parties hereto, provided that such corporation would be eligible for
appointment as a successor trustee under subsection 10.8(a).
(d) Any Warrant Certificates certified but not delivered by a
predecessor trustee may be certified by the successor trustee in the
name of the predecessor or successor trustee.
10.9 CONFLICT OF INTEREST
(a) The Trustee represents to the Corporation that at the time of
execution and delivery hereof no material conflict of interest
exists between its role as a trustee hereunder and its role in any
other capacity and agrees that in the event of a material conflict
of interest arising hereafter it will, within 90 days after
ascertaining that it has such material conflict of interest, either
eliminate the same or assign its trust hereunder to a successor
trustee approved by the Corporation and meeting the requirements set
forth in subsection 10.8(a). Notwithstanding the foregoing
provisions of this subsection 10.9(a), if any such material conflict
of interest exists or hereafter shall exist, the validity and
enforceability of this Indenture and the Warrant Certificate shall
not be affected in any manner whatsoever by reason thereof.
(b) Subject to subsection 10.9(a), the Trustee, in its personal or any
other capacity, may buy, lend upon and deal in securities of the
Corporation and generally may contract and enter into financial
transactions with the Corporation or any subsidiary of the
Corporation without being liable to account for any profit made
thereby.
10.10 ACCEPTANCE OF TRUST
The Trustee hereby accepts the trusts in this Indenture declared and
provided for and agrees to perform the same upon the terms and conditions herein
set forth.
10.11 TRUSTEE NOT TO BE APPOINTED RECEIVER
The Trustee and any person related to the Trustee shall not be appointed a
receiver, a receiver and manager or liquidator of all or any part of the assets
or undertaking of the Corporation.
<PAGE> 36
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ARTICLE XI
GENERAL
11.1 NOTICE TO THE CORPORATION AND THE TRUSTEE
(a) Unless herein otherwise expressly provided, any notice to be given
hereunder to the Corporation or the Trustee shall be deemed to be
validly given if delivered, sent by registered letter, postage
prepaid or telecopied:
If to the Corporation: INFOWAVE SOFTWARE, INC.
#188 - 4664 Lougheed Highway
Burnaby, British Columbia
V5C 6B7
ATTENTION: JIM MCINTOSH
Telecopy: (604) 683-6557
If to the Trustee: MONTREAL TRUST COMPANY OF CANADA
3rd Floor, 510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Telecopy: (604) 685-4079
ATTENTION: MANAGER,
CORPORATE TRUST DEPARTMENT
and any such notice delivered in accordance with the foregoing shall be deemed
to have been received on the date of delivery or, if mailed, on the fifth
Business Day following the date of the postmark on such notice or, if
telecopied, on the next Business Day following the date of transmission provided
that its contents are transmitted and received completely and accurately.
(b) The Corporation or the Trustee, as the case may be, may from time to
time notify the other in the manner provided in subsection 11.1(a)
of a change of address which, from the effective date of such notice
and until changed by like notice, shall be the address of the
Corporation or the Trustee, as the case may be, for all purposes of
this Indenture.
(c) If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to
the Trustee or to the Corporation hereunder could reasonably be
considered unlikely to reach its destination, such notice shall be
valid and effective only if it is delivered to the named officer of
the party to which it is addressed or, if it is delivered to such
party at the appropriate address provided in subsection 11.1(a), by
telecopy or other means of prepaid, transmitted and recorded
communication.
11.2 NOTICE TO WARRANT HOLDERS
(a) Any notice to the Warrant Holders under the provisions of this
Indenture shall be valid and effective if delivered or sent by
telecopy or by ordinary post addressed to such
<PAGE> 37
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holders at their post office addresses appearing on the register
hereinbefore mentioned and shall be deemed to have been effectively
given on the date of delivery or, if mailed, on the fifth Business
Day following the date of the postmark on such notice or, if
telecopied, on the next Business Day following the date of
transmission provided that its contents are transmitted and received
completely and accurately.
(b) If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to
the Warrant Holders hereunder could reasonably be considered
unlikely to reach its destination, such notice shall be valid and
effective only if it is delivered personally to such Warrant Holders
or if delivered to the address for such Warrant Holders contained in
the register of Special Warrants maintained by the Trustee, by
cable, telegram, telex or other means of prepaid transmitted and
recorded communication.
11.3 OWNERSHIP OF SPECIAL WARRANTS
The Corporation and the Trustee may deem and treat the registered owner of
any Special Warrants as the absolute owner thereof for all purposes, and the
Corporation and the Trustee shall not be affected by any notice or knowledge to
the contrary except where the Corporation or the Trustee is required to take
notice by statute or by order of a court of competent jurisdiction. A Warrant
Holder shall be entitled to the rights evidenced by its Warrant Certificate free
from all equities or rights of set off or counterclaim between the Corporation
and the original or any intermediate holder of the Special Warrants and all
persons may act accordingly. The receipt of any such Warrant Holder for the
Common Shares and the Purchase Warrants shall be a good discharge to the
Corporation and the Trustee for the same and neither the Corporation nor the
Trustee shall be bound to inquire into the title of any such holder except where
the Corporation or the Trustee is required to take notice by statute or by order
of a court of competent jurisdiction.
11.4 COUNTERPARTS
This Indenture may be executed in several counterparts, each of which when
so executed shall be deemed to be an original and such counterparts together
shall constitute one and the same instrument and notwithstanding their date of
execution they shall be deemed to be dated as of the date hereof.
11.5 SATISFACTION AND DISCHARGE OF INDENTURE
Upon the earlier of:
(a) the date by which there shall have been delivered to the Trustee for
exercise or destruction all Warrant Certificates theretofore
certified hereunder; or
(b) the Time of Expiry;
and if all certificates representing Common Shares and the Purchase Warrants, if
any, required to be issued in compliance with the provisions hereof have been
issued and delivered hereunder or to the Trustee in accordance with such
provisions, this Indenture shall cease to be of any force and effect and the
Trustee, on demand of and at the cost and expense of the Corporation and upon
delivery to the Trustee of a certificate of the Corporation stating that all
conditions precedent to the satisfaction and discharge of this Indenture have
been complied with, shall execute proper instruments acknowledging satisfaction
of
<PAGE> 38
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and discharging this Indenture. Notwithstanding the foregoing, the indemnities
provided to the Trustee by the Corporation hereunder shall remain in full force
and effect and survive the termination of this Indenture.
11.6 PROVISIONS OF INDENTURE AND SPECIAL WARRANTS FOR THE SOLE BENEFIT OF
PARTIES AND WARRANT HOLDERS
Nothing in this Indenture or in the Warrant Certificates, expressed or
implied, shall give or be construed to give to any person other than the parties
hereto and the Warrant Holders, as the case may be, any legal or equitable
right, remedy or claim under this Indenture, or under any covenant or provision
herein or therein contained, all such covenants and provisions being for the
sole benefit of the parties hereto and the Warrant Holders.
11.7 COMMON SHARES OR SPECIAL WARRANTS OWNED BY THE CORPORATION OR ITS
SUBSIDIARIES - CERTIFICATE TO BE PROVIDED
For the purpose of disregarding any Special Warrants owned legally or
beneficially by the Corporation or any Subsidiary of the Corporation in Section
8.16, the Corporation shall provide to the Trustee, from time to time, a
certificate of the Corporation setting forth as at the date of such certificate:
(a) the names (other than the name of the Corporation) of the registered
holders of Special Warrants which, to the knowledge of the
Corporation, are owned by or held for the account of the Corporation
or any Subsidiary of the Corporation; and
(b) the number of Special Warrants owned legally or beneficially by the
Corporation or any Subsidiary of the Corporation:
and the Trustee, in making the computations in Section 8.16, shall be entitled
to rely on such certificate without any additional evidence.
<PAGE> 39
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11.8 EVENTS OF DEFAULT
If the Corporation defaults in observing or performing any representation,
warranty, covenant, term or condition herein contained and on its part to be
observed or performed, and if such default continues for a period of 10 days
after notice in writing has been given by the Trustee to the Company, provided
that failure to provide such notice shall not constitute a waiver of such
default, specifying such default and requiring the Corporation to remedy the
same, then, in each and every such event, the Trustee may require that, in
addition to any remedy recoverable by the Trustee for the benefit of the Warrant
Holders at law, the Corporation pay the aggregate sum of $100 to the Trustee for
the benefit of the Warrant Holders.
IN WITNESS WHEREOF the parties hereto have executed this Indenture under
their respective corporate seals and the hands of their proper officers in that
behalf
INFOWAVE SOFTWARE, INC.
By: /s/ Gord Watson
---------------------------------
Authorized Signatory
MONTREAL TRUST COMPANY OF CANADA
By: /s/ illegible
---------------------------------
Authorized Signatory
By: /s/ illegible
---------------------------------
Authorized Signatory
<PAGE> 40
THIS IS SCHEDULE "A" to the Special Warrant Indenture made as of June 30, 1999
between INFOWAVE SOFTWARE, INC. and MONTREAL TRUST COMPANY OF CANADA as Trustee.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD
PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL JUNE 30, 2000
EXCEPT AS PERMITTED BY THE SECURITIES ACT (BRITISH COLUMBIA) AND THE
RULES MADE THEREUNDER
[For Special Warrants issued in the United States or to U.S. Persons
only, include the following:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES
ACT") OR UNDER ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION
THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY
(A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE
WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (C)
PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (D) IN COMPLIANCE
WITH CERTAIN OTHER PROCEDURES SATISFACTORY TO THE CORPORATION. DELIVERY
OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE, BEARING
NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD DELIVERY", MAY BE
OBTAINED FROM MONTREAL TRUST COMPANY OF CANADA UPON DELIVERY OF THIS
CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO
MONTREAL TRUST COMPANY OF CANADA AND THE CORPORATION, TO THE EFFECT
THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES
ACT";
SPECIAL WARRANT CERTIFICATE
INFOWAVE SOFTWARE, INC.
(Incorporated under the laws of British Columbia)
SPECIAL WARRANT
CERTIFICATE NO. _________ _____________ SPECIAL WARRANTS entitling the
holder to acquire, subject to adjustment,
one Common Share and one half of one
Purchase Warrant for each Special Warrant
represented hereby.
<PAGE> 41
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THIS IS TO CERTIFY THAT:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
(the "Holder") is entitled to acquire, upon exercise or deemed exercise of each
Special Warrant represented hereby and without payment of any additional
consideration, one fully paid and non-assessable common share (the "Common
Share") and one half of one non-transferable Common Share purchase warrant (a
"Purchase Warrant") of Infowave Software, Inc. (the "Corporation") until 4:00
p.m. (Vancouver time) (the "Time of Expiry") on the date (the "Expiry Date")
which is the earliest of:
a. five business days after the last Receipt (as defined below) is
issued;
b. 330 days after the Special Warrants are issued; and
c. the date on which all of the Special Warrants have been exercised;
each whole Purchase Warrant will entitle the Holder to purchase one fully paid
and non-assessable Common Share of the Corporation at any time until 4:00 p.m.
(Vancouver time) on or before June 30, 2000, at a purchase price of $3.75 per
Common Share, after which time such Purchase Warrants will expire. In the event
that the Special Warrants are not exercised by the Time of Expiry, all Special
Warrants represented hereby will be deemed to be exercised immediately prior to
such time with no further action on the part of the Holder and the Corporation.
The Corporation has covenanted to use its commercially reasonable efforts
to obtain receipts (the "Receipts") from each of the securities regulatory
authorities in British Columbia, Alberta and Ontario (the "Designated
Provinces"), for a (final) prospectus qualifying for issuance in the Designated
Provinces the Common Shares and the Purchase Warrants to be acquired upon
exercise of these Special Warrants.
The right to acquire Common Shares and the Purchase Warrants may only be
exercised, unless deemed to be exercised, by the Holder within the time set
forth above by:
(a) duly completing and executing the Exercise Form attached hereto; and
(b) surrendering this Special Warrant Certificate to Montreal Trust
Company of Canada (the "Trustee") at its principal office in
Vancouver, British Columbia.
IF THE WARRANTS REPRESENTED BY THIS SPECIAL WARRANT CERTIFICATE ARE
EXERCISED BY THE HOLDER PRIOR TO THE LAST RECEIPT BEING ISSUED, THE COMMON
SHARES, PURCHASE WARRANTS AND COMMON SHARES ISSUABLE UPON EXERCISE OF THE
PURCHASE WARRANTS SHALL BE SUBJECT TO HOLD PERIODS UNDER APPLICABLE SECURITIES
LEGISLATION AND MAY BE ENDORSED WITH LEGENDS TO THAT EFFECT.
These Special Warrants shall be effectively surrendered, unless deemed to
be surrendered, only upon personal delivery hereof or, if sent by mail or other
means of transmission, upon actual receipt thereof by the Trustee at the office
referred to above.
<PAGE> 42
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Upon surrender of these Special Warrants, the person or persons in whose
name or names the Common Shares and the Purchase Warrants are to be issued and
shall be deemed for all purposes, except as provided in the Indenture (as
defined below) to be the holder or holders of record of such Common Shares and
such Purchase Warrants and the Trustee has covenanted that it will, subject to
the provisions of the Indenture (as defined below), cause certificates
representing such Common Shares and such Purchase Warrants to be delivered or
mailed to the person or persons at the address or addresses specified in the
Exercise Form within five Business Days.
The registered Holder of these Special Warrants may acquire any lesser
number of Common Shares and Purchase Warrants than the number of Common Shares
and Purchase Warrants which may be acquired for the Special Warrants represented
by this Special Warrant Certificate. In such event, the Holder shall be entitled
to receive a new Special Warrant Certificate for the balance of the Common
Shares and Purchase Warrants which may be acquired. No fractional Common Shares
will be issued.
In the event of the deemed exercise of the Special Warrants represented by
this Special Warrant Certificate, as described above and as detailed in the
Indenture (as defined below), the Special Warrant Certificate will be deemed to
have been delivered and surrendered and the right of a Holder to acquire Common
Shares and Purchase Warrants represented hereby will be deemed to have been
exercised and all such Common Shares and Purchase Warrants will be issued.
The Special Warrants represented by this Special Warrant Certificate are
issued under and pursuant to a special warrant indenture made as of June 30,
1999 (the "Indenture") between the Corporation and the Trustee. Reference is
made to the Indenture and any instruments supplemental thereto for a full
description of the rights of the Holders of the Special Warrants and the terms
and conditions upon which the Special Warrants are, or are to be, issued and
held, with the same effect as if the provisions of the Indenture and all
instruments supplemental thereto were herein set forth. By acceptance hereof,
the Holder assents to all provisions of the Indenture. In the event of any
conflict between the provisions of this Special Warrant Certificate and the
provisions of the Indenture, the provisions of the Indenture will govern.
Capitalized terms used in the Indenture have the same meaning herein as therein,
unless otherwise defined.
In the event of any alteration of the Common Shares, including any
subdivision, consolidation or reclassification, and in the event of any form of
reorganization of the Corporation, including any amalgamation, merger or
arrangement, the Holders of Special Warrants shall, upon exercise of the Special
Warrants following the occurrence of any of those events, be entitled to receive
the same number and kind of securities that they would have been entitled to
receive had they exercised their Special Warrants immediately prior to the
occurrence of those events.
The Holder of this Special Warrant Certificate may, at any time prior to
the Expiry Time, upon surrender hereof to the Trustee at its principal office in
Vancouver, British Columbia, exchange this Special Warrant Certificate for other
Special Warrant Certificates entitling the Holder to acquire, in the aggregate,
the same number of Common Shares and Purchase Warrants as may be acquired under
this Special Warrant Certificate.
The holding of the Special Warrants evidenced by this Special Warrant
Certificate shall not constitute the Holder hereof a shareholder of the
Corporation or entitle the Holder to any right or interest in respect thereof
except as expressly provided in the Indenture.
<PAGE> 43
-4-
The Indenture provides that all Holders of Special Warrants shall be bound
by any resolution passed at a meeting of the Holders held in accordance with the
provisions of the Indenture and resolutions signed by the Holders of Special
Warrants entitled to acquire a specified majority of the Common Shares which may
be acquired pursuant to the exercise of all then outstanding Special Warrants.
The Special Warrants represented hereby and securities which may be
acquired hereunder have not been registered under the United States Securities
Act of 1933, as amended (the "U.S. Securities Act") and may not be exercised by
or on behalf of any U.S. person unless registered under the U.S. Securities Act
or pursuant to an applicable exemption from registration under the U.S.
Securities Act.
This Special Warrant Certificate shall not be valid for any purpose
whatever unless and until it has been certified by or on behalf of the Trustee.
Time shall be of the essence hereof.
IN WITNESS WHEREOF the Corporation has caused this Special Warrant
Certificate to be signed by its duly authorized officer as of June _____, 1999.
INFOWAVE SOFTWARE, INC.
By: _____________________________________
Authorized Signatory
Certified by:
MONTREAL TRUST COMPANY OF CANADA
Trustee
By: ________________________________
Authorized Signatory
<PAGE> 44
TRANSFER OF SPECIAL WARRANTS
ANY TRANSFER OF SPECIAL WARRANTS WILL REQUIRE COMPLIANCE WITH APPLICABLE
SECURITIES LEGISLATION. TRANSFERORS AND TRANSFEREES ARE URGED TO CONTACT LEGAL
COUNSEL BEFORE EFFECTING ANY SUCH TRANSFER.
FOR VALUE RECEIVED, the undersigned: (i) hereby sells, assigns and
transfers to _________________________, _______________ Special Warrants of
Infowave Software, Inc. registered in the name of the undersigned on the records
of Infowave Software, Inc. maintained by Montreal Trust Company of Canada
represented by the Special Warrant Certificate attached and irrevocably appoints
______________________ the attorney of the undersigned to transfer the said
securities on the books or register with full power of substitution; and (ii)
confirms that the transfer is made in compliance with all applicable securities
legislation and requirements of regulatory authorities including without
limitation any undertaking given to the Vancouver Stock Exchange.
DATED the ______ day of __________________, ________
- --------------------------------------- -------------------------------------
Signature Guaranteed (Signature of Special Warrant Holder)
Instructions:
1. Signature of the Special Warrant Holder must be the signature of the
person appearing on the face of this Special Warrant Certificate.
2. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a fiduciary or representative capacity, the certificate must be
accompanied by evidence of authority to sign satisfactory to the Trustee
and the Corporation.
3. The signature on the Transfer Form must be guaranteed by an authorized
officer of a chartered bank, trust company or medallion guaranteed by a
member of a recognized medallion guarantee program.
4. Special Warrants shall only be transferable in accordance with applicable
laws and the rules and policies of any applicable stock exchange. The
transfer of Special Warrants to a purchaser not resident in British
Columbia, Alberta or Ontario may result in the Common Shares and Purchase
Warrants obtained upon the exercise of the Special Warrants and the Common
Shares obtained upon exercise of the Purchase Warrants (whether after or
before obtaining receipts for a final prospectus relating to the
distribution of Common Shares and Purchase Warrants upon exercise of
Special Warrants) not being freely tradeable in the jurisdiction of the
purchaser.
<PAGE> 45
-2-
The undersigned transferee of _____________ Special Warrants of Infowave
Software, Inc. hereby (i) acknowledges that such Special Warrants are subject to
the terms, conditions and provisions of an Indenture dated as of June 30, 1999;
and (ii) confirms that the transfer is made in compliance with all applicable
securities legislation and requirements of regulatory authorities including,
without limitation, any undertaking given to the Vancouver Stock Exchange.
---------------------------------------
Name of Transferee
---------------------------------------
By:
---------------------------------------
Office or Title
---------------------------------------
Address of Transferee
---------------------------------------
<PAGE> 46
EXERCISE FORM
TO: INFOWAVE SOFTWARE, INC.
MONTREAL TRUST COMPANY OF CANADA
The undersigned hereby exercises the right to acquire _________ units
consisting of one common shares and one half of one common share purchase
warrant of Infowave Software, Inc. (or, in certain circumstances, such number of
other securities or property to which such Special Warrants entitle the
undersigned in lieu thereof or in addition thereto under the provisions of the
Indenture referred to in the accompanying Special Warrant Certificate) in
accordance with and subject to the provisions of such Indenture.
The Common Shares and Purchase Warrants (or other securities or property)
are to be registered as follows:
Name: __________________________________________________________________
Address in full: _______________________________________________________
Number of Common Shares: _______________________________________________
Number of Purchase Warrants: ___________________________________________
Note: If further nominees intended, please attach (and initial) schedule
giving the above for each further nominee.
DATED this _____ day of ___________.
- ------------------------------------ ---------------------------------------
Signature Guaranteed (Signature of Special Warrant Holder)
---------------------------------------
Print full name
---------------------------------------
---------------------------------------
Print full address
Instructions.
1. The registered holder may exercise its right to receive Common Shares
and Purchase Warrants by completing this form and surrendering this
form and the Special Warrant Certificate representing the Special
Warrants being exercised to Montreal Trust Company of Canada at its
principal office in Vancouver, British Columbia. Certificates for
Common Shares and Purchase Warrants will be delivered or mailed within
five business days after the exercise of the Special Warrants.
<PAGE> 47
-2-
2. If the Exercise Form indicates that Common Shares and Purchase Warrants
are to be issued to a person or persons other than the registered
holder of the Certificate, the signature of such holder of the Exercise
Form must be guaranteed by an authorized officer of a chartered bank,
trust company or medallion guaranteed by a member of a recognized
medallion guaranteed program.
3. If the Exercise Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person
acting in a judiciary or representative capacity, the certificate must
be accompanied by evidence of authority to sign satisfactory to the
Trustee and the Corporation.
4. IF THE REGISTERED HOLDER EXERCISES ITS RIGHT TO RECEIVE COMMON SHARES
AND PURCHASE WARRANTS PRIOR TO A PROSPECTUS RECEIPT BEING ISSUED BY THE
SECURITIES REGULATORY AUTHORITIES IN BRITISH COLUMBIA, ALBERTA AND
ONTARIO, THE COMMON SHARES WILL BE SUBJECT TO A HOLD PERIOD AND WILL BE
ISSUED WITH A LEGEND, WHEN APPLICABLE, REFLECTING SUCH HOLD PERIOD.
<PAGE> 48
THIS IS SCHEDULE "B" to the Special Warrant Indenture made as of June 30, 1999
between INFOWAVE SOFTWARE, INC. and MONTREAL TRUST COMPANY OF CANADA as Trustee.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NON-TRANSFERABLE.
THIS WARRANT AND THE COMMON SHARES TO BE ISSUED UPON THE EXERCISE THEREOF HAVE
NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS.
INFOWAVE SOFTWARE, INC.
COMMON SHARE PURCHASE WARRANT
Date: _______
Number of Warrants: _______________ Warrant Certificate No.: _______
1. WARRANTS TO PURCHASE COMMON SHARES. For value received by the undersigned,
_________________ (the "Holder") is entitled to subscribe for and purchase,
subject to the terms hereof, one fully paid and non-assessable common share (a
"Common Share") free from any liens, charges or encumbrances of Infowave
Software, Inc.(the "Corporation") at a purchase price of $3.75 per Common Share
in lawful money of Canada at any time up to 4:00 p.m. Vancouver time on or
before June ____, 2000 (the "Time of Expiry"), for each Warrant represented
hereby after which time the Warrants represented hereby shall expire, unless the
time for exercise of such Warrants is extended, (the price at which one Common
Share of the Corporation may be purchased hereunder from time to time being
hereinafter referred to as the "Exercise Price"), all subject to adjustment as
hereinafter provided, by surrendering this Warrant certificate, together with a
subscription form in the form attached hereto duly completed and executed, at
the principal office of Montreal Trust Company of Canada in the City of
Vancouver, British Columbia, Canada.
2. PARTIAL EXERCISE. The Holder may subscribe for and purchase less than the
full number of Common Shares of the Corporation entitled to be subscribed for
and purchased hereunder. In the event that the Holder subscribes for and
purchases less than the full number of Common Shares entitled to be subscribed
for and purchased under this Warrant certificate prior to the Time of Expiry,
the Corporation shall issue a new Warrant certificate to the Holder in the same
form as this Warrant certificate with appropriate changes.
3. DELIVERY OF COMMON SHARES. Within five business days of receipt of this
Warrant certificate together with a subscription form duly completed and
executed in the form attached hereto, the Corporation shall deliver or cause to
be delivered to the Holder certificates representing the Common Shares
subscribed for and purchased by the Holder hereunder, and a replacement Warrant
certificate, if any, against payment for such Common Shares subscribed for by
certified cheque, bank draft or money order in lawful money of Canada payable to
or to the order of the Corporation.
4. NO RIGHTS OF SHAREHOLDERS. Nothing contained in these Warrants shall be
construed as conferring upon the Holder any right or interest whatsoever as a
holder of Common Shares of the Corporation or any other right or interest except
as herein expressly provided.
<PAGE> 49
-2-
5. ADJUSTMENT OF SUBSCRIPTION AND PURCHASE RIGHTS. From and after the date
hereof, the Exercise Price and the number of Common Shares deliverable upon the
exercise of the Warrants will be subject to adjustment in the events and in the
following manner:
(a) In case of any reclassification of the Common Shares or change of
the Common Shares into other shares, or in case of the
consolidation, merger, reorganization or amalgamation of the
Corporation with or into any other corporation or entity which
results in any reclassification of the Common Shares or a change of
the Common Shares into other shares, or in case of any transfer of
the undertaking or assets of the Corporation as an entirety or
substantially as an entirety to another person (any such event being
hereinafter referred to as a "Reclassification of Common Shares"),
at any time prior to the Time of Expiry, the Holder shall, after the
effective date of such Reclassification of Common Shares and upon
exercise of the right to purchase Common Shares hereunder, be
entitled to receive, and shall accept, in lieu of the number of
Common Shares to which the Holder was theretofore entitled upon such
exercise, the kind and amount of shares and other securities or
property which the Holder would have been entitled to receive as a
result of such Reclassification of Common Shares if, on the
effective date thereof, the Holder had been the registered holder of
the number of Common Shares to which the Holder was theretofore
entitled upon such exercise. If necessary, appropriate adjustments
shall be made in the application of the provisions set forth in this
Section 5 with respect to the rights and interests thereafter of the
Holder of this Warrant certificate to the end that the provisions
set forth in this Section 5 shall thereafter correspondingly be made
applicable as nearly as may be reasonable in relation to any shares
or other securities or property thereafter deliverable upon the
exercise of the Warrants evidenced hereby.
(b) If and whenever at any time prior the Time of Expiry the Corporation
shall:
(i) subdivide the Common Shares into a greater number of shares;
(ii) consolidate the Common Shares into a lesser number of shares;
or
(iii) issue Common Shares, Participating Shares or Convertible
Securities to all or substantially all of the holders of
Common Shares by way of a stock dividend or other distribution
on the Common Shares payable in Common Shares, Participating
Shares or Convertible Securities;
(any such event being hereinafter referred to as "Capital
Reorganization") and any such event results in an adjustment in the
Exercise Price pursuant to paragraph (c), the number of Common
Shares purchasable pursuant to the Warrants evidenced hereby shall
be adjusted contemporaneously with the adjustment of the Exercise
Price by multiplying the number of Common Shares theretofore
purchasable on the exercise thereof by a fraction the numerator of
which shall be the Exercise Price in effect immediately prior to
such adjustment and the denominator of which shall be the Exercise
Price resulting from such adjustment.
(c) If and whenever at any time prior to the Time of Expiry, the
Corporation shall engage in a Capital Reorganization, the Exercise
Price shall, on the effective date, in the case of a subdivision or
consolidation, or on the record date, in the case of a stock
dividend, be adjusted by multiplying the Exercise Price in effect on
such effective date or record date by a fraction: (A) the numerator
of which shall be the number of Common Shares and
<PAGE> 50
-3-
Participating Shares outstanding before giving effect to such
Capital Reorganization; and (B) the denominator of which is the
number of Common Shares and Participating Shares outstanding after
giving effect to such Capital Reorganization. The number of Common
Shares and Participating Shares outstanding shall include the deemed
conversion into or exchange for Common Shares or Participating
Shares of any Convertible Securities distributed by way of stock
dividend or other such distribution. Such adjustment shall be made
successively whenever any event referred to in this paragraph shall
occur.
(d) Any issue of Common Shares, Participating Shares or Convertible
Securities by way of a stock dividend or other such distribution
shall be deemed to have been made on the record date thereof for the
purpose of calculating the number of outstanding Common Shares under
paragraphs (e) and (f).
(e) If and whenever at any time prior to the Time of Expiry, the
Corporation shall fix a record date for the issuance of rights,
options or warrants (other than the Warrants evidenced hereby) to
all or substantially all the holders of Common Shares entitling
them, for a period expiring not more than 45 days after such record
date, to subscribe for or purchase Common Shares, Participating
Shares or Convertible Securities at a price per share (or having a
conversion or exchange price per share) of less than 95% of the
Current Market Price of the Common Shares on such record date (any
such event being hereinafter referred to as a "Rights Offering"),
the Exercise Price shall be adjusted immediately after such record
date so that it shall equal the price determined by multiplying the
Exercise Price in effect on such record date by a fraction:
(i) the numerator of which shall be the aggregate of: (A) the
number of Common Shares outstanding on such record date; and
(B) a number determined by dividing whichever of the following
is applicable by the Current Market Price of the Common Shares
on the record date: (1) the amount obtained by multiplying the
number of Common Shares or Participating Shares which the
Holders of Common Shares are entitled to subscribe for or
purchase by the subscription or purchase price; or (2) the
amount obtained by multiplying the maximum number of Common
Shares or Participating Shares which the holders of Common
Shares are entitled to receive on the conversion or exchange
of the Convertible Securities by the conversion or exchange
price per share; and
(ii) the denominator of which shall be the aggregate of: (A) the
number of Common Shares outstanding on such record date; and
(B) whichever of the following is applicable: (1) the number
of Common Shares or Participating Shares which the holders of
Common Shares are entitled to subscribe for or purchase; or
(2) the maximum number of Common Shares or Participating
Shares which the holders of Common Shares are entitled to
receive on the conversion or exchange of the Convertible
Securities.
Any Common Shares owned by or held for the account of the
Corporation shall be deemed not to be outstanding for the purpose of
any such computation. Such adjustment shall be made successively
whenever such a record date is fixed.
To the extent that such Rights Offering is not so made or any such
rights, options or warrants are not exercised prior to the
expiration thereof, the Exercise Price shall then be
<PAGE> 51
-4-
readjusted to the Exercise Price which would then be in effect if
such record date had not been fixed or if such expired rights,
options or warrants had not been issued.
(f) If and whenever at any time prior to the Time of Expiry, the
Corporation shall fix a record date for the distribution to all or
substantially all the holders of Common Shares of:
(i) shares of any class, whether of the Corporation or any other
corporation;
(ii) rights, options or warrants;
(iii) evidences of indebtedness; or
(iv) other assets or property;
and if such distribution does not constitute a Capital
Reorganization or a Rights Offering or does not consist of rights,
options or warrants entitling the holders of Common Shares to
subscribe for or purchase Common Shares, Participating Shares or
Convertible Securities for a period expiring not more than 45 days
after such record date and at a price per share (or having a
conversion or exchange price per share) of at least 95% of the
Current Market Price of the Common Shares on such record date (any
such non-excluded event being hereinafter referred to as a "Special
Distribution") the Exercise Price shall be adjusted immediately
after such record date so that it shall equal the price determined
by multiplying the Exercise Price in effect on such record date by a
fraction: (I) the numerator of which shall be the amount by which
(A) the amount obtained by multiplying the number of Common Shares
outstanding on such record date by the Current Market Price of the
Common Shares on such record date, exceeds (B) the fair market value
(as determined by the directors of the Corporation, which
determination shall be conclusive) to the holders of such Common
Shares of such Special Distribution; and (II) the denominator of
which shall be the total number of Common Shares outstanding on such
record date multiplied by such Current Market Price.
Any Common Shares owned by or held for the account of the
Corporation shall be deemed not to be outstanding for the purpose of
any such computation. Such adjustment shall be made successively
whenever such a record date is fixed.
To the extent that such Special Distribution is not so made or any
such rights, options or warrants are not exercised prior to the
expiration thereof, the Exercise Price shall then be readjusted to
the Exercise Price which would then be in effect if such record date
had not been fixed or if such expired rights, options or warrants
had not been issued.
(g) For the purpose of this Section 5: (i) "Participating Share" means a
share (other than a Common Share) that carries the right to
participate in earnings to an unlimited degree; and (ii)
"Convertible Security" means a security convertible into or
exchangeable for a Common Share or a Participating Share or both.
(h) No adjustment pursuant to this Section 5 shall be made in respect of
dividends (payable in cash, Common Shares or Participating Shares)
declared payable on the Common Shares in any fiscal year of the
Corporation to the extent that such dividends, when aggregated with
any dividends previously declared payable on the Common Shares in
<PAGE> 52
-5-
such fiscal year, do not exceed 50% of the aggregate consolidated
net income of the Corporation, before extraordinary items, for its
immediately preceding fiscal year.
(i) In any case in which this Section 5 shall require that an adjustment
shall become effective immediately after a record date for an event
referred to herein, the Corporation may defer, until the occurrence
of such event, issuing to the Holder, upon the exercise of the
Warrants evidenced hereby after such record date and before the
occurrence of such event, the additional Common Shares issuable upon
such exercise by reason of the adjustment required by such event;
provided, however, that the Corporation shall deliver to the Holder
an appropriate instrument evidencing the Holder's right to receive
such additional Common Shares upon the occurrence of the event
requiring such adjustment and the right to receive any distributions
made on such additional Common Shares on and after such exercise.
(j) The adjustments provided for in this Section 5 are cumulative,
shall, in the case of adjustments to the Exercise Price, be computed
to the nearest one-tenth of one cent and shall apply (without
duplication) to successive Reclassifications of Common Shares,
Capital Reorganizations, Rights Offerings and Special Distributions;
provided that, notwithstanding any other provision of this Section
5, no adjustment of the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% of
the Exercise Price then in effect (except upon a consolidation of
the outstanding Common Shares) (provided, however, that any
adjustments which by reason of this paragraph are not required to be
made shall be carried forward and taken into account in any
subsequent adjustment).
(k) No adjustment in the number of Common Shares which may be purchased
upon exercise of the Warrants evidenced hereby or in the Exercise
Price shall be made pursuant to this Warrant certificate if the
Holder is entitled to participate in such event on the same terms
mutatis mutandis as if the Holder had exercised the Warrants
evidenced hereby for Common Shares prior to the effective date or
record date of such event.
(l) In the event of any question arising with respect to the adjustments
provided in this Section, such question shall conclusively be
determined by a firm of chartered accountants appointed by the
Corporation and acceptable to the Holder (who may be the
Corporation's auditors). Such accountants shall have access to all
necessary records of the Corporation and such determination shall be
binding upon the Corporation and the Holder.
(m) As a condition precedent to the taking of any action which would
require an adjustment in the subscription rights pursuant to the
Warrants, including the Exercise Price and the number of such
classes of shares or other securities or property which are to be
received upon the exercise thereof, the Corporation shall take all
corporate action which may, in the opinion of counsel, be necessary
in order that the Corporation has reserved and there will remain
unissued out of its authorized capital a sufficient number of Common
Shares for issuance upon the exercise of the Warrants evidenced
hereby, and that the Corporation may validly and legally issue as
fully paid and non-assessable all the shares of such classes or
other securities or may validly and legally distribute the property
which the Holder is entitled to receive on the full exercise thereof
in accordance with the provisions hereof.
<PAGE> 53
-6-
(n) At least 21 days prior to the effective date or record date,
as the case may be, of any event which requires an adjustment
in the subscription rights pursuant to this Warrant
certificate, including the Exercise Price and the number and
classes of shares or other securities or property which are to
be received upon the exercise thereof, the Corporation shall
give notice to the Holder of the particulars of such event and
the required adjustment.
6. NO FRACTIONAL COMMON SHARES. The Corporation shall not be required to issue
fractional Common Shares upon the exercise of the Warrants evidenced hereby. If
any fractional interest in a Common Share would, except for the provisions of
this Section, be deliverable upon the exercise of the Warrants evidenced hereby,
the Corporation shall, in lieu of delivering any certificate for such fractional
interest, satisfy such fractional interest by paying to the Holder an amount in
lawful money of Canada equal (computed to the nearest cent) to the Current
Market Price of the Common Shares multiplied by such fractional interest.
7. DEFINITION OF "CURRENT MARKET PRICE". For the purpose of any computation
under this Warrant certificate, the "Current Market Price" at any date shall be
the weighted average price per share for Common Shares for the 20 consecutive
trading days before such date on the Vancouver Stock Exchange in the Common
Shares (or, if the Common Shares are not listed on such stock exchange, on such
other stock exchange on which the Common Shares are listed as may be selected
for such purpose by the directors of the Corporation or, if the Common Shares
are not listed on any stock exchange, then on the over-the-counter market). The
weighted average price shall be determined by dividing the aggregate sale price
of all such shares sold on the said exchange or market during the said 20
consecutive trading days by the total number of such shares so sold.
8. LEGENDING OF COMMON SHARES.
(a) The Holder hereby agrees and consents by acceptance hereof that, in
the event that a receipt for the (final) prospectus relating to the
distribution of the Warrants is not obtained, the certificate or
certificates representing Common Shares issued upon exercise of the
Warrants shall be impressed with a legend (the "Legend") reciting
that the transfer thereof is restricted (the "Restricted Period"),
substantially in the following forms:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A HOLD PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL
JUNE _____, 2000 EXCEPT AS PERMITTED BY THE SECURITIES ACT
(BRITISH COLUMBIA) AND RULES MADE THEREUNDER."
(b) The Holder acknowledges by acceptance hereof that if any Warrants
are exercised during the Restricted Period, the certificate or
certificates representing the Common Shares issuable upon such
exercise shall also be impressed with the Legend set forth above
unless counsel reasonably acceptable to the Corporation delivers an
unqualified opinion that such Legend need not be imposed.
(c) The Holder hereby agrees and consents by acceptance hereof that all
certificates representing Common Shares acquired upon exercise of
the Warrants by Holders resident in the United States shall have the
following legend:
<PAGE> 54
-7-
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "U.S. SECURITIES ACT") OR UNDER ANY STATE SECURITIES
LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES
FOR THE BENEFIT OF THE CORPORATION THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH
RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (C)
PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE U.S.
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE,
OR (D) IN COMPLIANCE WITH CERTAIN OTHER PROCEDURES
SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE
MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE,
BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY", MAY BE OBTAINED FROM MONTREAL TRUST COMPANY OF
CANADA UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED
DECLARATION, IN A FORM SATISFACTORY TO MONTREAL TRUST COMPANY
OF CANADA AND THE CORPORATION, TO THE EFFECT THAT THE SALE OF
THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE
WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT";
9. NON-TRANSFERABILITY. The Warrants evidenced hereby shall not be assignable
or transferable by the Holder.
10. GOVERNING LAW. These Warrants evidenced hereby shall be governed and
construed in accordance with the laws of the Province of British Columbia.
11. MEETINGS OF WARRANTHOLDERS.
(a) Right to Convene Meeting.
(i) The Corporation may at any time and from time to time, and
will on receipt of an instrument signed in one or more
counterparts by Warrant Holders entitled to purchase in the
aggregate not less than 10% of the aggregate number of Common
Shares which could be purchased pursuant to all the Warrants
outstanding for the time being, requesting the Corporation to
take some action or proceeding (a "Warrant Holder's Request").
<PAGE> 55
-8-
(ii) If the Corporation fails within 15 days after receipt of such
Warrant Holder's request and indemnity to give notice
convening a meeting, such Warrant Holders may convene such
meeting.
(iii) Every such meeting will be held in the City of Vancouver,
Province of British Columbia, unless required by law to be
held elsewhere in Canada.
(b) Notice of Meeting. At least 10 days' notice of any meeting will be
given to the Warrant Holders and a copy will be sent by post to the
Corporation unless the meeting has been called by it. Such notice
will state the time when and the place where the meeting is to be
held and will state briefly the general nature of the business to be
transacted, but it will not be necessary for any such notice to set
out the terms of any resolution to be proposed or any of the
provisions of this Article.
(c) Chairman. A person nominated in writing by the Corporation will be
Chairman of the meeting and if no person is so nominated, or if the
person so nominated is not present within fifteen minutes from the
time fixed for the holding of the meeting, the Warrant Holders
present in person or by proxy will choose a person present to be
Chairman.
(d) Quorum. Subject to the provisions of Section 11(l), at any meeting
of the Warrant Holders a quorum will consist of Warrant Holders
present in person or by proxy and entitled to purchase at least 10%
of the aggregate number of Common Shares which could be purchased
pursuant to all the then outstanding Warrants, provided that at
least two persons entitled to vote are personally present. If a
quorum of the Warrant Holders is not present within half an hour
from the time fixed for holding any meeting, the meeting, if
summoned by the Warrant Holders, or on a Warrant Holder's Request,
will be dissolved, but in any other case the meeting will be
adjourned to the same day in the next week (unless such day is a
non-business day, in which case it will be adjourned to the next
following business day) at the same time and place. At the adjourned
meeting the Warrant Holders present in person or by proxy will form
a quorum and may transact the business for which the meeting was
originally convened notwithstanding that they may not be entitled to
purchase at least 10% of the aggregate number of Common Shares which
can be purchased pursuant to all of the then outstanding Warrants.
(e) Power to Adjourn. The Chairman of any meeting at which a quorum of
the Warrant Holders is present may with the consent of the meeting
adjourn any such meeting and no notice of such adjournment need be
given except such notice, if any, as the meeting may prescribe.
(f) Show of Hands. Every question submitted to a meeting will be decided
in the first place by a majority of the votes given on a show of
hands. At any such meeting, unless a poll is demanded, a declaration
by the Chairman that a resolution has been carried or carried
unanimously or by a particular majority will be conclusive evidence
of the fact.
(g) Poll. On any question submitted to a meeting and after a vote by
show of hands, when demanded by the Chairman or by one or more of
the Warrant Holders acting in person or by proxy and entitled to
purchase in the aggregate at least 5% of the aggregate number of
Common Shares which could be purchased pursuant to all the Warrants
for the time being outstanding, a poll will be taken in such manner
as the Chairman will direct.
<PAGE> 56
-9-
Questions other than extraordinary resolutions will be decided by a
majority of the votes cast on the poll.
(h) Voting. On a show of hands every person who is present and entitled
to vote, whether as a Warrant Holder or as proxy for one or more
absent Warrant Holders or both, will have one vote. On a poll each
Warrant Holder present in person or represented by proxy duly
appointed by instrument in writing will be entitled to one vote in
respect of each Common Share which the Holder is entitled to
purchase pursuant to the Warrant or Warrants then held by the
Holder. A proxy need not be a Warrant Holder.
(i) Regulations. The Corporation may from time to time make or vary such
regulations as it will think fit:
(i) for the issue of voting certificates by any bank, trust
company or other depository, certifying that specified
Warrants have been deposited with it by a named Holder and
will remain on deposit until after the meeting, which voting
certificate will entitle the Holders to be present and vote at
any such meeting and at any adjournment thereof in the same
manner and with the same effect as though the holders so named
in such voting certificates were the actual bearers of the
Warrants specified therein;
(ii) for the deposit of voting certificates or instruments
appointing proxies at such place and time as the Corporation
or the Warrant Holders convening the meeting, as the case may
be, may in the notice convening the meeting direct;
(iii) for the deposit of voting certificates or instruments
appointing proxies at some approved place or places other than
the place at which the meeting is to be held, and enabling
particulars of such voting certificates or instruments
appointing proxies to be mailed, cabled or telegraphed before
the meeting to the Corporation at the place where the same is
to be held, and for the voting of proxies so deposited as
though the instruments themselves were produced at the
meeting; and
(iv) for the form of the instrument of proxy.
Any regulations so made will be binding and effective and the votes
given in accordance therewith will be valid and will be counted.
Save as such regulations may provide, the only persons who will be
recognized at any meeting as the Holder of any Warrants, or as
entitled to vote or be present at the meeting in respect thereof,
will be persons who produce Warrants at the meeting.
(j) Corporation May Be Represented. The Corporation, by its officers and
directors and the legal advisors of the Corporation, may attend any
meeting of the Warrant Holders, but will have no vote as such.
(k) Powers Exercisable by Extraordinary Resolution. In addition to all
other powers conferred upon them by any other provisions hereof or
by law, the Warrant Holders at a meeting will have the following
powers, exercisable from time to time by extraordinary resolution:
<PAGE> 57
-10-
(i) to enforce any of the covenants on the part of the Corporation
contained in the Warrants, or to enforce any of the rights of
the Warrant Holders in any manner specified in such
extraordinary resolution, or to refrain from enforcing any
such covenant or right;
(ii) to waive any default on the part of the Corporation in
complying with any provision hereof either conditionally or
upon any conditions specified in such extraordinary
resolution; and
(iii) to consent to any amendment of the terms of the Warrants.
(l) Meaning of "Extraordinary Resolution".
(i) The expression "extraordinary resolution" when used herein
means, subject as hereinafter in Section 11(l) and in Section
11(o) provided, a resolution proposed at a meeting of Warrant
Holders duly convened for that purpose, and held in accordance
with the provisions in this Article contained at which there
are present, in person or by proxy, Warrant Holders entitled
to purchase at least 10% of the aggregate number of Common
Shares which can be purchased pursuant to all the then
outstanding Warrants, and passed by the affirmative votes of
Warrant Holders entitled to purchase not less than two-thirds
of the aggregate number of Common Shares which can be
purchased pursuant to all the then outstanding Warrants
represented at the meeting and voted upon such resolution.
(ii) If, at any such meeting called for the purpose of passing an
extraordinary resolution, Warrant Holders entitled to purchase
10% of the aggregate number of Common Shares which can be
purchased pursuant to all the then outstanding Warrants are
not present in person or by proxy within half an hour after
the time appointed for the meeting, then the meeting, if
convened by Warrant Holders or on a Warrant Holder's Request,
will be dissolved, but in any other case it will stand
adjourned and the provisions of Section 11(d) will mutatis
mutandis apply.
(m) Powers Cumulative. Any one or more of the powers or any combination
of the powers to be exercisable by the Warrant Holders by
extraordinary resolution or otherwise may be exercised from tune to
time and the exercise of any one or more of such powers or any
combination of powers from time to time will not be deemed to
exhaust the right of the Warrant Holders to exercise such power or
powers or combination of powers then or any power or powers or
combination of powers thereafter from time to time.
(n) Minutes. Minutes of all resolutions and proceedings at every such
meeting will be made and duly entered in books to be from time to
time provided for that purpose by the Corporation, and any such
minutes, if signed by the Chairman of the meeting at which such
resolutions were passed or proceedings had, or by the Chairman of
the next succeeding meeting of the Warrant Holders, will be prima
facie evidence of the matters stated and until the contrary is
proved, every such meeting, in respect of the proceedings of which
minutes will have been made, will be deemed to have been duly
convened and held, and all resolutions passed or proceedings taken,
to have been duly passed and taken.
<PAGE> 58
-11-
(o) Binding Effect of Resolutions. Every resolution and every
extraordinary resolution passed in accordance with the provisions of
this Article at a meeting of Warrant Holders will be binding upon
all Warrant Holders.
12. MODIFICATION OF TERMS FOR CERTAIN PURPOSES. From time to time the
Corporation may, and it will, when so directed by these presents, modify the
terms and conditions of this Warrant, for any one or more or all of the
following purposes:
(a) giving effect to any extraordinary resolution passed as provided in
Section 11;
(b) for any other purpose, including the correction or rectification of
any ambiguous, defective provisions, errors or omissions herein; and
(c) to evidence any succession of any corporation and the assumption by
any successor of the covenants of the Corporation contained in the
Warrants.
IN WITNESS WHEREOF the Corporation has caused this Warrant certificate to
be executed by its duly authorized officers.
INFOWAVE SOFTWARE, INC.
By: ______________________
Authorized Signatory
<PAGE> 59
SUBSCRIPTION FORM
TO: INFOWAVE SOFTWARE, INC.
The undersigned holder of the attached Warrant certificate hereby
subscribes for ______________ common shares ("Common Shares") of Infowave
Software, Inc.(or such number of common shares and/or other securities and/or
property to which such subscription entitles the Holder in lieu thereof or
addition thereto under the provisions of the Warrants) pursuant to the terms of
the Warrant certificate at the Exercise Price (as defined in the Warrant
certificate) per Common Share on the terms specified in the Warrant certificate
and encloses herewith cash or a bank draft, certified cheque or money order
payable to the order of Infowave Software, Inc. in payment therefor.
The undersigned hereby certifies that the undersigned is not a U.S. Person
or a person in the United States, and is not acquiring any of the Shares
issuable upon the exercise of the Warrants for the account or benefit of a U.S.
Person or a person in the United States, other than the Original U.S. Purchaser,
and none of the persons listed above is a U.S. Person or a person in the United
States, unless such person is the Original U.S. Purchaser (as defined below). In
addition to this exercise form, an Original U.S. Purchaser must also provide an
executed letter, substantially in the form attached as Schedule "A" hereto, a
copy of which is available upon request from the Trustee or Infowave Software,
Inc. For purposes hereof "United States" and "U.S. Person" shall have the
meanings given to such terms in Regulation S under the United States Securities
Act of 1933, as amended (the "U.S. Securities Act") and "Original U.S.
Purchaser" means the institutional accredited investor within the meaning of
Rule 501(a)(1),(2),(3) or (7) under the U.S. Securities Act who first acquires
Special Warrants pursuant to the Special Warrant Indenture dated as of June 29,
1999 between the Corporation and Montreal Trust Company of Canada.
The undersigned irrevocably hereby directs that _______________ Common
Shares be issued and delivered as follows:
Number of
Name in Full Address Common Shares
- ------------ ------- -------------
- -------------------------- ---------------------- -----------------------
- -------------------------- ---------------------- -----------------------
DATED this _____ day of ______________________ , __________
-----------------------
Name of Holder
-----------------------
Signature
-----------------------
Name
-----------------------
Position
<PAGE> 60
-2-
Instructions
1. The registered holder may exercise its right to receive Common Shares by
completing this form and surrendering this form, the Warrant Certificate
representing the Warrants being exercised and payment of the Exercise
Price as specified above to Montreal Trust Company of Canada at its
principal office in Vancouver, British Columbia. Certificates for Common
Shares will be delivered or mailed within five business days after the
exercise of the Warrants.
2. If the Subscription Form indicates that Common Shares are to be issued to
a person or persons other than the registered holder of the Certificate,
the signature of such holder of the Subscription Form must be guaranteed
by an authorized officer of a chartered bank, trust company or medallion
guaranteed who is a member of a recognized medallion guaranteed program.
3. If the Subscription Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a judiciary or representative capacity, the certificate must be
accompanied by evidence of authority to sign satisfactory to the Trustee
and the Corporation.
4. IF THE REGISTERED HOLDER EXERCISES ITS RIGHT TO RECEIVE COMMON SHARES
PRIOR TO A PROSPECTUS RECEIPT BEING ISSUED BY THE SECURITIES REGULATORY
AUTHORITIES IN BRITISH COLUMBIA, ALBERTA AND ONTARIO, THE COMMON SHARES
WILL BE SUBJECT TO A HOLD PERIOD AND WILL BE ISSUED WITH A LEGEND, WHEN
APPLICABLE, REFLECTING SUCH HOLD PERIOD.
<PAGE> 61
SCHEDULE "A"
Form of Letter to be Delivered by
Original U.S. Purchaser upon Exercise of Warrants
Infowave Software, Inc.
#188 - 4664 Lougheed Highway
Burnaby, British Columbia
V5C 6B7
- - and to -
Montreal Trust Company of Canada
as Warrant Agent
3rd Floor, 510 Burrard Street
Vancouver, British Columbia
V6C 3P9
Dear Sirs:
We are delivering this letter in connection with the purchase of common
shares (the "Shares") of Infowave Software, Inc. (the "Corporation"), a
corporation existing under the laws of British Columbia, upon the exercise of
warrants of the Corporation ("Warrants").
We hereby confirm that:
(a) we are an institutional "accredited investor" as defined in Rule
501(a)(1), (2), (3) and (7) of Regulation D under the United States
Securities Act of 1933 (the "U.S. Securities Act");
(b) we are purchasing the Shares for our own account;
(c) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of
purchasing the Shares;
(d) we are not acquiring the Shares with a view to distribution thereof
or with any present intention of offering or selling any of the
Shares, except (A) to the Corporation, (B) outside the United States
in accordance with Rule 904 under the U.S. Securities Act or (C)
inside the United States, (1) in accordance with Rule 144A under the
U.S. Securities Act and in compliance with applicable state
securities laws or (2) in accordance with Rule 144 under the U.S.
Securities Act, if applicable, and in compliance with applicable
state securities laws;
(e) we have had access to such financial and other information as we
deem necessary in connection with our decision to purchase the
Shares; and
(f) we acknowledge that we are not purchasing the Shares as a result of
any general solicitation or general advertising, as such terms are
used in Rule 502(c) of Regulation D under the U.S. Securities Act,
including advertisements, articles, notices or other
<PAGE> 62
-2-
communications published in any newspaper, magazine or similar media
or broadcast over radio, television, or any seminar or meeting whose
attendees have been invited by general solicitation or general
advertising.
We understand that the Shares are being offered in a transaction not
involving any public offering within the United States within the meaning of
U.S. Securities Act and that the Shares have not been and will not be registered
under the U.S. Securities Act. We further understand that any Shares acquired by
us will be in the form of definitive certificates evidencing such Shares as
approved by the Corporation from time to time and that such certificates will
bear a legend reflecting the substance of paragraph (d) above.
We acknowledge that you will rely upon our confirmations, acknowledgements
and agreements set forth herein, and we agree to notify you promptly in writing
if any of our representations or warranties herein ceases to be accurate or
complete.
--------------------------------------
(Name of Purchaser)
By: _________________________________
Name:
Title:
Address:
<PAGE> 1
EXHIBIT 4.4
INFOWAVE SOFTWARE, INC.
STOCK OPTION PLAN
February 26, 1997
(As Amended on September 3, 1997, March 27, 1998,
December 4, 1998 and October 6, 1999)
1. PURPOSE OF PLAN
1.1. The purpose of the Plan is to assist Eligible Persons of the Company and
its Subsidiaries to participate in the growth and development of the Company and
its Subsidiaries by providing such persons with the opportunity, through
Options, to acquire an increased proprietary interest in the Company.
2. DEFINED TERMS
In the Plan, the following terms shall have the following meanings,
respectively:
2.1. "Board" means the board of directors of the Company or, if established
and duly authorized to act, the Executive Committee of the board of directors of
the Company;
2.2. "Business Day" means any day, other than a Saturday or a Sunday, on which
the Exchange is open for trading;
2.3. "Company" means INFOWAVE SOFTWARE, INC., formerly Infowave Wireless
Messaging Incorporated, a company incorporated under the Company Act (British
Columbia);
2.4. "Change of Control" means:
(a) any Person, or combination of Persons acting jointly or in
concert, acquiring or becoming the beneficial owner of, directly
or indirectly, more than 50% of the voting securities of the
Company, whether through the acquisition of previously issued and
outstanding voting securities of the Company or of voting
securities of the Company that have not been previously issued, or
any combination thereof or any other transaction having a similar
effect; and
(b) amalgamation, merger or arrangement of the Company with or into
another where the holders of Shares immediately prior to the
transaction will hold less than 51% of the voting securities of
the resulting entity upon completion of the transaction;
2.5. "Eligible Person" means a person who is, at the time the Option is
granted:
(a) a director, senior officer or full-time employee of the Company or
its Subsidiary;
<PAGE> 2
- 2 -
(b) a consultant who:
(i) provides ongoing consulting services to the Company or the
Subsidiary under a written contract;
(ii) possesses technical, business or management expertise of
value to the Company or the Subsidiary;
(iii) spends a significant amount of time and attention on the
business and affairs of the Company or the Subsidiary; and
(iv) has a relationship with the Company or Subsidiary that
enables the individual to be knowledgeable concerning the
business and affairs of the Company; or
(c) an employee of a management company providing services (other than
investor relations) to the Company or its Subsidiary;
2.6. "Exchange" means The Toronto Stock Exchange;
2.7. "Insider" has the meaning ascribed thereto in the Securities Legislation
and regulation of British Columbia and Ontario;
2.8. "Option" means an option to purchase Shares granted under the Plan;
2.9. "Option Price" means the price per share at which Shares may be purchased
under the Option, as the same may be adjusted from time to time in accordance
with Article 7 or 8;
2.10. "Optionee" means a person to whom an Option has been granted;
2.11. "Person" has the meaning ascribed thereto in the Securities Act (British
Columbia), as amended from time to time;
2.12. "Plan" means this stock option plan, as amended from time to time;
2.13. "Shares" means the common shares of the Company, or, in the event of an
adjustment contemplated by Article 8, such other shares or securities to which
an Optionee may be entitled upon the exercise of an Option as a result of such
adjustment; and
2.14. "Subsidiary" means a subsidiary of the Company within the meaning of the
Securities Act (British Columbia).
3. ADMINISTRATION OF THE PLAN
3.1. The Plan shall be administered by the Board.
<PAGE> 3
- 3 -
3.2. The Board shall have the power, where consistent with the general purpose
and intent of the Plan and subject to the specific provisions of the Plan and
the policies of the Exchange from time to time in effect:
(a) to establish policies and procedures for carrying out the
purposes, provisions and administration of the Plan;
(b) to interpret and construe the Plan and to determine all questions
arising out of the Plan and any Option granted pursuant to the
Plan, and any such interpretation, construction or termination
made by the Board shall be final, binding and conclusive for all
purposes;
(c) to determine which Eligible Persons are granted Options and to
grant Options;
(d) to determine the number of Shares covered by each Option;
(e) to determine the Option Price;
(f) to determine the time or times when Options will be granted, vest
and be exercisable;
(g) to determine if the Shares that are subject to an option will be
subject to any restrictions upon the exercise of such Option; and
(h) to prescribe the form of the instruments relating to the grant,
exercise and other terms of options.
3.3. A director of the Company to whom an Option may be granted shall not
participate in the decision of the Board to grant such Option.
4. SHARES SUBJECT TO PLAN
4.1 Options may be granted in respect of authorized and unissued Shares,
provided that the aggregate number of Shares reserved for issuance under this
Plan and all other employee purchase or option plans of the Company (other than
the proposed Employee Incentive Plan of the Company), subject to adjustment or
increase of such number pursuant to the provisions of Article 8 shall initially
be set to not exceed 3,552,540 Shares. Shares in respect of which Options are
not exercised shall be available for subsequent Options under the Plan.
5. ELIGIBILITY, GRANT AND TERMS OF OPTIONS
5.1 Options may be granted to Eligible Persons, including to persons who are
Insiders of the Company.
5.2 Except as otherwise provided in this Plan, the number of Shares subject
to each Option, the Option Price, the expiration date of each Option, the extent
to which each Option is exercisable from time to time during the term of the
Option and other terms and conditions
<PAGE> 4
- 4 -
relating to each such option shall be determined by the Board; provided,
however, that Options shall have the following minimum attributes:
(a) all Options must be exercisable during a period not extending
beyond 5 years from the time the Option was granted;
(b) the Option Price must not be lower than the closing market price
of the shares on The Toronto Stock Exchange on the date prior to
the grant of the Option;
(c) the aggregate number of common shares reserved for issuance under
Options granted to any one person must not exceed 5% of the
outstanding Shares of the Company on a non-diluted basis;
(d) all Options are non-transferable or assignable by the Optionee
otherwise than by will or the law of intestacy and the Option may
be exercised during the lifetime of the Optionee only by the
Optionee;
(e) if the Optionee should die while an Eligible Person, the Option
may then be exercised by the legal heirs or personal
representatives of the Optionee, to the same extent as if the
Optionee were alive and an Eligible Person for a period not
exceeding the earlier of 6 months after the death of the Optionee,
or the expiry of the Option but only for such shares as the
Optionee was entitled to at the date of the death of the Optionee;
and
(f) subject to paragraph (e) hereof, each Option held by an Optionee
will terminate on the earlier of 30 days after the Optionee ceases
to be an Eligible Person and the expiry date of the applicable
Option.
6. EXERCISE OF OPTIONS
6.1. Subject to the provisions of the Plan, an Option may be exercised from
time to time by delivery to the Company at its registered office of a written
notice of exercise addressed to the Secretary of the Company specifying the
number of Shares with respect to which the Option is being exercised and
accompanied by payment in full of the Option Price of the Shares to be
purchased. Certificates for such Shares shall be issued and delivered to the
Optionee within a reasonable time following the receipt of such notice and
payment.
6.2. Notwithstanding any of the provisions contained in the Plan or in any
Option, the Company's obligation to issue Shares to an Optionee pursuant to the
exercise of an Option shall be subject to:
(a) completion of such registration or other qualification of such
Shares or obtaining approval of such governmental authority as the
Company shall determine to be necessary or advisable in connection
with the authorization, issuance or sale thereof;
<PAGE> 5
- 5 -
(b) the listing of such Shares on any stock exchange on which the
Shares may then be listed; and
(c) the receipt from the Optionee of such representations, agreements
and undertakings, including as to future dealings in such Shares,
as the Company or its counsel determines to be necessary or
advisable in order to safeguard against the violation of the
securities laws of any jurisdiction.
In this connection the Company shall, to the extent necessary, take all
reasonable steps to obtain such approvals, registrations and qualifications as
may be necessary for the issuance of such Shares in compliance with applicable
securities laws and for the listing of such Shares on any stock exchange on
which the Shares are then listed.
7. VESTING
7.1. The Board may determine, in its sole discretion, subject to Article 11
hereof, the vesting schedule applicable to each Option, which vesting schedule
will be set out in the documents relating to the grant of the Option.
7.2. The Board may, in its sole discretion, and in certain circumstances,
amend, abridge, or otherwise eliminate any vesting schedule as its applies to
any outstanding stock options issued to Eligible Persons pursuant to the Plan,
so that any such stock options, whether vested or unvested, may have an amended
vesting schedule or may immediately vest and become exercisable.
8. CERTAIN ADJUSTMENTS
8.1. Appropriate adjustments in the number of Shares subject to the Plan, and
as regards Options granted or to be granted, in the number of Shares optioned
and in the Option Price, shall be made by the Board to give effect to
adjustments in the number of Shares of the Company resulting from subdivisions,
consolidations or reclassifications of the Shares of the Company, the payment of
stock dividends by the Company (other than dividends in the ordinary course) or
other relevant changes in the capital stock of the Company. The appropriate
adjustment in any particular circumstance shall be conclusively determined by
the Board in its sole discretion.
9. AMENDMENT OR DISCONTINUANCE OF PLAN
9.1. The Board may amend or discontinue the Plan at any time; provided,
however, that no such amendment may increase the maximum number of Shares that
may be optioned under the Plan, change the manner of determining the Option
Price or, without the consent of the optionee, alter or impair any Option
previously granted to an Optionee under the Plan. No amendment to this Plan
shall be applicable to any Option granted or to be granted to an Insider of the
Company until the amendment is approved by the holders of the Shares.
<PAGE> 6
- 6 -
10. LOANS TO OPTIONEES
10.1. Subject to applicable law and other applicable rules of any stock
exchange in Canada upon which Shares of the Company are listed, the Company may
in its sole discretion arrange for the Company or any Subsidiary to make loans
or provide guarantees for loans by financial institutions to assist Optionees to
purchase Shares upon the exercise of the Options so granted or to assist the
Optionees to pay any income tax exigible upon exercise of the Options. Such
loans may be secured or unsecured, and shall bear interest at such rates, if
any, and be on such other terms as may be determined by the Company.
Nothwithstanding the foregoing, this Section 9.1 shall not apply so long as the
Company is listed on The Toronto Stock Exchange unless The Toronto Stock
Exchange gives specific approval to such a loan.
11. CHANGE OF CONTROL
11.1. Without limiting Section 7 of this Plan and notwithstanding that
directors of the Company may hold unvested Options, in the event of an offer
being made, either to the Company or to the shareholders of the Company, by a
person acting at arm's length to the Company, as that term is defined in the
Income Tax Act (Canada), by which a Change of Control is proposed, whether with
the co-operation of the Board or otherwise, then prior to the completion of such
Change of Control, the Board may, in its sole and absolute discretion, cause any
or all outstanding stock options issued to Eligible Persons pursuant to the Plan
(except only those which are subject to cancellation), whether vested or
unvested, to vest and be exercisable as at such time as the Board may determine.
12. MISCELLANEOUS
12.1. The holder of an Option shall not have any rights as a shareholder of the
Company with respect to any of the Shares covered by such Option until such
holder shall have exercised such Option in accordance with the terms of the Plan
and the issuance of the Shares by the Company.
12.2. Nothing in the Plan or any Option shall confer upon any Optionee any
right to continue in the employ of the Company or any Subsidiary of the Company
or affect in any way the right of the Company or any such Subsidiary to
terminate his employment at any time; nor shall anything in the Plan or any
Option be deemed or construed to constitute an agreement, or an expression of
intent, on the part of the Company or any such Subsidiary to extend the
employment of any Optionee beyond the time that he would normally be retired
pursuant to the provisions of any present or future retirement plan of the
Company or any Subsidiary or any present or future retirement policy of the
Company or any Subsidiary, or beyond the time at which he would otherwise be
retired pursuant to the provisions of any contract of employment with the
Company or any Subsidiary.
12.3. To the extent required by law or regulatory policy or necessary to allow
Shares issued on exercise of an option to be free of resale restrictions, the
Company shall report the grant, exercise or termination of the Option to the
Exchange and the appropriate securities regulatory authorities.
<PAGE> 1
Exhibit 10.4
----
BUILDING : BRENTWOOD OFFICE CENTRE
LANDLORD : RIOCAN HOLDINGS INC.
TENANT : INFOWAVE WIRELESS MESSAGING INC.
TENANT'S ADDRESS : #188, 4664 Lougheed Highway
Burnaby, B.C.
V5C 6B7
INDEMNIFIER : n/a
SUITE NO. : 101
AREA : 14,281 square feet
TERM OF LEASE : 5 years
FROM : April 1, 1998
TO : March 31, 2003
RENTAL/SQ.FT.RATE : $9.00
OPTION : 1x54 R.T.B.A. (SEE RIDER #1)
ALLOWANCE : $8.00 payable to Tenant towards leasehold
improvements (SEE RIDER #1)
<PAGE> 2
INDEX
OFFICE LEASE
TABLE OF CONTENTS
ARTICLE 1
SPECIAL PROVISIONS
ARTICLE 2
LEASED PREMISES, TERM AND ACCEPTANCE
OF THE LEASED PREMISES
<TABLE>
<S> <C>
Section 2.1 Leased Premises.................................................
Section 2.2 Use of Additional Areas.........................................
Section 2.3 Grant and Term..................................................
Section 2.4 Construction of Leased Premises.................................
ARTICLE 3
RENT
Section 3.1 Covenant to Pay.................................................
Section 3.2 Basic Rent......................................................
Section 3.3 Pre-Authorized Payments/Postdated Cheques.......................
Section 3.4 Advance Rent....................................................
Section 3.5 Rent Past Due...................................................
ARTICLE 4
TAXES AND OPERATING COSTS
Section 4.1 Taxes Payable by Landlord.......................................
Section 4.2 Taxes Payable by Tenant.........................................
Section 4.3 Business Taxes and Other Taxes of the Tenant....................
Section 4.4 Tenant's Proportionate Share of Operating Costs.................
Section 4.5 Payment of Taxes and Operating Costs............................
ARTICLE 5
BUILDING -- CONTROL AND SERVICES
Section 5.1 Control of the Building.........................................
Section 5.2 Landlord's Services.............................................
Section 5.3 Tenant's Responsibilities.......................................
Section 5.4 Relocation of the Leased Premises...............................
Section 5.5 Additional Services.............................................
ARTICLE 6
UTILITIES
Section 6.1 Charges for Utilities...........................................
ARTICLE 7
USE OF THE LEASED PREMISES
Section 7.1 Use of the Leased Premises......................................
Section 7.2 Conduct of Business.............................................
Section 7.3 Observance of Law...............................................
Section 7.4 Hazardous Substances............................................
ARTICLE 8
INSURANCE AND INDEMNITY
Section 8.1 Tenant's Insurance..............................................
Section 8.2 Increase in Insurance Premiums..................................
Section 8.3 Cancellation of Insurance.......................................
Section 8.4 Loss or Damage..................................................
Section 8.5 Landlord's Insurance............................................
Section 8.6 Indemnification.................................................
ARTICLE 9
MAINTENANCE, REPAIRS AND ALTERATIONS
Section 9.1 Maintenance and Repairs by the Landlord.........................
Section 9.2 Maintenance and Repairs by the Tenant...........................
</TABLE>
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<TABLE>
<S> <C>
Section 9.3 Landlord's Approval of the Tenant's Repairs.....................
Section 9.4 Removal and Restoration by the Tenant...........................
Section 9.5 Tenant to Discharge all Liens...................................
Section 9.6 Signs and Advertising...........................................
Section 9.7 Tenant Not to Overload Facilities...............................
Section 9.8 Tenant Not to Overload Floors...................................
ARTICLE 10
DAMAGE AND DESTRUCTION
Section 10.1 Destruction of the Leased Premises..............................
Section 10.2 Destruction of the Building.....................................
Section 10.3 Expropriation...................................................
Section 10.4 Architect.......................................................
ARTICLE 11
ASSIGNMENT AND SUBLETTING
Section 11.1 Assignment and Subletting.......................................
Section 11.2 Assignment by the Landlord......................................
ARTICLE 12
ACCESS AND ALTERATIONS
Section 12.1 Right of Entry..................................................
ARTICLE 13
STATUS STATEMENT, SUBORDINATION AND ATTORNMENT
Section 13.1 Status Statement................................................
Section 13.2 Subordination and Attornment....................................
Section 13.3 Attorney........................................................
Section 13.4 Financial Information...........................................
ARTICLE 14
DEFAULT
Section 14.1 Right to Re-enter...............................................
Section 14.2 Right to Relet..................................................
Section 14.3 Expenses........................................................
Section 14.4 Waiver of Exemption from Distress...............................
Section 14.5 Landlord's Rights...............................................
Section 14.6 Remedies Generally..............................................
ARTICLE 15
MISCELLANEOUS
Section 15.1 Rules and Regulations...........................................
Section 15.2 Intent and Interpretation.......................................
Section 15.3 Overholding -- No Tacit Renewal.................................
Section 15.4 Tenant Partnership or Group.....................................
Section 15.5 Waiver..........................................................
Section 15.6 Accord and Satisfaction.........................................
Section 15.7 Force Majeure...................................................
Section 15.8 Notices.........................................................
Section 15.9 Registration....................................................
Section 15.10 Accrual of Basic Rent and Additional Rent.......................
Section 15.11 Compliance with the Planning Act................................
Section 15.12 Quiet Enjoyment.................................................
Section 15.13 Consent and Approval............................................
Section 15.14 Non-Liability...................................................
ARTICLE 16
DEFINITIONS
RIDER #1 SPECIAL PROVISIONS
SCHEDULE "A" LEGAL DESCRIPTION...............................................
SCHEDULE "B" FLOOR PLAN......................................................
SCHEDULE "C" CONSTRUCTION OF THE LEASED PREMISES.............................
SCHEDULE "D" METHOD OF FLOOR MEASUREMENT.....................................
SCHEDULE "E" RULES AND REGULATIONS...........................................
SCHEDULE "F" PRE-AUTHORIZED PAYMENT-PLAN.....................................
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THIS LEASE is dated February 12, 1998.
B E T W E E N:
RIOCAN HOLDINGS INC.
("LANDLORD")
OF THE FIRST PART;
- AND -
INFOWAVE WIRELESS MESSAGING INC.
("TENANT")
OF THE SECOND PART.
ARTICLE 1.
SPECIAL PROVISIONS
The following are certain special provisions, which are part of, and are
referred to in subsequent provisions of this Lease. Any conflict or
inconsistency between these special provisions and the provisions contained
elsewhere in this Lease will be resolved in favour of the provisions contained
elsewhere in this Lease:
SECTION 1.1 LEASED PREMISES - SEE RIDER #1, CLAUSES #3 & 5
Containing a Rentable Area of approximately 14,281 square feet, located on the
1ST floor of the Building as shown outlined in red on the plan(s) attached as
Schedule "B" and designated as Unit No. 101 (Section 2.1).
SECTION 1.2 FIXTURING PERIOD
The period commencing February 1, 1998 and expiring March 31, 1998.
(Section 2.4).
SECTION 1.3 COMMENCEMENT DATE AND TERM - SEE RIDER #1, CLAUSE #2
The period of five (5) years commencing on the 1st day of April, 1998 (the
"Commencement Date") and fully to be completed and ended on the 31st day of
March, 2003, save as hereinafter provided for earlier termination.
(Section 2.3).
SECTION 1.4 BASIC RENT - SEE RIDER #1, CLAUSE #1
Annual payments during the Term based upon the following annual rates per square
foot of the Rentable Area of the Leased Premises and payable in accordance with
the terms of this Lease; (Section 3.2).
From April 1, 1998 to March 31, 2003
$128,529.00 per annum, ($10,710.75 per month), based on annual rate of $9.00 per
square foot.
SECTION 1.5 ADVANCE RENT - INTENTIONALLY DELETED
SECTION 1.6 ADDRESS OF LANDLORD (SECTION 15.8)
c/o O&Y Properties Inc.
Exchange Tower, Suite 2900
#2 First Canadian Place
Toronto, Ontario
M5X 1B5
SECTION 1.7 ADDRESS OF TENANT (SECTION 15.8)
#188, 4664 Lougheed Highway
Burnaby, B.C.
V5C 6B7
SECTION 1.8 INDEMNIFIER (APPENDIX "A") - INTENTIONALLY DELETED
SECTION 1.9 ADDRESS OF INDEMNIFIER (APPENDIX "A") - INTENTIONALLY DELETED
7
<PAGE> 5
SECTION 1.10 USE OF THE LEASED PREMISES (Section 7.1)
The Tenant will use the Leased Premises solely for the purpose of general
office use.
SECTION 1.11 ADDITIONAL PROVISIONS (Rider #1)
1. RENT-FREE PERIOD
2. RENEWAL OPTION
3. STORAGE AREA
4. PARKING
5. RIGHT OF FIRST REFUSAL
6. COMMUNICATION TOWER
7. LEASEHOLD IMPROVEMENT ALLOWANCE
ARTICLE 2.
LEASED PREMISES, TERM AND ACCEPTANCE
OF THE LEASED PREMISES
SECTION 2.1 LEASED PREMISES
The Landlord leases to the Tenant, and the Tenant leases from the Landlord, the
Leased Premises. The Architect shall determine the actual Usable Area of the
Leased Premises and shall calculate the actual Rentable Area of the Leased
Premises in accordance with Schedule "D" hereof and, if necessary, thereafter
the Basic Rent and Additional Rent shall be adjusted retroactively to the
Commencement Date in accordance with the terms of this Lease.
SECTION 2.2 USE OF ADDITIONAL AREAS
The Tenant's use of the Leased Premises includes the non-exclusive right of the
Tenant and persons having business with the Tenant in common with the Landlord
and all others entitled, to the use of the Common Areas and Facilities.
SECTION 2.3 GRANT AND TERM
The Tenant shall, subject to the terms of this Lease, have and hold the Leased
Premises during the Term (being the period referred to in Section 1.3 of the
Special Provisions) subject to the payment of Basic Rent and Additional Rent
and the observance and performance of the terms, covenants and conditions
contained in this Lease.
SECTION 2.4 CONSTRUCTION OF LEASED PREMISES
(a) The Landlord will complete the work designated as "Landlord's Work" in
accordance with the provisions of Schedule "C".
(b) Notwithstanding anything contained in this Section 2.4, the Landlord
may upon reasonable notice to the Tenant require the Tenant to perform parts of
the Tenant's Work prior to the completion of the Landlord's Work in any case
where the nature or state of all work is such that the Landlord considers it
necessary or desirable to do so. The Landlord may require that all mechanical
and electrical work to be done with respect to the Leased Premises by or on
behalf of the Tenant shall be carried out by the Landlord's contractors and
employees at the Tenant's cost and expense which is repayable by the Tenant to
the Landlord upon demand as Additional Rent.
(c) The Landlord shall give the Tenant notice of the date upon which
possession of the Leased Premises will be available to the Tenant with the
Landlord's Work substantially completed or completed to the extent that the
Tenant's Work can be performed by the Tenant in conjunction with the Landlord's
Work. The Tenant shall, during the Fixturing Period (being the period referred
to in Section 1.2 of the Special Provisions), enter upon and take possession of
the Leased Premises for the purpose of completing the Tenant's Work, in common
with the Landlord and the Landlord's contractors and employees. During the
Fixturing Period, the Tenant shall:
(i) perform the Tenant's Work and cause its employees and
contractors to do their work so as not to interfere with the Landlord's
contractors and employees in the completion of the Landlord's Work, and
(ii) be bound by all of the terms, covenants and conditions of this
Lease (including, without limitation, the payment of all insurance premiums,
electricity, water, temporary heat, security, refuse removal and other
Utilities and services furnished to the Tenant or its contractors by the
Landlord or others and all other Additional Rent, all as estimated by the
Landlord, acting reasonably) except those requiring payment of Basic Rent.
Upon the expiration of the Fixturing Period, Basic Rent and Additional Rent
shall be payable in accordance with the terms of this Lease. SEE RIDER #1,
CLAUSE #1
(d) If there is a dispute as to (i) completion of the Landlord's Work, or
(ii) the availability of the Leased Premises for possession by the Tenant, or
(iii) the Usable Area or the Rentable Area of the Leased Premises, the opinion
of the Architect will be final and binding.
(e) The Tenant will examine the Leased Premises before taking possession and
unless the Tenant serves the Landlord with written notice specifying any
deficiencies or defects within ten (10) days after taking possession, the Tenant
will be deemed to have examined the Leased Premises and to have agreed that they
are in good order and that the Landlord's Work, if any, has been satisfactorily
completed. There is no promise, representation or undertaking by
<PAGE> 6
or binding upon the Landlord with respect to an alteration, remodelling or
redecorating of, or installation of equipment or fixtures in, the Leased
Premises, unless expressly set forth in this Lease.
(f) The Tenant acknowledges that if there is a delay which results in the
Building or the Landlord's Work not being completed on schedule, the Tenant
shall and does hereby release the Landlord from all costs, expenses, claims,
losses or damages suffered or incurred as a result of such delay whether or not
caused, or to the extent contributed to, by the acts, omissions or negligence of
the Landlord or those for whom it is at law responsible.
ARTICLE 3.
RENT
SECTION 3.1 COVENANT TO PAY
The Tenant will pay Basic Rent and Additional Rent when due and payable as set
out in this Lease from and after the Commencement Date unless otherwise
specified in this Lease.
SECTION 3.2 BASIC RENT -- SEE RIDER #1, CLAUSE #1
The Tenant will, from and after the Commencement Date and thereafter throughout
the Term, pay the Landlord as Basic Rent, in equal consecutive monthly
instalments, in advance on the first day of each calendar month of each Lease
Year, the annual sum based upon the annual rate specified in Section 1.4 of the
Special Provisions. Basic Rent will be prorated on a daily basis for any
fractional month period at the beginning or end of the Term. When the Rentable
Area of the Leased Premises is determined the Basic Rent and Additional Rent
shall, if necessary, be adjusted retroactively to the Commencement Date.
SECTION 3.3 PRE-AUTHORIZED PAYMENT/POSTDATED CHEQUES
At the Landlord's request, the Tenant will participate in a pre-authorized
payment plan whereby the Landlord will be authorized to debit the Tenant's bank
account each month or from time to time during each Lease Year in an amount
equal to the Basic Rent and Additional Rent payable on a monthly basis, and, if
applicable, generally any amount payable provisionally pursuant to the
provisions of this Lease on an estimated basis. The Tenant hereby undertakes to
sign a form of application which is the same or similar to Schedule "F" to give
full force and effect to the foregoing within five (5) days of presentation.
In lieu of the pre-authorized payment plan referred to above, the Landlord shall
be entitled to require the Tenant to present at the beginning of each Lease Year
a series of monthly postdated cheques for each such Lease Year for the aggregate
of the monthly payments of Basic Rent and Additional Rent payable on a monthly
basis, and, if applicable, generally any amount payable provisionally pursuant
to the provisions of this Lease on an estimated basis.
SECTION 3.4 ADVANCE RENT -- INTENTIONALLY DELETED
SECTION 3.5 RENT PAST DUE
If the Tenant fails to pay any Rent when due, then, in addition to all other
rights and remedies available to the Landlord, the unpaid amounts will bear
interest from the due date to the date of payment at an annual rate of four (4)
percentage points above the Prime Rate, calculated and compounded monthly or, at
the Landlord's option, at the maximum annual rate permitted by law.
ARTICLE 4.
TAXES AND OPERATING COSTS
SECTION 4.1 TAXES PAYABLE BY LANDLORD
The Landlord will, subject to Sections 4.2 and 4.4 pay directly to the taxing
authority all Taxes. The Landlord may, nevertheless, defer payment of Taxes to
the fullest extent permitted by law, so long as it diligently prosecutes any
contest or appeal of Taxes.
SECTION 4.2 TAXES PAYABLE BY TENANT
(a) (i) If separate tax bills for the portion of Taxes relating to the
Leased Premises (the "Leased Premises Taxes") are available, then
the Tenant shall pay to the Landlord, or the taxing authorities if
the Landlord so directs, the Leased Premises Taxes for each Lease
Year. The Tenant shall promptly deliver to the Landlord receipts
evidencing the payment of all such Leased Premises Taxes and such
other information in connection therewith as the Landlord
reasonably requires.
(ii) If there are no separate tax bills for Leased Premises Taxes, but
there are separate assessments for Leased Premises Taxes, then the
Landlord shall allocate to the Leased Premises for such Lease
Year, a portion of the Taxes determined by reference to such
separate assessments, and the Tenant shall pay to the Landlord,
the portion of such Taxes so allocated by the Landlord.
3
<PAGE> 7
(iii) If there are no separate tax bills for Leased Premises Taxes and
there are no separate assessments for Leased Premises Taxes, then
Landlord shall allocate to the Office Area a portion of the Taxes
applicable to the Property on such basis as the Landlord may from
time to time determine equitable. The Tenant will pay to the
Landlord for each Lease Year, the Tenant's Share of those Taxes
so allocated to the Office Area.
(iv) The Tenant will pay to the Landlord for each Lease Year, the
Tenant's Share of those Taxes allocated by the Landlord to the
Office Area which are not otherwise included in the Taxes payable
by the Tenant and other tenants pursuant to clauses in their
leases similar to Sections 4.2(a)(i), 4.2(a)(ii), and
4.2(a)(iii).
(b) If the Landlord, acting equitably, determines that as a result of the
construction or installation of any Leasehold Improvements or Fixtures in
the Leased Premises, the use of the Leased Premises or the particular
location of the Leased Premises within the Building, the Tenant's Share of
Taxes payable in accordance with subparagraph (a)(iii) or (a)(iv) above
does not accurately reflect the proper share of the Taxes which should in
the Landlord's opinion be payable by the Tenant, the Landlord may increase
or decrease the Tenant's Share of Taxes and the Tenant will pay such
adjusted amount rather than the Tenant's Share as set out in subparagraph
(a) above.
(c) If (i) the Tenant or permitted Transferee or other occupant of the Leased
Premises shall elect to have the Leased Premises or any part thereof
assessed for separate school taxes and (ii) there are no separate tax bills
or separate assessments relating to the Leased Premises, then the Tenant
shall pay to the Landlord as Additional Rent, as soon as the amount of such
separate school taxes is ascertained, any amount by which the amount of
separate school taxes exceeds the amount which would otherwise have been
payable for school taxes had such election not been made by the Tenant or
the Transferee or other occupant of the Leased Premises.
(d) In addition to the Rent payable hereunder, the Tenant will pay to the
Landlord (acting as agent for the taxing authority if applicable) or
directly to the taxing authority (if required by the applicable
legislation) in the manner specified by the Landlord, the full amount of
all goods and services taxes, sales taxes, value-added taxes, multi-stage
taxes, business transfer taxes and any other taxes imposed on the Landlord
or the Tenant in respect of the Rent payable by the Tenant under this Lease
or in respect of the rental of space by the Tenant under this Lease
(collectively and individually, "GST"). GST is payable by the Tenant
whether characterized as a goods and services tax, sales tax, value-added
tax, multi-stage tax, business transfer tax, or otherwise. GST so payable
by the Tenant will: (i) be calculated by the Landlord in accordance with
the applicable legislation; (ii) be paid by the Tenant at the same time as
the amounts to which the GST applies are payable to the Landlord under the
terms of this Lease (or upon demand at such other time or times as the
Landlord from time to time determines); and (iii) despite anything else in
this Lease, be considered not to be Rent, but the Landlord shall have all
of the same remedies for and rights of recovery with respect to such
amounts as it has for non-payment of Rent under this Lease or at Law.
SECTION 4.3 BUSINESS TAXES AND OTHER TAXES OF THE TENANT
(a) The Tenant will pay to the lawful taxing authorities or to the Landlord, as
the Landlord directs, all business taxes, personal property taxes, licence
fees or other similar rates and assessments levied or assessed against or
in relation to the Tenant's business, assets, Leasehold Improvements and
Fixtures in the Leased Premises and shall promptly deliver to the Landlord
receipts evidencing payment of all such taxes and furnish such other
information in connection therewith as the Landlord reasonably requires.
(b) The Tenant will Indemnify and hold the Landlord harmless from and against
payment of all loss, costs, charges and expenses occasioned by or arising
from all Taxes and the amounts payable pursuant to Section 4.3(a) and any
taxes which may in future be levied in lieu of or in addition to such
amounts or which may be assessed against any rentals payable pursuant to
this Lease in lieu of such amounts, whether against the Landlord or the
Tenant, including, without limitation, any increase in Taxes and the
amounts payable pursuant to Section 4.3(a) arising directly or indirectly
out of any appeal or contestation by the Tenant. The Tenant will deliver to
the Landlord such security for any increase in Taxes or other amounts
payable hereunder as the Landlord deems advisable.
SECTION 4.4 TENANT'S PROPORTIONATE SHARE OF OPERATING COSTS
The Tenant will pay, in accordance with Section 4.5. the Tenant's Proportionate
Share or the Tenant's Share, as the case may be, of Operating Costs.
SECTION 4.5 PAYMENT OF TAXES AND OPERATING COSTS
(a) The Tenant will pay the amounts payable under Section 4.2 (if applicable),
4.3 (if applicable) and 4.4 according to estimates or revised estimates
made by the Landlord from time to time in respect of periods determined by
the Landlord. The Tenant's payments will be made in monthly instalments in
advance, together with Basic Rent, for the periods in respect of which the
estimates are made. When a bill for an estimated amount is received by the
Landlord, the Landlord may bill the Tenant for the amount the Tenant is
obligated to pay under this Lease and the Tenant will immediately pay the
Landlord the billed amount (less amounts previously paid by the Tenant with
respect to such billed amount on the basis of the Landlord's estimate and
which amounts are to be credited to such billed amounts.)
(b) Within one hundred and twenty (120) days after the end of the period for
which the estimated payments have been made, or so soon thereafter as is
reasonably possible, the Landlord will determine and advise the Tenant of
the exact amount of the Tenant's obligations under Sections 4.2(a)(ii),
4.2(a)(iii), 4.2(a)(iv), 4.3 (if applicable) and 4.4 and provide the Tenant
with an audited statement setting out such amounts. If necessary, an
adjustment will be made between the parties within fifteen (15) days after
the Tenant receives such statement. This provision shall survive the
expiration or earlier termination of the Term of this Lease.
4
<PAGE> 8
ARTICLE 5.
BUILDING -- CONTROL AND SERVICES
SECTION 5.1 CONTROL OF THE BUILDING
(a) The Landlord will operate and maintain the Building as would a prudent
landlord of a similar office building having regard to size, age and location.
(b) The Building is at all times subject to the exclusive control, management
and operation of the Landlord. The Landlord has the right with respect to such
control, management and operation to:
(i) obstruct or close off all or any part of the Property for the purpose
of maintenance, repair or construction;
(ii) employ all personnel necessary for the operation and management of
the Building, either directly or through a third party property management
company;
(iii) construct other improvements and make alterations, additions,
subtractions or re-arrangement, build additional storeys and construct
facilities adjoining or proximate to the Building, including underground
tunnels and pedestrian walkways and overpasses;
(iv) do and perform such other acts in and to the Building, as, in the use
of good business judgment, the Landlord determines to be advisable for the
more efficient and proper operation of the Building; and
(v) control, supervise and regulate the Parking Areas in such manner as
the Landlord determines from time to time, including, without limitation,
imposing charges or rates as may from time to time be determined by the
Landlord for the use of the Parking Areas.
(c) The Landlord is not subject to any liability, nor is the Tenant entitled
to any compensation or abatement of Rent as a result of the Landlord's exercise
of its rights conferred under Section 5.1 so long as the Landlord proceeds as
expeditiously as reasonably possible to minimize interference with the Tenant's
business.
SECTION 5.2 LANDLORD'S SERVICES
(a) During the Term, the Landlord shall provide the following services and
utilities upon the terms and subject to the conditions set out in Section
5.2(b) hereof:
(i) except during the completion of repairs, alterations or Leasehold
Improvements, climate control for the Leased Premises shall be provided
during Normal Business Hours in order to maintain a temperature adequate
for normal occupancy in accordance with the provisions hereof. If the
Tenant requires the provision of climate control services to the Leased
Premises outside Normal Business Hours it shall provide the Landlord with
not less than two (2) banking days prior notice thereof and the Landlord
will provide such services to the Tenant, at the Tenant's expense, at the
rate determined by the Landlord in its sole discretion, which shall be
payable by the Tenant within five (5) days after written demand as
Additional Rent;
(ii) when reasonably necessary from time to time, the Landlord shall cause
the floors in the Leased Premises to be cleaned or vacuumed, the windows to
be cleaned and the desks, tables and other furniture of the Tenant to be
dusted, all in keeping with the standards of a first-class office building;
(iii) water and electricity in such quantities as the Landlord, in its sole
discretion, determines to be reasonable, shall be made available to the
tenants of the Building. If the Tenant's equipment requires such utilities
in excess of the quantities normally supplied by the Landlord and the
Tenant requests the Landlord to supply such excess quantities, facilities
to supply such excess quantities may be provided by the Landlord at the
sole expense of the Tenant, if such excess facilities are available,
subject to the following conditions:
(A) the Landlord will have the right to refuse to supply such excess
utilities if the supplying of additional facilities or excess
utilities shall in any way affect the operation, the aesthetics or
the Structure of the Building, or in any way reduce the efficiency of
existing electricity, water or other utilities supplied to the
Building; and
(B) the actual cost of supplying such additional facilities or
excess utilities shall be paid by the Tenant to the Landlord upon
demand and in accordance with Section 6.1 hereof, together with an
amount equal to fifteen percent (15%) of the total cost thereof
representing the Landlord's overhead and administrative costs; and
(iv) elevator service shall be provided by the Landlord during Normal
Business Hours, for use by the Tenant in common with others and subject to
the conditions set out in section 5.2(b) and any other rules or regulations
required for the safe and efficient operation of the elevator servicing the
Building.
(b) The provision by the Landlord of the services and utilities referred to in
Section 5.2(a) shall be subject to the following terms and conditions:
(i) the Landlord shall have no responsibility or liability for failure to
supply climate control services when stopped or prevented from so doing by
strikes or other causes beyond the Landlord's reasonable control;
5
<PAGE> 9
(ii) any use of the Leased Premises not in accordance with the design
standards of the Building or any arrangement of partitions which
interferes with the normal operation of the climate control
system for the Building may require changes or alterations in the
system or the ducts. Any changes or alterations so required, if
such changes can be accommodated by the Landlord's equipment,
shall be made by the Landlord, at the Tenant's expense, and only
after such changes or alterations have received the Landlord's
prior written consent. If installation of partitions, equipment
or fixtures by or on behalf of the Tenant (other than the
partitions installed pursuant to the Landlord's Work as set out
in Schedule "C") necessitates the rebalancing of the portion of
the climate control equipment serving the Leased Premises, such
work will be performed by the Landlord at the Tenant's expense,
together with an amount equal to fifteen percent (15%) of the
total expense thereof representing the Landlord's overhead and
administrative costs, and shall be payable by the Tenant within
five (5) days are written demand as Additional Rent;
(iii) the Landlord shall use reasonable efforts to adjust and balance
the climate control systems as soon as reasonably possible after
the Commencement Date;
(iv) the Landlord will not be responsible for any inadequacy of
performance of the climate control system serving the Leased
Premises if (1) the occupancy of the Leased Premises exceeds one
(1) person for every one hundred (100) square feet of the
Rentable Area of the Leased Premises, or (2) the electrical
power consumed in the Leased Premises for all purposes, exclusive
of the heating, ventilating and air-conditioning system, exceeds
nine (9) watts per square foot of the Rentable Area of the Leased
Premises (or such other level of wattage determined by the
Landlord from time to time) or (3) the window coverings or
exterior windows are not kept fully closed while the windows are
exposed to direct sunlight. If the use of the Leased Premises
does not accord with the aforementioned requirements and changes
in the climate control system are desirable or necessary to
accommodate such use, the Landlord may make such changes and the
entire cost thereof shall be paid by the Tenant to the landlord
as Additional Rent as set out in subparagraph (ii) hereof. If, in
the opinion of the Landlord, such changes result in Operating
Costs in excess of those which would have occurred had such
changes not been made, the Landlord may estimate the amount of
such excess on a reasonable basis and such amount shall be
payable by the Tenant as Additional Rent in accordance with the
terms of this Lease;
(v) the elevator services provided by the Landlord shall be subject
to the Rules and Regulations attached hereto as Schedule "E".
Temporary interruption of elevator service may be required during
periods when repairs, alterations or Leasehold Improvements are
being made; and
(vi) the Landlord shall not be liable and the Tenant hereby releases
and holds harmless the Landlord from any claim, loss or damage
resulting from (1) any interruption or disruption of elevator
service caused or continued to by mechanical failure; (2) any
failure by the Landlord to provide elevator service during any
period of power interruption; (3) any cause beyond the control of
the Landlord; or (4) the carrying out of any repairs, maintenance
or replacements of the elevators.
SECTION 5.3 TENANTS'S RESPONSIBILITIES
The Tenant will regulate those portions of the climate control equipment within
and exclusively serving the Leased Premises so as to maintain such reasonable
conditions of temperature and humidity within the Leased Premises as are
determined by the Landlord and its Architect and engineers so that no direct or
indirect appropriation of the heating, ventilating and air-conditioning from the
Common Areas and Facilities occurs. The Tenant shall comply with such
stipulations and with all Rules and Regulations of the Landlord pertaining to
the operation and regulation of such equipment. If the Tenant fails to comply
with such stipulations and the Rules and Regulations, the Landlord shall be
entitled to take such steps as it deems advisable to correct such defaults
(including, without limitation, entering upon the Leased Premises and assuming
control of such equipment) without liability to the Tenant, and the Tenant will
pay to the Landlord forthwith upon demand as Additional Rent all costs and
expenses incurred by the Landlord in so doing, together with an amount equal to
fifteen percent (15%) of such costs and expenses representing the Landlord's
overhead and administrative costs.
SECTION 5.4 RELOCATION OF THE LEASED PREMISES
At any time and from time to time during the Term, the Landlord shall be
entitled to relocate or rearrange the Leased Premises from the location shown on
Schedule "B" or to make alterations, additions or reductions to the Leased
Premises provided that:
(i) the Rentable Area of the Leased Premises is not increased or
decreased by more than ten percent (10%); and
(ii) the Landlord effects such alterations, additions, reductions,
relocation or rearrangement at its expense, including all
Leasehold improvements in the Leased Premises, all moving costs
and all other reasonable direct out-of-pocket costs incurred by
the Tenant as evidenced by paid invoices delivered by the Tenant
to the Landlord, provided that there shall not be any payment
required of the Landlord on account of goodwill, loss of profits
or loss of business.
SECTION 5.5 ADDITIONAL SERVICES
(a) If the Tenant requires any Additional Services to be performed in or
relating to the Leased Premises, it shall so advise the Landlord in writing, and
the Landlord shall have the right, but shall not be obligated, to perform any
such Additional Services.
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If the Landlord performs any such Additional Services, the Tenant shall pay
all costs and expenses incurred by the Landlord or on the Landlord's behalf in
performing or completing such Additional Services forthwith upon receipt of the
invoice therefore from the Landlord, together with an amount equal to fifteen
percent (15%) of such costs and expenses representing the Landlord's overhead
and administrative costs. If the Landlord does not wish to exercise its right to
perform any Additional Services, the Tenant shall not cause any such Additional
Services to be performed by any other Person unless and until it has obtained
the consent of the Landlord in writing to (i) the performance of such Additional
Services; and (ii) the Person to be performing such Additional Services, such
consent not to be unreasonably withheld.
(b) If the Tenant disputes or contests the calculation of any costs or expenses
incurred by the Landlord or on the Landlord's behalf in performing or completing
such Additional Services as set out in the Landlord's invoice therefor, it shall
notify the Landlord in writing, and the Landlord shall, upon receipt of such
notice, request its senior financial officer to prepare a statement of
calculation with respect to such Additional Services which shall be conclusive
of such costs and expenses and shall be binding upon the Landlord and the
Tenant. The cost of preparation of such statement shall be paid by the Tenant
and shall be added to the cost of such Additional Services. Notwithstanding any
such objection or contestation by the Tenant to the Landlord's calculation of
the cost or expense of such Additional Services, the full amount as calculated
by the Landlord in its invoice shall be due and payable on receipt, and shall be
readjusted, if necessary, upon receipt of the statement from the Landlord's
senior financial officer.
ARTICLE 6.
UTILITIES
SECTION 6.1 CHARGES FOR UTILITIES
(a) If there are separate meters (other than check meters) installed pursuant
to Section 6.1(d) for the Leased Premises, the Tenant will pay Utilities
directly to the Utility suppliers on the basis of the separate meters.
(b) If there are no separate meters for the Leased Premises, the Tenant will
pay to the Landlord, or as the Landlord otherwise directs, as Additional Rent,
the aggregate, without duplication, of:
(i) the cost of all Utilities applicable or attributable to the Leased
Premises, as determined by the Landlord;
(ii) the costs of any other charges levied or assessed in lieu of or in
addition to such Utilities as determined by the Landlord;
(iii) all costs incurred by the Landlord in determining or allocating the
charge for Utilities including, without limitation, professional
engineering and consulting fees; and
(iv) an administration fee of fifteen percent (15%) of the costs and
charges referred to in subparagraphs (i) to (iii) hereof.
Charges for Utilities will be paid in equal monthly instalments in advance on
the basis of an initial rate determined by the Landlord or its engineers. Such
initial rate shall be based upon the Tenant's Proportionate Share of the
Utilities. If the Landlord or its engineers determine that the Tenant is
obligated to pay an additional charge for the supply and usage of Utilities to
the Leased Premises in excess of the standard usage of general office premises
in the Building, the additional charge for Utilities shall be calculated on the
basis determined by the Landlord or its engineers, together with all costs
incurred by the Landlord in determining or allocating the additional charge for
Utilities. If the public utility rate is increased or decreased during the Term,
the charges will be equitably adjusted and the decision of the Landlord, acting
reasonably, will be final.
(c) The Landlord will have the exclusive right to attend to the replacement of
standard electric light bulbs, tubes and ballasts in the Leased Premises
throughout the Term on the basis determined by the Landlord in accordance with
good commercial practice. The Landlord, at its option, may either include the
cost of replacement in Operating Costs or require the Tenant to pay a monthly
charge for such replacement (subject to adjustment based on actual costs) per
bulb, tube and ballast. If the Landlord elects not to relamp and reballast on a
scheduled basis, then the replacement of these standard electric light bulbs,
tubes and ballasts in the Leased Premises will be undertaken by the Landlord at
such time as they actually burn out and after notice from the Tenant that,
replacement is required. In that event, the cost of replacement and installation
will be paid by the Tenant with the next monthly payment of Additional Rent,
together with an amount equal to fifteen percent (15%) of such cost representing
the Landlord's overhead and administrative costs.
(d) The Tenant shall pay for the cost of any metering which the Tenant requests
the Landlord to install in the Leased Premises, or which the Landlord wishes to
install in the Building, for the purpose of assisting in determining the
consumption of any Utility in the Leased Premises.
(e) In no event shall the Landlord be liable for, nor shall the Landlord have
any obligation with respect to any interruption or cessation of, or failure in
the supply of, any Utilities, services or systems in, to or serving the Building
or the Leased Premises, whether or not supplied by the Landlord or otherwise.
ARTICLE 7.
USE OF THE LEASED PREMISES
SECTION 7.1 USE OF THE LEASED PREMISES
The Leased Premises will be used solely for the purpose specified in Section
1.10 of the Special Provisions and the
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Tenant will not use or permit or suffer the use of, the Leased Premises or
any part thereof for any other business or purpose.
SECTION 7.2 CONDUCT OF BUSINESS
The Tenant will occupy the Leased Premises and commence its business operations
in the Leased Premises from and after the Commencement Date and will thereafter
throughout the Term use the whole of the Leased Premises in a reputable and
first-class manner. The Tenant will not commit or permit to be committed any
waste or injury to the Leased Premises, the Leasehold Improvements or Fixtures
or any other part of the Property or any nuisance therein or any use of manner
of use causing annoyance to other tenants and occupants of the Building. Any
business conducted by the Tenant, whether through advertising or selling
procedures or otherwise, which in the opinion of the Landlord may harm or tend
to harm the business or reputation of the Landlord or reflect unfavourably on
the whole or any part of the Property, the Landlord or other tenants in the
Building, will be immediately discontinued by the Tenant at the request of the
Landlord. The Tenant agrees not to refer to the Building by any name other than
that designated from time to time by the Landlord and the Tenant will use the
name of the Building for the business address of the Tenant but for no other
purpose. Upon at least thirty (30) days prior to written notice to the Tenant,
the Landlord may change the name of the Building and the Landlord shall not be
responsible for any costs or expenses incurred by the Tenant as a result of such
change of name.
SECTION 7.3 OBSERVANCE OF LAW
The Tenant will, at its expense, and subject to Section 9.3:
(i) comply with all provisions or changes of law and other
requirements of all governmental bodies which pertain to or
affect the Leased Premises or require or govern the making of
any repairs, alterations or other changes of or to the Leased
Premises or the Tenant's use of it:
(ii) obtain all necessary permits, licences and approvals relating
to the use of the Leased Premises and the conduct of business
therein; and
(iii) comply with all reasonable directions given or regulations
introduced by the Landlord or measures introduced by any
governmental or quasi-governmental authority form time to time
in the interest of energy conservation and to control Operating
Costs whereby the Landlord may by the use of a pulse or other
system turn out or reduce all lighting in the Leased Premises
by local switching for the Leased Premises and reduce energy
consumption in the Leased Premises or in the Building. However,
if the Tenant does not participate in such measures with respect
to the Leased Premises, the Tenant may be required to pay, as
Additional Rent, for the additional energy consumed in the
Leased Premises as a result of its not participating in such
measures. In addition, it is understood and agreed that any and
all costs and expenses paid or incurred by the Landlord in
installing energy conservation equipment and systems and safety
or life support systems shall be included in Operating Costs.
SECTION 7.4 HAZARDOUS SUBSTANCES
The Tenant covenants and agrees to utilize the Leased Premises and operate its
business in a manner so that no part of the Leased Premises are used to
generate, manufacture, refine, treat, transport, store, handle, dispose of,
transfer, produce or process any Hazardous Substances. Further the Tenant
hereby covenants and agrees to indemnify and save harmless the Landlord and
those for whom the Landlord is in law responsible for any and all losses,
costs, claims, damages, liabilities, expenses or injuries caused or contributed
to by any Hazardous Substances which are at any time located, stored or
incorporated in any part of the Leased Premises. The Tenant hereby agrees that
the Landlord or its authorized representatives shall have the right at the
Tenant's expense, payable as Additional Rent within five (5) days of receipt of
an invoice therefore, to conduct such environmental site reviews and
investigations as if may deem necessary for the purposes of ensuring compliance
with this Section 7.4. The Tenant's obligations pursuant to this Section 7.4
shall survive the expiration of earlier termination of the Term.
ARTICLE 8.
INSURANCE AND INDEMNITY
SECTION 8.1 TENANT'S INSURANCE
(a) The Tenant shall, throughout the period that the Tenant is given
possession of the Leased Premises and during the entire Term at its sole cost
and expense, take out and keep in full force and effect and in the names of the
Tenant, the Landlord, the Owners and the Mortgagee as their respective
interests may appear, the following insurance:
(i) "All Risks" (including flood and earthquake) insurance in an
amount of at least ninety percent (90%) of the full replacement
cost, insuring all property owned by the Tenant, or for which the
Tenant is legally liable or installed by or on behalf of the
Tenant, and located within the Building including, but not
limited to, furniture, fixtures, installations, alterations,
additions, partitions and all other Leasehold Improvements. Such
insurance shall include a standard joint loss agreement;
(ii) Broad Form Boiler and Machinery insurance on a blanket repair
and replacement basis with limits for each accident in an amount
of at least the replacement cost of all Leasehold Improvements,
contents and of all boilers, pressure vessels, air-conditioning
equipment and miscellaneous electrical apparatus owned or
operated by the Tenant or by others (except for the Landlord) on
behalf of the Tenant in the Leased Premises. Such insurance shall
include a joint loss agreement:
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(iii) Business interruption insurance in an amount sufficient to reimburse
the Tenant for loss of earnings attributable to perils insured
against under Sections 8.1(a)i) and 8.1(a)(ii);
(iv) Comprehensive General Liability Insurance including personal
injury, broad form contractual liability, owners' and contractors'
protective, contingent employers' liability, employers' liability,
medical payments, products liability, completed operations,
non-owned automobile liability, all coverages with respect to the
Leased Premises, the Tenant's use of the Common Areas, AND THE
COMMUNICATION TOWER REFERRED TO IN RIDER #1, CLAUSE #6. Such
policies shall be written on a comprehensive basis with inclusive
limits of not less the Five Million Dollars ($5,000,000.00) or such
higher limits as the Landlord or the Mortgagee may require from time
to time. Such insurance shall contain severability of interests and
cross-liability clauses;
(v) All Risks Tenant's Legal Liability insurance for the replacement
cost value of the Leased Premises including loss of use thereof;
(vi) insurance covering the cost of repair and replacement of glass
broken on the Leased Premises including outside windows and doors
on the perimeter of the Leased Premises; and
(vii) any other forms of insurance as the Landlord, acting reasonably, or
the Mortgagee requires from time to time, in forms and amounts and
for risks against which a prudent tenant would insure.
(b) The following terms and conditions are applicable to the insurance
policies specified under Section 8.1(a):
(i) the policies specified under Sections 8.1(a)(i), (ii) and (iii)
shall contain the Mortgagee's standard mortgage clause and may have
reasonable deductibles. If there is a dispute as to the full
replacement cost, the Landlord's evaluation will prevail;
(ii) the policies specified under Sections 8.1(a)(i), (ii) and (iii)
shall contain a waiver of any subrogation rights which the Tenant's
insurers may have against the Landlord, the Owners and the Mortgagee
and those for whom they are in law responsible, whether the damage
is caused or contributed to by their act, omission or negligence;
(iii) all of the policies shall be taken out with insurers reasonably
acceptable to the Landlord and in a form reasonably satisfactory to
the Landlord;
(iv) all of the policies shall be non-contributing with and only apply as
primary and not as excess to any other insurance available to the
Landlord, the Owners and the Mortgagee;
(v) none of the policies shall be invalidated as respects the
interests of the Landlord, the Owners and the Mortgagee by reason of
any breach or violation of any warranties, representations,
declarations or conditions contained in the policies; and
(vi) all of the policies shall contain an undertaking by the insurers to
notify the Landlord, the Owners and the Mortgagee in writing not
less than thirty (30) days prior to any material change,
cancellation or termination.
The Tenant agrees to deliver certificates of insurance or, if requested by the
Landlord, complete certified copies of policies, to the Landlord within thirty
(30) days after the placing of the required insurance. No review or approval of
such insurance documentation by the Landlord shall derogate from or diminish the
Landlord's rights or the Tenant's obligations contained in this Lease including,
without limitation, those contained in Article 8.
(c) If there is damage or destruction to the Leasehold Improvements in the
Leased Premises, the Tenant will use the full insurance proceeds received in
respect of such damage or destruction for the sole purpose of repairing or
restoring them. If there is damage to or destruction of the Building and as a
consequence thereof this Lease is terminated under Section 10.1 or 10.2, then,
if the Leased Premises have also been damaged or destroyed, the Tenant will pay
the Landlord all of its insurance proceeds relating to the Leasehold
Improvements.
SECTION 8.2 INCREASE IN INSURANCE PREMIUMS
If (a) the occupancy of the Leased Premises; (b) the conduct of business in the
Leased Premises; or (c) any acts or omissions of the Tenant in the Leased
Premises or in any other part of the Building results in any increase in
premiums to the Insurance carried by the Landlord with respect to any part of
the Building, the Tenant will pay the increase in premiums within five (5) days
after invoices for additional premiums are rendered by the Landlord. In
determining whether the Tenant is liable for increased premiums and the amount
for which the Tenant is responsible, a schedule issued by the organization that
computes the insurance rate on the Property showing the components of the rate
will be conclusive evidence of the items that make up the rate.
SECTION 8.3 CANCELLATION OF INSURANCE
If any insurance policy in respect of any part of the Building is cancelled or
threatened by the insurer to be cancelled, or the coverage reduced by the
insurer by reason of the use and occupation of the Leased Premises and if the
Tenant fails to remedy the condition giving rise to cancellation, threatened
cancellation or reduction of coverage within forty-eight (48) hours after
notice by the Landlord, the Landlord may, at its option, either (a) exercise its
rights of re-entry including termination under Article 14, or (b) at the
Tenant's expense, enter upon the Leased Premises and remedy the condition giving
rise to the cancellation, threatened cancellation or reduction.
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SECTION 8.4 LOSS OR DAMAGE
The Landlord and the Owners are not liable for any death or injury arising from
or out of any occurrence in, upon, at, or relating to the Building or damage to
property of the Tenant or of others wherever located, whether or not resulting
from (a) the negligence of the Landlord or the Owners or those for whom they may
in law be responsible; (b) the Landlord's failure to supply any services or
utilities required by this Lease where the failure is beyond the Landlord's
reasonable control; (c) the existence of any Hazardous Substances which are or
have been located, stored or incorporated in or on any part of the Building; or
(d) the exercise by the Landlord of any of its rights under this Lease. Without
limiting the generality of the foregoing, the Landlord and the Owners shall not
be liable for any injury or damage to Persons or property resulting from fire,
explosion, falling plaster, falling ceiling tile, falling ceiling fixtures and
diffuser coverings, steam, gas, electricity, water, rain, flood, snow or leaks
from any part of the Building, including pipes, sprinklers, appliances,
plumbing works, roof, windows or the surface of any floor or ceiling of the
Building or from any Lands adjoining the Building. In addition, the Landlord
and the Owners shall not be liable for any damage to or destruction of any
negotiable instruments, cash or other valuable property belonging to the Tenant
or others and stored or otherwise contained in the Leased Premises. All
property of the Tenant kept or stored on the Leased Premises will be so kept or
stored at the risk of the Tenant only and the Tenant shall indemnify the
Landlord and the Owners and save them harmless from any claims arising out of
any damages to the same including, without limitation, any subrogation claims
by the Tenant's insurers. The intent of this Section is that the Tenant (and
all other Persons having business with the Tenant) is to look solely to its
insurers to satisfy any claim which may arise on account of death, injury, loss
or damage, irrespective of its cause.
SECTION 8.5 LANDLORD'S INSURANCE
The Landlord shall at all times throughout the Term carry:
(i) broad form boiler and machinery insurance on items owned by the
Landlord and the Owners (except property that the Tenant and
other tenants of the Building are required to insure);
(ii) insurance on the Building (excluding the foundations and
excavations) and the equipment contained in or servicing the
Building against damage by fire and extended perils;
(iii) public liability and property damage insurance with respect to
the Landlord's operations in the Building; and
(iv) other forms of insurance as would be carried by a prudent owner
of a similar office building or considered advisable by the
Owners, the Landlord or any Mortgagee.
Notwithstanding the Landlord's obligation to insure as set out above and the
Tenant's contribution to the cost of the Landlord's insurance premiums, (i) the
Tenant is not relieved of any liability arising from or contributed to by its
negligence or its wilful acts or omissions, (ii) no incurable interest is
conferred upon the Tenant under the Landlord's insurance policies, and (iii)
the Tenant has no right to receive proceeds from the Landlord's insurance
policies. Notwithstanding anything to the contrary contained herein, the
Landlord shall be entitled to self insure with respect to any of the insurance
required to be maintained by the Landlord pursuant to this Section 8.5 and the
premiums and all other costs that would otherwise have been incurred with
respect to such insurance may be included in Operating Costs.
SECTION 8.6 INDEMNIFICATION
The Tenant will indemnify the Landlord and the Owners and save them harmless
from and against all loss, claims, actions, damages, costs, liability and
expense in connection with loss of life, personal injury, damage to property
(including any portion of the Building and its equipment, machinery, services
and Leasehold Improvements) or any other loss or injury arising from or out of
this Lease, or any occurrence on the Property or any part thereof, or the
Tenant's occupancy of the Leased Premises, or occasioned wholly or in part by
any act or omission of the Tenant or by anyone permitted to be in the Leased
Premises or the Building by the Tenant. If the Landlord or the Owners are,
without fault on their part, made a party to any litigation commenced by or
against the Tenant, then the Tenant will protect, indemnify and hold the
Landlord and the Owners harmless and pay all expenses and reasonable legal fees
incurred or paid by the Landlord or the Owners in connection with the
litigation. The Tenant will also pay all costs and legal fees (on a solicitor
and his client basis) that may be incurred or paid by the Landlord in enforcing
the terms, covenants and conditions in this Lease. The indemnity contained in
this Section 8.6 shall survive the expiration or earlier termination of the
Term of this Lease.
ARTICLE 9.
MAINTENANCE, REPAIRS AND ALTERATIONS
SECTION 9.1 MAINTENANCE AND REPAIRS BY THE LANDLORD
The Landlord will maintain and repair the Structure of the Building and the
mechanical, electrical, heating, ventilating, air-conditioning and other base
building systems of the Building, as would a prudent owner of a similar office
building. The cost of such maintenance and repairs will be included in
Operating Costs. However, if the Landlord is required, due to the business
carried on by the Tenant, to make repairs or replacements to the Structure or
any other part of the Building by reason of the application of laws, ordinances
or other regulations of any governmental body, or by reason of any act,
omission or default of the Tenant or those for whom the Tenant is in law
responsible, then the Tenant will be liable for the total cost of those repairs
or replacements plus fifteen percent (15%) of the total cost representing the
Landlord's overhead and administrative costs.
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SECTION 9.2 MAINTENANCE AND REPAIRS BY THE TENANT
(a) The Tenant will at all times, at its expense, maintain the whole of the
Leased Premises including without limitation, all interior partitions, doors,
electrical, lighting, wiring, plumbing, fixtures and equipment and the heating,
ventilating and air-conditioning systems and equipment within and exclusively
serving the Leased Premises in good order, first-class condition and repair, so
determined by the Landlord. The Tenant will make all needed repairs and
replacements with due diligence and dispatch. If required by the Landlord or any
governmental authority, the Tenant will, at its expense, remove from the Leased
Premises any Hazardous Substances which are or have been located, stored or
incorporated in any part of the Leased Premises. The foregoing obligation to
remove such Hazardous Substances shall survive the expiration or earlier
termination of the Term of this Lease. Notwithstanding anything contained in
this Lease, if any such repairs or replacements to the Leased Premises or to any
Leasehold Improvements installed by or on behalf of the Tenant in the Leased
Premises, affect the Structure of the Building, or any part of the electrical,
mechanical, plumbing, heating, ventilating, air-conditioning, lighting or other
base building systems of the Building, such work shall be performed only by the
Landlord at the Tenant's sole cost and expense. Upon completion thereof, the
Tenant shall pay to the Landlord, as Additional Rent within five (5) days after
demand, both the Landlord's costs relating to such repairs or replacements
including the fees of any architectural and engineering consultants plus a sum
equal to fifteen percent (15%) of the total cost thereof representing the
Landlord's overhead and administrative costs.
(b) The Tenant will leave the Leased Premises in a reasonably neat and tidy
condition at the end of each day in order that the Landlord's cleaning services
can be performed.
(c) The Tenant will advise the Landlord of any damage to or breakage of the
glass in or forming part of the Leased Premises (including outside windows and
doors on or at the perimeter of the Leased Premises) and the Landlord will
complete all needed repairs and replacements to such glass with due diligence.
The cost of completing such repairs and replacement shall be payable by the
Tenant as part of Operating Costs except in the event that the repairs or
replacements to the glass are required as a result of the negligence or wilful
acts or omissions of the Tenant or those for whom it is at law responsible, in
which event the cost thereof shall be payable by the Tenant to the Landlord,
upon demand as Additional Rent.
(d) At the expiration or earlier termination of the Term, the Tenant will
surrender the Leased Premises to the Landlord in as good a condition as the
Tenant is required to maintain them throughout the Term.
(e) Notwithstanding any other provisions of this Lease, if the Building or any
part thereof, or any equipment, machinery, facilities or Leasehold Improvements
contained therein or made thereto, or the Structure thereof requires repair or
replacement or becomes damaged or destroyed through the negligence, carelessness
or misuse of the Tenant or those for whom it is in law responsible or by any
Person having business with the Tenant or by the Tenant or those for whom it is
in law responsible in any way stopping up or damaging the climate control,
heating and air-conditioning apparatus, water pipes, drainage pipes or other
equipment or facilities or parts of the Building, the cost of the resulting
repairs, replacements or alterations plus a sum equal to fifteen percent (15%)
of the cost thereof representing the Landlord's overhead and administrative
costs will be paid by the Tenant to the Landlord as Additional Rent within five
(5) days after presentation of an account of such expenses incurred by the
Landlord.
(f) The Tenant shall, when it becomes aware of it, notify the Landlord of
damage to, or deficiency or defect in any part of the Building, including the
Leased Premises, any equipment or utility systems, or any installations located
in the terms of this Lease.
SECTION 9.3 LANDLORD'S APPROVAL OF THE TENANT'S REPAIRS
The Tenant will not make any Alterations to any part of the Leased Premises
without first obtaining the Landlord's written approval. The Landlord will not
be required to consider any request for its approval until the Tenant has
submitted to it details of the proposed work, including professionally prepared
drawings if requested by the Landlord, and specifications conforming to good
engineering practices. Any approval shall be conditional upon the Tenant
delivering to the Landlord prior to the commencement of any such Alterations:
(i) evidence satisfactory to the Landlord that the Tenant has obtained,
at its expense, all necessary consents, permits, licences and
inspections from all governmental and regulatory authorities having
jurisdiction; and
(ii) security in an amount and form required by the Landlord, as an
indemnification against construction liens, cost, damages and expenses
resulting from such Alterations.
All Alterations will be performed by competent workmen: (i) at the Tenant's
expenses; (ii) in a good and workmanlike manner; (iii) in accordance with the
drawings and specifications approved by the Landlord; and (iv) subject to the
reasonable regulations, controls and inspection of the Landlord.
Notwithstanding the foregoing, the Landlord shall be entitled to withhold its
consent or approval to any proposed Alterations if, in its sole opinion, such
Alterations decrease the Market Rental value of the Leased Premises or are
inconsistent or incompatible with the general design or quality of the Building.
Any Alterations made by the Tenant without the prior consent of the Landlord or
not made in accordance with the drawings and specifications approved by the
Landlord will, if requested by the Landlord, be promptly removed by the Tenant
and the Leased Premises restored to their previous condition at the Tenant's
expense.
If however, all or any portion of the proposed Alterations affect the Structure
or any of the electrical, mechanical or other base building systems of any part
of the Building, such Alterations (or the appropriate portion of them), if
approved by the Landlord, will be performed only by the Landlord, and the Tenant
shall pay to the Landlord, upon demand, the cost
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of completing such Alterations together with an amount equal to fifteen percent
(15%) of such cost representing the Landlord's overhead and administrative
costs.
SECTION 9.4 REMOVAL AND RESTORATION BY THE TENANT
(a) All Leasehold Improvements made by the Tenant, or made by the Landlord on
the Tenant's behalf immediately become the property of the Landlord upon
affixation or installation and will not be removed from the Leased Premises
at any times unless permitted or required by the Landlord. The Landlord is
under no obligation to repair, maintain or insure these Leasehold
Improvements. The Tenant will, prior to the end of the Term, at its cost,
remove all of its Fixtures and those Leasehold Improvements which the
Landlord requires the Tenant to remove and shall forthwith repair any
damage to the Leased Premises caused by their installation or removal. In
addition, the Tenant will, prior to the end of the Term, at its cost,
remove from the Leased Premises any Hazardous Substances which are located,
stored on incorporated in any part of the Leased Premises. The Tenant's
obligation to observe and perform this covenant shall survive the
expiration of the Term or earlier termination of this Lease.
(b) If the Tenant does not remove all of its Fixtures and those Leasehold
Improvements which the Landlord requires the Tenant to remove at the end of
the Term, all of such Leasehold Improvements and Fixtures may, without
further notice to the Tenant, be immediately removed from the Leased
Premises and may be disposed of, sold or stored, at the option of the
Landlord, and as the Landlord sees fit. Any costs or expenses incurred by
the Landlord in removing, disposing, selling or storing such Leasehold
Improvements or Fixtures shall be paid by the Tenant to the Landlord, upon
demand, together with an amount equal to fifteen percent (15%) of such
costs and expenses representing the Landlord's overhead and administrative
costs. Any Fixtures not removed from the Leased Premises at the end of the
Term, will at the Landlord's option, become the property of the Landlord
(and, in such event, this paragraph shall have the effect of assigning the
Tenant's right and title in such Fixtures to the Landlord) and may be
removed from the Leased Premises and sold or disposed of by the Landlord in
such manner as it deems advisable.
(c) If the Tenant does not remove any Hazardous Substances from the Leased
Premises at the end of the Term, such Hazardous Substances or materials
may, without further notice to the Tenant, be immediately removed from the
Leased Premises and may be disposed of or stored, at the option of the
Landlord, and as the Landlord sees fit. Any costs or expenses incurred or
damages suffered by the Landlord in removing, disposing or storing such
Hazardous Substances shall be paid by the Tenant to the Landlord, upon
demand, together with an amount equal to fifteen percent (15%) of such
costs and expenses representing the Landlord's overhead and administrative
costs.
(d) The Tenant shall, in the case of every installation or removal of Leasehold
Improvements or Fixtures either during or at the expiration of the Term,
effect the same at times prescribed by the Landlord and utilizing only
those elevators designated by the Landlord and shall promptly make good any
damage caused to the Leased Premises or the Building or any part thereof by
the installation or removal of such Fixtures and Leasehold Improvements,
all at its sole expense.
SECTION 9.5 TENANT TO DISCHARGE ALL LIENS
(a) The Tenant shall ensure that no construction liens or other liens or
encumbrances in respect of materials supplied or work done or to be done by
the Tenant or on behalf of the Tenant or related to the Tenant's Work shall
be registered against or shall otherwise affect the Building, the Lands or
the Leased Premises or any part thereof or the Landlord's, the Owners' or
the Tenant's interest in the Leased Premises.
(b) If a lien or other encumbrance is registered against or otherwise affects
the Building or the Leased Premises or the Landlord's, the Owners' or the
Tenant's interest therein, and the Tenant fails to discharge or vacate or
cause any such lien or encumbrance to be discharged or vacated within five
(5) days after it is filed or registered, then, in addition to any other
rights or remedies of the Landlord, the Landlord may (but shall not be
obligated to) discharge or vacate the lien or encumbrance by paying the
amount claimed into court or directly to the lien claimant and the amount
so paid, a sum equal to fifteen percent (15%) thereof representing the
Landlord's overhead and administrative costs, together with all costs and
expenses (including legal costs and expenses) plus interest at the Prime
Rate shall be immediately due and payable by the Tenant to the Landlord as
Additional Rent forthwith on demand.
SECTION 9.6 SIGNS AND ADVERTISING
The Tenant will not place or permit any notice, lettering or other signage on
any part of the outside of the Building or on the exterior or in the interior of
the Leased Premises which is visible from the outside of the Leased Premises.
The Landlord may prescribe a uniform pattern of identification signs for tenants
to be placed in a location designated by the Landlord. The Landlord shall
install, at the Tenant's sole cost, the Landlord's standard tenant
identification signs in accordance with the Landlord's design criteria, on or
near the main door to the Leased Premises and, at the Landlord's option, at
other locations on the floor on which the Leased Premises are located. At the
expiration of the Term of this Lease, the Tenant will remove all signs,
pictures, advertisements, notices, letterings or decorations from the Leased
Premises at the Tenant's expense and will promptly repair all damages caused by
its installation and removal. The Landlord may provide a directory board in the
main lobby of the Building in a location designated by the Landlord in which
event the Tenant's name may be displayed therein and, if so displayed, the
Tenant shall pay to the Landlord as Additional Rent the cost of such display and
the ongoing cost thereof.
SECTION 9.7 TENANT NOT TO OVERLOAD FACILITIES
The Tenant will not install any equipment which will exceed or overload the
capacity of any utility, electrical or mechanical facilities in the Leased
Premises and the Tenant will not bring into the Leased Premises or install any
utility, electrical or mechanical facility or service which the Landlord does
not approve. The Tenant agrees that if any equipment installed by the Tenant
requires additional utility, electrical or mechanical facilities, the Landlord
may, in its sole discretion, if they are available, elect to install them at the
Tenant's expense and in accordance with plans and
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specifications to be approved in advance in writing by the Landlord.
SECTION 9.8 TENANT NOT TO OVERLOAD FLOORS
The Tenant will not bring upon the Building or the Leased Premises any
machinery, equipment, article or thing that by reason of its weight, size or
use, might in the opinion of the Landlord damage the Building or the Leased
Premises and will not at any time overload the floors of the Leased Premises. If
any damage is caused to the Building or the Leased Premises by any machinery,
equipment, object or thing or by overloading, the Tenant will forthwith repair
such damage, or, at the option of the Landlord, pay the Landlord within five (5)
days after demand as Additional Rent the cost of repairing such damage plus a
sum equal to fifteen percent (15%) of such cost representing the Landlord's
overhead and administrative costs.
ARTICLE 10.
DAMAGE AND DESTRUCTION
SECTION 10.1 DESTRUCTION OF THE LEASED PREMISES
(a) If the Leased Premises are destroyed or damaged as a result of fire or
any other peril which is insured against by the Landlord, the if:
(i) the Leased Premises are rendered wholly or partially untenantable,
this Lease will continue in effect and the Landlord will commence
diligently to restore the Leased Premises to the extent only of
insurance proceeds actually received by the Landlord and only to
the extent of the Landlord's obligations set out in Section 9.1.
To the extent of insurance proceeds actually received by the
Landlord, Basic Rent will abate entirely or proportionately, as
the case may be, to the portion of the Leased Premises rendered
untenantable from the date of the destruction or damage until the
Landlord has completed its restoration work; or
(ii) the Leased Premises are not rendered untenantable in whole or in
part, this Lease will continue in effect, the Rent and other
amounts payable by the Tenant will not abate and the Landlord will
commence diligently to restore the Leased Premises to the extent
required by this Section 10.1(a).
(b) Once the Landlord has substantially completed its restoration work the
Tenant will complete all work required to fully restore the Leased Premises for
business. Nothing in this Section 10.1 requires the Landlord to rebuild the
Leased Premises in the condition and state that existed before the damage, but
the Leased Premises, as rebuilt, will have reasonably similar facilities and
services to those in the Leased Premises prior to the damage.
(c) Notwithstanding Section 10.1(a), if the Leased Premises are damaged or
destroyed by any cause whatsoever, and if, in the opinion of the Architect
reasonably arrived at, the Leased Premises cannot be rebuilt to the extent of
the Landlord's obligations set out in Section 9.1, within one hundred and eighty
(180) days of the damage or destruction (assuming normal working days without
overtime), the Landlord, instead of rebuilding or making the Leased Premises fit
for the Tenant in accordance with Section 10.1(a) may, at its option, elect to
terminate this Lease by giving the Tenant, within thirty (30) days after the
damage or destruction, written notice of termination, and thereupon Rent will be
apportioned and paid to the date of damage or destruction.
SECTION 10.2 DESTRUCTION OF THE BUILDING
(a) Notwithstanding Section 10.1, if twenty-five percent (25%) or more of the
Rentable Area of the Building is damaged or destroyed (irrespective of whether
the Leased Premises are damaged or destroyed) and if, in the opinion of the
Architect reasonably arrived at, the damaged or destroyed parts of the Building
cannot be rebuilt to the extent of the Landlord's obligations set out in Section
9.1, or made fit for the purposes of the respective tenants of the space within
one hundred and twenty (120) days of the damage or destruction, then, the
Landlord may, at its option (to be exercised by written notice to the Tenant
within sixty (60) days following the occurrence), elect to terminate this Lease.
In the case of such election, the Term and the tenancy hereby created will
expire upon the thirtieth day after such notice is given, without indemnity or
penalty payable by, or any other recourse against, the Landlord. The Tenant
shall, within such thirty (30) day period, vacate and surrender the Leased
Premises to the Landlord. All Rent will be payable without reduction or
abatement subsequent to the destruction or damage and until the date of
termination, unless the Leased Premises has been destroyed or damaged as well,
in which event Section 10.1 will apply.
(b) If any part of the Building is destroyed or damaged and the Landlord does
not elect to terminate this Lease, the Landlord will commence diligently to
restore the Building, but only to the extent of the Landlord's obligations as
set out pursuant to the terms of the various leases for the premises in the
Building, and exclusive of any tenant's responsibilities set out therein. If the
Landlord elects to restore the Building, the Landlord may restore according to
plans and specifications and working drawings other than those used in the
original construction of the Building.
SECTION 10.3 EXPROPRIATION
Both the Landlord and Tenant agree to co-operate with the other regarding an
expropriation of the Leased Premises or the Property or any part thereof, so
that each may receive the maximum award to which they are respectively entitled
at law. To the extent that any portion of the Property other than the Leased
Premises is expropriated, then, the full proceeds accruing or awarded as a
result will belong to the Landlord and the Tenant will abandon or assign to the
Landlord any rights which the Tenant may have or acquire by operation of law to
those proceeds or awards and will execute all such documents as in the opinion
of the Landlord are necessary to give effect to this intention.
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SECTION 10.4 ARCHITECT
The opinion, decision or certificate of the Architect will bind the parties as
to (a) the percentage of the Rentable Area of the Building damaged or destroyed;
(b) the period of time required to restore the Leased Premises or the Building;
(c) whether or not the Leased Premises are rendered untenantable and the extent
of such untenantability; (d) the date upon which the Landlord's or Tenant's
obligations restoration obligations are completed or substantially completed and
the date when the Leased Premises are rendered tenantable; and (e) the state of
completion of any work of either the Landlord or the Tenant or the Tenant under
this Lease.
ARTICLE 11.
ASSIGNMENT AND SUBLETTING
SECTION 11.1 ASSIGNMENT AND SUBLETTING
(a) The Tenant will not: (i) assign this Lease; (ii) sublet, share or part with
possession of all or any part of the Leased Premises; nor (iii) mortgage or
encumber this Lease, its Leasehold Improvements and Fixtures, or the Leased
Premises (collectively, a "Transfer"), by or in favour of any Person (a
"Transferee") without the prior written consent of the Landlord which consent
may be unreasonably withheld, notwithstanding any statutory provision to the
contrary, in the event of any request for consent to a Transfer within
twenty-four (24) months of the Commencement Date or if the length of time since
the previous Transfer is less than twenty-four (24) months, and in all other
instances may not be unreasonably withheld. However, notwithstanding any
statutory provisions to the contrary, the Landlord will be deemed to be
reasonable if it bases its decision whether or not to consent on any or all of
the following factors:
(i) whether the Transfer is contrary to any covenants or restrictions
granted by the Landlord to other existing or prospective tenants or
occupants of the Building, or to the Mortgagee or any other
parties;
(ii) whether in the Landlord's opinion the financial background,
business history and capability of the Transferee is satisfactory;
(iii) whether in the Landlord's opinion the Transferee will be able to
pay the Rent in full when due and payable;
(iv) whether the Landlord at that time has or will have in the next
ensuing three month period, other premises elsewhere in the
Building which might be suitable for the needs of the Transferee;
(v) whether the proposed Transfer is in favour of any existing occupant
of the Building; and
(vi) whether in the opinion of the Landlord, the nature or character of
the proposed business of the Transferee is unethical, immoral,
illegal or such that it might harm or tend to harm the business or
reputation of the Landlord or reflect unfavourably on the whole or
any part of the Building, the Landlord or the other tenants of the
Building.
The consent by the Landlord to any Transfer will not constitute a waiver of the
necessity for consent to any subsequent Transfer.
This prohibition against a Transfer without first obtaining the Landlord's
consent applies to a change in the direct or indirect effective voting control
of the Tenant from the Person(s) holding voting control at the date of this
Lease (or if the Tenant is not a corporation, at the date of the assignment of
this Lease to a corporation), unless (A) the Tenant is a public corporation
whose shares are listed and traded on any recognized stock exchange in Canada or
the United States, and (B) the Landlord receives assurances satisfactory to the
Landlord that there will be a continuity of the management of the Tenant, and of
its business practices and policies. If the Tenant is a partnership or is
controlled by a partnership (either directly or indirectly), this prohibition
against a Transfer also includes a change in the constitution of the partnership
resulting from the withdrawal of any of the partners existing as of the
Commencement Date (or if the Tenant is not a partnership, at the date of the
assignment of this Lease to a partnership) or the addition of any partners to
the partnership subsequent thereto. This prohibition against a Transfer also
includes an assignment by operation of law. No Transfer may be made where any
portion of Rent is lower than that provided for in this Lease or otherwise on
terms more favourable to the Transferee than the terms set forth in this Lease.
(b) If the Tenant intends to effect a Transfer, then the Tenant will give prior
written notice to the Landlord of such intent, specifying the proposed
Transferee and providing additional information including, without limitation, a
copy of a bona fide written offer with respect to the proposed Transfer which
the Tenant is prepared to accept subject to compliance with the provisions of
this Lease and which must disclose any and all monetary payments or other
consideration made or to be made by the proposed Transferee as consideration for
such Transfer and any other information concerning the financial or business
status of the Transferee that the Landlord requires. The Landlord will, within
thirty (30) days after having received notice and all necessary information,
notify the Tenant in writing either that (i) it consents or does not consent to
the Transfer, or (ii) it elects to cancel this Lease in preference to giving
consent. If the Landlord elects to cancel this Lease, the Tenant will notify the
Landlord in writing within fifteen (15) days thereafter of the Tenant's
intention either to refrain from the Transfer or to accept the cancellation of
this Lease. If the Tenant fails to deliver its notice within the fifteen (15)
day period, this Lease will be terminated upon the date stipulated by the
Landlord in its notice of cancellation. If the Tenant advises the Landlord it
intends to refrain from the Transfer, then the Landlord's election to cancel
this Lease will be void.
(c) If there is a Transfer, the Landlord may collection Rent from the
Transferee, and apply the net amount collected to the Rent required to be paid
pursuant to this Lease, but no acceptance by the Landlord of any payments by a
Transferee will be a waiver of the requirement for the Landlord's consent to
such Transfer, or the acceptance of the Transferee as the Tenant, or a release
of the Tenant from the further performance by the Tenant of its covenants or
obligations. Any documents evidencing the consent to the Transfer will be
prepared by the Landlord or its solicitors,
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and all legal costs incurred by the Landlord and the Landlord's then-standard
fee with respect thereto will be paid by the Tenant to the Landlord or its
solicitors as Additional Rent. Notwithstanding a Transfer, the Tenant will be
jointly and severally liable with the Transferee on this Lease and will not be
released from performing any of its obligations.
(d) If the Tenant receives consent under Section 11.1, it will be subject to
the following conditions that:
(i) the Basic Rent payable by the Transferee will not be less than the
greater of:
(A) the Landlord's current posted rental rate for premises in the
Building similar to the Leased Premises at the time of the
Landlord's consent;
(B) the Basic Rent payable under Section 3.2 immediately prior to
the Transfer; or
(C) the Market Rental at the time the Landlord gives its consent, as
determined by the Landlord in accordance with the provisions
hereof;
If the annual Basic Rent is to increase at specified times in accordance
with this Lease, such increases will be added to the Basic Rent as
determined above.
(ii) any money or other value (including, without limitation, any amount
payable by the Transferee to the Tenant in excess of the Basic Rent
payable by the Tenant in accordance with Section 3.2 hereof for the
portion of the Leased Premises so Transferred) which is paid,
directly or indirectly, by any Transferee to the Tenant in connection
with a Transfer, shall be paid by the Tenant to the Landlord as
Additional Rent forthwith upon receipt of same;
(iii) at the Landlord's option, the Transferee shall enter into a written
agreement directly with the Landlord to be bound by all of the terms
contained in this Lease; and
(iv) if this Lease is disaffirmed, disclaimed, repudiated or terminated by
any trustee in bankruptcy of a Transferee, the original Tenant named
in this Lease or any Transferee (except the bankrupt Transferee) will
be considered, upon notice from the Landlord given within thirty (30)
days after the disaffirmation, disclaimer, repudiation or
termination, to have entered into a lease (the "Remainder Period
Lease") with the Landlord, on the same terms and conditions as are
contained in this Lease, mutatis mutandis, except that (A) the Term
of the Remainder Period Lease shall commence on the date of the
disaffirmation, disclaimer, repudiation or termination and shall
expire on the date this Lease would have expired had it not been so
disaffirmed, disclaimed, repudiated or terminated, and (B) the Basic
Rent shall be increased based on the formula set out in Section
11.1(d)(i).
(e) The Tenant acknowledges and agrees that the Landlord will not be liable
for any claims, actions, damages, liabilities or expenses of the Tenant or
any proposed Transferee arising our of the Landlord unreasonably
withholding its consent to any Transfer and the Tenant's only recourse will
be to bring an application for a declaration that the Landlord must grant
its consent to the Transfer.
SECTION 11.2 ASSIGNMENT BY THE LANDLORD
If there is a sale, lease or other disposition by the Landlord of the
Property or any part thereof, or the assignment by the Landlord of this Lease or
any Interest of the Landlord hereunder, and to the extent that the purchaser or
assignee assumes the covenants and obligations of the Landlord hereunder, the
Landlord will, thereupon and without further agreement, be relieved of all
further liability with respect to its covenants and obligations.
ARTICLE 12.
ACCESS AND ALTERATIONS
SECTION 12.1 RIGHT OF ENTRY
The Landlord and its agents have the right to enter the Leased Premises at
all reasonable times (except in the event of an emergency, when the Landlord can
enter at any time) to show them to prospective purchasers, lessees or
mortgagees, and to examine them and make repairs, alterations or changes to the
Leased Premises or the Building as the Landlord considers necessary including,
without limitation, repairs, alterations or changes to the pipes, conduits,
wiring, ducts and other installations in the Leased Premises where necessary to
serve another part of the Building. For that purpose, the Landlord may take all
required material into the Leased Premises and may have access to all ducts
located under the floor or above the ceiling and access panels to mechanical
shafts and the Landlord has the right to check, calibrate, adjust and balance
controls and other parts of the heating, ventilating and air-conditioning. The
Rent will not abate while any repairs, alterations or changes are being made due
to loss or interruption of the business of the Tenant or otherwise, and the
Landlord will not be liable for any damage, injury or death caused to any
Person, or to the property of the Tenant or of others located on the Leased
Premises as a result of the entry.
ARTICLE 13.
STATUS STATEMENT, SUBORDINATION AND ATTORNMENT
SECTION 13.1 STATUS STATEMENT
Within ten (10) days after written request by the Landlord, the Tenant will
deliver in a form supplied by the Landlord, a status statement or a certificate
to any proposed purchaser, assignee, lessor or mortgagee, or to the Landlord,
which will contain such statements, acknowledgments and information as is
customarily called for in status
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statements and estoppel certificates delivered in conjunction with commercial
tenancies.
SECTION 13.2 SUBORDINATION AND ATTORNMENT
(a) This Lease and the Tenant's rights hereunder are, and will at all
times be, subordinate to all ground or underlying leases, mortgages, trust deeds
or the charge or lien resulting from, or any instruments of, any financing,
refinancing or collateral financing (collectively, an "Encumbrance") or any
renewals or extensions thereof from time to time in existence against the
Property or any part thereof, and the Tenant will, upon request, execute any
document requested by the Landlord to confirm the subordination of this Lease to
any Encumbrance and to the advances made or to be made on the security of the
Encumbrance. The Tenant will also, if requested, (i) attorn to the Owners, the
holder of any Encumbrance or any representative, receiver or receiver-manager
appointed or designated by the Owner or the holder of any Encumbrance, and (ii)
attorn to the purchaser of transferee of the Property (or any part of it) or of
any ownership or equity interest in the Property (or any part of it).
(b) The Tenant will, if possession is taken under, or any proceedings are
brought for possession under or the foreclosure of, or in the event of the
exercise of the power of sale under, any Encumbrance, attorn to the
Encumbrancer or the purchaser upon any such foreclosure, sale or other
proceeding and recognize the Encumbrancer or the purchaser as the Landlord
under this Lease.
(c) The form and content of any document confirming or effecting the
subordination and attornment provided for in this Section 13.2 will be that
required by the Landlord or the holder of any Encumbrance or the purchaser or
transferee in each case, and each such document will be executed and delivered
by the Tenant to the Landlord within ten (10) days after the Landlord requests
it.
(d) Upon written request of the Tenant, the Landlord shall submit to any
long-term encumbrancer of the Property for its consideration, the Tenant's form
of agreement to the effect that so long as the Tenant performs and observes all
of its covenants, obligations and agreements under this Lease and attorns to
such encumbrancer, it shall be permitted to remain in quiet possession of the
Leased Premises without interruption or disturbance from such encumbrancer,
subject to the terms of this Lease. The Tenant shall pay to the Landlord on
demand the Landlord's legal and administrative charges in connection with such
agreement. The Tenant shall indemnify the Landlord from and against all costs
including legal and administrative costs incurred by the Landlord in connection
with obtaining and preparing any such agreement.
SECTION 13.3 ATTORNEY
The Tenant will, upon request of the Landlord, execute and deliver
promptly any statements, instruments and certificates required to carry out the
intent of Sections 13.1 or 13.2. Failure by the Tenant to deliver any of the
foregoing within ten (10) days after the date of a request by the Landlord
shall constitute a default under this Lease and the Landlord shall be entitled
to exercise all of its remedies pursuant to Article 14 hereof.
SECTION 13.4 FINANCIAL INFORMATION
The Tenant will, upon request, provide the Landlord with such information
as to the Tenant's financial standing and corporate organization as the
Landlord or the Mortgagee requires.
ARTICLE 14.
DEFAULT
SECTION 14.1 RIGHT TO RE-ENTER
If and whenever:
(i) the Tenant fails to pay any Rent on the day or dates appointed
for payment and such default shall continue for a period of five
(5) consecutive days; or
(ii) the Tenant fails to observe or perform any other of the terms,
covenants or conditions of this Lease to be observed or performed
by the Tenant (other than the terms, covenants or conditions set
out below in subparagraph (iii) for which no notice shall be
required), provided the Landlord first gives the Tenant ten (10)
days' written notice of the Tenant's failure, or such shorter
period of time as is otherwise provided in this Lease, and the
Tenant within the ten (10) day or shorter period fails to
commence diligently and thereafter to proceed diligently to cure
its failure; or
(iii) the Tenant or any Indemnifier becomes bankrupt or insolvent or
takes the benefit of any act now or hereafter in force for
bankrupt or insolvent debtors or files any proposal or makes any
assignment for the benefit of creditors or any arrangement or
compromise; a receiver or a receiver-manager is appointed for all
or a portion of the Tenant's property; any steps are taken or any
action or proceedings are instituted by the Tenant or by any
other party to dissolve, wind-up or liquidate the Tenant or its
assets; the Tenant abandons the Leased Premises, or sells or
disposes of the trade fixtures, goods or chattels of the Tenant
or removes them from the Leased Premises so that there would not
in the event of such sale or disposal be sufficient trade
fixtures, goods or chattels of the Tenant on the Leased Premises
subject to distress to satisfy all Rent due or accruing hereunder
for a period of at least three (3) months; the Leased Premises
become and remain vacant for a period of five (5) consecutive
days; the Tenant effects or permits a Transfer without the
Landlord's consent where required; this Lease or any of the
Tenant's assets are taken under any writ of execution; or
re-entry is permitted under any other terms of this Lease.
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then the Landlord, in addition to any other rights or remedies do it, has the
immediate right of re-entry upon the Leased Premises and it may repossess the
Leased Premises and enjoy them as of its former estate and may expel all Persons
and remove all property from the Leased Premises and such property may be
removed and sold or disposed of by the Landlord as it deems advisable or may be
stored in a public warehouse or elsewhere at the cost and for the account of
the Tenant, all without service of notice or resort to legal process and
without the Landlord being considered guilty of trespass or becoming liable for
any loss or damage which may be occasioned.
SECTION 14.2 RIGHT TO RELET
(a) If the Landlord elects to re-enter the Leased Premises, or if it takes
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, it may either terminate this Lease or it may without terminating this
Lease make any alterations and repairs as are necessary in order to relet the
Leased Premises. Upon each reletting (which reletting the Landlord may do at
such rental and upon such other terms and conditions as the Landlord in its
sole discretion may deem advisable) all rent received by the Landlord will be
applied, first to the payment of any indebtedness other than Basic Rent or
Additional Rent due hereunder; second, to the payment of any costs and expenses
or reletting including brokerage fees and solicitor's fees and the costs of
alterations and repairs; third, to the payment of Basic Rent and Additional
Rent due and unpaid hereunder; and the residue, if any, will be held by the
Landlord and applied in payment of future Rent as it becomes payable hereunder.
No re-entry or taking possession of the Leased Premises will be construed as an
election on its part to terminate this Lease unless a written notice of that
intention is given to the Tenant. Notwithstanding any such reletting without
termination, the Landlord may at any time thereafter elect to terminate this
Lease for such previous breach.
(b) If the Landlord terminates this Lease, in addition to other remedies
available, it may recover from the Tenant all damages the Landlord incurs by
reason of the Tenant's breach, including the cost of recovering the Leased
Premises, all legal costs incurred by the Landlord and the Basic Rent,
Additional Rent and GST which would have been payable for the remainder of the
Term had the Lease not otherwise have been terminated, all of which shall be
immediately due and payable by the Tenant to the Landlord. In any of the events
referred to in Section 14.1. In addition to all other rights, the full amount of
the current month's instalment of Basic Rent and Additional Rent, together with
the next three months' instalments of Basic Rent and Additional Rent, all of
which will be deemed to be accruing due on a day-to-day basis, will immediately
become due and payable as accelerated rent, and the Landlord may immediately
distrain for the same, together with any arrears then unpaid.
SECTION 14.3 EXPENSES
If legal action is brought for recovery of possession of the Leased Premises,
for the recovery of Basic Rent, Additional Rent and GST or any other amount due
under this Lease, or because of the breach of any other of the Tenant's
obligations, the Tenant will pay to the Landlord all expenses incurred therefor
including a solicitor's fee (on a solicitor and his client basis), unless a
court otherwise awards, plus fifteen percent (15%) of such expenses to cover
the Landlord's overhead and administrative costs.
SECTION 14.4 WAIVER OF EXEMPTION FROM DISTRESS
Despite the Landlord and Tenant Act, or any other applicable Act, legislation,
or any legal or equitable rule of law, non of the goods and chattels of the
Tenant which are on or have at any time been on the Leased Premises will be
exempt from levy by distress for Basic Rent or Additional Rent in arrears by
the Tenant.
SECTION 14.5 LANDLORD'S RIGHTS
If the Tenant fails to pay any Additional Rent payable to a third party when
due, the Landlord may, but will not be obligated to, pay all or part of the
amount payable. If the Tenant is in default in the performance of any of its
other covenants or obligations under the Lease, the Landlord may, but will not
be obligated to, after giving reasonable notice (it being agreed that
forty-eight (48) hours is a reasonable notice of default of Section 8.1), or,
without notice in the case of an emergency, perform or cause to be performed
all or part of what the Tenant failed to perform and may enter upon the Leased
Premises and do those things that the Landlord considers necessary for that
purpose. The Tenant will pay to the Landlord on demand, the Landlord's expenses
incurred under this Section 14.5 plus an amount equal to fifteen percent (15%)
of those expenses for the Landlord's overhead and administrative costs. The
Landlord will have no liability to the Tenant for loss or damages resulting
from its action or entry upon the Leased Premises.
SECTION 14.6 REMEDIES GENERALLY
Mention in this Lease of any particular remedy of the Landlord in respect of
the default by the Tenant does not preclude the Landlord from any other remedy
in respect thereof, whether available at law or in equity or by statute or
expressly provided for in this Lease. No remedy shall be exclusive or dependent
upon any other remedy, but the Landlord may from time to time exercise any one
or more of such remedies generally or in combination, such remedies being
cumulative and not alternative. Subject to Section 11.1(e), whenever the Tenant
seeks a remedy in Court to enforce the observance or performance of one of the
terms, covenants and conditions contained in this Lease on the part of the
Landlord to be observed or performed, the Tenant's only remedy shall be for
damages the Tenant shall be able to prove in a Court of competent jurisdiction
that it has suffered as a result of a breach (if established) by the Landlord
in the observance or performance of any of the terms, covenants and conditions
contained in this Lease on the part of the Landlord to be observed or performed.
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ARTICLE 15.
MISCELLANEOUS
SECTION 15.1 RULES AND REGULATIONS
The Rules and Regulations adopted by the Landlord including, without
limitation, those set out in Schedule "E", are made a part of this Lease, and
the Tenant will observe them. The Landlord reserves the right to amend or
supplement the Rules and Regulations applicable to the Leased Premises or the
Property or any part thereof as in the Landlord's judgment are needed for the
safety, care, cleanliness and efficient operation of the Building. Notice of
the Rules and Regulations and amendments and supplements, if any, will be given
to the Tenant and the Tenant, its invitees or those for whom the Tenant is at
law responsible, will thereupon observe them provided that they do not
contradict any terms, covenants and conditions of this Lease. Any breach of
any of the Rules and Regulations by the Tenant, its invitees or those for whom
the Tenant is at law responsible, shall constitute a breach under this Lease
and all remedies and rights generally available to the Landlord for a breach by
the Tenant under this Lease shall be available and may be applied against the
Tenant.
SECTION 15.2 INTENT AND INTERPRETATION
(a) NET LEASE
The Tenant acknowledges that it is intended that this Lease is a completely
carefree net lease to the Landlord, except as expressly herein set out, that
the Landlord is not responsible during the Term for any costs, charges,
expenses and outlays of any nature whatsoever arising from or relating to the
Leased Premises, or the use and occupancy thereof and the Tenant will pay all
charges, impositions, costs and expenses of every nature and kind relating to
the Leased Premises except as expressly herein set out.
(b) OBLIGATIONS AS COVENANTS AND SEVERABILITY
Each obligations or agreement of the Landlord or the Tenant expressed in this
Lease, even though not expressed as a covenant, is considered to be a covenant
for all purposes. If any provision of this Lease is or becomes invalid, void,
illegal or unenforceable, it shall be considered separate and severable from
the Lease and the remaining provisions shall remain in force and be binding
upon the parties as though such provision had not been included.
(c) ENTIRE AGREEMENT AND AMENDMENT OR MODIFICATION
This Lease and the Schedules, and Riders, if any, attached together with the
Rules and Regulations set forth all covenants, promises, agreements, conditions
or understandings, either oral or written, between the Landlord and the Tenant.
No alteration or amendment to this Lease will be binding upon the Landlord or
the Tenant unless in writing and signed by the Tenant and the Landlord.
(d) GOVERNING LAW
This Lease will be construed in accordance with and governed by the laws of the
Province in which the Building is located.
(e) TIME OF THE ESSENCE
Time is of the essence of this Lease and of every part of it.
SECTION 15.3 OVERHOLDING - NO TACIT RENEWAL
If the Tenant remains in possession of the Leased Premises after the end of the
Term without having signed a new lease or an extension of Term agreement, there
is no tacit renewal of this Lease or the Term, notwithstanding any statutory
provisions or legal presumptions to the contrary, and the Tenant will be deemed
to be occupying the Leased Premises as a tenant from month-to-month at a
monthly Basic Rent equal to twice the monthly amount of Basic Rent payable
during the last month of the Term, and otherwise, upon the same terms, covenants
and conditions as are set forth in this Lease (including the payment of
Additional Rent) so far as these are applicable to a monthly tenancy.
SECTION 15.4 TENANT PARTNERSHIP OR GROUP
(a) If the Tenant is a partnership ("Tenant Partnership") each Person who
is presently a member of the Tenant Partnership, and each Person who
subsequently becomes a member of any successor Tenant Partnership will be and
continue to be liable jointly and severally for the full performance of, and
will be and continue to be subject to, the terms, covenants and conditions of
this Lease, whether or not the Person ceases to be a member of the Tenant
Partnership or successor Tenant Partnership.
(b) If the Tenant is comprised of more than (1) Person, each such Person
will be and continue to be liable jointly and severally for the full
performance of, and will be and continue to be subject to, the terms,
covenants and conditions of this Lease, whether or not the Person ceases to be
actively involved in the business operations conducted from the Leased Premises.
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SECTION 15.5 WAIVER
The waiver by either party of any breach of the other of any term, covenant or
condition herein contained, is not deemed to be a waiver of such term, covenant
or condition or of any subsequent breach of the same or of any other term,
covenant or condition herein contained. The subsequent acceptance of Rent by
the Landlord is not deemed to be a waiver of any preceding breach by the Tenant
regardless of the Landlord's knowledge of the preceding breach at the time of
acceptance of the Rent. No term, covenant or condition of this Lease is deemed
to have been waived by the Landlord unless the waiver is in writing by the
Landlord.
All Basic Rent and Additional Rent to be paid by the Tenant to the Landlord
will be paid without any deduction, abatement, set-off or compensation
whatsoever (except for the Basic Rent to the extent it may be abated pursuant
to Section 10.1), and the Tenant hereby waives the benefit of any statutory or
other rights in respect of abatement, set-off or compensation in its favour at
the time hereof or at any future time.
SECTION 15.6 ACCORD AND SATISFACTION
No payment by the Tenant or receipt by the Landlord of a lesser amount than the
monthly payment of Rent stipulated is deemed to be other than on account of the
earliest stipulated Rent, nor is any endorsement or statement on any cheque or
any letter accompanying any cheque or payment as Rent deemed an acknowledgment
of full payment of accord and satisfaction. The Landlord may accept and cash any
cheque or payment without prejudice to the Landlord's right to recover the
balance of the Rent due or to pursue any other remedy provided in this Lease.
SECTION 15.7 FORCE MAJEURE
Notwithstanding anything in this Lease, if either party is bona fide delayed or
hindered in or prevented from the performance of any term, covenant or act
required hereunder by reason of strikes or labour troubles; inability to procure
materials or services; power failure; restrictive governmental laws or
regulations; riots; insurrection; sabotage; rebellion; war; act of God; climatic
conditions; or other reason whether of a like nature or not which is not the
fault of the party delayed in performing work or doing acts required under the
terms of this Lease, then the performance of that term, covenant or act is
excused for the period of the delay and the party delayed will be entitled to
perform that term, covenant or act within the appropriate time period after the
expiration of the period of the delay. However, the provisions of this Section
do not operate to excuse the Tenant from the prompt payment of Rent.
SECTION 15.8 NOTICES
Any notice, demand, request or other instrument which may be or is required to
be given under this Lease will be personally delivered or sent by telecopy, fax
or registered mail postage prepaid and will be addressed (a) if to the
Landlord, to the address specified in Section 1.6 of the Special Provisions,
and (b) if to the Tenant, at the Leased Premises or, at the Landlord's option
to the Tenant's office at the address specified in Section 1.7 of the Special
Provisions. Any notice, demand, request or consent is conclusively deemed to
have been given or made on the day upon which it is personally delivered or sent
by telecopy or fax, or, if mailed, then four (4) business days (excluding
Saturdays, Sundays and statutory holidays) following the day of mailing, as the
case may be. Either party may give written notice of any change of its address
and thereafter the new address is deemed to be the address of that party for
the giving of notices. If the postal service is interrupted or is substantially
delayed, any notice, demand, request or other instrument must be personally
delivered.
SECTION 15.9 REGISTRATION
Neither the Tenant nor any one on the Tenant's behalf or claiming under the
Tenant will register this Lease. If either party intends to register a document
for the purpose only of giving notice of this Lease or of any assignment or
sublease of this Lease, then, upon request, both parties will join in the
execution of a short form or notice of this Lease which will (a) be prepared by
the Landlord or its solicitors at the Tenant's expense, and (b) only describe
the parties, the Leased Premises and the Commencement Date and the expiration
date of the Term, and any options to extend the Term.
SECTION 15.10 ACCRUAL OF BASIC RENT AND ADDITIONAL RENT
Rent will be considered as annual and accruing from day-to-day based upon a
three hundred and sixty-five (365) day calendar year and where it becomes
necessary for any reason to calculate Rent for an irregular period of less than
one (1) year, an appropriate apportionment and adjustment will be made.
SECTION 15.11 COMPLIANCE WITH THE PLANNING ACT - INTENTIONALLY DELETED
SECTION 15.12 QUIET ENJOYMENT
If the Tenant pays the Rent and observes and performs all its terms, covenants
and conditions, the Tenant will quietly hold and enjoy the Leased Premises for
the Term without interruption by the Landlord, unless otherwise permitted under
the terms of this Lease.
SECTION 15.13 CONSENT AND APPROVAL
The Landlord and each Person acting for or on behalf of the Landlord, making a
determination, designation, calculation,
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estimate, conversion or allocation under this Lease, will act reasonably and in
good faith and each accountant, architect, engineer or surveyor, or other
professional Person employed or retained by the Landlord will act in accordance
with the applicable principles and standards of that Persons' profession.
SECTION 15.14 NON-LIABILITY
The Tenant acknowledges, covenants and agrees:
(i) that the Landlord named in this Lease is the nominee on behalf of
RioCan Real Estate Investment Trust (the "Trust"); and
(ii) the obligations being created by this Lease and any liabilities
arising in any manner whatsoever out of or in connection with
this Lease are not personally binding upon, and that resort shall
not be had to, nor shall recourse or satisfaction be sought from,
the private property of any of;
(A) the unitholders of the Trust;
(B) annuitants under a plan of which a unitholder of the Trust
acts as trustee or carrier; and
(C) the officers, trustees, employees or agents of the Trust.
ARTICLE 16.
DEFINITIONS
In this Lease and in the Schedules to this Lease the following definitions are
applicable:
Section 16.1 "Additional Rent" means all sums of money or charges required
to be paid by the Tenant under this Lease (except Basic Rent) whether or not
designated "Additional Rent" or payable to the Landlord.
Section 16.2 "Additional Services" means the services and supervision thereof
by the Landlord referred to in Section 5.5 hereof, and all other services of
any nature or kind supplied by the Landlord in addition to those required to be
supplied by the Landlord to the Tenant pursuant to this Lease, except for any
services which the Landlord elects to supply to all of the tenants of the
Building the cost of which is included in Operating Costs.
Section 16.3 "Alterations" means any repairs, replacements, decorations,
Leasehold Improvements or other alterations made by the Tenant or its
representatives to any part of the Leased Premises, or made by any other tenant
to any other leased premises in the Building.
Section 16.4 "Architect" means the architect, surveyor or space planner from
time to time named by the Landlord. The decision of the Architect whenever
required by this Lease (or requested by the Landlord) and any certificate
prepared or approved by the Architect will be final and binding.
Section 16.5 "Basic Rent" means the sums payable by the Tenant to the
Landlord as set out in Section 3.2 of this Lease.
Section 16.6 "Building" means the multi-storey office building erected or to
be erected on the Lands and located in the City of Burnaby, Province of British
Columbia, known municipally as 4664 Lougheed Highway, and forming a part of the
project known generally as Brentwood Office Centre, from and including the
lowest floor or level of the Building to and including the roof thereon, the
Common Areas and Facilities, the Parking Areas, and the areas and facilities
serving the Building, as determined by the Landlord, which areas and facilities
may include, without limitation, lobbies, foyers and vestibules, sidewalks,
storage and mechanical areas, janitor rooms, mail rooms, telephone, mechanical
and electrical rooms, stairways, escalators, elevators, truck and receiving
areas, driveways, loading docks and corridors and shall also include the Retail
Area, the Office Area, the Storage Areas and those areas designated or intended
by the Landlord to be leased or used for service, administration, management,
safety and operational purposes.
Section 16.7 "Common Areas and Facilities" means (a) those areas, facilities,
utilities, improvements, equipment and installations in the Building which,
from time to time, are not designated or intended by the Landlord to be leased
to tenants of the Building, and (b) those areas, facilities, utilities,
improvements, equipment and installations which serve or are for the benefit of
the Property, whether or not located within, adjacent to, or near the Building
and which are designated from time to time by the Landlord as part of the
Common Areas and Facilities, including, without limitation, all areas,
facilities, utilities, improvements, equipment and installations which are
provided or designated (and which may be changed from time to time) by the
Landlord for the use or benefit of the tenants, their employees, customers and
other invitees in common with others entitled to the use and benefit thereof in
the manner and for the purposes permitted by this Lease.
Section 16.8 "Concourse Level" means the areas of the Building, if any,
located below the ground floor and forming part of the Retail Area, together
with all other facilities and areas located on such level(s).
Section 16.9 "Fixtures" means all furniture, trade fixtures and equipment
installed by the Tenant in the Leased Premises and not affixed in any manner
thereto.
Section 16.10 "Fixturing Period" means the period referred to in Section 1.2
of the Special Provisions during which the Tenant is required to complete the
Tenant's Work.
Section 16.11 "Hazardous Substances" means any contaminant, pollutant,
dangerous substance, potentially dangerous substance, noxious substance, toxic
substance, hazardous waste, flammable, explosive or radioactive material, urea
formaldehyde foam insulation, asbestos, PCB's or any other substances or
materials that are declared or defined to be hazardous, toxic, contaminants or
pollutants in or pursuant to any applicable federal, provincial or municipal
statute, by-law or regulation.
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Section 16.13 "Landlord" means the party of the First Part and includes the
Landlord and its duly authorized representatives.
Section 16.14 "Landlord's Work" means all construction and other work referred
to as "Landlord's Work" in Schedule "C" attached hereto.
Section 16.15 "Lands" means the lands underneath, adjacent and appurtenant to
the Building, as more particularly described in Schedule "A" attached to this
Lease or as such Lands may be altered, expanded or reduced from time to time.
Section 16.16 "Lease" means this agreement and all the terms, covenants and
conditions set out herein, as amended from time to time in accordance with
Section 15.2(c) hereof.
Section 16.17 "Leased Premises" means the premises demised by this Lease as set
out in Section 2.1 hereof.
Section 16.18 "Leasehold Improvements" means all items generally considered as
leasehold improvements, including without limitation all installations,
alterations and additions from time to time made, erected or installed in the
Leased Premises by or on behalf of the Tenant, or any previous occupant of the
Leased Premises or by or on behalf of tenants in other premises in the Building
including, without limitation, all partitions however affixed and whether or not
moveable, heating, ventilating and air-conditioning systems, facilities and
equipment, light fixtures, internal stairways and doors, floor, wall and ceiling
coverings, and any and all fixtures, facilities, equipment or installations
installed by or on behalf of the Landlord in accordance with Schedule "C".
Section 16.19 "Market Rental" means, at any given time, the then current market
net rental rate for net leases with similar terms (including, without
limitation, the length of the term and the frequency of adjustments in rent, if
any) entered into at arm's length for premises of similar size, age, quality and
use, similarly improved and fixtured in similar office buildings in the City in
which the Building is located.
Section 16.20 "Mortgagee" means any mortgagee or chargee (including any trustee
for bondholders), from time to time, of the Property or any part thereof, or of
the Landlord's or the Owners' interest in the Property.
Section 16.21 "Normal Business Hours" means the hours from 8:00 a.m. to 6:00
p.m. on Mondays to Fridays unless such a day is a statutory holiday.
Section 16.22 "Office Area" means the portion of the Building designated by the
Landlord from time to time for office purposes located on all floors of the
building and such changes, alterations and improvements as may be made thereto
from time to time in the sole discretion of the Landlord.
Section 16.23
(a) "Operating Costs" means the total amounts incurred, paid or payable
whether by the Landlord or by others on behalf of the Landlord which are
applicable or attributable to the Property, as determined by the Landlord in the
manner set forth in the following sentence, for the maintenance, operation,
repair, replacement, management and administration of the Property, calculated
as if the Building were fully occupied and operational during each Lease Year of
the Term. The Tenant acknowledges and agrees that Operating Costs may be
attributed by the Landlord to the Office Area, Retail Area and other components
of the Building in accordance with current practices relevant to multi-use
commercial developments on a basis consistent with the nature of the particular
costs and expenses being attributed and the costs and expenses so attributed may
be allocated to the tenants of such components separately in which event the
Tenant shall pay the Tenant's Share of such costs and expenses so allocated.
(b) Operating Costs include, without limitation and without duplication,
the aggregate of:
(i) the total annual costs of insuring the Building and equipment and
other property servicing the Building from time to time as the
Landlord, or the Mortgagee, from time to time determines, provided
that if the Landlord self insures with respect to any of the insurance
required to be maintained by it in accordance with the terms of this
Lease, reasonable reserves not to exceed insurance premiums that
otherwise would be payable or attributable by the Landlord to such
insurance may be included hereunder;
(ii) the cost of cleaning (including carpet cleaning in the Common Areas
and Facilities and window cleaning), snow removal, garbage and waste
collection and disposal, including the cost of performing the work
referred to in Section 5.2(a), and the cost of security, supervision
and traffic control;
(iii) the aggregate of the costs and amounts paid by the Landlord, to the
extent such costs are not separately metered and paid for directly by
individual tenants, for Utilities used in the maintenance, operation,
heating, ventilating and air-conditioning of the Building;
(iv) salaries, wages and other amounts paid or payable for all management,
supervisory, and operational personnel including the Building manager,
engineers, janitors, caretakers, security staff, management personnel
(in each case whether employed by the Landlord or pursuant to a third
party management contract) and all other related staff and the total
charges (including contributions and premiums for fringe benefits,
unemployment insurance, and Workers' Compensation, pension plan
contributions and similar premiums and contributions) of any
independent contractors or managers, engaged in the repair, care,
maintenance, security, management and cleaning of the Property;
(v) the cost of the rental of any equipment and signs, and the cost of
supplies, used by the Landlord
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in the maintenance and operation of the Property;
(vi) audit fees and the cost of accounting services incurred in the
preparation of the statements referred to in this Lease and the
financial statements related thereto, and in the computation of the
Rent and other charges payable by tenants of the Building;
(vii) subject to (viii) below, the cost of all repairs and replacements
to and maintenance (including, without limitation, landscaping
maintenance) and operation of the Property and the systems,
facilities and equipment serving the Building (including without
limitation, the components of the heating, ventilating and
air-conditioning systems serving portions of the Building which are
maintained and repaired by the Landlord) and all repairs and
replacements undertaken by the Landlord for the general safety and
benefit of the tenants of the Building or to reduce Operating
Costs;
(viii) depreciation or amortization over the economic life, (not to exceed
fifteen (15) years), together with interest calculated at two (2)
percentage points above the Prime Rate, of the costs, including
repairs and replacements of the maintenance, cleaning, operating,
heating, ventilating and air-conditioning equipment, master
utility meters and all other fixtures, equipment and facilities
that are part of the Building and not intended to be leased to
tenants, which, in accordance with generally accepted accounting
principles, are not fully expended or deducted in the Lease Year in
which they are incurred;
(ix) all business taxes and other Taxes, if any, from time to time
payable by the Landlord with respect to the Common Areas and
Facilities and Capital Taxes as defined herein;
(x) the Market Rental, business taxes and other Taxes, if any,
attributable to space in the Building occupied by the Landlord or
the Building manager for management, supervisory or administrative
purposes including, without limitation, space leased or used for
service, administration, management, safety and operational
purposes;
(xi) the costs and expenses of environmental site reviews and
investigations, and removal and/or clean-up of Hazardous Substances
from the Common Areas and Facilities; and
(xii) an administration and management fee of at least five percent (5%)
of the Rent (including Basic Rent, Percentage Rent and Additional
Rent) received or receivable by the Landlord from the tenants of
the Building; the actual amount of the administration fee referred
to herein shall be determined by the Landlord and may be increased
from time to time by the Landlord in accordance with the then
current rate for such fees in comparable buildings in the vicinity.
From the total of the above costs, there shall be deducted or excluded, as
the case may be:
(A) all net recoveries which reduce Operating Costs received by the
Landlord from tenants as a result of any act, omission, default or
negligence of such tenants or by reason of a breach by such tenants
of provisions in their respective leases (other than recoveries
from such tenants under clauses in their respective leases
requiring their contribution to Operating Costs);
(B) net proceeds received by the Landlord from insurance policies taken
out by the Landlord to the extent that the proceeds relate to
Operating Costs;
(C) ground rent payable to any ground lessor if the Landlord is not the
owner of the Lands and principal and interest payments on any
mortgages, charges or other encumbrances registered against the
title of the Property;
(D) costs and expenses relating to the leasing of space or premises in
the Building including leasing commissions and advertising costs;
and
(E) the cost of Alterations to specific leased premises in the Building
which are completed at the request of the tenant of such premises
and which are not specifically referred to as costs or expenses
which are the responsibility of the Tenant pursuant to the
provisions of this Lease.
(C) "Capital Tax" means the amount imputed by the Landlord to the
Building for taxes, rates, duties and assessments imposed from time to time upon
the Landlord or the Owners and payable by the Landlord or the Owners on account
of the capital that it or they have invested in the Building or any part of it.
Capital Tax will be imputed (i) as if the Building were the only property of the
Landlord or the Owner; and (ii) on the basis of the Landlord's determination of
the amount of capital attributable to the Building. The Landlord's determination
of the capital attributable to the Building will be based solely on the costs of
acquiring, developing and constructing the Building and any expansions or
additions to it. Capital Tax will not be increased by any mortgage or other
financing or refinancing of the Building or any part of it.
Section 16.24 "Owners" means the registered owners and holders of the freehold
or leasehold title of the Property or any part thereof from time to time. In
sections that contain a release or other exculpatory language in favour of the
Owners. "Owners" includes the officers, directors, employees (while in the
ordinary course of their employment) and agents of the Owners.
Section 16.25 "Parking Areas" means the improvements constructed, or which may
be constructed, in or as part of the Building for use as parking facilities and
the areas and facilities that are appurtenant solely to those improvements.
Section 16.26 "Percentage Rent" means the sums payable by the tenants of the
Retail Area based upon a percentage of the gross revenues received by such
tenants.
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Section 16.27 "Person", if the context allows, includes any person, firm,
partnership or corporation, or any group of persons, firms, partnerships or
corporations or any combination thereof.
Section 16.28 "Prime Rate" means the annual rate of interest from time to time
publicly quoted by any Canadian chartered bank designated by the Landlord as its
reference rate of interest for determining rates of interest chargeable in
Toronto on Canadian dollar demand loans to commercial customers.
Section 16.29 "Property" means the Building and the Lands as herein defined.
Section 16.30 "Proportionate Share" means a fraction to be calculated by the
Landlord, in each case being a fraction which has as its numerator the Rentable
Are of the Leased Premises and as is denominator the Rentable area of the
Building. The Landlord may recalculate or adjust the Tenant's Proportionate
Share from time to time due to changes, additions or improvements to the
Building.
Section 16.31 "Rent" means all Basic Rent and Additional Rent payable hereunder
(together with Percentage Rent, where applicable).
Section 16.32 "Lease Year" means a period of time, the first Lease Year
commencing on the first day of the Term hereof, and ending on the 31st day of
December next following; thereafter Lease Years shall consist of consecutive
period of twelve (12) calendar months. If, however, the Landlord considers it
necessary or convenient for the Landlord's accounting purposes, the Landlord may
at any time and from time to time, by written notice to the Tenant, specify an
annual day from which each subsequent Lease Year is to commence, and, in such
event, the then current Lease Year shall terminate on the date preceding the
commencement of such new Lease Year. The last Lease Year of the Term shall
terminate upon the expiration or earlier termination of this Lease, as the case
may be.
Section 16.33 "Retail Area" means those portions of the Building designated by
the Landlord from time to time for retail and commercial purposes located on the
ground floor and the Concourse Level, if any, and such changes, alterations and
improvements as may be made thereto from time to time in the sole discretion of
the Landlord.
Section 16.34 "Storage Areas" means all those areas (which in all cases are
separate and apart from leasable premises) to be used by tenants for storage in
conjunction with use of leasable premises.
Section 16.35 "Structure" means the foundations, roof (excluding the roof
membrane), exterior wall assemblies including weather walls and bearing walls,
subfloor and structural columns and beams of the Building and any other portions
of the Building designated by the Landlord from time to time as Structure.
Section 16.36 "Taxes" means all real property taxes, rates, duties and
assessments (including local improvement taxes), imposts, charges or levies,
whether general or special, that are levied, rated, charged or assessed against
the Property or any part thereof or Rent therefrom from time to time by any
lawful taxing authority, whether federal, provincial, municipal, school or
otherwise, and any taxes or other amounts which are imposed in lieu of, or in
addition to, any such real property taxes whether of the foregoing character or
not and whether in existence at the Commencement Date or not, including, without
limitation, any excise tax, business transfer tax or any tax levied, rated,
charged or assessed in respect of the rental of space by the Tenant under this
Lease, and any real property taxes or other taxes levied or assessed against the
Landlord or the Owners on account of their respective interest in the Property
or any part thereof, or their ownership thereof, as the case may be, calculated
on the basis of the Building being assessed as a fully leased and operational
building, and the costs and expenses incurred for consulting, appraisal, legal
and other services to the extent they are incurred in an attempt to minimize or
reduce any of the foregoing real property taxes or other taxes referred to
above.
Section 16.37 "Tenant" means the party of the Second Part. If there is more than
one Tenant, any notice required or permitted by this Lease may be given by or to
any one of them and has the same force and effect as if given by or to all of
them. Any reference to "Tenant" includes, where the context allows, the
servants, employees, agents, invitees and licensees of the Tenant and all others
over whom the Tenant may reasonably by expected to exercise control.
Section 16.38 "Tenant's Share" means a fraction to be calculated by the
Landlord, in each case being a fraction which has as its numerator the Rentable
Are of the Leased Premises and as its denominator the Rentable Area of each
floor of the Office Area calculated on the basis that each such floor is a
single tenancy floor. The Landlord may recalculate or adjust the Tenant's Share
from time to time due to changes, additions, or improvements to the Building.
Section 16.39 "Tenant's Share" means all construction and other work required to
be provided or performed in order to render the Leased Premises complete and
suitable to open for business, including without limitation, all work designated
as Tenant's Work in Schedule "C" attached hereto but excluding those items
specifically referred to as "Landlord's Work".
23
<PAGE> 27
Section 16.40 "Utilities" means all gas, electricity, water, steam, fuel, power,
telephone and other utilities used in or for the Building or the Leased
Premises, as the case may be, or allocated to the Leased Premises by the
Landlord in accordance with the terms of this Lease.
IN WITNESS WHEREOF, the Landlord and the Tenant have signed and sealed this
Lease.
SIGNED, SEALED AND DELIVERED ) LANDLORD: RIOCAN HOLDINGS INC.
in the presence of: )
)
)
) Per:
) --------------------------------------
) c/s
)
)
) Per:
) --------------------------------------
) c/s
)
)
) TENANT: INFOWAVE WIRELESS MESSAGING INC.
)
)
)
) Per:
) --------------------------------------
) c/s
)
)
) Per:
) --------------------------------------
) (I/We have authority to bind
) the corporation)
)
)
24
<PAGE> 28
RIDER NO. 1 TO A LEASE MADE BETWEEN
INFOWAVE WIRELESS MESSAGING INC. AS TENANT AND RIOCAN HOLDINGS INC. AS LANDLORD,
IN RESPECT OF THE BRENTWOOD OFFICE CENTRE.
1. RENT FREE PERIOD
The Landlord and Tenant acknowledge and agree that notwithstanding any other
provision contained herein to the contrary, the Tenant shall be entitled to
occupy the Leased Premises for the period from April 1, 1998 to and including
June 30, 1998, without obligation to pay the Basic Rent provided for in Section
3.2 hereof (the "Rent Free Period") and shall during such period be a Tenant in
the Leased Premises subject to the same covenants and agreements as are
contained in this Lease, mutatis mutandis. Nothwithstanding the foregoing, it is
understood and agreed that the Tenant shall be required to pay all Additional
Rent provided for in this Lease during the Rent Free Period.
2. RENEWAL OPTION
As long as the Tenant continues to comply with all the requirements of this
Lease, the Tenant shall be granted one (1) option to renew the Lease for a
further five (5) year term (the "Renewal Term") commencing on the 1st day
following the expiration of the Term of the Lease, provided that the Tenant
shall give to the Landlord not more than twelve (12) months, and not less than
six (6) months prior to the expiration of the Term of the Lease, written notice
of the Tenant's exercise of its right to renew for such Renewal Term.
The Renewal Term shall be on the same terms, covenants and conditions as
contained in this Lease (as amended from time to time), except for the right to
any further renewal beyond the Renewal Term, except for such provisions of the
Lease as are pertinent only to the original Term, and except for the Basis Rent.
The Basic Rent for the Renewal Term will be as agreed between the Landlord and
the Tenant, but shall not be less than the prevailing market rates at a date
which is six (6) months prior to the commencement of the Renewal Term for
comparable fully improved space, used for the same or similar use, with the same
or similar sales volumes, in the same or similar area of the City and in any
event the Basic Rent shall not be less than the Basic Rent actually payable by
the Tenant pursuant to the provisions of this Lease during the last year of the
Term of this Lease.
In the event that the Landlord and the Tenant are unable to agree on the Basic
Rent to be paid by the Tenant during the Renewal Term by a day which is three
(3) months prior to the expiry of the Term, then this option to renew shall be
null and void and of no further force or effect, and the Tenant shall surrender
the Leased Premises to the Landlord upon the expiry of the Term of this Lease.
3. STORAGE AREA
(a) In conjunction with the Lease to the Tenant of the Leased Premises, the
Landlord hereby leases to the Tenant, throughout the Term, additional premises
(the "Storage Space") consisting of approximately 500 square feet of storage
space located on the warehouse level of the Building. The actual area of the
Storage Space shall be certified measured to BOMA standards, and the location
shall be agreed upon between the Landlord and Tenant, acting reasonably. The
annual rent payable by the Tenant for the Storage Space during the term of this
Lease shall be calculated based on six dollars ($6.00) per square foot of the
actual area of the Storage Space (measured as Retail Area).
The aforesaid rent shall be on a gross basis, meaning that there shall be no
additional charge to the Tenant for Operating Costs, Taxes or utilities.
(b) The storage Space shall not be used for any purpose other than for storage
incidental and ancillary to the Tenant's business conducted on the Leased
Premises.
(c) All of the terms of this Lease shall apply to the Storage Space, mutatis
mutandis, except where they appear pursuant to the terms hereof to be
inapplicable or in conflict with the express provisions of this clause in which
case the provisions of this clause shall prevail.
(d) The Tenant agrees to accept the Storage Space in "as is" condition as at
the Commencement Date, and the Landlord is not obliged to perform any leasehold
improvements thereto. No leasehold improvement allowance or tenant inducement
whatsoever is applicable to the lease of the Storage Space.
4. PARKING
The Tenant shall have the right to the use of up to thirty-five (35)
non-reserved random parking spaces in the parking facility serving the Building.
The Tenant shall pay to the operator of the parking garage or to the Landlord,
as directed by the Landlord, throughout the Term of this Lease a monthly parking
fee for the use of each parking space based upon the then prevailing rate being
charged in the Building, as may be adjusted from time to time. Such monthly
payment of the parking fee, if paid to the Landlord, shall be recoverable by the
Landlord in the same manner as Additional Rent in arrears. In addition, the
Tenant hereby agrees to use and occupy the parking spaces referred to above in
accordance with all rules and regulations relating to the use and occupation of
the parking garage by the Tenant, its employees and invitees.
5. RIGHT OF FIRST REFUSAL
The Landlord agrees to grant to the Tenant a one time Right of First Refusal on
any contiguous space adjacent to the Leased Premises coming vacant in the
Building. Should the Landlord, at any time throughout the Term, receive a bona
fide third party offer to lease the said premises, the Landlord shall advise the
Tenant in writing, and the Tenant shall have the right to exercise its Right of
First Refusal to rent the said premises on the same terms and conditions as the
25
<PAGE> 29
bona fide third party offer. The Tenant shall have a period of five (5)
business days from the date of written notice from the Landlord to exercise
this Right of First Refusal. In the event the Tenant does not exercise this
right within the five (5) business day period, the Landlord shall be free to
lease the said premises and this Right of First Refusal shall be null and void.
6. COMMUNICATION TOWER
The Tenant shall have the right to erect a communication tower on the roof of
the Building, subject to the Tenant obtaining at its sole cost and expense all
requisite governmental approvals and permits, and subject to the Landlord's
prior written approval, acting reasonably, on the size, style, and location of
the tower. All costs associated with the installation of such tower shall be
the sole expense of the Tenant, and the Tenant acknowledges that it must
provide engineering drawings and specifications of such tower, including
details outlining the installation of such tower for Landlord's approval, and a
report from its structural engineer approving the load capacity for said tower
prior to installation.
The Tenant shall throughout the Term of the Lease and any extensions or
renewals thereof, maintain such communication tower in a first class and
reputable manner and upon the expiration or earlier termination of this Lease
shall remove the said tower and shall restore the area upon which same has been
erected to its original condition. The Tenant's obligations hereunder shall
survive the expiration or earlier termination of the Term of this Lease.
7. FIXTURING ALLOWANCE
The Landlord shall pay to the Tenant a fixturing allowance (the "Fixturing
Allowance") in the amount of eight dollars ($8.00) per square foot of the
Rentable Area of the Leased Premises, which shall be paid to the Tenant once
the following conditions have been met:
(i) the Landlord has received and approved the Tenant's architectural,
structural, mechanical and electrical plans and specifications.
(ii) the Tenant's Work has been completed to the satisfaction of the
Landlord in accordance with the plans and specifications approved by the
Landlord, and the Tenant has provided evidence satisfactory to the Landlord that
all accounts for such work have been paid, and all lien periods have expired;
(iii) the Lease has been executed by the Tenant and delivered to the
Landlord; and
(iv) the Tenant has taken occupancy of the Leased Premises and has opened
the Leased Premises for business.
26
<PAGE> 30
SCHEDULE "A"
LEGAL DESCRIPTION
BRENTWOOD OFFICE CENTRE, BURNABY, BRITISH COLUMBIA
Block 81 "A" of District Lot 124
Group 1
Plan 3348
Except the West 150 Feet New Westminister District
<PAGE> 31
SCHEDULE "B"
[MAP]
1st FLOOR NOT TO SCALE OCT. /94
[LOGO]
Counsel Management
Services Inc.
#224-4370 Dominion St. BRENTWOOD OFFICE CENTER
Burnaby, B.C. 4664 LOUGHEED HWY. BURNABY, B.C.
PH: (604) 451-9727
Fax: (604) 451-9728
Seeton Shinkewski Design Group Ltd. 855 - 409 Granville Street Vancouver,
B.C. V6C 1T2 Phone 685-4301 Fax 684-0336
<PAGE> 32
SCHEDULE "C"
LANDLORD'S AND TENANT'S WORK
CONSTRUCTION OF LEASED PREMISES
LANDLORD'S OBLIGATION
The Landlord shall at its cost and expense complete all items of work listed
herein as "Landlord's Work" with all such work to be done in accordance with
building code, and the Tenant's plans and specifications approved by the
Landlord. Any work in addition to any of the items specifically enumerated as
Landlord's Work shall be performed by the Tenant at its own cost and expense.
Any equipment or work other than those items specifically enumerated as
Landlord's Work which the Landlord installs or constructs in the Leased
Premises on the Tenant's behalf shall be paid for by the Tenant as Additional
Rent within fifteen (15) days after receipt of a bill therefore, at cost plus
fifteen percent (15%) for overhead and supervision.
LANDLORD'S WORK
1. SITE WORK, PARKING AND LANDSCAPING
As existing.
2. STRUCTURAL FRAME, EXTERNAL WALLS AND ROOF
As existing.
3. DEMISING WALLS
As existing.
4. FLOORS
As existing.
5. CEILING
As existing.
6. PLUMBING
As existing.
7. ELECTRICAL
As existing.
8. TELEPHONE
As existing.
9. HEATING AND AIR CONDITIONING
As existing.
<PAGE> 33
Schedule "C" Continued
Page 2
TENANT'S OBLIGATION
The Tenant shall at its cost and expense complete or cause the completion of all
items of work described as Tenant's Work herein prior to the Commencement Date
in accordance with the plans and specifications which have been submitted to
and approved by the Landlord. All work performed by the Tenant with respect to
the Leased Premises shall:
(a) be done in accordance with the design criteria set down by the
Landlord or its authorized representatives with respect to the
external and internal appearance of the Leased Premises;
(b) be done as expeditiously as reasonably possible;
(c) be done in such a manner as will not interfere unreasonably with work
being done by the Landlord upon the Leased Premises or any other
portion of the Shopping Centre;
(d) be done in compliance with such reasonable rules and regulations as
the Landlord or its agents or contractors may make;
(e) be carried out by competent workers under the supervision of one or
more professional contractor(s) and designer(s), who shall be subject
to prior written approval of the Landlord (such approval not to be
unreasonably withheld or delayed), and be subject to the reasonable
supervision of the Landlord or its agents or contractors;
(f) be done at the risk of the Tenant.
TENANT'S WORK
1. INTERIOR FINISHING
The Landlord will be responsible for all interior partitions, ceilings,
interior painting, and decorating. The Tenant will install at its own
expense all floor coverings. The Tenant shall be responsible for all store
fixtures and furnishings.
2. LIGHTING AND ELECTRICAL
The landlord will provide at its own cost all lighting receptacles,
telephone outlets, lighting and electrical fixtures including exit signs,
appliances, and any other equipment. The Tenant will also provide hookups
for any special equipment (if any) including reheat coils, exhaust fans,
makeup units, hot water tank, electrical heater motor, compressors,
communication and computer equipment, etc. The Tenant will also be
responsible for all necessary wiring for the aforementioned work from the
electrical panel supplied by the Landlord.
3. PLUMBING
The Tenant shall be responsible for installation of all plumbing equipment,
fixtures and lines required for the Premises and installation of the
Tenant's kitchen equipment (if any) within the Leased Premises connecting
to the plumbing and drainage systems provided by the Landlord. All
installations of water closets, wash basins, miscellaneous equipment and
plumbing pertaining thereto and all furnishings of the said kitchen
equipment will be carried out by the Tenant in accordance with building
code at the Tenant's cost. Additional water and drainage lines as may be
required for such installations will be brought by the Landlord to the
Leased Premises at the Tenant's expense.
4. HEATING, VENTILATION AND AIR-CONDITIONING
<PAGE> 34
5. FIRE PROTECTION
6. TELEPHONE
The Tenant will be responsible for the installation of the telephone system
as required by the Tenant, distributed from the terminal outlet supplied by
the Landlord.
7. ADDITIONAL REQUIREMENTS
Any requirements by the Tenant in addition to those specified as the
Landlord's Work shall be provided at the Tenant's own cost.
8. DRAWINGS AND SPECIFICATIONS
The Tenant shall prepare and submit to the Landlord or its Architect or
Engineer for approval, complete drawings and specifications prepared by
qualified designers and conforming to good engineering and construction
practice, including ceiling finishes, floor coverings and any special
equipment or installations, all water, sewage, electrical, heating,
ventilation, and air-conditioning ducting (except to the extent provided
by the Landlord), and such other items of the Tenant's Work as the Landlord
may request. The Landlord shall notify the Tenant of its approval thereof
or of all the specific changes required by it and the Tenant shall then
promptly prepare and submit to the Landlord or its Architect or Engineer
within ten (10) days next following, complete drawings and specifications
within the times hereinbefore provided.
No work for which drawings and specifications are required shall be
commenced until such drawings and specifications have been approved in
advance in writing by the Landlord. No items of the Tenant's Work shall be
commenced until the Tenant has secured approval thereof from all
governmental authorities having jurisdiction and submitted proof of such
approval to the Landlord.
9. PERMITS AND APPROVALS
The Tenant shall obtain all permits and approvals for the Tenant's Work and
also all permits and approvals required for the business use for which the
Tenant proposes to utilize the Leased Premises, and any other permits,
licenses and permissions needed to lawfully conduct the Tenant's business.
All fees and other expenses associated with the obtaining of any necessary
approvals, permits and licenses hereunder shall be borne by the Tenant.
Upon completion of the Tenant's Work, the Tenant shall also secure all
applicable certificates of completion and occupancy.
10. TENANT'S INSURANCE
Tenant shall obtain and provide the Landlord or its General Contractor with
proof of insurance coverage in amounts satisfactory to the Landlord of
Tenant's legal liability insurance, comprehensive general liability
insurance and insurance for Tenant's improvements prior to commencing any
work in the Leased Premises. The Tenant shall ensure fire protection
devices are available during the carrying out of the Tenant's Work.
<PAGE> 35
Schedule "C" Continued
Page 4
11. TENANT'S CONTRACTORS
The Tenant shall retain competent interior designers (as may be
appropriate), who shall be duly licensed in the Province of Alberta where
required, in connection with the design of the Tenant's Work and the
preparation of the plans required to be submitted by the Tenant herein.
The Tenant may elect to use any contractor of his choice to perform his
work providing prior approval is received from the Landlord. In any case,
the Tenant will enter into his own contractual agreement with the
contractor of his choice and indemnifies the Landlord that the contractor
carries the necessary insurance and has taken out the necessary permits.
It is the Tenant's sole responsibility to pay its contractors for their
work, and to ensure payment of all sub-contractors and suppliers. Upon
demand by the Landlord, the Tenant shall produce proof of such payment
satisfactory to the Landlord (which may be in the form of a Statutory
Declaration endorsed by all contractors and sub-contractors).
12. GENERAL PROVISIONS
The following provisions are in addition to, and do not waive the
provisions of any general covenants between the Tenant and the Landlord as
may be contained in the Lease:
(a) All work by the Tenant within the Leased Premises shall be completed
in new or like new materials. Materials and workmanship shall be of a
uniformly high quality and used and/or performed in accordance with
the very best standards of practice and shall not be in contravention
of any governing codes or regulations and shall be subject to the
approval of the Landlord and/or its Architect.
(b) Under no circumstances will the Tenant, its employees, its contractors
or its contractors' employees enter onto any roof of the Centre or
make any opening in the roof.
(c) The Tenant and his contractor(s) shall not impose a greater load on
any concrete floor than the design live load of 100 pounds per square
foot uniformly distributed. No unusual loads may be suspended from the
underside of roof structure, without the Landlord's written approval.
(d) During the Tenant's Fixturing Period the Tenant shall maintain the
Leased Premises in a reasonably clean and orderly manner and shall be
responsible for the cost of removing from the Centre all excess
materials, trash and cartons resulting from Tenant's Work and stocking
of the Leased Premises. Should the Tenant fail to regularly clean up
construction material, trash and cartons, the Landlord may remove such
materials and charge the costs to the Tenant. Final clean up shall
include the cleaning of the light fixtures, millwork units, store
front and public spaces affected by the work.
(e) The Tenant shall not allow any liens or notices thereof to be placed
against the Leased Premises or the Centre. Failure to discharge any
liens or notices thereof within five (5) days of notice by the
Landlord to do so, shall constitute a default under the Lease.
(f) The Landlord will not allow the Tenant's contractor to jackhammer
floors, tie into main electrical or mechanical services, cut holes in
the roof or do any other structural work and, therefore, some of the
work shown on the Tenant's plans may be required to be completed by
the Landlord's contractor even though the Tenant has arranged to use
his own contractors for the majority of the work. Any work done by the
Landlord's contractor will be backcharged to the Tenant.
(g) All floor slabs for the Leased Premises have been poured prior to the
commencement of Tenant's Work. The Landlord shall have no
responsibility to the Tenant for the cost of installation of
under-floor requirements, all of which shall in any event be completed
on a basis satisfactory to the Landlord. All coring to be done after
regular Centre hours so as not to disturb existing tenants.
<PAGE> 36
Schedule "C" Continued
Page 5
(h) Any damage caused by the Tenant or any of its employees, contractors,
or its subtrades to any work of the Landlord's contractor or any
property of the Landlord or other tenants will be repaired to the
satisfaction of the Landlord at the Tenant's expense.
(i) The Tenant will be entirely responsible for the security of the Leased
Premises during construction of the Tenant's Work and shall take all
necessary steps to secure the Leased Premises, and the Landlord shall
have no liability for any loss or damage to or theft of the Tenant's
building materials, equipment or supplies, or tools, supplies and
equipment of the Tenant's contractor.
(j) The Tenant's contractors shall be subject to and comply with all
rules, regulations and direction which may be imposed by the
Landlord's contractors or the Landlord with respect to construction
related matters from time to time.
(k) The opinion in writing of the Landlord's Architect or Engineer shall
be binding on both the Landlord and the Tenant respecting all matters
of dispute regarding the Landlord's Work and the Tenant's Work
including the state of completion and whether or not such work is
completed in a good and workmanlike manner.
<PAGE> 37
SCHEDULE "D"
METHOD OF FLOOR MEASUREMENT
The following sets out the various methods of measuring areas in the
Building.
(A) Office Area -- Single Tenancy Floors
The Rentable Area of a floor in the Building occupied by a single tenant
shall be calculated by measuring the area within the inside face of the glass
(whether or not the glass extends to the floor) in the permanent exterior
building walls. It shall include all space within the said area except the
Atrium (if any), stairwells (unless installed for the exclusive benefit of a
tenant occupying leased premises on more than one floor of the Building),
elevator shafts, flues, stacks, pipe shafts,vertical ducts, other vertical
risers which penetrate the floor and the walls enclosing such excepted areas. No
deduction shall be made for washrooms, janitor closets, air-conditioning rooms,
fan rooms, electrical, telephone or other rooms and closets within and servicing
only that floor or servicing a single tenant on more than one floor, corridors,
elevator lobbies, service elevator lobbies, any enclosures on the perimeter of
the Building used for the purposes of cooling, heating or ventilating or for any
columns or projections forming part of the Structure of the Building.
(B) Office Area -- Multiple Tenancy Floors
The Rentable Area of leasable premises on a multiple tenancy floor shall
be the Usable Area of such leasable premises multiplied by a fraction, the
numerator of which shall be the Rentable Area of that floor calculated on the
basis of a single tenancy, and the denominator of which shall be the sum of the
Usable Areas of all leased premises on that floor.
The Usable Area of leasable premises on a multiple tenancy floor shall be
calculated by measuring the area within the inside face of the glass (whether
or not the glass extends to the floor) in the permanent exterior building
walls, the interior face of permanent interior building walls, the corridor
face of walls separating the leasable premises from common corridors and the
centre of partitions separating the leasable premises from adjoining leasable
premises, excluding the Atrium (if any) but including any enclosures on the
perimeter of the Building used for the purposes of cooling, heating or
ventilating and all columns or projections forming part of the Structure of the
Building.
(C) Retail Area
The Rentable Area of leasable premises in the Retail Area shall be
calculated by measuring the area enclosed by the inside face of the glass
(whether or not the glass extends to the floor (in the permanent exterior
buildings walls, the interior face of permanent interior building walls, the
centre of partitions separating the leasable premises from adjoining leasable
premises and the predetermined lease line where the leasable premises face onto
an interior public corridor or lobby area. No deduction shall be made for
vestibules inside the permanent exterior building walls or the predetermined
lease line, enclosures on the perimeter of the leasable premises used for the
purpose of cooling, heating or ventilating and columns or projections forming
part of the Structure of the Building. Furthermore, if the store front is
recessed from the lease line, the area of such recess shall for all purposes lie
within the Rentable Area of such premises.
(D) Atrium
Where it is necessary to deduct the area of the Atrium on any floor within
the Building, the area to be deducted shall be the area of the void measured to
the edge of the surrounding floor slab.
(E) Multi-floor Leased Premises
If a particular tenant's leasable premises include the whole or part of
more than one floor of the Building then that part of the leasable premises on
each floor shall be measured separately in accordance with the above provisions
and the Rentable Area of the tenant's leasable premises shall be the aggregate
of the Rentable Area of its premises on each floor of the Building.
(F) Rentable Area of the Building
The Rentable Area of the Building shall be the aggregate of the Rentable
Area of each floor of the Office Area calculated on the basis that each such
floor is a single tenancy floor together with the Rentable Area of each of the
premises in the Retail Area which are designated or intended by the Landlord to
be leased from time to time.
The Rentable Area of the Building shall:
(a) exclude the main telephone, mechanical, electrical and other utility
rooms and enclosures, the management office for the Building, public
lobbies and walkways in the Retail Area, all Storage Areas and Parking
Areas; and
(b) be adjusted from time to time to reflect any changes, additions or
improvements to the Building.
<PAGE> 38
SCHEDULE "E"
RULES AND REGULATIONS
(a) The Tenant will not place or permit any debris, garbage, trash or refuse to
be placed or left in or upon any part of the Building outside of the Leased
Premises.
(b) The Landlord will permit the Tenant and the Tenant's employees and all
Persons lawfully requiring communication with them to have the use during Normal
Business Hours of the main entrance and the stairways, corridors, elevators, if
any, or other mechanical means of access leading to the Leased Premises. At time
other than during Normal Business Hours the Tenant and its employees will have
access to the Building and to the Leased Premises only in accordance with the
Rules and Regulations and will be required to identify themselves satisfactorily
and to register in any book which may at the Landlord's option be kept by the
Landlord for that purpose. In no event will the Tenant be permitted to move in
or out of the Leased Premises during Normal Business Hours.
(c) The Landlord will permit the Tenant and its employees to use the washrooms
on the Tenant's floor of the Building.
(d) The Tenant will permit access to the Leased Premises for window cleaners to
clean the windows of the Leased Premises during Normal Business Hours.
(e) The sidewalks, entrances, passages, elevators and staircases will not be
obstructed or used by the Tenant, its agents, servants, contractors, invitees or
employees for any purpose other than ingress to and egress from the Leased
Premises or the Building.
(f) The Tenant, its agent, servants, contractors, invitees or employees, will
not bring in or take out, position, construct, install or move any safe or other
heavy machinery or equipment or anything liable to injure or destroy any part of
the Building without first obtaining the written consent of the Landlord. The
Landlord will have the right to prescribe the weight permitted and the position
thereof, and the use and design of planks, skids or platforms, to distribute
weight. All damage done to the Building by moving or using any heavy equipment
or other office equipment or furniture will be repaired at the expense of the
Tenant. The moving of all heavy equipment or other office equipment or furniture
will occur only by prior arrangement with the Landlord. No Tenant will employ
anyone to do its moving in the Building other than stafff of the Building,
unless permission to employ anyone else is given by the Landlord and the
reasonable cost of such moving will be paid by the Tenant. Safes and other heavy
office equipment and machinery will be moved through the halls and corridors
only upon steel bearing plates. No freight or bulky matter of any description
will be received into the Building or carried in the elevators except during
hours approved by the Landlord.
(g) The Tenant will not place or cause to be placed any additional locks upon
any doors of the Leased Premises without the approval of the Landlord and
subject to any conditions imposed by the Landlord.
(h) The Tenant will not permit any cooking or any heating of any food or
liquids in the Leased Premises without the written consent of the Landlord.
(i) Canvassing, soliciting and peddling in or about the Building are
prohibited.
(j) The Tenant will not place or maintain any supplies, merchandise or other
articles in any vestibule or entry of the Leased Premises, on the footwalks
adjacent thereto or elsewhere on the exterior of the Leased Premises or
elsewhere in the Building.
(k) The Tenant will not permit or allow any odours, vapours, steam, water,
vibrations, noises or other undesirable effects to emanate from the Leased
Premises or any equipment or installation therein, which in the Landlord's
opinion, are objectionable or cause any interference with the safety, comfort or
convenience of the Building by the Landlord or the occupants and tenants thereof
or their agents, servants, invitees or employees.
(l) The Tenant will use only the Building standard window blinds as determined
by the Landlord and will not install or permit to be installed on or adjacent to
the windows in the Leased Premises any other window coverings or shades of any
type whatsoever whether or not visible from the outside of the Building,
including, without limitation, drapes, curtains, blinds or shades.
(m) The Tenant shall not receive or ship fixtures, equipment or articles of any
kind whatsoever except through facilities, doors and elevators designated by the
Landlord and at hours prescribed by the Landlord and under the supervision of
the Landlord, its agents or employees.
(n) The Tenant will, at its expense, comply with any waste management, disposal
and recycling requirements of both the Landlord and any applicable governmental
authorities.
<PAGE> 39
SCHEDULE "F"
APPLICATION FOR AGREEMENT
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HEAD OFFICE OR PROPRIETOR'S NAME ACCOUNT RECEIVABLE NUMBER
- -------------------------------------------------------------------------------
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STORE NAME AND NUMBER DATE OF LEASE MONTHLY CHARGES
- -------------------------------------------------------------------------------
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STORE ADDRESS DATE OF LAST PAYMENT
- -------------------------------------------------------------------------------
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HEAD OFFICE ADDRESS BANK ACCOUNT NUMBER
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TRANSIT NUMBER BANK AND BRANCH
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAME IN WHICH ACCOUNT STANDS IN BANK RECORDS
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SIGNING OFFICER SIGNATURE
- -------------------------------------------------------------------------------
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REQUEST FOR PRE-AUTHORIZED PAYMENTS
I authorize _________________________________________ (hereinafter referred to
as the "Company") and/or ______________________________to debit the account of
the undersigned maintained with the financial institution indicated above,
monthly, in accordance with the PAYMENT AUTHORIZATION below, for the purpose of
paying monthly rentals as noted above.
"PLEASE ENCLOSE AN UNSIGNED SAMPLE CHEQUE FROM YOUR BANK OR TRUST COMPANY"
- --------------------------------------------------------------------------
AUTHORIZATION TO HONOUR PAYMENTS
--------------------------------
NAME OF BANK_______________________________________________________________
ADDRESS____________________________________________________________________
You are hereby requested and authorized to pay and debit my/our account at your
office, or at another branch of your institution if it is transferred there;
all cheques drawn on you on my behalf and made payable to the Company or drawn
on you by _____________________________________; and all amounts specified on
any magnetic or computer produced paper tapes requesting you to pay the Company
or ___________________________________.
In consideration of your acting as aforesaid, it is agreed that your treatment
of each cheque and/or tape and your rights with respect to it shall be the same
as if it were signed by the undersigned personally, authorizing and requesting
you to pay and credit such amount to the said Company or _____________________,
debiting my account and failure to pay shall give no liability on your part,
regardless of the loss or damage.
If the financial institution indicated above is not a bank in which THE BANK
ACT OF CANADA applies, "cheque" as used in this authorization shall include an
"Order" that would be a cheque within the meaning of section 165 if THE BILLS
OF EXCHANGE ACT (CANADA).
Any delivery of this authorization to you will constitute delivery by the
undersigned.
(The signature appearing below must be the same as the signature appearing in
the signature file of the financial institution identified above.)
DATE: ______________________________ 19_______ ___________________________
AUTHORIZED SIGNATURE(S)
<PAGE> 1
Exhibit 10.5
BEDFORD PROPERTY INVESTORS
{LOGO}
NET OFFICE LEASE
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. SALIENT LEASE TERMS............................................................2
2. DEFINITIONS....................................................................3
3. PREMISES.......................................................................9
4. TERM...........................................................................9
5. PRE-TERM POSSESSION............................................................9
6. DELAY IN DELIVERY OF POSSESSION...............................................10
7. MINIMUM RENT..................................................................10
8. ADDITIONAL RENT...............................................................10
9. ACCORD AND SATISFACTION.......................................................12
10. SECURITY DEPOSIT..............................................................12
11. USE...........................................................................13
12. COMPLIANCE WITH LAWS AND REGULATIONS..........................................14
13. SERVICE AND EQUIPMENT.........................................................18
14. WASTE.........................................................................20
15. ALTERATIONS...................................................................20
16. PROPERTY INSURANCE............................................................21
17. INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION.............................22
18. LIABILITY INSURANCE...........................................................23
19. INSURANCE POLICY REQUIREMENTS.................................................24
20. LESSEE INSURANCE DEFAULT......................................................24
21. FORFEITURE OF PROPERTY AND LESSOR'S LIEN......................................24
22. MAINTENANCE AND REPAIRS.......................................................25
23. DESTRUCTION...................................................................26
24. CONDEMNATION..................................................................27
25. ASSIGNMENT AND SUBLETTING.....................................................28
26. ABANDONMENT...................................................................31
27. ENTRY BY LESSOR...............................................................31
28. SIGNS.........................................................................31
29. DEFAULT.......................................................................31
30. REMEDIES UPON DEFAULT.........................................................32
31. BANKRUPTCY....................................................................34
32. SURRENDER OF LEASE............................................................35
33. LESSOR'S EXCULPATION..........................................................35
34. ATTORNEYS' FEES...............................................................35
35. NOTICES.......................................................................35
36. SUBORDINATION.................................................................36
37. ESTOPPEL CERTIFICATES.........................................................36
38. WAIVER........................................................................37
39. HOLDING OVER..................................................................37
40. SUCCESSORS AND ASSIGNS........................................................37
41. TIME..........................................................................37
42. EFFECT OF LESSOR'S CONVEYANCE.................................................37
43. COMMON AREAS..................................................................37
44. TRANSFER OF SECURITY..........................................................38
45. LATE CHARGES..................................................................38
46. CORPORATE AUTHORITY...........................................................38
47. MORTGAGEE PROTECTION..........................................................38
48. WAIVER OF STATUTES............................................................39
49. MISCELLANEOUS PROVISIONS......................................................39
</TABLE>
<PAGE> 2
NET OFFICE LEASE
THIS LEASE is dated for reference purposes only this 23rd day of November
1999.
1. SALIENT LEASE TERMS
1.1 RENT PAYMENT: BEDFORD PROPERTY INVESTORS, INC.
Lockbox # 73048 - Highlands
P.O. Box 60000
San Francisco, CA 94169-3048
1.2 PARTIES AND NOTICE ADDRESS: Lessor:
BEDFORD PROPERTY INVESTORS, INC.
270 Lafayette Circle
Lafayette, CA 94549
Lessee:
INFOWAVE SOFTWARE, INC.
#188-4664 Longheed Highway
Burnaby, BC, Canada V5C6B7
(If more than one party,
then the obligations
hereunder shall be joint
and several.)
(Section 35.1)
1.3 LEASED (A) Name and Location of Complex:
PREMISES: Highlands Campus Tech Centre
Building A
21520 30th Avenue SE
Bothell, WA 98021
(B) Leased Premises:
First (1st) floor, Suite 102
(C) Approximately 7,329 rentable
square feet.
(Section 3.2)
1.4 TERM: (A) Estimated Delivery Date:
April 1, 2000
(B) Sixty (60) months
(Section 4.1)
1.5 RENT: (A) Minimum Rent:
Months 01 - 12: $8,856.00
Months 13 - 36: $10,047.00
Months 37 - 60: $10,627.00
(B) Advance Rent:
$8,856.00 (Month 1 rent)
2
<PAGE> 3
(Section 7.2)
1.6 INITIAL SECURITY DEPOSIT: $150,000.00 Letter of Credit
(Section 10.1)
1.7 USE: Premises used solely for general office
and research and development.
(Section 11.1)
1.8 INITIAL PRO RATA PERCENT: 9.83%
(Section 2.1(l))
(Section 16.3)
1.9 DECLARATION OF Date of Recordation: May 4, 1995
RESTRICTIONS: Book: 3026 Pages: 1471 - 1525
Document Number: Records of
Snohomish County
(Section 3.5)
1.10 CONTENTS: This Lease consists of:
Pages 1 through 43
Sections 1 through 49.16
Addenda: Addendum dated as of
November 23, 1999
Exhibits:
A - Legal Description of Complex
B - Plan of the Complex
C - Floor Plan of the Leased Premises
D - Construction Obligations
E - Acknowledgment of Commencement
F - Rules & Regulations
G - Letter of Credit
H - Janitorial Schedule
2. DEFINITIONS
2.1 The terms defined in this Article 2 shall, for all purposes of this
Lease and all agreements supplemental hereto, have the meanings herein specified
unless expressly stated otherwise.
(a) "BUILDING" shall mean the structure which contains the Leased
Premises, as further defined in Exhibit D hereto.
(b) "BUILDING STANDARD WORK" shall mean the typical interior improvements
in the Building Shell (as defined in Exhibit D hereto) constructed or to be
constructed by Lessor, which are of the nature and quality required by
specifications developed for the Complex by Lessor's architect. The Tenant
Improvements (as defined in Exhibit D hereto) to be constructed pursuant to
Exhibit D, unless otherwise specified pursuant to the terms and conditions of
Exhibit D, shall be Building Standard Work.
(c) "COMMENCEMENT DATE" shall mean the earlier of the following dates:
(i) The day upon which Lessee takes possession of the Leased Premises
(Pre-term possession of the Leased Premises by Tenant pursuant to Article 5
shall not constitute Lessee's taking possession of the Leased Premises for
purposes of determining the Commencement Date.); or
(ii) The date upon which the Tenant Improvements are Substantially
Complete (as defined in Exhibit D hereto) as determined by Lessor's architect in
accordance with Exhibit D.
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(d) "COMMON AREAS" shall mean all areas and facilities outside the Leased
Premises within the exterior boundaries of the Complex of which the Leased
Premises form a part, that are provided and designated by Lessor from time to
time for the general use and convenience of Lessee and of other tenants of
Lessor having the common use of such areas, and their respective authorized
representatives and invitees. Common Areas include, without limitation,
corridors, stairways, elevator shafts, janitor rooms, driveways, parking areas,
and landscaped areas all as generally described on Exhibit B attached hereto.
Exhibit B is tentative and Lessor reserves the right to make alterations thereto
from time to time, provided such alterations do not materially impair Lessee's
use and enjoyment of the Leased Premises or the Common Areas.
(e) "COMPLEX" is that parcel of real property of which the Leased
Premises forms a part, together with the parcels in common ownership therewith,
and contiguous thereto, which property is described with particularity in
Exhibit A attached hereto and made a part hereof by reference.
(f) "LEASE YEAR" means any calendar year, or portion thereof, following
the commencement hereof, the whole or any part of which period is included
within the Term.
(g) "LEASED PREMISES" shall mean the portion of space leased to Lessee
hereunder, as described in Section 1.3 and depicted on Exhibit C.
(h) "LINES" shall mean communications, computer, audio and video,
security and electrical (other than electrical wiring terminating at or
connected to Building standard electrical outlets), cables, wires, lines, duct
work, sensors, switching equipment, control boxes and related improvements at
the Complex, Building or the Leased Premises.
(i) "MAJOR VERTICAL PENETRATIONS" shall mean stairs, elevator shafts,
flues, pipe shafts, vertical ducts, and the like, and their enclosing walls,
which serve more than one floor of the Building, but shall not include stairs,
dumbwaiters, lifts, and the like, exclusively serving a tenant occupying offices
on more than one floor.
(j) "OCCUPIED FLOOR AREA" means that portion of the Rentable Area of the
Complex which is leased and occupied.
(k) "OPERATING COSTS" means the total amounts paid or payable, whether by
Lessor or others on behalf of Lessor, in connection with the ownership,
maintenance, repair, replacement and operations of the Complex (including,
without limitation, all areas and facilities within the exterior boundaries of
the Complex) as determined by standard accounting procedures. Operating Costs
shall include, but not be limited to, the aggregate of the amount paid for all
fuel used in heating and air conditioning of the Building; the amount paid or
payable for all electricity furnished by Lessor to the Complex (other than
electricity furnished to and paid for by other lessees by reason of their
extraordinary consumption of electricity); the cost of periodic relamping and
reballasting of lighting fixtures; the amount paid or payable for all hot and
cold water (other than that chargeable to individual tenants by reason of their
extraordinary consumption of water); the amount paid or payable for all labor
and/or wages and other payments, including the cost to Lessor of workers'
compensation and disability insurance, payroll taxes, welfare and fringe
benefits made to janitors, caretakers, and other employees, contractors and
subcontractors of Lessor (including wages of the Building manager) involved in
the operation, maintenance and repair of the Complex; painting of exterior walls
of the buildings in the Complex; managerial and administrative expenses; the
total charges of any independent contractors employed in the repair, care,
operation, maintenance, and cleaning of the Complex; the amount paid or payable
for all supplies occasioned by everyday wear and tear; the costs of climate
control, window and exterior wall cleaning, telephone and utility costs; the
cost of accounting services necessary to compute the rents and charges payable
by tenants of the Complex and to keep the books and records for the Complex;
fees for legal, accounting, inspection and consulting services; the cost of
operating, repairing and maintaining the Building elevators and the utility
systems, including Lines, of the Complex; the cost of porters, guards and other
protection services; the cost of establishing and maintaining the Building's
directory board; payments for
4
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LESSOR'S INITIALS LESSEE'S INITIALS
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<PAGE> 5
general maintenance and repairs to the plant and equipment supplying climate
control; the cost of supplying all services pursuant to Article 13 hereof to the
extent such services are not paid by individual tenants; amortization of the
costs, including repair and replacement, of all maintenance and cleaning
equipment and master utility meters and of the costs incurred for repairing or
replacing all other fixtures, equipment and facilities serving or comprising the
Complex which by their nature require periodic or substantial repair or
replacement, and which are not charged fully in the year in which they are
incurred, at rates on the various items determined from time to time by Lessor
in accordance with sound accounting principles; the net cost and expenses for
liability and property insurance for which Lessor is responsible hereunder or
which Lessor or its lenders deems necessary in connection with the operation of
the Complex (including, without limitation, self-insurance and the payment of
deductible amounts under insurance policies); community association dues or
assessments and property owners' association dues and assessments which may be
imposed upon Lessor by virtue of any recorded instrument affecting title to the
Complex; and costs of complying with all governmental regulations, rules, laws,
ordinances and codes. In addition, Operating Costs shall include any Real Estate
Taxes as defined in Paragraph 2.1(o) hereof, and an administrative/management
fee payable to Lessor and/or a third party property management firm consistent
with what would be charged by an independent professional management service for
operation of comparable projects in the vicinity. Operating Costs shall also
include, without limitation, the repair and replacement, resurfacing and
repaving of any paved areas, curbs, gutters or other surfaces or areas within
the Complex, the repair and replacement of any equipment or facilities located
within or serving the Complex, and the cost of any capital repairs, replacements
or improvements made by Lessor to the Complex ("CAPITAL COSTS") subject to the
limitations set forth below. However, certain Capital Costs (the "RESTRICTED
CAPITAL COSTS") shall be includable in Operating Costs each year only to the
extent of that fraction allocable to the year in question calculated by
amortizing such Restricted Capital Costs over the reasonably useful life of the
improvement resulting therefrom, as determined by generally accepted accounting
principles, with interest on the unamortized balance at the interest rate as may
have been paid by Lessor for the funds borrowed for the purpose of performing
the work for which the Restricted Capital Costs have been expended, or if Lessor
did not use outside financing to pay for Restricted Capital Costs, at the
interest rate of ten percent (10%) per annum, but in no event shall either of
such interests rates exceed the highest rate permissible by law. Lessor shall
use commercially-reasonable efforts and act in good faith to obtain a
competitive financing package for any Capital Costs intended to be passed
through to Lessee. The Restricted Capital Costs subject to such amortization
procedure are the following: (x) those costs for capital improvements to the
Complex of a type which do not normally recur more frequently than every five
(5) years in the normal course of operation and maintenance of facilities such
as the Complex (specifically excluding painting of all or a portion of the
Complex); (y) costs reasonably incurred for the primary purpose of reducing
other operating expenses or utility costs, and (z) expenditures by Lessor that
are required by governmental law, ordinance, regulation or mandate, including,
without limitation, any Environmental Laws (as such term is defined in Article
12), which were not applicable to the Complex at the time of the original
construction. Except for those improvements that qualify for treatment as
Restricted Capital Costs, Lessee shall not be obligated to pay for any
improvements to the Complex which would constitute a betterment to the Complex,
including, but not limited to: expenses incurred to increase the original
rentable space in the Complex; expenses incurred to upgrade the quality and/or
character of the Complex; any and all other costs incurred where the Lessor or
other tenants will be the primary beneficiary of the expenditure of such costs.
Operating Costs shall not include legal or accounting expenses incurred
expressly for negotiating a lease with a particular tenant, or as a result of a
default of a specific tenant, which negotiation or default does not affect the
operation of the Complex. In addition, the following costs and expenses shall
not be included in Operating Costs:
(i) Costs occasioned by the act, omission or violation of law
by Lessor, any occupant of the Complex other than Lessee,
or their respective agents, employees or contractors.
(ii) Costs to the extent Lessor receives reimbursement for those
costs from others, including payment of insurance proceeds,
5
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LESSOR'S INITIALS LESSEE'S INITIALS
Seattle Form
<PAGE> 6
condemnation proceeds or pursuant to any contractor or
manufacturer warranty or guaranty.
(iii) Costs of any renovation, improvement, painting or
redecorating of any portion of the Land or Building or
Complex if performed solely for other Lessees.
(iv) Fees, commissions, attorneys' fees, auditing fees,
brokerage fees or commissions, and other costs incurred in
connection with negotiations or disputes with any other
current, past or prospective occupant or Lessee of the
Building or the Complex or in preparing, negotiating or
enforcing leases or lease-related documents such as
guarantees, estoppels, nondisturbance agreements,
termination agreements, amendments, subleases, assignments,
and the like; and costs arising from the violation by
Lessor or any occupant of the Building or the Complex
(other than Lessee) of the terms and conditions of any
lease or other agreement, and any rental concessions or
buyouts or Lessee relocations.
(v) Interest, charges and fees incurred on debt, payment on
mortgages and rent under ground leases; and costs expended
in connection with any sale, hypothecation, financing,
refinancing, or ground lease of the Building or Land or
Complex or of the Lessor's interest therein.
(vi) Any depreciation for any of the real or personal property
associated with the Premises, Building, Complex or Land,
including any leasehold improvements; any reserves for any
purpose; any bad debt, rent loss, or reserves for bad debt
or rent loss.
(vii) Advertising, promotional costs, or market study fees.
(viii) Increases in insurance costs caused by nature of the
ongoing business activities of Lessor or any other occupant
of the Complex.
(ix) Wages, salaries, compensation, and labor burden for any
employee not stationed at the Complex on a full-time basis
or above the level of Lessor's Complex manager and Lessor's
general overhead or any other expense not related to the
Building or Complex.
(x) Any governmental fines, penalties, or interest imposed on
Lessor unless caused by Lessee, its employees, agents,
contractors, subLessees, or assigns; any costs related to
public transportation, transit, or vanpool, unless imposed
by governmental authority or at the request of Lessee.
(xi) Costs, including but not limited to attorneys' fees,
associated with the operation of the business of the entity
which constitutes Lessor, as distinguished from the costs
of operation of the Complex, including accounting and legal
matters, costs of defending any lawsuits with any mortgage,
costs of selling, syndicating, financing, mortgaging or
hypothecating any of Lessor's interest in the Building or
any part thereof, and costs of any disputes between Lessor
and its employees or disputes of Lessor with building
management personnel.
6
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LESSOR'S INITIALS LESSEE'S INITIALS
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<PAGE> 7
(xii) Costs and expenses for which Lessee reimburses Lessor
directly and separately from Common Area Costs or which
Lessee pays directly to a third person.
(xiii) Damages incurred by Lessor for any default, breach, claim,
judgment or settlement.
(xiv) The cost of acquiring sculptures, paintings and other art
objects, provided, however, the cost of leasing art work
for Common Areas may be included in Common Area costs.
(xv) Charitable and political contributions.
(l) "PRO RATA PERCENT" shall be that fraction (converted to a percentage)
the numerator of which is the Rentable Area of the Leased Premises and the
denominator of which is the number of Rentable Area of all floors (or leased
premises if the Complex is on a single floor) in the Complex. Lessee's Pro Rata
Percent as of the commencement of the Term hereof is specified in Section 1.8.
Said Pro Rata Percent shall be recalculated as may be required effective as at
the commencement of any period to which the calculation is applicable in this
Lease. Notwithstanding the preceding provisions of this Section 2.1(l), Lessee's
Pro Rata Percent as to certain expenses may be calculated differently to yield a
higher percentage share for Lessee as to certain expenses in the event Lessor
permits other tenants in the Complex to directly incur such expenses rather than
have Lessor incur the expense in common for the Complex (such as, by way of
illustration, wherein a tenant performs its own janitorial services). In such
case Lessee's Pro Rata Percent of the applicable expense shall be calculated as
having as its denominator the Rentable Area of all floors (or leased premises if
the Complex is on a single floor) rentable to tenants in the Complex less the
Rentable Area of tenants who have incurred such expense directly. Furthermore,
in the event Lessee consumes extraordinary amounts of any provided utility or
other service, Lessee's Pro Rata Percent for such utility or service may, at
Lessor's election, be based on usage as opposed to Rentable Area, that is,
Lessee's Pro Rata Percent of such a utility or service would be calculated as
having as its denominator the total usage of such utility or service in the
Complex (or Building as the case may be), and having as its numerator Lessee's
usage of such utility or service. In any case in which Lessee, with Lessor's
consent, incurs such expenses directly, Lessee's Pro Rata Percent will be
calculated specially so that expenses of the same character which are incurred
by Lessor for the benefit of other tenants in the Complex shall not be prorated
to Lessee. If repairs are required for systems exclusively serving the Leased
Premises (whether within or outside of said Leased Premises), Lessee shall pay
one hundred percent (100%) of such repair costs. Nothing herein shall imply that
Lessor will permit Lessee or any other tenant of the Complex to incur any
Operating Costs directly. Any such permission shall be in the sole discretion of
the Lessor, which Lessor may grant or withhold in its arbitrary judgment.
(m) "R/U RATIO" (an abbreviation for Rentable/Usable Ratio) shall mean
that fraction the numerator of which is Rentable Area and the denominator of
which is Usable Area.
(n) "REAL ESTATE TAXES" or "TAXES" shall mean and include all general and
special taxes, assessments, fees of every kind and nature, duties and levies,
charged and levied upon or assessed by any governmental authority against the
Complex including the land, the Building, any other improvements situated on the
land other than the Building, the various estates in the land and the Building,
any Tenant Improvements, fixtures, installations, additions and equipment,
whether owned by Lessor or Lessee; except that it shall exclude any taxes of the
kind covered by Section 8.1 hereof to the extent Lessor is reimbursed therefor
by any tenant in the Building. Real Estate Taxes shall also include the
reasonable cost to Lessor of contesting the amount, validity, or the
applicability of any Taxes mentioned in this Section. Further included in the
definition of Taxes herein shall be general and special assessments, license
fees, commercial rental tax, levy or tax (other than net income, inheritance or
estate taxes) imposed by any authority having the direct or indirect power to
tax, as against any legal or equitable interest of Lessor in the Leased Premises
or in the Complex or
7
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<PAGE> 8
on the act of entering into this Lease or, as against Lessor's right to rent or
other income therefrom, or as against Lessor's business of leasing the Leased
Premises or the Complex; any tax, fee, or charge with respect to the possession,
leasing, transfer of interest, operation, management, maintenance, alteration,
repair, use, or occupancy by Lessee, of the Leased Premises or any portion
thereof or the Complex; or any tax imposed in substitution, partially or
totally, for any tax previously included within the definition of Taxes herein,
or any additional tax related to the Complex, the Building or the land they are
situated on, the nature of which may or may not have been previously included
within the definition of Taxes. Further, if at any time during the Term of this
Lease the method of taxation or assessment of real estate or the income
therefrom prevailing at the time of execution hereof shall be, or has been,
altered so as to cause the whole or any part of the Taxes now or hereafter
levied, assessed or imposed on real estate to be levied, assessed or imposed
upon Lessor, wholly or partially, as a capital levy, business tax, fee, permit
or other charge, or on or measured by the Rents received therefrom, then such
new or altered taxes, regardless of their nature, which are attributable to the
land, the Building, the Complex or to other improvements on the land shall be
deemed to be included within the term Real Estate Taxes for purposes of this
Section, whether in substitution for, or in addition to any other Real Estate
Taxes, save and except that such shall not be deemed to include any enhancement
of said tax attributable to other income of Lessor. With respect to any general
or special assessments which may be levied upon or against the Leased Premises,
the Complex, or the underlying realty, or which may be evidenced by improvement
or other bonds, and may be paid in annual or semi-annual installments, Real
Estate Taxes or Taxes for such year shall only include an amount for such
general or special assessments equal to what the annual or semi-annual
installments for that year would be if Lessor selected the maximum
legally-permissible period for paying the general or special assessment,
prorated for any partial year, and statutory interest shall be included within
the computation of Taxes for which Lessee is responsible hereunder.
(o) "RENT," "RENT" or "RENTAL" means Minimum Rent and all other sums
required to be paid by Lessee pursuant to the terms of this Lease.
(p) "RENTABLE AREA." The Rentable Area shall mean all areas available or
held for the exclusive use and occupancy of occupants or future occupants of the
Complex, measured from the inside finished surface of the dominant portion of
the permanent outer Building walls, excluding any Major Vertical Penetrations of
the floor. No deductions shall be made for columns and projections necessary to
the Building. The Rentable Area of an office on the floor shall be computed by
multiplying the Usable Area of that office by the R/U Ratio described in Section
2.1(m) for the floor.
(q) "STRUCTURAL" as herein used shall mean any portion of the Leased
Premises or Complex which provides bearing support to any other integral member
of the Complex such as, by limitation, the roof structure (trusses, joists,
beams), posts, load bearing walls, foundations, girders, floor joists, footings,
and other load bearing members constructed by Lessor.
(r) "TENANT IMPROVEMENTS" shall have the meaning set forth in the Work
Letter Agreement.
(s) "TERM" shall mean the term of the Lease as specified in Article 4
hereof, including any partial month at the commencement of the Term.
(t) "TOTAL BUILDING AREA" is the total gross leasable area of the
Building.
(u) "USABLE AREA." The Usable Area of an office shall be the number of
square feet computed by measuring to the finished surface of the office side of
corridor and other permanent walls, to the center of partitions that separate
the office from adjoining Usable Areas, and to the inside finished surface of
the permanent outer Building walls. No deductions shall be made for the columns
and projections necessary to the Building. The Usable Area of a floor shall be
equal to the sum of all Usable Areas on that floor.
(v) "WORK LETTER AGREEMENT" shall mean that certain Work Letter Agreement
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<PAGE> 9
of even date herewith, a form of which is attached hereto as Exhibit D.
3. PREMISES
3.1 DEMISING CLAUSE. Lessor hereby leases to Lessee, and Lessee hires from
Lessor a portion of the Complex as hereinafter defined.
3.2 DESCRIPTION. The Complex, as defined in Section 2.1(e), is described
generally in Section 1.3(A) hereof. The premises leased herein are described in
Section 1.3(B) and are delineated on Exhibit C which is attached hereto and made
a part hereof by reference, consisting of the approximate amount of square
footage as specified in Section 1.3(C) hereof (the "LEASED PREMISES.") The term
"BUILDING" shall refer to the Building in which the Leased Premises are located.
Lessee acknowledges that Lessor reserves the right to change the shape, size,
location, number and extent of the improvements to any portion of the Complex
without consent of Lessee and without affecting Lessee's obligations hereunder.
Lessor reserves the area beneath and above the Building as well as the exterior
thereof together with the right to install, maintain, use, repair and replace
pipes, ducts, conduits, wires, and structural elements leading through the
Leased Premises serving other parts of the Complex, so long as such items are
concealed by walls, flooring or ceilings. Such reservation in no way affects the
maintenance obligations imposed herein, nor shall such reservation alter the
parties' responsibilities and obligations set forth in this Lease regarding
Hazardous Materials (as defined in Section 12.3(a) below). Lessor may exercise
the rights reserved to it in this Section 3.2, subject to not materially
impairing Lessee's use and enjoyment of the Leased Premises and the Common Areas
and not unreasonably interfering with the operation of Lessee's business within
the Leased Premises.
3.3 [Intentionally omitted.]
3.4 COVENANTS, CONDITIONS AND RESTRICTIONS. The parties agree that this
Lease is subject to the effect of (a) any covenants, conditions, restrictions,
easements, mortgages or deeds of trust, ground leases, rights of way of record,
and any other matters or documents of record; including the Declaration of
Restrictions as referenced in Section 1.9 (b) any zoning laws of the city,
county and state where the Complex is situated; and (c) general and special
taxes not delinquent. Lessee agrees that as to its leasehold estate, Lessee and
all persons in possession or holding under Lessee will conform to and will not
violate the terms of any covenants, conditions or restrictions of record which
may now or hereafter encumber the property (hereinafter the "RESTRICTIONS").
This Lease is subordinate to the restrictions and any amendments or
modifications thereto. Lessee acknowledges its receipt, review and acceptance of
a copy of the Declaration of Restrictions. Lessor represents that as of the date
hereof the terms and conditions of the Declaration of Restrictions and the Lease
do not conflict with one another, and shall use good faith efforts to ensure
that the Declaration of Restrictions is not amended in anyway that could
materially and adversely affect Lessee's rights under this Lease.
4. TERM
4.1 COMMENCEMENT DATE. The Term of this Lease shall commence on the date
specified in Section 2.1(c) hereof and shall be for the term specified in
Section 1.4(B) hereof, plus any partial month at the commencement of the Term.
4.2 ACKNOWLEDGMENT OF COMMENCEMENT. After delivery of the Leased Premises
to Lessee, Lessee shall execute a written acknowledgment of the date of
commencement in the form attached hereto as Exhibit E, and by this reference it
shall be incorporated herein.
5. PRE-TERM POSSESSION
5.1 CONDITIONS OF ENTRY. In the event the Leased Premises are to be
constructed or remodeled by Lessor, Lessor may notify Lessee when the Leased
Premises are ready for Lessee's
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fixturing or Lessee's work, which may be prior to Substantial Completion of the
Tenant Improvements in the Leased Premises by Lessor. Lessee may thereupon enter
the Leased Premises for such purposes at its own risk, to make such improvements
as Lessee shall have the right to make, to install fixtures, supplies, inventory
and other property. Lessee agrees that it shall not in any way interfere with
the progress of Lessor's work in constructing the Tenant Improvements by such
entry. Should such entry prove an impediment to the progress of Lessor's work,
in Lessor's judgment, Lessor may demand that Lessee forthwith vacate the Leased
Premises until such time as Lessor's work is complete, and Lessee shall
immediately comply with this demand.
During the course of any pre-term possession, whether such pre-term period
arises because of an obligation of construction on the part of Lessor, or
otherwise, all terms and conditions of this Lease, except for rent and
commencement, shall apply, particularly with reference to indemnity by Lessee of
Lessor under Article 17 herein for all occurrences within or about the Leased
Premises.
6. DELAY IN DELIVERY OF POSSESSION
6.1 DELAY. If Lessor, for any reason whatsoever, cannot deliver possession
of the Leased Premises to Lessee at the Estimated Delivery Date set forth in
Section 1.4 (A), this Lease shall not be void or voidable, nor shall Lessor be
liable for any loss or damage resulting therefrom, but in that event, Lessee
shall have no obligation to pay any Rent for the period between the Estimated
Delivery Date and the Commencement Date. In the event Lessor cannot deliver the
Leased Premises to Lessee within six (6) months beyond the Estimated Delivery
Date, then Lessor may elect to terminate this Lease. In the event Lessor cannot
deliver the Leased Premises to Lessee within six (6) months beyond the Estimated
Delivery Date for any reason other than Lessee Delay or Force Majeures (each as
defined in the Work Letter Agreement), then Lessee may elect to terminate this
Lease. In the event the Leased Premises are not delivered within two (2) years
from the date of execution, this Lease shall automatically terminate.
7. MINIMUM RENT
7.1 PAYMENT. Lessee shall pay to Lessor at the address specified in Section
1.1, or at such other place as Lessor may otherwise designate, as "MINIMUM RENT"
for the Leased Premises the amount specified in Section 1.5(A) hereof, payable
in advance on the first day of each month during the Term. If the Term commences
on other than the first day of a calendar month, the rent for the first partial
month shall be prorated accordingly.
All payments of Minimum Rent (including sums defined as rent in Section
2.1(o)) shall be in lawful money of the United States, and payable without
deduction, setoff, offset, counterclaim, recoupment, notice or demand.
7.2 ADVANCE RENT. The amount specified in Section 1.5(B) hereof is paid
herewith to Lessor upon execution of this Lease as advance rent, receipt of
which is hereby acknowledged, provided, however, that such amount shall be held
by Lessor as a "SECURITY DEPOSIT" pursuant to Section 10.1 hereof until it is
applied by Lessor to the first Minimum Rent due hereunder.
7.3 LATE PAYMENT. If during any twelve (12) month period Lessee fails on
more than one occasion to make any payment of Minimum Rent to Lessor on the date
when it is due, then Lessor may, by giving written notice to Lessee, require
that Lessee pay the Minimum Rent to Lessor quarterly in advance.
8. ADDITIONAL RENT
8.1 PERSONAL PROPERTY, GROSS RECEIPTS, LEASING TAXES. This Section 8.1 is
intended to deal with impositions or taxes directly attributed to Lessee or this
transaction, as distinct from Real Property Taxes attributable to the Complex
which are to be allocated among various tenants and others and which are
included in Operating Costs. In addition to the Minimum Rent and additional
charges to be paid by Lessee hereunder, Lessee shall reimburse Lessor upon
demand for
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any and all taxes required to be paid by Lessor (excluding state, local or
federal personal and corporate income taxes measured by the income of Lessor
from all sources, and estate and inheritance taxes) to the extent directly
attributable to Lessee or this transaction and to the extent Lessee has not
otherwise compensated Lessor for the same taxes under another provision of this
Lease, whether or not now customary or within the contemplation of the parties
hereto:
(a) Upon, measured by, or reasonably attributable to the cost or value of
Lessee's equipment, furniture, fixtures and other personal property located in
the Leased Premises or by the cost or value of any Tenant Improvements made in
or to the Leased Premises by or for Lessee, other than Building Standard Work,
regardless of whether title to such improvements shall be in Lessee or Lessor;
(b) Upon or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Lessee of the
Leased Premises or any portion thereof to the extent such taxes are not included
as Real Estate Taxes as defined in Section 2.1(n); and
(c) Upon this transaction or any document to which Lessee is a party
creating or transferring an interest or an estate in the Leased Premises.
For purposes of this Section 8.1, the term "taxes" shall include, but not
be limited to, any fees, charges, (including, without limitation, permit,
approval or licensing fees, charges or costs) and fines, penalties and costs
attributable to Lessee's failure to timely pay taxes or to reimburse Lessor for
taxes pursuant to this Section 8.1.
In the event that it shall not be lawful for Lessee so to reimburse Lessor
for any Real Property Taxes or any other taxes specified in this Section 8.1,
the Minimum Rent payable to Lessor under this Lease shall be increased to net
Lessor (i.e., after payment of the Real Property Taxes or other taxes for which
Lessor may not receive reimbursement from Lessee) the amount of Minimum Rent
plus reimbursement for Real Property Taxes or other taxes which would have been
receivable by Lessor if such Real Property Taxes or other taxes had been
reimbursed to Lessor by Lessee as contemplated herein. All Real Property Taxes
or other taxes payable by Lessee under this Section shall be deemed to be, and
shall be paid as, additional Rent.
8.2 OPERATING COSTS.
(a) Lessee shall pay to Lessor, as additional rent, its Pro Rata Percent
of the Operating Costs for the Complex for any Lease Year, calculated on the
basis of the greater of (i) actual Operating Costs; or (ii) as if the Complex
were at least ninety percent (90%) occupied and operational for the whole of
such Lease Year.
(b) If any Lease Year of less than twelve (12) months is included within
the Term, the amount payable by Lessee for such period shall be prorated on a
per diem basis (utilizing a three hundred sixty [360] day year).
8.3 METHOD OF PAYMENT. Any additional Rent payable by Lessee under Sections
8.1 and 8.2 hereof shall be paid as follows, unless otherwise provided:
(a) During the Term, Lessee shall pay to Lessor monthly, in advance with
its payment of Minimum Rent, one-twelfth (1/12) of the amount of such additional
Rent as reasonably estimated by Lessor in advance, in good faith, to be due from
Lessee.
(b) Annually, as soon as is reasonably possible after the expiration of
each Lease Year, Lessor shall prepare in good faith and deliver to Lessee a
comparative statement setting forth (1) the Operating Costs for such Lease Year,
and (2) the amount of additional Rent owed by Lessee as determined in accordance
with the provisions of this Article 8.
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(c) If the aggregate amount of such estimated additional Rent payments
made by Lessee in any Lease Year should be less than the additional Rent due for
such year, then Lessee shall pay to Lessor as additional Rent upon demand the
amount of such deficiency. If the aggregate amount of such additional Rent
payments made by Lessee in any Lease Year of the Term should be greater than the
additional Rent due for such year, then the amount of such excess, less such
amount as may be reasonably required to cure any outstanding default of Lessee
or pay any outstanding monetary obligation of Lessee to Lessor, will be applied
by Lessor to the next succeeding installments of such additional Rent due
hereunder; and if there is any such excess for the last year of the Term, the
amount thereof will be refunded by Lessor to Lessee, except such amount as may
be reasonably required to cure any outstanding default of Lessee or pay any
outstanding monetary obligation of Lessee to Lessor.
8.4 AUDIT RIGHTS. Within thirty (30) days after receipt of Lessor's annual
reconciliation, Lessee shall have the right, after at least thirty (30) days
prior written notice to Lessor given within such thirty-day period, to examine
and conduct an audit at the offices of Lessor or its property manager, the books
and records of Lessor pertaining solely to the Operating Costs for the
immediately preceding calendar year covered in such annual reconciliation
statement. Such audit shall be conducted by an independent certified accounting
firm retained by Lessee. All expenses of the audit shall be borne by Lessee,
unless the audit reveals that the Operating Costs charged to Lessee by Lessor
were overstated by five percent (5%) or more, in which event the cost of the
audit shall be paid by Lessor.
9. ACCORD AND SATISFACTION
9.1 ACCEPTANCE OF PAYMENT. No payment by Lessee or receipt by Lessor of a
lesser amount of Minimum Rent or any other sum due hereunder as additional Rent
or any other payment shall be deemed to be other than on account of the earliest
due Rent or payment, nor shall any endorsement or statement on any check or any
letter accompanying any such check or payment be deemed an accord and
satisfaction, and Lessor may accept such check or payment without prejudice to
Lessor's right to recover the balance of such Rent or payment or pursue any
other remedy available in this Lease, at law or in equity. Lessor may accept any
partial payment from Lessee without invalidation of any contractual notice
required to be given herein (to the extent such contractual notice is required)
and without invalidation of any notice required to be given pursuant to any
applicable statute or other law of the State of Washington.
10. SECURITY DEPOSIT
10.1 PAYMENT ON LEASE EXECUTION. Lessee shall deliver to Lessor, in lieu of
a cash security deposit, an irrevocable standby letter of credit ("Letter of
Credit") naming Lessor as beneficiary, in the amount of One Hundred Fifty
Thousand and No/100 Dollars ($150,000.00) within five (5) business days after
mutual execution of this Lease. A major national bank shall issue such Letter of
Credit in substance identical to the form attached hereto as Exhibit "G". The
Letter of Credit shall allow draws by Lessor upon sight draft accompanied by a
statement by Lessor that it is entitled to draw upon the Letter of Credit and
shall contain terms which allow Lessor to make partial and multiple draws up to
the face amount of the Letter of Credit. If Lessee fails to pay Rent or other
charges when due hereunder, or otherwise defaults with respect to any provision
of this Lease, including and not limited to Lessee's obligation to restore or
clean the Leased Premises following vacation thereof pursuant to Section 15.4 of
this Lease, Lessor may draw on the Letter of Credit, or a portion thereof, in
such amounts as are required to cover the payment of any Rent or other charges
in default, or for the payment of any other sum to which Lessor may become
obligated by reason of Lessee's default. If Lessee has not delivered to Lessor
at least sixty (60) days prior to the expiration of the original Letter of
Credit (or any renewal letter of credit) a renewal or extension thereof, then
following Lessee's failure to do so upon 5 days notice, Lessor shall have the
right to draw down the entire amount of the original Letter of Credit (or
renewal thereof) and retain, in a separate, interest-bearing account with
interest accruing for the benefit of Lessee, the proceeds thereof as the
security pursuant to this
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Section. The amount of the required Letter of Credit shall be reduced by:
$75,000 after twelve (12) months of the Lease Term; $37,500 after twenty-four
(24) months of the Lease Term; and $37,500 after thirty-six (36) months of the
Lease Term; provided that the foregoing reductions shall only occur, if at the
time of such scheduled reductions in the Letter of Credit amount, Lessee (i) is
not then in default under the Lease beyond any applicable cure period, and (ii)
Lessee has achieved success in its business as demonstrated by Lessee's meeting
the following minimum financial performance standards for four consecutive
quarters :
(a) the current ratio of Lessee's assets to liabilities is at least 2:1;
(b) Lessee's Net Worth is equal to or greater than $7,500,000. For
purposes hereof, the term "Net Worth" shall mean, as of any date, (x) the
aggregate tangible assets of Lessee as of such date (i.e., all assets except for
intangible assets) such as goodwill, patents, trademarks, copyrights,
franchises, research and development, minus (y) the aggregate liabilities of
Lessee at such date;
(c) Lessee's Net Operating Income shall be positive for each such fiscal
quarter. For purposes of the preceding sentence, "Net Operating Income" shall
mean, for each such quarter, the gross revenues and receipts of Lessee for such
quarter (and not including any revenues or receipts received from the sale,
transfer or other disposition of any operating or non-operating assets, or any
extraordinary events), minus all costs, expenses and charges from Lessee's
operation for such quarter (including interest expense, but not including taxes
or depreciation), determined in accordance with generally accepted accounting
principles.
Additionally, the Letter of Credit requirement shall be eliminated upon the
Lessee's achieving sustained success in its business demonstrated by executing
four consecutive quarters of performing all of the following:
(a) the current ratio of Lessee's assets to liabilities is at least 2:1;
(b) Lessee's Net Worth is equal to or greater than $7,500,000; and
(c) Lessee's Net Operating Income not be less than $750,000 for each such
fiscal quarter.
Lessee shall provide a Security Deposit equal to the last month's Minimum
Base Rent in the event the Letter of Credit is eliminated.
10.2 RESTORATION OF DEPOSIT. If Lessor elects to use or apply all or any
portion of the Security Deposit as provided in Section 10.1, Lessee shall within
ten (10) days after written demand therefor pay to Lessor in cash, an amount
equal to that portion of the Security Deposit used or applied by Lessor, and
Lessee's failure to so do shall be a material breach of this Lease. The ten (10)
day notice specified in the preceding sentence shall insofar as not prohibited
by law, constitute full satisfaction of notice of default provisions required by
law or ordinance with respect to any default arising out of Lessee's failure to
restore the Security Deposit.
11. USE
11.1 PERMITTED USE. The Leased Premises may be used and occupied only for
the purposes specified in Section 1.7 hereof, and for no other purpose or
purposes. Lessee shall promptly comply with all laws, ordinances, orders and
regulations affecting Lessee's use and occupancy of the Leased Premises,
including those relating to cleanliness and safety.
11.2 SAFES, HEAVY EQUIPMENT. Lessee shall not place a load upon any floor
of the Leased Premises which exceeds fifty (50) pounds per square foot live
load. Lessor reserves the right to prescribe the weight and position of all
safes and heavy installations which Lessee wishes to place in the Leased
Premises so as properly to distribute the weight thereof, or to require plans
prepared
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by a qualified structural engineer at Lessee's sole cost and expense for such
heavy objects. Notwithstanding the foregoing, Lessor shall have no liability for
any damage caused by the installation of such heavy equipment or safes.
11.3 MACHINERY. Business machines and mechanical equipment belonging to
Lessee which cause noise and/or vibration that may be transmitted to the
structure of the Building or to any other leased space to such a degree as to be
objectionable to Lessor or to other tenants in the Complex shall be placed and
maintained by the party possessing the machines or equipment, at such party's
expense, in settings of cork, rubber or spring type noise and/or vibration
eliminators, and Lessee shall take such other measures as needed to eliminate
vibration and/or noise. If the noise or vibrations cannot be eliminated, Lessee
must remove such equipment within ten (10) days following written notice from
Lessor.
11.4 HAZARDOUS ACTIVITIES. Lessee shall not engage in any activities or
permit to be kept, used, or sold in or about the Leased Premises any article,
which may be prohibited by the standard form of fire insurance policies. Lessee
shall, at its sole cost and expense, comply with any and all requirements
pertaining to the Leased Premises, its occupation and/or use, of any insurance
organization or company, necessary for the maintenance of reasonable fire and
public liability insurance covering the Building, the Complex and appurtenances.
12. COMPLIANCE WITH LAWS AND REGULATIONS
12.1 LESSEE'S OBLIGATIONS.
(a) Generally, Lessee, shall, at its sole cost and expense, comply with
all of the requirements of all municipal, state and federal authorities now in
force, or which may hereafter be in force, pertaining to Lessee's use and
occupancy of the Leased Premises, and shall faithfully observe in the use of the
Leased Premises all municipal ordinances and state and federal statutes and
regulations now in force or which may hereafter be in force, including, without
limitation, the Environmental Laws (as hereinafter defined), whether or not any
of the foregoing were foreseeable or unforeseeable at the time of the execution
of this Lease. The judgment of any court of competent jurisdiction, or the
admission of Lessee in any action or proceeding against Lessee, whether Lessor
be a party thereto or not, that any such requirement, ordinance, statute or
regulation pertaining to the Leased Premises has been violated, shall be
conclusive of that fact as between Lessor and Lessee. Within five (5) days after
receipt of notice or knowledge of any violation or alleged violation of any
Environmental Law(s) and/or the ADA (as defined below) pertaining to the
Complex, any governmental or regulatory proceedings, investigations, sanctions
and/or actions threatened or commenced with respect to any such violation or
alleged violation, and any claim made or commenced with respect to such
violation or alleged violation, Lessee shall notify Lessor thereof and provide
Lessor with copies of any written notices or information in Lessee's possession.
(b) ADA Compliance. Under the Americans with Disabilities Act, 42 U.S.C.
ss.ss. 12101-12213 (and any rules, regulations, restrictions, guidelines,
requirements or publications promulgated or published pursuant thereto,
collectively herein referred to as the "ADA"), responsibility for compliance
with the ADA may be allocated by agreement between a landlord and a tenant.
Similar principles apply to the Washington State Barrier Free Facilities Code
("BFFC"). Accordingly, (i) Lessee shall be responsible for compliance with the
ADA and the BFFC for any construction, renovation, alterations and repairs made
within the Premises (without regard to which party carries out such
construction, renovation, alteration or repairs or which party pays for the same
under the other provisions of this Lease), and (ii) Lessor shall be responsible
for compliance with the ADA and the BFFC for the exterior and common areas of
the Buildings at all times during the Term. To the extent the exterior and
common areas of the Building do not comply with the requirements of the ADA or
the BFFC in effect as of the date of mutual execution of this Lease, Lessor
shall not be entitled to pass the cost of correcting such violations onto the
Lessee as an Operating Cost. To the extent the exterior and common areas of the
Building do not comply with requirements of the ADA or the BFFC first adopted or
promulgated after the date of mutual
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execution of this Lease, Lessor shall be entitled to pass the cost of correcting
such violations onto the Lessee as part of Operating Costs.
12.2 CONDITION OF LEASED PREMISES. Subject to performance of Lessor's work
pursuant to the Work Letter Agreement (including completion of any and all
Punchlist Items) and subject to the express warranty contained in this Section
12.2, Lessee hereby accepts the Leased Premises in the condition existing as of
the date of occupancy, subject to all applicable zoning, municipal, county and
state laws, ordinances, rules, regulations, orders, restrictions of record, and
requirements in effect during the Term or any part of the Term hereof regulating
the Leased Premises, and without representation, warranty or covenant by Lessor,
express or implied, as to the condition, habitability or safety of the Leased
Premises, the suitability or fitness thereof for Lessee's intended purposes, or
any other matter. Lessor warrants to Lessee that the Building and the Leased
Premises shall be free of latent defects for a period of one year commencing as
of the date of substantial completion of the Building. Any warranty claim by
Lessee, to be effective and valid, must be delivered to Lessor in writing prior
to expiration of such one year warranty period.
12.3 HAZARDOUS MATERIALS.
(a) Hazardous Materials Defined. As used herein, the term "HAZARDOUS
MATERIALS" shall mean any wastes, materials or substances (whether in the form
of liquids, solids or gases, and whether or not air-borne), which are or are
deemed to be pollutants or contaminants, or which are or are deemed to be
hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or
injurious, or which present a risk, to public health or to the environment, or
which are or may become regulated by or under the authority of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq.; the Hazardous Materials Transportation Act, 39 U.S.C.
Section 1801, et seq.; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the Federal Clean
Water Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section
7401 et seq.; or under any other applicable local, Washington State or federal
laws, judgments, ordinances, orders, rules, regulations, codes or other
governmental restrictions, guidelines or requirements, any amendments or
successor(s) thereto, replacements thereof or publications promulgated pursuant
thereto (collectively "ENVIRONMENTAL LAWS"), including, without limitation, any
waste, material or substance which is:
(i) defined as a "hazardous substance" or "pollutant or contaminant"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601 et seq.;
(ii) listed as an "extremely hazardous substance," "hazardous
chemical," or "toxic chemical" pursuant to the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C.ss.11001 et seq.;
(iii) listed as a "hazardous substance" in the United States Department
of Transportation Table, 49 C.F.R. 172.101 and amendments thereto, or by the
Environmental Protection Agency (or any successor agency) in 40 C.F.R. Part 302
and amendments thereto;
(iv) defined, listed or designated by regulations promulgated pursuant
to any Environmental Law; or
(v) any of the following: pesticide; flammable explosive; petroleum,
including crude oil or any fraction thereof; asbestos or asbestos-containing
material; polychlorinated biphenyl; radioactive material; or urea formaldehyde.
In addition to the foregoing, the term Environmental Laws shall be deemed
to include, without limitation, local, state and federal laws, judgments,
ordinances, orders, rules, regulations, codes and other governmental
restrictions, guidelines and requirements, any amendments and successors
thereto, replacements thereof and publications promulgated pursuant
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thereto, which deal with or otherwise in any manner relate to, air or water
quality, air emissions, soil or ground conditions or other environmental matters
of any kind.
(b) Use, etc. of Hazardous Materials. Lessee agrees that during the Term,
there shall be no use, presence, disposal, storage, generation, leakage,
treatment, manufacture, import, handling, processing, release or threatened
release of Hazardous Materials on, from or under the Leased Premises by Lessee,
its employees, agents, representatives, contractors, invitees, subtenants and/or
assigns (hereinafter collectively, "Lessee's Parties."). Notwithstanding the
preceding sentence, Lessee's Parties may use and store ordinary office, cleaning
or janitorial supplies containing Hazardous Materials in the Leased Premises
provided such use and storage is in compliance with all applicable laws and
regulations and is consistent in terms of nature and quantity with that of other
office users. The use, presence, disposal, storage, generation, leakage,
treatment, manufacture, import, handling, processing, release or threatened
release of Hazardous Materials by Lessee's Parties are sometimes hereinafter
individually or collectively referred to as "HAZARDOUS USE." Lessee shall not be
entitled to install any tanks under, on or about the Leased Premises for the
storage of Hazardous Materials without the express written consent of Lessor,
which may be given or withheld in Lessor's sole arbitrary judgment.
(c) Hazardous Materials Report; When Required. In the event that Lessor
agrees in writing that Lessee or Lessee's Parties may make some Hazardous Use of
the Leased Premises, Lessee shall submit to Lessor a written report with respect
to Hazardous Materials ("REPORT") in the form prescribed in subparagraph (d)
below on the following dates:
(i) Within ten (10) days after the Commencement Date,
(ii) Within ten (10) days after each anniversary of the Commencement
Date during the Term,
(iii) At any time within ten (10) days after written request by Lessor,
and
(iv) At any time when there has been or is planned any condition which
constitutes or would constitute a change in the information submitted in the
most recent Report, including any notice of violation as referred to in
subparagraph (d)(vii) below.
(d) Hazardous Materials Report; Contents. The Report shall contain,
without limitation, the following information:
(i) Whether on the date of the Report and (if applicable) during the
period since the last Report there has been any Hazardous Use on, from or under
the Leased Premises.
(ii) If there was such Hazardous Use, the exact identity of the
Hazardous Materials, the dates upon which such materials were brought upon the
Leased Premises, the dates upon which the Hazardous Materials were removed
therefrom, and the quantity, location, use and purpose thereof.
(iii) If there was such Hazardous Use, any governmental permits
maintained by Lessee with respect to such Hazardous Materials, the issuing
agency, original date of issue, renewal dates (if any) and expiration date.
Copies of any such permits and applications therefor shall be attached.
(iv) If there was such Hazardous Use, any governmental reporting or
inspection requirements with respect to such Hazardous Materials, the
governmental agency to which reports are made and/or which conducts inspections,
and the dates of all such reports and/or inspections (if applicable) since the
last Report. Copies of any such Reports shall be attached.
(v) If there was such Hazardous Use, identification of any operation or
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business plan prepared for any government agency with respect to any Hazardous
Use.
(vi) Any liability insurance carried by Lessee with respect to
Hazardous Materials, the insurer, policy number, date of issue, coverage
amounts, and date of expiration. Copies of any such policies or certificates of
coverage shall be attached.
(vii) Any notices of violation of Environmental Laws, written or oral,
received by Lessee from any governmental agency since the last Report, the date,
name of agency, and description of violation. Copies of any such written notices
shall be attached.
(viii) Any knowledge, information or communication which Lessee has
acquired or received relating to (x) any enforcement, cleanup, removal or other
governmental or regulatory action threatened or commenced against Lessee or with
respect to the Leased Premises pursuant to any Environmental Laws; (y) any claim
made or threatened by any person or entity against Lessee or the Leased Premises
on account of any alleged loss or injury claimed to result from any alleged
Hazardous Use on or about the Leased Premises or Complex; or (z) any report,
notice or complaint made to or filed with any governmental agency concerning any
Hazardous Use on or about the Leased Premises or Complex. The Report shall be
accompanied by copies of any such claim, report, complaint, notice, warning or
other communication that is in the possession of or is available to Lessee.
(ix) Such other pertinent information or documents as are reasonably
requested by Lessor in writing.
(e) Release of Hazardous Materials: Notification and Cleanup. If at any
time during the Term Lessee knows or believes that any release of any Hazardous
Materials by Lessee's Parties has come or will come to be located upon, about or
beneath the Leased Premises or the Complex, then Lessee shall immediately,
either prior to the release or following the discovery thereof by Lessee, give
verbal and follow-up written notice of that condition to Lessor. Lessee
covenants to investigate, clean up and otherwise remediate any release of
Hazardous Materials by Lessee's Parties at Lessee's cost and expense; such
investigation, clean-up and remediation shall be performed only after Lessee has
obtained Lessor's written consent, which shall not be unreasonably withheld;
provided, however, that Lessee shall be entitled to respond immediately to an
emergency without first obtaining Lessor's written consent. All clean-up and
remediation shall be done in compliance with Environmental Laws and to the
reasonable satisfaction of Lessor. Notwithstanding the foregoing, whether or not
such work is prompted by the foregoing notice from Lessee or is undertaken by
Lessor for any other reason whatsoever, Lessor shall have the right, but not the
obligation, in Lessor's sole and absolute discretion, exercisable by written
notice to Lessee at any time, to undertake within or outside the Leased Premises
all or any portion of any investigation, clean-up or remediation with respect to
Hazardous Materials brought onto, used, or released on, under or around the
Leased Premises or the Complex by Lessee's Parties (or, once having undertaken
any of such work, to cease same, in which case Lessee shall perform the work),
all at Lessee's cost and expense, which shall be paid by Lessee as additional
Rent within ten (10) days after receipt of written request therefor by Lessor
(and which Lessor may require to be paid prior to commencement of any work by
Lessor). No such work by Lessor shall create any liability on the part of Lessor
to Lessee or any other party in connection with such Hazardous Materials or
constitute an admission by Lessor of any responsibility with respect to such
Hazardous Materials. It is the express intention of the parties hereto that
Lessee shall be liable under this Section 12.3(e) for any and all conditions
covered hereby which were caused or created (i) by any of Lessee's Parties, or
(ii) by any Hazardous Materials brought onto the Leased Premises or the Complex
by or for the benefit of Lessee's Parties. Lessee shall not enter into any
settlement agreement, consent decree or other compromise with respect to any
claims relating to any Hazardous Materials in any way connected to the Leased
Premises or the Complex without first (i) notifying Lessor of Lessee's intention
to do so and affording Lessor the opportunity to participate in any such
proceedings, and (ii) obtaining Lessor's prior written consent.
(f) Inspection and Testing by Lessor. Lessor shall have the right at all
times
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during the Term to (i) inspect the Leased Premises, as well as Lessee's books
and records related to Hazardous Materials, and to (ii) conduct tests and
investigations to determine whether Lessee is in compliance with the provisions
of this Section. Except in case of emergency, Lessor shall give reasonable
notice to Lessee before conducting any inspections, tests, or investigations.
The cost of all such inspections, tests and investigations shall be borne by
Lessee, if such tests reveal a violation of the provisions of this Article 12 by
any of Lessee's Parties. Neither any action nor inaction on the part of Lessor
pursuant to this Section 12.3(f) shall be deemed in any way to release Lessee
from, or in any way modify or alter, Lessee's responsibilities, obligations,
and/or liabilities incurred pursuant to Section 12.3 hereof.
12.4 INDEMNITY. Lessee shall indemnify, hold harmless, and, at Lessor's
option (with such attorneys as Lessor may approve in advance and in writing),
defend Lessor and Lessor's officers, directors, shareholders, trustees,
partners, employees, contractors, agents and mortgagees or other lien holders,
from and against any and all claims, demands, expenses, actions, judgments,
damages (whether consequential, direct or indirect, known or unknown, foreseen
or unforeseen), penalties, fines, liabilities, losses of every kind and nature
(including, without limitation, property damage, diminution in value of Lessor's
interest in the Leased Premises or the Complex, damages for the loss or
restriction on use of any space or amenity within the Leased Premises or the
Complex, damages arising from any adverse impact on marketing space in the
Complex, sums paid in settlement of claims and any costs and expenses associated
with injury, illness or death to or of any person), suits, administrative
proceedings, costs and fees, including, but not limited to, attorneys' and
consultants' fees and expenses, and the costs of cleanup, remediation, removal
and restoration (all of the foregoing being hereinafter sometimes collectively
referred to as "LOSSES"), arising from or related to any violation or alleged
violation of any of the requirements, ordinances, statutes, regulations or other
laws referred to in this Article, including, without limitation, the
Environmental Laws, by any of Lessee's Parties; any breach of the provisions of
this Article 12 by any of Lessee's Parties; or any Hazardous Use on, about or
from the Leased Premises or the Complex by Lessee's Parties. Lessee warrants
that it is leasing the Leased Premises "as-is, where-is," with respect to
Hazardous Materials and that it has thoroughly inspected the Leased Premises
prior to execution of this Lease with respect to Hazardous Materials.
13. SERVICE AND EQUIPMENT
13.1 CLIMATE CONTROL. Lessor, as part of Operating Costs, shall provide
climate control to the Leased Premises from 7:00 a.m. to 6:00 p.m. (the "CLIMATE
CONTROL HOURS") on weekdays (Saturdays, Sundays and those holidays officially
observed by governmental offices of the State of Washington excepted) to
maintain a temperature adequate for comfortable occupancy and consistent with
what is provided to tenants in other office building of comparable age, size and
quality. Lessor shall have no responsibility or liability for failure to supply
climate control service when making repairs, alterations or improvements or when
prevented from so doing by strikes or any other cause beyond Lessor's reasonable
control. Any climate control furnished for periods not within the Climate
Control Hours pursuant to Lessee's request shall be at Lessee's sole cost and
expense in accordance with rate schedules promulgated by Lessor from time to
time, which rate schedules shall be limited to Lessor's actual costs together
with a reasonable markup to compensate Lessor for the administration and
collection of such charges. Lessee acknowledges that Lessor has installed in the
Building a system for the purpose of climate control. Any use of the Leased
Premises not in accordance with the design standards or any arrangement of
partitioning which interferes with the normal operation of such system may
require changes or alterations in the system or ducts through which the climate
control system operates. Any changes or alterations so occasioned, if such
changes can be accommodated by Lessor's equipment, shall be made by Lessee at
its cost and expense but only with the written consent of Lessor first had and
obtained, and in accordance with drawings and specifications and by a contractor
first approved in writing by Lessor. If installation of partitions, equipment or
fixtures by Lessee necessitates the re-balancing of the climate control
equipment in the Leased Premises, the same will be performed by Lessor at
Lessee's expense. Lessee acknowledges that up to one (1) year may be required
after Lessee has fully occupied the Leased Premises in order to adjust and
balance the climate control systems. Any charges to be paid by Lessee hereunder
shall be due within ten (10) days of receipt of an invoice from Lessor, which
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invoice may precede Lessor's expenditure for the benefit of Lessee.
13.2 ELEVATOR SERVICE. Lessor, as part of Operating Costs, shall provide
elevator service (which may be with or without operator at Lessor's option)
during normal business hours provided that Lessee, its employees, and all other
persons using such services shall do so at their own risk.
13.3 CLEANING PUBLIC AREAS. Lessor, as part of Operating Costs, shall
maintain and keep clean the street level lobbies, sidewalks, truck dock, public
corridors and other public portions of the Building.
13.4 REFUSE DISPOSAL. As part of janitorial services, Lessor shall provide
for normal and customary removal of refuse and rubbish from the Leased Premises.
Lessee shall pay Lessor, within ten (10) days of being billed therefor, for the
removal from the Leased Premises and the Building of such refuse and rubbish of
Lessee as shall exceed that ordinarily accumulated daily in the routine of
business office occupancy.
13.5 JANITORIAL SERVICE. Lessor, as part of Operating Costs, shall provide
cleaning and janitorial service in and about the Complex and Leased Premises
daily on weekdays (Saturdays, Sundays and those holidays officially observed by
governmental offices of the State of Washington excepted) in accordance with the
Janitorial Schedule attached hereto as Exhibit H.
To the extent that Lessee shall require special or more frequent cleaning and/or
janitorial service over and above what is specified in the Janitorial Schedule
(hereinafter referred to as "SPECIAL CLEANING SERVICE") Lessor may, upon
reasonable advance notice from Lessee, elect to furnish such Special Cleaning
Service and Lessee agrees to pay Lessor, within ten (10) days of being billed
therefor, Lessor's charge for providing such additional service.
13.6 OTHER UTILITY SERVICE. Lessor, as part of Operating Costs, shall
provide for normal and customary electrical, water and sewer utility service to
the Leased Premises through third party utility providers.
13.7 INTERRUPTIONS. Lessor does not warrant that any of the services
referred to above or any other services and/or utilities which Lessor may supply
or are supplied will be free from interruption and/or the need for maintenance
and repairs or replacement. Lessee acknowledges that any one or more such
services may be suspended or reduced by reason of repairs, alterations or
improvements necessary to be made, by strikes or accidents, by any cause beyond
the reasonable control of Lessor, by orders or regulations of any federal,
state, county or municipal authority, or by any other cause or reason. In
addition, Lessor shall have no liability for damages arising from, and Lessor
does not warrant that Lessee's use of any Lines will be free from, (a) any
eavesdropping or wire-tapping by unauthorized parties, (b) any failure of any
Lines to satisfy Lessee's requirements, or (c) any shortages, failures,
variations, interruptions, disconnections, loss or damage caused by
installation, maintenance, replacement, use or removal of Lines by or for other
occupants of the Complex, by any failure of the environmental conditions or the
power supply for the Building to conform to any requirements for the Lines or
any associated equipment or any other problems associated with any Lines by any
other cause.
Any such interruption or suspension of services shall not be deemed an
eviction or disturbance of Lessee's use and possession of the Leased Premises or
any part thereof, nor render Lessor liable to Lessee for damages by abatement of
Rent or otherwise, nor relieve Lessee of performance of Lessee's obligations
under this Lease.
Notwithstanding anything to the contrary in this Section 13.7, if any
interruption in the use of any service or utility continues for more than three
(3) business days after written notice to Lessor of such interruption, such
interruption is caused by Lessor's negligence, willful misconduct or failure to
correct a condition within Lessor's reasonable control and such interruption
results in a cessation of or substantial interference with Lessee's operations
on the Leased Premises, Lessee shall be entitled as its sole and exclusive
remedy to bring a legal action directly against Lessor seeking
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recovery of any and all damages suffered and losses incurred by Lessee
(including but not limited to loss of business) due to an interruption of
utilities for a period greater than seventy-two (72) hours.
14. WASTE
14.1 WASTE OR NUISANCE. Lessee shall not commit, or suffer to be committed,
any waste upon the Leased Premises, or any nuisance, or other act or thing which
may disturb the quiet enjoyment of any other tenant or occupant of the Complex
in which the Leased Premises are located.
15. ALTERATIONS
15.1 CONSENT OF LESSOR; OWNERSHIP. Lessee shall not make, or suffer to be
made, any alterations to the Leased Premises, the Building, or the Complex,
and/or Lines, systems and facilities therein, or any part thereof, without the
written consent of Lessor first had and obtained, which Lessor shall not
unreasonably withhold or delay. Any additions to or alterations of the Leased
Premises (except trade fixtures) shall, immediately upon being made, constitute
a part of the realty and Lessor's property, and shall, at the expiration or
earlier termination of this Lease, remain upon the Leased Premises without
compensation to Lessee, except and to the extent that Lessor requires such items
to be removed prior to Lease expiration or termination, as provided in Section
15.4, below. Except as otherwise provided in this Lease, Lessee shall have the
right to remove its trade fixtures placed upon the Leased Premises, provided
that Lessee restores the Leased Premises as indicated below. Any and all costs
incurred by Lessor, whether in complying with laws, governmental requirements or
otherwise, as a result of any "alterations" (as hereinafter defined), or as a
result of request by Lessee for increased Lines or other utility capacity above
that presently existing (or, in the event the Building is to be constructed or
substantially altered by Lessor prior to the delivery date, above that which is
planned by Lessor for the Building) shall be paid by Lessee within ten (10) days
after demand therefor by Lessor.
15.2 REQUIREMENTS. Any alterations, additions or installations performed by
Lessee in the Leased Premises or Building (hereinafter collectively
"alterations") shall be subject to strict conformity with the following
requirements:
(a) All alterations shall be at the sole cost and expense of Lessee;
(b) Prior to commencement of any work of alteration, Lessee shall submit
detailed plans and specifications, including working drawings (hereinafter
referred to as "PLANS"), of the proposed alterations, which shall be subject to
the consent of Lessor in accordance with the terms of Section 15.1 above;
(c) Following approval of the Plans by Lessor, Lessee shall give Lessor
at least ten (10) days' prior written notice of commencement of work in the
Leased Premises so that Lessor may post notices of non-responsibility in or upon
the Leased Premises as provided by law;
(d) No alterations shall be commenced without Lessee having previously
obtained all appropriate permits and approvals required by and of governmental
agencies;
(e) All alterations shall be performed in a skillful and workmanlike
manner, consistent with the best practices and standards of the construction
industry, and pursued with diligence in accordance with the Plans previously
approved by Lessor and in full accord with all applicable laws and ordinances.
All material, equipment, and articles incorporated in the alterations are to be
new and of recent manufacture and of the most suitable grade for the purpose
intended;
(f) Lessee must obtain the prior written approval from Lessor for
Lessee's contractor before the commencement of the work. Lessor may require that
Lessee use subcontractors designated by Lessor as to specified portions of the
work. Lessee's contractor shall maintain all of the insurance reasonably
required by Lessor, including, without limitation, commercial general
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liability, workers' compensation, builder's risk and course of construction
insurance. The limits of such insurance shall, at a minimum, be the same as
those specified in Article 18;
(g) As a condition of approval of the alterations, Lessor may require
performance and labor and materialmen's payment bonds issued by a surety
approved by Lessor, in a sum equal to the cost of the alterations guarantying
the completion of the alterations free and clear of all liens and other charges
in accordance with the Plans. Such bonds shall name Lessor as beneficiary;
(h) The alterations must be performed in a manner such that they will not
interfere with the quiet enjoyment of the other lessees in the Complex;
(i) Lessor shall have the right to condition any approval of the
alterations upon (i) submission by Lessee of a Report with respect to Hazardous
Materials, and/or (ii) the performance by Lessee at Lessee's cost and expense of
such investigation, clean-up and remediation with respect to Hazardous Materials
as Lessor may request, in Lessor's sole and absolute discretion; provided,
however, that Lessor shall have the right, but not the obligation, to undertake
all or any portion of such investigation, clean-up or remediation at Lessee's
cost and expense in accordance with the provisions of Section 12.3(e) above.
Lessee acknowledges and agrees that Lessor shall have the right, in its sole and
absolute discretion, to disapprove the making of any such alterations based upon
the results of any investigation with respect to Hazardous Materials.
15.3 LIENS. Lessee shall keep the Leased Premises and the Complex in which
the Leased Premises are situated free from any liens arising out of any work
performed, materials furnished or obligations incurred by Lessee. In the event a
mechanic's or other lien is filed against the Leased Premises or the Complex of
which the Leased Premises form a part as a result of a claim arising through
Lessee, Lessor may demand that Lessee furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to at least one hundred fifty percent
(150%) of the amount of the contested lien claim or demand, indemnifying Lessor
against liability for the same and holding the Leased Premises free from the
effect of such lien or claim. Such bond must be posted within ten (10) days
following notice from Lessor. In addition, Lessor may require Lessee to pay
Lessor's attorneys' fees and costs in participating in any action to foreclose
such lien if Lessor shall decide it is to its best interest to do so. Lessor may
pay the claim prior to the enforcement thereof, in which event Lessee shall
reimburse Lessor in full, including attorneys' fees, for any such expense, as
additional rent, with the next due rental.
15.4 RESTORATION. Lessee shall return the Leased Premises to Lessor at the
expiration or earlier termination of the Term of this Lease in good and sanitary
order, condition and repair, free of rubble and debris, broom clean, reasonable
wear and tear excepted. However, Lessee shall ascertain from Lessor at least
thirty (30) days prior to the expiration or earlier termination of the Term of
this Lease, whether Lessor desires the Leased Premises, or any part thereof,
restored to its condition prior to the making of permitted alterations, and if
Lessor shall so desire, then Lessee shall forthwith restore said Leased Premises
or the designated portions thereof as the case may be, to its original
condition, entirely at its own expense, excepting normal wear and tear. All
damage to the Leased Premises caused by the removal of such trade fixtures and
other personal property that Lessee is permitted to remove under the terms of
this Lease and/or such restoration shall be repaired by Lessee at its sole cost
and expense prior to termination.
15.5 TENANT IMPROVEMENTS EXCLUDED. The Tenant Improvements are not subject
to this Article 15, but are instead governed by the attached Exhibit D.
16. PROPERTY INSURANCE
16.1 USE OF PREMISES. No use shall be made or permitted to be made on the
Leased Premises, nor acts done, which will increase the existing rate of
insurance upon the Building in which the Leased Premises are located or upon any
other building or improvement in the Complex or cause the cancellation of any
insurance policy covering the Building or any other building or improvement in
the Complex, or any part thereof, nor shall Lessee sell, or permit to be kept,
used
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or sold, in or about the Leased Premises or the Complex, any article which may
be prohibited by the standard form of "All Risk" fire insurance policies. Lessee
shall, at its sole cost and expense, comply with any and all requirements of any
insurance organization or company, pertaining to the Leased Premises, necessary
for the maintenance of reasonable property damage and commercial general
liability insurance, covering the Leased Premises, the Building, or the Complex.
16.2 INCREASE IN PREMIUMS. Lessee agrees to pay to Lessor directly, as
additional Rent and not as part of Operating Costs, any increase in premiums on
policies which may be carried by Lessor on the Leased Premises, the Building or
the Complex, or any blanket policies which include the Building or Complex,
covering damage thereto and loss of Rent caused by fire and other perils,
resulting from the nature of Lessee's occupancy or any act or omission of
Lessee. All payments of additional Rent by Lessee to Lessor pursuant to this
Section 16.2 shall be made within ten (10) days after receipt by Lessee of
Lessor's billing therefor. Lessee shall also pay its Pro Rata Percent of all
premiums for insurance carried by Lessor on the Leased Premises, the Building
and the Complex as part of Operating Costs.
16.3 PERSONAL PROPERTY INSURANCE. Lessee shall maintain in full force and
effect on all of its fixtures, furniture, equipment and other business personal
property in the Leased Premises a policy or policies providing protection
against any peril included within the classification "All Risk" to the extent of
at least ninety percent (90%) of their replacement cost, or that percentage of
the replacement cost required to negate the effect of a coinsurance provision,
whichever is greater. No such policy shall have a deductible in a greater amount
than FIVE THOUSAND DOLLARS ($5,000.00). Lessee shall also insure in the same
manner the physical value of all its leasehold improvements and alterations in
the Leased Premises. During the Term, the proceeds from any such policy or
policies of insurance shall be used for the repair or replacement of the
fixtures, equipment, and leasehold improvements so insured. Lessor shall have no
interest in said insurance, and will sign all documents necessary or proper in
connection with the settlement of any claim or loss by Lessee. Lessee shall also
maintain business interruption insurance and insurance for all plate glass upon
the Leased Premises. All insurance specified in this Section 16.3 to be
maintained by Lessee shall be maintained by Lessee at its sole cost.
16.4 RENT LOSS/BUSINESS INTERRUPTION INSURANCE. Lessee shall carry Business
Interruption or loss of income insurance covering those risks referred to in
Articles 16 and 18 hereof, in an amount equal to all gross income of Lessee
generated from its operations in the Leased Premises for a period of twelve (12)
months at the then current rate of gross income earning.
17. INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION
17.1 INTENT AND PURPOSE. This Article 17 is written and agreed to in
respect of the intent of the parties to assign the risk of loss, whether
resulting from negligence of the parties or otherwise, to the party who is
obligated hereunder to cover the risk of such loss with insurance. Thus, the
indemnity and waiver of claims provisions of this Lease have as their object, so
long as such object is not in violation of public policy, the assignment of risk
for a particular casualty to the party carrying the insurance for such risk,
without respect to the causation thereof.
17.2 WAIVER OF SUBROGATION. Lessor and Lessee release each other, and their
respective authorized representatives, from any claims for damage to the Leased
Premises and the Building and other improvements in which the Leased Premises
are located, and to the furniture, fixtures, and other business personal
property, Lessee's improvements and alterations of either Lessor or Lessee, in
or on the Leased Premises and the Building and other improvements in which the
Leased Premises are located, including loss of income, to the extent covered by
insurance proceeds from insurance policies carried by Lessor or Lessee or to the
extent it would have been covered by insurance proceeds if each party had
maintained the insurance policies required of it under this Lease.
17.3 FORM OF POLICY. Each party shall cause each such property insurance
policy obtained by it to provide that the insurance company waives all rights of
recovery by way of subrogation against either party in connection with any
damage covered by such policy. Neither party shall be
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liable to the other for any damage caused by any peril included within the
classification "All Risk" which is insured against under any property insurance
policy carried under the terms of this Lease.
17.4 INDEMNITY. Lessee, as a material part of the consideration to be
rendered to Lessor, shall indemnify, defend, protect and hold harmless Lessor
against all actions, claims, demands, damages, liabilities, losses, penalties,
or expenses of any kind which may be brought or imposed upon Lessor or which
Lessor may pay or incur by reason of injury to person or property or business,
from whatever cause, all or in any way connected with the acts and omissions of
Lessee, and the condition or use of the Leased Premises, or the improvements or
personal property therein or thereon, including without limitation any liability
or injury to the person or property or business of Lessee, its agents, officers,
employees or invitees. Lessee agrees to indemnify, defend and protect Lessor and
hold it harmless from any and all liability, loss, cost or obligation on account
of, or arising out of, any such injury or loss however occurring, including
breach of the provisions of this Lease and the negligence of the parties hereto.
Notwithstanding the foregoing, nothing contained herein shall obligate Lessee to
indemnify Lessor against Lessor's sole or active negligence or willful
misconduct.
17.5 DEFENSE OF CLAIMS. In the event any action, suit or proceeding is
brought against Lessor by reason of any occurrence covered by Section 17.4,
above, Lessee, upon Lessor's request, will at Lessee's expense resist and defend
such action, suit or proceeding, or cause the same to be resisted and defended
by counsel designated either by Lessee or by the insurer whose policy covers the
occurrence and in either case reasonably approved by Lessor. The obligations of
Lessee under this Section arising by reason of any occurrence taking place
during the Term shall survive any termination of this Lease.
17.6 WAIVER OF CLAIMS. Lessee, as a material part of the consideration to
be rendered to Lessor, hereby waives all claims against Lessor for damages or
injury, as described below, from any cause arising at any time, including the
negligence of the parties hereto:
(a) damages to goods, wares, merchandise and loss of business or income
in, upon or about the Leased Premises and injury to Lessee, its agents,
employees, invitees or third persons, in, upon or about the Leased Premises; and
(b) (notwithstanding anything to the contrary contained in this Lease,
including, without limitation, the definition of Operating Costs in Section
2.1(k), which includes "policing") damages to goods, wares, merchandise and loss
of business, in, upon or about the Leased Premises or the Complex, and injury to
Lessee, its agents, employees, invitees or third persons in, upon or about the
Leased Premises or the Complex, where such damage or injury results from
Lessor's failure to police or provide security for the Complex or Lessor's
negligence in connection therewith.
Notwithstanding the foregoing, in no event shall Lessee be deemed to have
waived any claims as against Lessor where such claims are based upon, or arise
out of, the active negligence or willful misconduct of Lessor.
17.7 REFERENCES. Wherever in this Article the term Lessor or Lessee is used
and such party is to receive the benefit of a provision contained in this
Article, such term shall refer not only to that party but also to its officers,
directors, shareholders, employees, contractors, partners, agents and mortgagees
or other lien holders.
18. LIABILITY INSURANCE
18.1 LESSEE'S INSURANCE. Lessee shall, at Lessee's expense, obtain and keep
in force during the Term, a commercial general liability insurance policy
insuring Lessee against the risks of, bodily injury and property damage,
personal injury, contractual liability, completed operations, products
liability, owned and non-owned automobile liability arising out of the
ownership, use, occupancy or maintenance of the Leased Premises and all areas
appurtenant thereto. Such insurance shall be a combined single limit policy in
an amount not less than ONE MILLION DOLLARS
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($1,000,000.00) per occurrence with a TWO MILLION DOLLAR ($2,000,000.00) annual
aggregate; and an umbrella policy of THREE MILLION DOLLARS ($3,000,000.00) any
one occurrence. Lessor and any lender or other party in interest designated by
Lessor shall be named as additional insured(s). The policy shall contain cross
liability endorsements and shall insure performance by Lessee of the indemnity
provisions of this Lease; shall be primary, not contributing with, and not in
excess of coverage which Lessor may carry; shall state that Lessor is entitled
to recovery for the negligence of Lessee even though Lessor is named as an
additional insured; shall provide for severability of interest; shall provide
that an act or omission of one of the insured or additional insureds which would
void or otherwise reduce coverage shall not void or reduce coverages as to the
other insured or additional insured; and shall afford coverage after the Term
(by separate policy or extension if necessary) for all claims based on acts,
omissions, injury or damage which occurred or arose (or the onset of which
occurred or arose) in whole or in part during the Term. The limits of said
insurance shall not limit any liability of Lessee hereunder. Not more frequently
than every three (3) years, if, in the reasonable opinion of Lessor, the amount
of liability insurance required hereunder is not adequate, Lessee shall promptly
increase said insurance coverage as required by Lessor.
18.2 WORKERS' COMPENSATION INSURANCE. Lessee shall carry Workers'
Compensation insurance as required by law, including an employers' liability
endorsement.
19. INSURANCE POLICY REQUIREMENTS
19.1 GENERAL REQUIREMENTS. All insurance policies required to be carried by
Lessee (except Lessee's business personal property insurance) hereunder shall
conform to the following requirements:
(a) The insurer in each case shall carry a designation in "Best's
Insurance Reports" as issued from time to time throughout the Term as follows:
Policyholders' rating of A; financial rating of not less than VII;
(b) The insurer shall be qualified to do business in the state in which
the Leased Premises are located;
(c) The policy shall be in a form and include such endorsements as are
reasonably acceptable to Lessor;
(d) Certificates of insurance shall be delivered to Lessor at
commencement of the Term and certificates of renewal at least thirty (30) days
prior to the expiration of each policy;
(e) Each policy shall require that Lessor be notified in writing by the
insurer at least thirty (30) days prior to any cancellation or expiration of
such policy, or any reduction in the amounts of insurance carried.
20. LESSEE INSURANCE DEFAULT
20.1 RIGHTS OF LESSOR. In the event that Lessee fails to obtain any
insurance required of it under the terms of this Lease, Lessor may, at its
option, but is not obligated to, obtain such insurance on behalf of Lessee and
bill Lessee, as additional rent, for the cost thereof. Payment shall be due
within ten (10) days of receipt of the billing therefor by Lessee.
21. FORFEITURE OF PROPERTY AND LESSOR'S LIEN
21.1 REMOVAL OF PERSONAL PROPERTY. Lessee agrees that as at the date of
termination of this Lease or repossession of the Leased Premises by Lessor, by
way of default or otherwise, it shall remove all personal property to which it
has the right to ownership pursuant to the terms of this Lease. Any and all such
property of Lessee not removed by such date shall, at the option of Lessor,
irrevocably become the sole property of Lessor. Lessee waives all rights to
notice and all common law and statutory claims and causes of action which it may
have against Lessor subsequent to such
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date as regards the storage, destruction, damage, loss of use and ownership of
the personal property affected by the terms of this Article. Lessee acknowledges
Lessor's need to relet the Leased Premises upon termination of this Lease or
repossession of the Leased Premises and understands that the forfeitures and
waivers provided herein are necessary to aid said reletting, and to prevent
Lessor incurring a loss for inability to deliver the Leased Premises to a
prospective lessee.
22. MAINTENANCE AND REPAIRS
22.1 LESSOR'S OBLIGATIONS. Subject to the other provisions of this Lease
imposing obligations in this respect upon Lessee, Lessor shall repair, replace
and maintain the external and Structural parts of the Complex which do not
comprise a part of the Leased Premises and are not leased to others, janitor and
equipment closets and Major Vertical Penetrations within the Leased Premises
designated by Lessor for use by it in connection with the operation and
maintenance of the Complex, and all Common Areas. Lessor shall perform such
repairs, replacements and maintenance with reasonable dispatch, in a good and
workmanlike manner; but Lessor shall not be liable for any damages, direct,
indirect or consequential, or for damages for personal discomfort, illness or
inconvenience of Lessee by reason of failure of equipment, Lines, facilities or
systems or reasonable delays in the performance of such repairs, replacements
and maintenance, unless caused by the deliberate act or omission of Lessor, its
servants, agents, or employees. The cost for such repairs, maintenance and
replacement shall be included in Operating Costs in accordance with Section
2.1(k) hereof.
22.2 NEGLIGENCE OF LESSEE. If the Building, the elevators, boilers,
engines, pipes or apparatus used for the purpose of climate control of the
Building or operating the elevators, or if the water pipes, drainage pipes,
electric lighting or other equipment, Lines, systems and/or facilities of the
Building or the Complex, or the roof or the outside walls of the Building, fall
into a state of disrepair or become damaged or destroyed through the negligence,
carelessness or misuse of Lessee, its agents, employees or anyone permitted by
it to be in the Complex, or through it in any way, the cost of the necessary
repairs, replacements or alterations shall be borne by Lessee who shall pay the
same to Lessor as additional charges forthwith on demand.
22.3 LESSEE'S OBLIGATIONS. Lessee shall maintain and repair the interior
portions of the Leased Premises, including without limiting the generality of
the foregoing, all interior partitions and walls, fixtures; all Tenant
Improvements and alterations in the Leased Premises; all electrical and
telephone outlets and conduits not concealed by floors, walls or ceilings; all
fixtures and shelving; and all special mechanical and electrical equipment
(which equipment is not a normal part of the Leased Premises) installed by or
for Lessee; reasonable wear and tear, damage with respect to which Lessor has an
obligation to repair as provided in Section 22.1 and Section 23.2 hereof only
excepted. Prior to commencement of any repairs, Lessee shall give Lessor at
least ten (10) days' prior written notice thereof so that Lessor may post
notices of non-responsibility in or upon the Leased Premises as provided by law.
Lessee must obtain the prior written approval from Lessor for Lessee's
contractor before the commencement of the repair, which approval shall not be
unreasonably withheld or delayed. Lessor may require that Lessee use a specific
contractor for certain types of repairs. Lessor may enter and view the state of
repair and Lessee will repair in a good and workmanlike manner according to
notice in writing. Notwithstanding the foregoing, Lessee shall not make any
repairs to the equipment, Lines, facilities or systems of the Building or
Complex which are outside of the Leased Premises or which do not exclusively
serve the Leased Premises.
22.4 CLEANING. Lessee agrees at the end of each business day to leave the
Leased Premises in a reasonably orderly condition for the purpose of the
performance of Lessor's cleaning services referred to herein. Lessee shall
maintain the appearance of the Leased Premises in a manner consistent with the
character, use and appearance of the Complex.
22.5 WAIVER. Lessee waives all rights it may have under law to make repairs
at Lessor's expense.
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23. DESTRUCTION
23.1 RIGHTS OF TERMINATION. In the event the Leased Premises suffers (a) an
"uninsured property loss" (as hereinafter defined) or (b) a property loss which
cannot be repaired within one hundred ninety five (195) days from the date of
destruction under the laws and regulations of state, federal, county or
municipal authorities, or other authorities with jurisdiction, Lessor may
terminate this Lease as at the date of the damage upon written notice to Lessee
following the property loss. In the event of a property loss to the Leased
Premises which cannot be repaired within one hundred ninety-five (195) days of
the occurrence thereof, Lessee shall have the right to terminate the Lease by
written notice to Lessor within twenty (20) days following notice from Lessor
that the time for restoration shall exceed one hundred ninety-five (195) days.
For purposes of this Lease, the term "uninsured property loss" shall mean any
loss arising from a peril not covered by the standard form of "All Risk"
property insurance policy.
23.2 REPAIRS. In the event of a property loss which may be repaired within
one hundred ninety-five (195) days from the date of the damage, or, in the
alternative, in the event the parties do not elect to terminate this Lease under
the terms of Section 23.1 above, then this Lease shall continue in full force
and effect and Lessor shall forthwith undertake to make such repairs to
reconstitute the Leased Premises to as near the condition as existed prior to
the property loss as practicable. Such partial destruction shall in no way annul
or void this Lease except that Lessee shall be entitled to a proportionate
reduction of Minimum Rent and additional Rent following the property loss and
until the time the Leased Premises are restored. Such reduction shall be an
amount which reflects the degree of interference with Lessee's business. So long
as Lessee conducts its business in the Leased Premises, there shall be no
abatement until the parties agree on the amount thereof. If the parties cannot
agree within forty-five (45) days of the property loss, the matter shall be
submitted to arbitration under the rules of the American Arbitration
Association. Upon the resolution of the dispute, the settlement shall be
retroactive and Lessor within ten (10) days thereafter shall refund to Lessee
any sums due in respect of the reduced rental from the date of the property loss
and shall also pay Lessee interest on such refunded sums, which shall be deemed
to have accrued from the date of Lessee's overpayment until Lessor's repayment
at the interest rate specified in Section 49.16. Lessor's obligations to restore
shall in no way include any construction originally performed by Lessee or
subsequently undertaken by Lessee, but shall include solely that property
constructed by Lessor prior to commencement of the Term, including without
limitation, any Tenant Improvements.
23.3 REPAIR COSTS. The cost of any repairs to be made by Lessor pursuant to
Section 23.2 of this Lease shall be paid by Lessor utilizing available insurance
proceeds, and Lessor shall have no obligation to restore the Leased Premises or
the Complex to the extent that the cost of such repairs or restoration is not
covered by insurance proceeds actually received by Lessor in connection with
such damage or destruction. If Lessor elects not to repair the Leased Premises
pursuant to this Section 23.3, Lessor shall so notify Lessee in writing and
Lessee shall have the right to terminate this Lease by delivery of written
notice to Lessor delivered no later than thirty (30) days after receipt of
Lessor's notice, which termination shall first take effect fourteen (14) days
after Lessor's receipt of Lessee's notice, provided, however, if before
expiration of such fourteen (14) day period, Lessor rescinds its election not to
restore by notice to Lessee, this Lease shall not terminate and Lessor shall
become obligated to restore the Leased Premises notwithstanding the
unavailability or deficiency of insurance proceeds.
23.4 WAIVER. Lessee hereby waives all statutory or common law rights of
termination in respect to any partial destruction or property loss which Lessor
is obligated to repair or may elect to repair under the terms of this Article.
Further, in event of a property loss occurring during the last one (1) year of
the original Term hereof or of any extension, Lessor need not undertake any
repairs and may cancel this Lease unless Lessee has the right under the terms of
this Lease to extend the Term for an additional period of at least five (5)
years and does so within thirty (30) days of the date of the property loss.
23.5 LESSOR'S ELECTION. In the event that the Complex or Building in which
the Leased Premises are situated be destroyed to the extent of not less than
thirty-three and one-third percent (33-1/3%) of the replacement cost thereof,
Lessor may elect to terminate this Lease, whether the Leased Premises be injured
or not, in the same manner as in Section 23.1 above. At all events, a
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total destruction of the Complex of which the Leased Premises form a part, or
the Leased Premises itself, shall terminate this Lease.
24. CONDEMNATION
24.1 DEFINITIONS.
(a) "CONDEMNATION" means (i) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a condemnor and/or (ii) a
voluntary sale or transfer by Lessor to any condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
(b) "DATE OF TAKING" means the date the condemnor has the right to
possession of the property being condemned.
(c) "AWARD" means all compensation, sums or anything of value awarded,
paid or received on a total or partial condemnation.
(d) "CONDEMNOR" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
24.2 TOTAL TAKING. If the Leased Premises are totally taken by
condemnation, this Lease shall terminate on the date of taking.
24.3 PARTIAL TAKING; COMMON AREAS.
(a) If any portion of the Leased Premises is taken by condemnation,
Lessee shall have the option exercisable only during the first thirty (30) days
after the date of condemnation to terminate this Lease.
(b) If any part of the Common Areas of the Complex is taken by
condemnation, this Lease shall remain in full force and effect so long as there
is no material interference with the access to or parking for the Leased
Premises, except that if thirty percent (30%) or more of the Common Areas is
taken by condemnation, either party shall have the election to terminate this
Lease pursuant to this Section.
(c) If fifty percent (50%) or more of the Building in which the Leased
Premises are located is taken, Lessor shall have the election to terminate this
Lease in the manner prescribed herein.
24.4 TERMINATION OR ABATEMENT. If either party elects to terminate this
Lease under the provisions of Section 24.3 (such party is hereinafter referred
to as the "TERMINATING PARTY"), it must terminate by giving notice to the other
party (the "NONTERMINATING PARTY") within thirty (30) days after the nature and
extent of the taking have been finally determined (the "DECISION PERIOD"). The
Terminating Party shall notify the Nonterminating Party of the date of
termination, which date shall not be earlier than sixty (60) days after the
Terminating Party has notified the Nonterminating Party of its election to
terminate nor later than the date of taking. If Notice of Termination is not
given within the Decision Period, the Lease shall continue in full force and
effect except that Minimum Rent and additional Rent shall be reduced by
subtracting therefrom an amount calculated by multiplying the Minimum Rent and
additional Rent in effect prior to the taking by a fraction, the numerator of
which is the number of square feet taken from the Leased Premises and the
denominator of which is the number of square feet in the Leased Premises prior
to the taking.
24.5 RESTORATION. If there is a partial taking of the Leased Premises and
this Lease remains in full force and effect pursuant to this Article, Lessor, at
its cost, shall accomplish all necessary restoration so that the Leased Premises
is returned as near as practical to its condition immediately prior to the date
of the taking, but in no event shall Lessor be obligated to expend more
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for such restoration than the extent of funds actually paid to Lessor by the
condemnor.
24.6 AWARD. Any award for the real property arising from the condemnation
or the settlement thereof shall belong to and be paid to Lessor, except that
Lessee shall receive from the award compensation for the following if specified
in the award by the condemning authority, so long as it does not reduce Lessor's
award in respect of the real property: Lessee's trade fixtures, tangible
personal property, loss of business and relocation expenses. At all events,
Lessor shall be solely entitled to all award in respect of the real property,
including the bonus value of the leasehold. Lessee shall not be entitled to any
award until Lessor has received the above sum in full.
25. ASSIGNMENT AND SUBLETTING
25.1 LEASE IS PERSONAL. The purpose of this Lease is to transfer possession
of the Leased Premises to Lessee for Lessee's personal use in return for certain
benefits, including rent, to be transferred to the Lessor. Lessee's right to
assign or sublet as stated in this Article is subsidiary and incidental to the
underlying purpose of this Lease. Lessee acknowledges and agrees that it has
entered into this Lease in order to acquire the Leased Premises for its own
personal use and not for the purpose of obtaining the right to convey the
leasehold to others.
25.2 "TRANSFER OF THE LEASED PREMISES" DEFINED. The terms "TRANSFER OF THE
LEASED PREMISES" or "TRANSFER" as used herein shall include any assignment of
all or any part of this Lease (including assignment by operation of law),
subletting of all or any part of the Leased Premises or transfer of possession,
or granting of the right of possession or contingent right of possession of all
or any portion of the Leased Premises including, without limitation, license,
concession, mortgage, devise, hypothecation, agency, franchise or management
agreement, or suffering any other person (the agents and servants of Lessee
excepted) to occupy or use the Leased Premises or any portion thereof. If Lessee
is a corporation which is not deemed a public corporation, or is an
unincorporated association or partnership, or Lessee consists of more than one
party, the transfer, assignment or hypothecation of any stock or interest in
such corporation, association, partnership or ownership interest, in the
aggregate in excess of twenty-five percent (25%), shall be deemed a Transfer of
the Leased Premises.
25.3 NO TRANSFER WITHOUT CONSENT. Lessee shall not suffer a Transfer of the
Leased Premises or any interest therein, or any part thereof, or any right or
privilege appurtenant thereto without the prior written consent of Lessor, and a
consent to one Transfer of the Leased Premises shall not be deemed to be a
consent to any subsequent Transfer of the Leased Premises. Any Transfer of the
Leased Premises without such consent shall (i) be voidable, and (ii) terminate
this Lease, in either case, at the option of Lessor.
25.4 WHEN CONSENT GRANTED.
(a) The consent of Lessor to a Transfer may not be unreasonably withheld,
provided that it is agreed to be reasonable for Lessor to consider any of the
following reasons, which list is not exclusive, in electing to consent or to
deny consent:
(i) Financial strength of the proposed transferee is not at least equal
to that of Lessee at the time of execution of this Lease;
(ii) A proposed transferee whose occupation of the Leased Premises
would cause a diminution in the reputation of the Complex or the other
businesses located therein;
(iii) A proposed transferee whose use presents a risk of violation of
Article 12 in excess of the level of risk generated by Lessee;
(v) A proposed transferee whose occupancy will require a material
variation in the terms of this Lease (for example, a variation in the use
clause) or which otherwise
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materially and adversely affects any interest of Lessor;
(vi) A proposed transferee who is or is likely to be, or whose business
is or is likely to be, subject to compliance with additional laws or other
governmental requirements beyond those to which Lessee or Lessee's business is
subject and which additional laws or other governmental requirements may
materially and adversely affect the Leased Premises, the Complex or Lessor's
operation thereof ; or
(vii) That the validity of the Transfer is conditioned on the
conformity of the Lessee and transferee with all provisions of this Lease at the
time of Transfer, including, without limitation, the requirement that there be
no uncured notices of default under the terms of this Lease.
(b) Notwithstanding the foregoing, Lessee shall have the right, without
the consent of Lessor, but upon prior written notice to Lessor, to assign this
Lease to a company incorporated or to be incorporated by Lessee, provided that
Lessee owns or beneficially controls all the issued and outstanding shares of
capital stock of the company; further provided, however, that in the event that
at any time following such assignment, Lessee wishes to sell, mortgage, devise,
hypothecate or in any other manner whatsoever transfer any portion of the
ownership or beneficial control of the issued and outstanding shares in the
capital stock of such company, such transaction shall be deemed to constitute a
Transfer and shall be subject to all of the provisions of this Article 25 with
respect to a Transfer of the Premises including, by specific reference, the
provisions of Section 25.8.
25.5 PROCEDURE FOR OBTAINING CONSENT.
(a) Lessor need not commence its review of any proposed Transfer, or
respond to any request by Lessee with respect to such, unless and until it has
received from Lessee adequate descriptive information concerning the transferee,
the business to be conducted by the transferee, the transferee's financial
capacity, and such other information as may reasonably be required in order to
form a prudent judgment as to the acceptability of the proposed Transfer,
including, without limitation, the following:
(i) The past two years' Federal Income Tax returns of the proposed
transferee (or in the alternative the past two years' audited annual Balance
Sheets and Profit and Loss statements, certified correct by a Certified Public
Accountant);
(ii) Banking references of the proposed transferee;
(iii) A resume of the business background and experience of the
proposed transferee;
(iv) At least five (5) business references for the proposed transferee;
(v) An executed copy of the instrument by which Lessee proposes to
effectuate the Transfer.
(b) Lessee shall reimburse Lessor as additional Rent for Lessor's
reasonable costs and attorneys' fees incurred in conjunction with the processing
and documentation of any proposed Transfer of the Leased Premises, whether or
not consent is granted, provided such amount shall not exceed one half of the
then Monthly Minimum Rent under the Lease.
25.6 RECAPTURE.
(a) By written notice to Lessee (the "TERMINATION NOTICE") within twenty
(20) business days following submission to Lessor by Lessee of the information
specified in Section 25.5, Lessor may terminate this Lease in the event of a
proposed assignment of this Lease or sublet of the entire Leased Premises, or
terminate this Lease as to the portion of the Leased Premises to be sublet,
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if the proposed sublet is to be of less than the entire Leased Premises;
provided Lessee shall have the right exercisable within ten (10) days following
its receipt of the Termination Notice to withdraw its request for Lessor's
consent to a proposed assignment or sublease, and upon Lessor's timely receipt
of such withdrawal notice from Lessee, the Lease termination shall not take
effect. In the event Lessor elects to terminate this Lease as to that portion of
the Leased Premises to be sublet, an amendment to this Lease shall be executed
whereby the description of the Leased Premises is restated and Lessee's
obligations for rent and other charges are reduced in proportion to the
reduction in Rentable Area of the Leased Premises caused thereby.
(b) In the event that Lessor terminates this Lease or terminates this
Lease as to that portion of the Leased Premises proposed to be sublet, Lessor
may, if it elects, enter into a new lease covering the Leased Premises or the
affected portion thereof with the intended assignee or sublessee on such terms
as Lessor and such person may agree, or enter into a new lease covering the
Leased Premises with any other person; in such event, Lessee shall not be
entitled to any portion of the profit if any which Lessor may realize on account
of such termination and reletting. From and after the date of such termination
of this Lease, the parties shall have no further obligations to each other under
this Lease except for matters occurring or obligations arising prior to the date
of such termination.
25.7 REASONABLE RESTRICTION. The restrictions on Transfer described in this
Article 25 are acknowledged by Lessee to be reasonable for all purposes.
25.8 EFFECT OF TRANSFER. If Lessor consents to a Transfer, the following
conditions shall apply:
(a) Each and every covenant, condition or obligation imposed upon Lessee
by this Lease and each and every right, remedy or benefit afforded Lessor by
this Lease shall not be impaired or diminished as a result of such Transfer.
(b) Lessee shall pay to Lessor on a monthly basis, eighty percent (80%)
of the excess of any sums of money, or other economic consideration received by
Lessee from the Transferee in such month (whether or not for a period longer
than one month), including higher rent, bonuses, key money, or the like over the
aggregate, of (i) the amortized portion of the reasonable expenses actually paid
by Lessee to unrelated third parties for brokerage commissions, tenant
improvements to the Leased Premises, or design fees incurred as a direct
consequence of the Transfer, and, (ii) the total sums which Lessee pays Lessor
under this Lease in such month, or the prorated portion thereof if the portion
of the Leased Premises transferred is less than the entire Leased Premises. The
amount so derived shall be paid with Lessee's payment of Minimum Rent. The term
"amortized portion" is that portion of the applicable expenses derived by
dividing such expenses by the number of months in the balance of the original
term following the Transfer.
(c) No Transfer, whether or not consent of Lessor is required hereunder,
shall relieve Lessee of its primary obligation to pay the Rent and to perform
all other obligations to be performed by Lessee hereunder. The acceptance of
Rent by Lessor from any person shall not be deemed to be a waiver by Lessor of
any provision of this Lease or to be a consent to any Transfer of the Leased
Premises.
(d) If Lessor consents to a sublease, such sublease shall not extend
beyond the expiration of the Term.
(e) No Transfer shall be valid and no transferee shall take possession of
the Leased Premises or any part thereof unless, within ten (10) days after the
execution of the documentary evidence thereof, Lessee shall deliver to Lessor a
duly executed duplicate original of the Transfer instrument in form reasonably
satisfactory to Lessor which provides that (i) the transferee assumes Lessee's
obligations for the payment of Rent and for the full and faithful observance and
performance of the covenants, terms and conditions contained herein, (ii) such
transferee will, at Lessor's election, attorn directly to Lessor in the event
Lessee's Lease is
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terminated for any reason on the terms set forth in the instrument of transfer
and (iii) such instrument of Transfer contains such other assurances regarding
the foregoing as Lessor reasonably deems necessary.
26. ABANDONMENT
26.1 LESSEE TO OCCUPY. Lessee shall not abandon the Leased Premises at any
time during the Term and if Lessee shall abandon or surrender the Leased
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Lessee and remaining on the Leased Premises after such
abandonment, surrender or dispossession shall, at the option of Lessor, be
deemed abandoned.
27. ENTRY BY LESSOR
27.1 RIGHTS OF LESSOR. Lessee shall permit Lessor and Lessor's agents to
enter the Leased Premises at all reasonable times (but to the extent
commercially practicable outside normal business hours) for the purpose of
inspecting the same or for the purpose of maintaining the Building and the
Lines, systems and facilities therein, or for the purpose of making repairs,
replacements, alterations or additions to any portion of the Building and the
Lines, systems and facilities therein, including the erection and maintenance of
such scaffolding, canopies, fences and props as may be required, or for the
purpose of posting notices of non-responsibility for alterations, additions or
repairs. Lessee shall also permit Lessor and Lessor's agents to enter the Leased
Premises at all reasonable times, or for the purpose of placing upon the
Building any usual or ordinary "for sale" signs, or for the purpose of showing
the Building or the Leased Premises to any potential purchasers, lenders or
tenants, without any rebate of Rent and without any liability to Lessee for any
loss of occupation or quiet enjoyment of the Leased Premises thereby occasioned,
and shall permit Lessor, at any time within ninety (90) days prior to the
expiration of this Lease, to place upon the Leased Premises any usual or
ordinary "to let" or "to lease" signs. This Section in no way affects the
maintenance obligations of the parties hereto.
28. SIGNS
28.1 APPROVAL, INSTALLATION AND MAINTENANCE. Lessee shall not place on the
Leased Premises or the Complex any exterior signs or advertisements, nor any
interior signs or advertisements that are visible from the exterior of the
Leased Premises, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold except that Lessor reserves the right to withhold for any
aesthetic reason in its sole judgment. The cost of installation and regular
maintenance of any such signs approved by Lessor shall be at the sole expense of
Lessee. At the termination of this Lease, or any extension thereof, Lessee shall
remove all its signs, and all damage caused by such removal shall be repaired at
Lessee's expense.
29. DEFAULT
29.1 DEFINITION. The occurrence of any of the following shall constitute a
material default and breach of this Lease by Lessee:
(a) Any failure by Lessee to pay the Rent or to make any other payment
required to be made by Lessee hereunder when due, where such failure continues
for three (3) days after written notice thereof by Lessor to Lessee;
(b) The abandonment of the Leased Premises by Lessee in violation of
Section 26.1 hereof;
(c) Any failure by Lessee to provide executed documents as and when
required under the provisions of Section 36.2 and/or Section 37.1;
(d) A failure by Lessee to observe and perform any other provision of
this Lease
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to be observed or performed by Lessee, where such failure continues for thirty
(30) days after written notice thereof by Lessor to Lessee; provided, however,
that if the nature of the default is such that the same cannot reasonably be
cured within the thirty (30) day period allowed, Lessee shall not be deemed to
be in default if Lessee shall, within such thirty (30) day period, commence to
cure and thereafter diligently prosecute the same to completion;
(e) Either (1) the appointment of a receiver (except a receiver appointed
at the instance or request of Lessor) to take possession of all or substantially
all of the assets of Lessee, or (2) a general assignment by Lessee for the
benefit of creditors, or (3) any action taken or suffered by Lessee under any
insolvency or bankruptcy act shall constitute a breach of this Lease by Lessee.
In such event, Lessor may, at its option, declare this Lease terminated and
forfeited by Lessee, and Lessor shall be entitled to immediate possession of the
Leased Premises. Upon such notice of termination, this Lease shall terminate
immediately and automatically by its own limitation.
(f) Any three (3) failures by Lessee to observe and perform the same
provision of this Lease during any twelve (12) month period of the Term, as such
may be extended, shall constitute, at the option of Lessor, a separate and
noncurable default.
30. REMEDIES UPON DEFAULT
30.1 TERMINATION AND DAMAGES. In the event of any default by Lessee, then
in addition to any other remedies available to Lessor herein or at law or in
equity, Lessor shall have the immediate option to terminate this Lease and all
rights of Lessee hereunder by giving written notice of such intention to
terminate. In the event that Lessor shall elect to so terminate this Lease, then
Lessor may recover from Lessee:
(a) The worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus
(b) The worth at the time of award of the amount by which the unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss Lessee proves could have been reasonably avoided;
plus
(c) The worth at the time of award of the amount by which the unpaid rent
for the balance of the Term after the time of award exceeds the amount of such
rental loss that Lessee proves could be reasonably avoided; plus
(d) Any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee's failure to perform its obligations under this
Lease or which in the ordinary course of events would be likely to result
therefrom; and
(e) At Lessor's election, such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time by the applicable law in the
state in which the Leased Premises are located.
30.2 DEFINITION. As used in subSections 30.1(a) and (b) above, the "worth
at the time of award" is computed by allowing interest at the rate of ten
percent (10%) per annum. As used in subSection 30.1(c) above, the "worth at the
time of award" is computed by discounting such amount at the discount rate of
the Federal Reserve Bank for the region in which the Complex is located at the
time of award plus one percent (1%).
30.3 PERSONAL PROPERTY.
(a) In the event of any default by Lessee, Lessor shall also have the
right, with or without terminating this Lease, to reenter the Leased Premises
and remove all persons and property from the Leased Premises; such property may
be removed and stored in a public warehouse or elsewhere at the cost of and for
the account of Lessee.
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30.4 RECOVERY OF RENT; RELETTING.
(a) Lessor may continue Lease in effect after Lessee's breach and
abandonment and recover rent as it becomes due. In the event of the abandonment
of the Leased Premises by Lessee, or in the event that Lessor shall elect to
reenter as provided in Section 30.3 above, or shall take possession of the
Leased Premises pursuant to legal proceeding or pursuant to any notice provided
by law, then if Lessor does not elect to terminate this Lease as provided in
Section 30.1 above, this Lease shall continue in effect for so long as Lessor
does not terminate Lessee's right to possession, and Lessor may enforce all its
rights and remedies under this Lease, including, without limitation, Lessor's
right from, time to time, without terminating this Lease, to either recover all
Rental as it becomes due or relet the Leased Premises or any part thereof for
such term or terms and at such rental or rentals and upon such other terms and
conditions as Lessor, in its sole discretion, may deem advisable, with the right
to make alterations and repairs to the Leased Premises. Acts of maintenance or
preservation or efforts to relet the Leased Premises or the appointment of a
receiver upon initiation of Lessor or other legal proceeding granting Lessor or
its agent possession to protect Lessor's interest under this Lease shall not
constitute a termination of Lessee's right to possession.
(b) In the event that Lessor shall elect to so relet, then rentals
received by Lessor from such reletting shall be applied: first, to the payment
of any indebtedness other than Rent due hereunder from Lessee to Lessor; second,
to the payment of any cost of such reletting; third, to the payment of the cost
of any alterations and repairs to the Leased Premises; fourth, to the payment of
Rent due and unpaid hereunder; and the residue, if any, shall be held by Lessor
and applied in payment of future Rent as the same may become due and payable
hereunder. Should that portion of such rentals received from such reletting
during any month, which is applied by the payment of Rent hereunder, be less
than the Rent payable during that month by Lessee hereunder, then Lessee shall
pay such deficiency to Lessor immediately upon demand therefor by Lessor. Such
deficiency shall be calculated and paid monthly. Lessee shall also pay to
Lessor, as soon as ascertained, any reasonable costs and expenses incurred by
Lessor in such reletting or in making such alterations and repairs not covered
by the rentals received from such reletting.
(c) No reentry or taking possession of the Leased Premises or any other
action under this Section shall be construed as an election to terminate this
Lease unless a written notice of such intention be given to Lessee or unless the
termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Lessor because of any
default by Lessee, Lessor may at any time after such reletting elect to
terminate this Lease for any such default.
30.5 NO WAIVER. Efforts by Lessor to mitigate the damages caused by
Lessee's default in this Lease shall not constitute a waiver of Lessor's right
to recover damages hereunder.
30.6 CURING DEFAULTS. Should Lessee fail to repair, maintain, keep clean,
and/or service the Leased Premises, or any part or contents thereof at any time
or times, or perform any other obligations imposed by this Lease, then after
having given Lessee reasonable notice of the failure or failures and a
reasonable opportunity which in no case shall exceed thirty (30) days, to remedy
the failure (provided, however, that if the nature of the failure or default is
such that the same cannot reasonably be cured within the thirty (30) day period
allowed, Lessee shall not be deemed to be in default and Lessor shall not
exercise its rights under this Section 30.6 if Lessee shall, within such thirty
(30) day period, commence to cure and thereafter diligently prosecute the same
to completion), Lessor may enter upon the Leased Premises and perform or
contract for the performance of the repair, maintenance, or other Lessee
obligation, and Lessee shall pay Lessor for all direct and indirect costs
incurred in connection therewith within ten (10) days of receiving a bill
therefor from Lessor.
30.7 CUMULATIVE REMEDIES. The various rights, options, election powers, and
remedies of Lessor contained in this Article and elsewhere in this Lease shall
be construed as cumulative and no one of them exclusive of any others or of any
legal or equitable remedy which Lessor might otherwise have in the event of
breach or default, and the exercise of one right or remedy by Lessor
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shall not in any way impair its right to any other right or remedy.
30.8 DUTY TO MITIGATE. Notwithstanding anything to the contrary in this
Lease, each party shall have an affirmative obligation to use commercially
reasonable efforts to mitigate its damages (and in Lessor's case, the costs of
reletting) in the event of a default by the other party.
31. BANKRUPTCY
31.1 BANKRUPTCY EVENTS. If at any time during the Term there shall be filed
by or against Lessee in any court pursuant to any statute either of the United
States or of any state a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of Lessee's property, or if a receiver or trustee takes possession of
any of the assets of Lessee, or if the leasehold interest herein passes to a
receiver, or if Lessee makes an assignment for the benefit of creditors or
petitions for or enters into an arrangement (any of which are referred to herein
as "a bankruptcy event"), then the following provisions shall apply:
(a) At all events any receiver or trustee in bankruptcy or Lessee as
debtor in possession ("debtor") shall either expressly assume or reject this
Lease within sixty (60) days following the entry of an Order for Relief.
(b) In the event of an assumption of the Lease by a debtor, receiver or
trustee, such debtor, receiver or trustee shall immediately after such
assumption (1) cure any default or provide adequate assurances that defaults
will be promptly cured; and (2) compensate Lessor for actual pecuniary loss or
provide adequate assurances that compensation will be made for actual pecuniary
loss; and (3) provide adequate assurance of future performance.
For the purposes of this Section 31.1(b), adequate assurance of future
performance of all obligations under this Lease shall include, but is not
limited to:
(i) Written assurance that rent and any other consideration due under
the Lease shall first be paid before any other of Lessee's costs of operation of
its business in the Leased Premises are paid;
(ii) Written agreement that assumption of this Lease will not cause a
breach of any provision hereof including, but not limited to, any provision
relating to use or exclusivity in this or any other Lease, or agreement relating
to the Leased Premises, or if such a breach is caused, the debtor, receiver or
trustee will indemnify Lessor against such loss (including costs of suit and
attorneys' fees), occasioned by such breach;
(c) Where a default exists under the Lease, the party assuming the Lease
may not require Lessor to provide services or supplies incidental to the Lease
before its assumption by such trustee or debtor, unless Lessor is compensated
under the terms of the Lease for such services and supplies provided before the
assumption of such Lease.
(d) The debtor, receiver, or trustee may only assign this Lease in
accordance with the terms of Article 25 and if adequate assurance of future
performance by the assignee is provided, whether or not there has been a default
under the Lease. For the purpose hereof, adequate assurance of future
performance means written agreement that assignment of this Lease will not cause
a breach of any provision hereof including, but not limited to, any provision
relating to use or exclusivity in this or any other Lease or agreement relating
to the Leased Premises, and that if such a breach is caused, the debtor,
receiver or trustee will indemnify Lessor against such loss (including costs of
suit and attorney's fees), occasioned by such breach. Any consideration paid by
any assignee in excess of the rental reserved in the Lease shall be the sole
property of, and paid to, Lessor. Upon assignment by the debtor or trustee, the
obligations of the Lease shall be deemed to have been assumed and the assignee
shall execute an assumption agreement on request of Lessor.
(e) Lessor shall be entitled to the fair market value for the Leased
Premises and the services provided by Lessor (but in no event less than the
rental reserved in the Lease)
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subsequent to the commencement of a bankruptcy event.
(f) Lessor specifically reserves any and all remedies available to Lessor
in Article 30 hereof or at law or in equity in respect of a bankruptcy event by
Lessee to the extent such remedies are permitted by law.
32. SURRENDER OF LEASE
32.1 NO MERGER. The voluntary or other surrender of this Lease by Lessee,
or a mutual cancellation thereof, shall not work as a merger, and shall, at the
option of Lessor, terminate all or any existing subleases or subtenancies, or
may, at the option of Lessor, operate as an assignment to it of any or all such
subleases or subtenancies.
33. LESSOR'S EXCULPATION
33.1 LIMITED LIABILITY. In the event of default, breach, or violation by
Lessor (which term includes Lessor's partners, co-venturers, co-tenants,
officers, directors, trustees, employees, agents, or representatives) of any of
Lessor's obligations under this Lease, Lessor's liability to Lessee shall be
limited to its ownership interest in the Complex or the proceeds of a public
sale of such interest pursuant to foreclosure of a judgment against Lessor.
33.2 NO RECOURSE. Lessor (as defined in Section 33.1) shall not be
personally liable for any deficiency beyond its interest in the Complex. All
personal liability of all trustees, their employees, agents or representatives,
is expressly waived by Lessee.
34. ATTORNEYS' FEES
34.1 ACTIONS, PROCEEDINGS, ETC. Lessee hereby agrees to pay, as additional
rent, all attorneys' fees and disbursements, and all other court costs or
expenses of legal proceedings or other legal services which Lessor may incur or
pay out by reason of, or in connection with:
(a) Any action or proceeding brought by Lessor wherein Lessor obtains a
final judgment or award against Lessee (including arbitration) on account of any
default by Lessee in the observance or performance of any obligation under this
Lease including, but not limited to, matters involving payment of Rent and
additional Rent, alterations or other Lessee's work and subletting or
assignment;
(b) Any action or proceeding brought by Lessee against Lessor (or any
officer, partner, or employee of Lessor) in which Lessee fails to secure a final
judgment against Lessor;
(c) Any other appearance by Lessor (or any officer, partner, or employee
of Lessor) as a witness or otherwise in any action or proceeding whatsoever
involving or affecting Lessee or this Lease other than an action or proceeding
relating to a dispute between Lessor and Lessee; and; and
(d) Any alteration of the Leased Premises by Lessee, and all negotiations
with respect thereto.
In any action or proceeding referred to in Section 34.1, Lessee shall be
entitled to recover its reasonable attorneys' fees and costs if Lessee is the
prevailing party against Lessor.
34.2 SURVIVAL. Lessee's obligations under this Section shall survive the
expiration or any other termination of this Lease. This Section is intended to
supplement (and not to limit) other provisions of this Lease pertaining to
indemnities and/or attorneys' fees.
35. NOTICES
35.1 WRITING. All notices, demands and requests required or permitted to be
given or
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made under any provision of this Lease shall be in writing and shall be given or
made by (i) personal service, or (ii) by mailing same by registered or certified
mail, return receipt requested, postage prepaid, or (iii) by reputable courier
which provides written evidence of delivery, addressed to the respective party
at the address set forth in Section 1.2 of this Lease or at such other address
as the party may from time to time designate, by a written notice sent to the
other in the manner aforesaid.
35.2 EFFECTIVE DATE. Any such notice, demand or request ("notice") given by
registered or certified mail shall be deemed given or made upon receipt or
refusal to receive. Any notice given by personal delivery to the party at its
address as aforesaid shall be deemed given on the day on which delivery is made.
Notice given by a reputable courier service which provides written evidence of
delivery shall be deemed given upon receipt or refusal to receive.
35.3 AUTHORIZATION TO RECEIVE. Each person and/or entity whose signature is
affixed to this Lease as Lessee or as guarantor of Lessee's obligations
("obligor") designates such other obligor its agent for the purpose of receiving
any notice pertaining to this Lease or service of process in the event of any
litigation or dispute arising from any obligation imposed by this Lease.
36. SUBORDINATION
36.1 PRIORITY OF ENCUMBRANCES. This Lease, at Lessor's option, shall be
subordinate to any ground lease, mortgage, deed of trust, or any other
hypothecation for security now or hereafter placed upon the real property of
which the Leased Premises are a part and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Lessee's right to quiet possession of the Leased Premises shall not be disturbed
if Lessee is not in default and so long as Lessee shall pay the rent and observe
and perform all the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee or ground lessor
shall elect to have this Lease prior to the lien of its mortgage, deed of trust
or ground lease, and shall give written notice thereof to Lessee, this Lease
shall be deemed prior to such mortgage, deed of trust or ground lease, whether
this Lease is dated prior or subsequent to the date of said mortgage, deed of
trust or ground lease or the date of recording thereof.
36.2 EXECUTION OF DOCUMENTS. Lessee agrees to execute any documents
required to effectuate such subordination or to make this Lease prior to the
lien of any mortgage, deed of trust or ground lease, as the case may be, and
failing to do so within ten (10) days after written demand, does hereby make,
constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and in
Lessee's name, place and stead, to do so. It is understood by all parties that
Lessee's failure to execute the subordination documents referred to above may
cause Lessor serious financial damage by causing the failure of a financing or
sale transaction. At Lessee's request, Lessor shall obtain for the Lease Term
what is commonly known as a "nondisturbance" agreement which is intended to
protect Lessee's right to possession under this Lease for so long as Lessee
complies with the terms of this Lease and which shall be in such standard form
and substance as the lender or ground lessor at that time typically provides to
comparable tenants. Lessor agrees to use reasonable efforts to obtain
modifications to such standard nondisturbance agreements as Lessee may
reasonably request, provided that Lessee reimburses Lessor within ten (10) days
of Lessor's written demand for any attorneys' fees incurred by Lessor in
pursuing such requested modifications.
36.3 ATTORNMENT. Lessee shall attorn to any purchaser at any foreclosure
sale, or to any grantee or transferee designated in any deed given in lieu of
foreclosure.
37. ESTOPPEL CERTIFICATES
37.1 EXECUTION BY LESSEE. Within ten (10) days of request therefor by
Lessor, Lessee shall execute a written statement acknowledging the commencement
and termination dates of this Lease, that it is in full force and effect, has
not been modified (or if it has, stating such modifications) and providing any
other pertinent information as Lessor or its agent might reasonably request.
Failure to comply with this Article shall be a material breach of this Lease by
Lessee giving Lessor all rights and remedies under Article 30 hereof, as well as
a right to damages caused by the loss of
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a loan or sale which may result from such failure by Lessee.
37.2 FINANCING, SALE OR TRANSFER. If Lessor desires to finance, refinance,
sell, ground lease or otherwise transfer the Leased Premises, or any part
thereof, or the Building, Lessee hereby agrees, within ten (10) days of request
therefor by Lessor, to deliver to any lender or to any prospective buyer, ground
lessor or other transferee designated by Lessor such financial statements of
Lessee, any guarantor of this Lease and Lessee's parent company, if any, as may
be reasonably required by such party. Such statements shall include the past
three (3) years' financial statements of Lessee. All such financial statements
shall be received by Lessor in confidence and shall be used only for the
purposes herein set forth.
38. WAIVER
38.1 EFFECT OF WAIVER. The waiver by Lessor of any breach of any Lease
provision shall not be deemed to be a waiver of such Lease provision or any
subsequent breach of the same or any other term, covenant or condition therein
contained. The subsequent acceptance of rent hereunder by Lessor shall not be
deemed to be a waiver of any preceding breach by Lessee of any provision of this
Lease, other than the failure of Lessee to pay the particular rental so
accepted, regardless of Lessor's knowledge of such preceding breach at the time
of acceptance of such rent.
39. HOLDING OVER
39.1 MONTH-TO-MONTH TENANCY ON ACCEPTANCE. If Lessee should remain in
possession of the Leased Premises after the expiration of the Term and without
executing a new Lease, then, upon acceptance of Rent by Lessor, such holding
over shall be construed as a tenancy from month-to-month, subject to all the
conditions, provisions and obligations of this Lease as existed during the last
month of the Term hereof, so far as applicable to a month to month tenancy,
except that the Minimum Rent shall be equal to twice the Minimum Rent payable
immediately prior to the expiration or earlier termination of the Lease.
40. SUCCESSORS AND ASSIGNS
40.1 BINDING EFFECT. The covenants and conditions herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all of the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.
41. TIME
41.1 TIME OF THE ESSENCE. Time is of the essence of this Lease with respect
to each and every article, section and subsection hereof.
42. EFFECT OF LESSOR'S CONVEYANCE
42.1 RELEASE OF LESSOR. If, during the Term, Lessor shall sell its interest
in the Building or Complex of which the Leased Premises form a part, or the
Leased Premises, then from and after the effective date of the sale or
conveyance, provided that the transferee of Lessor assumes all of the Lessor's
obligations hereunder from and after the date of such sale or conveyance, Lessor
shall be released and discharged from any and all obligations and
responsibilities under this Lease, except those already accrued.
43. COMMON AREAS
43.1 Lessor shall maintain the Common Areas in similar condition to
comparable office parks (subject to reimbursement of Operating Costs pursuant to
Article 8 hereof), and may establish and enforce reasonable rules and
regulations concerning such areas as they are not inconsistent with this Lease,
close any of the Common Areas to whatever extent required in the opinion of
Lessor's counsel to prevent a dedication of any of the Common Areas or the
accrual of any rights of any
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person or of the public to the Common Areas, close temporarily any of the Common
Areas for maintenance purposes, and make changes to the Common Areas including,
without limitation, changes in the location of driveways, corridors, entrances,
exits, vehicular parking spaces, parking area, the designation of areas for the
exclusive use of others, the direction of the flow of traffic or construction of
additional buildings thereupon. Lessor may provide security for the Common Areas
but is not obligated to do so. Lessor's may exercise the rights reserved to it
in this Section 43.1, subject to not materially impairing Lessee's use and
enjoyment of the Leased Premises and the Common Areas and not unreasonably
interfering with the operation of Lessee's business within the Leased Premises.
44. TRANSFER OF SECURITY
44.1 TRANSFER TO PURCHASER. If any security be given by Lessee to secure
the faithful performance of all or any of the covenants of this Lease on the
part of Lessee, Lessor may transfer and/or deliver the security, as such, to the
purchaser of the reversion, in the event that the reversion be sold, and
thereupon Lessor shall be discharged from any further liability in reference
thereto.
45. LATE CHARGES
45.1 LATE PAYMENT BY LESSEE. Lessee acknowledges that late payment by
Lessee to Lessor of rent or any other payment due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult and impractical to fix. Such costs include, without
limitation, processing and accounting charges, and late charges that may be
imposed on Lessor by the terms of any encumbrance and note secured by any
encumbrance covering the Leased Premises. Therefore, if any installment of rent,
or any other payment due hereunder from Lessee is not received by Lessor when
due, Lessee shall pay to Lessor an additional sum of ten percent (10%) of such
rent or other charge as a late charge. The parties agree that this late charge
represents a fair and reasonable estimate of the cost that Lessor will incur by
reason of late payment by Lessee. Acceptance of any late charge shall not
constitute a waiver of Lessee default with respect to the overdue amount, or
prevent Lessor from exercising any other rights or remedies available to Lessor.
46. CORPORATE AUTHORITY
46.1 AUTHORIZATION TO EXECUTE. If Lessee is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
47. MORTGAGEE PROTECTION
47.1 NOTICE AND RIGHT TO CURE DEFAULT. Lessee agrees to give any
mortgagee(s) and/or trust deed holders, by registered mail, a copy of any notice
of default served upon Lessor, provided that prior to such notice Lessee has
been notified, in writing (by way of Notice of Assignment of Rents and Leases,
or otherwise), of the address of such mortgagees and/or trust deed holders.
Lessee further agrees that if Lessor shall have failed to cure such default
within the time provided for in this Lease, before Lessee may exercise any right
to terminate this Lease (but without limiting Lessee's other rights and remedies
with respect to a Lessor default), Lessee shall provide the mortgagees and/or
trust deed holders with an additional notice of default and its intent to
terminate and the mortgagees and/or trust deed holders shall have an additional
thirty (30) days from the date of such additional notice within which to cure
such default or, if such default cannot be cured within that time, then such
additional time as may be necessary if, within such thirty (30) days, any
mortgagee and/or trust deed holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such cure), in
which event this Lease shall not be terminated while such remedies are being so
diligently pursued.
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48. WAIVER OF STATUTES
48.1 WAIVER BY LESSEE. In this Lease, numerous provisions have been
negotiated by the parties, some of which provisions are covered by statute.
Whenever a provision of this Lease and a provision of any statute or other law
cover the same matter, the provisions of this Lease shall control. This waiver
applies to future statutes enacted in addition to or in substitution for the
statutes specified herein.
49. MISCELLANEOUS PROVISIONS
49.1 CAPTIONS. The captions of this Lease are for convenience only and are
not a part of this Lease and do not in any way limit or amplify the terms and
provisions of this Lease.
49.2 NUMBER AND GENDER. Whenever the singular number is used in this Lease
and when required by the context, the same shall include the plural, the plural
shall include the singular, and the masculine gender shall include the feminine
and neuter genders, and the word "person" shall include corporation, firm or
association. If there be more than one Lessee, the obligations imposed under
this Lease upon Lessee shall be joint and several.
49.3 MODIFICATIONS. This instrument contains all of the agreements,
conditions and representations made between the parties to this Lease and may
not be modified orally or in any other manner than by an agreement in writing
signed by all of the parties to this Lease.
49.4 PAYMENTS. Except as otherwise expressly stated, each payment required
to be made by Lessee shall be in addition to and not in substitution for other
payments to be made by Lessee.
49.5 SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
49.6 NO OFFER. The preparation and submission of a draft of this Lease by
either party to the other shall not constitute an offer, nor shall either party
be bound to any terms of this Lease or the entirety of the Lease itself until
both parties have fully executed a final document and an original signature
document has been received by both parties. Until such time as described in the
previous sentence, either party is free to terminate negotiations with no
obligation to the other.
49.7 DISPUTED SUMS. Under the terms of this Lease numerous charges are and
may be due from Lessee to Lessor including, without limitation, Operating Costs
which include Real Property Taxes, insurance reimbursement and other items of a
similar nature including, at Lessor's option, advances made by Lessor in respect
of Lessee's default. In the event that at any time during the Term there is a
bona fide dispute between the parties as to the amount due for any of such
charges claimed by Lessor to be due, the amount demanded by Lessor shall be paid
by Lessee until the resolution of the dispute between the parties or by
litigation. Failure by Lessee to pay the disputed sums until resolution shall
constitute a default under the terms of the Lease. Upon the resolution of the
dispute, the settlement shall be retroactive and Lessor within ten (10) days
thereafter shall refund to Lessee any sums overpaid by Lessee and shall also pay
Lessee interest on such overpaid amounts, which shall be deemed to have accrued
from the date of Lessee's overpayment until Lessor's repayment at the interest
rate specified in Section 49.16.
49.8 [Intentionally omitted.]
49.9 LIGHT, AIR AND VIEW. No diminution of light, air, or view by any
structure which may hereafter be erected (whether or not by Lessor) shall
entitle Lessee to any reduction of Rent, result in any liability of Lessor to
Lessee, or in any other way affect this Lease or Lessee's obligations hereunder.
49.10 PUBLIC TRANSPORTATION. Lessee shall comply with all requirements of
any local transportation management ordinance.
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49.11 RULES AND REGULATIONS. Lessee agrees to comply with all reasonable
rules and regulations adopted and promulgated by Lessor and applicable to all
tenants in the Complex for the lawful, orderly, clean, safe, aesthetic, quiet,
and beneficial use, operation, maintenance, management, and enjoyment of the
Complex. Lessor shall have no liability for violation by any other tenant in the
Complex of any rules or regulations, nor shall such violation or waiver thereof
excuse Lessee from compliance. The initial rules and regulations concerning the
Complex are attached hereto as Exhibit F. Lessor reserves the right to make
additional reasonable rules affecting the Complex throughout the Term hereof,
provided such additional rules and regulations shall not conflict in any
material manner with any rights granted to Lessee under this Lease. All delivery
and dispatch of supplies, fixtures, equipment and furniture shall be by means
and during hours established by Lessor. Lessee shall not at any time park its
trucks or other delivery vehicles in the Common Areas, except in such parts
thereof as from time to time designated by Lessor.
49.12 JOINT AND SEVERAL LIABILITY. Should Lessee consist of more than one
person or entity, they shall be jointly and severally liable on this Lease.
49.13 SURVIVAL OF OBLIGATIONS. All obligations of either party which may
accrue or arise during the Term or as a result of any act or omission of such
party Lessee during said Term shall, to the extent they have not been fully
performed, satisfied or discharged, survive the expiration or termination of
this Lease.
49.14 REAL ESTATE BROKERS. Lessor and Lessee each represents and warrants
to the other party that it has not authorized or employed, or acted by
implication to authorize or employ, any real estate broker or salesman to act
for it in connection with this Lease, except for the brokers expressly
identified in Section IV of the Addendum to Lease Agreement (the "Designated
Brokers"). Lessor and Lessee shall each indemnify, defend and hold the other
party harmless from and against any and all claims by any real estate broker or
salesman, other than the Designated Brokers, whom the indemnifying party
authorized or employed, or acted by implication to authorize or employ, to act
for the indemnifying party in connection with this Lease.
49.15 NONLIABILITY OF LESSOR FOR APPROVALS. Except as may otherwise be
expressly stated by a provision of this Lease, and only to the extent so stated,
the consent or approval, whether express or implied, or the act, failure to act
or failure to object, by Lessor in connection with any plan, specification,
drawing, proposal, request, act, omission, notice or communication
(collectively, "act") by or for, or prepared by or for, Lessee, shall not create
any responsibility or liability on the part of Lessor ( and shall not constitute
a representation or warranty by Lessor) with respect to the completeness,
sufficiency, efficacy, propriety, quality or legality of such act.
49.16 INTEREST ON PAST DUE AMOUNTS. If any sum due Lessor from Lessee is
not received by Lessor within five (5) calendar days after the date such sum is
due and payable, such sum shall bear interest from the due date until paid by
Lessee at the rate of two percent (2%) above the Prime Rate (as herein defined),
not to exceed the maximum rate of interest allowed by law in the state where the
Leased Premises are located, and such interest shall be deemed to be additional
rent. "Prime Rate" means the highest rate charged by Bank of America NT&SA, San
Francisco Main Office, on short-term unsecured loans to its most creditworthy
corporate borrowers.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the
day and year first written above.
LESSOR: LESSEE:
BEDFORD PROPERTY INVESTORS, INC., INFOWAVE SOFTWARE, INC.
a Maryland corporation a Canadian corporation
By:__________________________ By:__________________________
Name:________________________ Name:________________________
Its:_________________________ Its:_________________________
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FOR OFFICE USE ONLY:
PREPARED BY:
REVIEWED BY:
APPROVED BY:
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STATE OF______________)
) ss.
COUNTY OF ____________)
I certify that I know or have satisfactory evidence that_____________ is the
person who appeared before me and said person acknowledged that he/she signed
this instrument, on oath stated that he/she is authorized to execute the
instrument and acknowledged it as the______________________________ (title) of
Infowave Software, Inc., to be the free and voluntary act of such party for the
uses and purposes mentioned in the instrument.
DATED:__________________________
______________________________________
Notary Public_________________________
Print name____________________________
Residing at___________________________
My appointment expires________________
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STATE OF______________)
) ss.
COUNTY OF ____________)
I certify that I know or have satisfactory evidence that_________________
is the person who appeared before me and said person acknowledged that he/she
signed this instrument, on oath stated that he/she is authorized to execute the
instrument and acknowledged it as the______________________________ (title) of
Bedford Property Investors, Inc. to be the free and voluntary act of such party
for the uses and purposes mentioned in the instrument.
DATED:__________________________
______________________________________
Notary Public_________________________
Print name____________________________
Residing at___________________________
My appointment expires________________
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EXHIBIT A
LEGAL DESCRIPTION OF COMPLEX
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EXHIBIT B
PLAN OF THE COMPLEX
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EXHIBIT C
FLOOR PLAN OF THE LEASED PREMISES
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EXHIBIT D
CONSTRUCTION OBLIGATIONS
1. DEFINED TERMS. All capitalized terms referred to in this Exhibit D (this
"Agreement") not defined below shall have the same meaning as defined in the
Lease of which this Agreement forms a part.
2. CONSTRUCTION OF TENANT IMPROVEMENTS. Lessor shall construct the Tenant
Improvements in accordance with this Agreement and the Approved Construction
Plans (as hereinafter defined.)
3. DEFINITIONS. Each of the following terms shall have the following
meaning:
"BASE TENANT IMPROVEMENT ALLOWANCE" shall mean the amount to be contributed
by Lessor toward Tenant Improvement Cost. The Base Tenant Improvement Allowance
shall be an amount equal to Two Hundred Nineteen Thousand Eight Hundred Seventy
and No/100 Dollars ($219,870.00)
"BUILDING" shall mean the Building Shell and the Tenant Improvements.
"BUILDING SHELL" shall mean the basic minimum enclosure of the Building
consisting of the foundation and floors, structural framework, roof coverings,
exterior walls and exterior doors and windows, basic fire sprinkler systems,
underground electrical power stubs, base electrical to the building electrical
room plumbing system stubs, the site work, parking lots and landscaping
appurtenant to the Complex, but excluding all Tenant Improvements. In addition,
the Building Shell includes (a) Restrooms installed on each floor, including
building common showers on the first floor, (b) fully supply ducted VAV-HVAC
system with approximately 180 tons of cooling capacity and thirty (30) separate
zones completely installed, (c) the installation of the thirty (30) VAV boxes,
(d) Circon Technology Corporation DDC System utilizing Echelon Communication
Protocol, (e) 2000-amp electrical service installed to the Building, (f)
building standard ceiling grid. Armstrong "Second Look II) Tegular tiles "on the
floor" ready for installation, (g) Electrical "J" boxes for ceiling fixtures
installed, (h) Eighteen set deep cell parabolic troffer fixtures stacked "on the
floor" within the tenant space, (i) all fire safety equipment including
sprinklers installed and turned down, (j) monitoring of the exterior entries to
the building by a central monitoring service, (and k)_building lobby, restrooms,
common elevator lobbies and hallways for each floor.
"CONSTRUCTION PLANS" shall mean the complete plans and specifications for
the construction of the Tenant Improvements, which shall be in substantial
compliance with the Approved Preliminary Plans, consisting of all architectural,
engineering, mechanical and electrical drawings and specifications which are
required to obtain all building permits, licenses and certificates from the
applicable governmental authority(ies) for the construction of the Tenant
Improvements. The Construction Plans shall be prepared by Space Planner, and in
all respects shall be in substantial compliance with all applicable laws, rules,
regulations, building codes for the City of Bothell.
"CONTRACTOR" shall mean Foushee & Associates or such other qualified
contractor designated by Lessee on or before _____________________________,
provided that any such other contractor shall be subject to Lessor's approval..
Contractor shall be responsible for construction of the Building Shell and the
Tenant Improvements.
"FORCES MAJEURE" shall mean any delay resulting from or caused by an Act of
God, fire, earthquake, flood, explosion, action of the elements, war, invasion,
insurrection, riot, mob violence, sabotage, malicious mischief, inability to
procure or general shortage of labor, equipment, facilities, materials, or
supplies in the open market, inability to obtain or delays in obtaining
necessary government approvals, licenses or permits, failure of transportation,
strike, lockout, action
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of labor unions, litigation not with the reasonable control of Lessor,
condemnation, requisition, law, order or regulation of government or civil,
military or naval authority, or any other cause (excluding financial inability)
whether similar or dissimilar to the foregoing not within the reasonable control
of Lessor. The time for performance of any obligation of Lessor to construct the
Tenant Improvements shall be extended at Lessor's election by the period of any
delay caused by any of the foregoing Forces Majeure events.
"LESSEE DELAY" shall mean any delay in the construction of the Tenant
Improvements, or any delays in approvals or submissions required hereunder
beyond the time period provided for in this Agreement caused by (i) any changes
in the nature or scope of the Tenant Improvements requested by Lessee (including
Change Requests, and any changes in the Approved Preliminary Plan and/or
Approved Construction Plans for the Tenant Improvements), (ii) Lessee's failure
to timely provide Lessor with any needed information on the Tenant Improvements,
or (iii) Lessee's failure to timely review and approve any Preliminary Plans,
Construction Plans or finish specifications for the Tenant Improvements. In the
event of any Lessee Delay, this Lease shall be deemed to have commenced and the
obligations of Lessee under the Lease, including without limitation the
obligation to pay all rent due thereunder, shall have been deemed commence on
the date the Lease would otherwise have commenced had it not been for Lessee
Delay. Any and all costs and expenses incurred by Lessor as a result of any
Lessee Delay, including without limitation, architectural, engineering and space
planning fees, permit resubmittal fees, increased Tenant Improvement Costs, and
the like shall be the sole responsibility and obligation of Lessee and shall be
reimbursed by Lessee to Lessor upon demand therefore.
"LESSEE'S PERSONAL PROPERTY" shall mean all personal property constructed
or installed in the Leased Premises by Lessee at Lessee's expense, including
furniture, fixtures and equipment, but excluding Tenant Improvements.
"PUNCHLIST ITEMS" is defined in Section 11 below.
"SPACE PLANNER" shall mean ____________. Space Planner shall be employed by
Lessor and all costs of Space Planner will be the responsibility of Lessee, as
part of the Tenant Improvement Cost.
"SUBSTANTIAL COMPLETION" or "SUBSTANTIALLY COMPLETE" shall be the date that
the construction of the Tenant Improvements is sufficiently complete so that
Lessee can legally occupy and utilize the Leased Premises, subject only to minor
"punchlist" items, the completion of which will not materially affect Lessee's
use and occupancy of the Leased Premises. Lessor shall cause all Punchlist Items
to be completed as provided in Section 11 below.
"TENANT IMPROVEMENTS" shall mean all interior portions of the Building to
be constructed by Lessor for Lessee pursuant to this Agreement and the Approved
Construction Plans, including but not limited to, electrical systems, heating,
ventilating and air conditioning systems ("HVAC"), plumbing and fire sprinkler
systems (to the extent the electrical, HVAC, plumbing and fire sprinkler systems
are not included in the Building Shell), interior partitions, millwork, floor
coverings, acoustical ceilings, interior painting, and similar items.
"TENANT IMPROVEMENT COST" shall mean the costs for construction and
installation of the Tenant Improvements, inclusive of the fees charged by Space
Planner. The costs for construction and installation shall include, but not be
limited to, the following:
(a) architectural / space planning fees and costs charged by Space
Planner in the preparation of the Preliminary Plans and Construction Plans;
(b) any and all other fees and costs charged by architects, engineers and
consultants in the preparation of the Construction Plans, including mechanical,
electrical, plumbing and structural drawings and of all other aspects of the
Construction Plans, and for processing governmental applications and
applications for payment, observing construction of the work, and
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other customary engineering, architectural, interior design and space planning
services;
(c) surveys, reports, environmental and other tests and inspections of
the site and any improvements thereon;
(d) labor, materials, equipment and fixtures supplied by the Contractor,
its subcontractors and/or materialmen;
(e) the furnishing and installation of all HVAC duct work, terminal
boxes, distributing diffusers and accessories required for completing the
heating, ventilating and air conditioning system in the Leased Premises,
including costs of meter and key control for after-hour usage , if required by
Lessor;
(f) all electrical circuits, wiring, lighting fixtures, and tube outlets
furnished and installed throughout the Leased Premises, including costs of meter
and key control for after-hour electrical power usage;
(g) all window and floor coverings in the Leased Premises:
(h) all fire and life safety control systems, such as fire walls,
sprinklers and fire alarms, including piping, wiring and accessories installed
within the Leased Premises;
(i) all plumbing, fixtures, pipes and accessories installed within the
Leased Premises;
(j) fees charged by the city and/or county where the Building is located
(including, without limitation, fees for building permits and plan checks)
required for the construction of the Tenant Improvements in the Leased Premises;
(k) all taxes, fees, charges and levies by governmental and
quasi-governmental agencies for authorization, approvals, licenses and permits;
and all sales, use and excise taxes for the materials supplied and services
rendered in connection with the installation and construction of the Tenant
Improvements;
(l) all costs and expenses incurred to comply with all laws, rules,
regulations or ordinances of any governmental authority in connection with the
construction of the Tenant Improvements.
Tenant Improvement Costs shall not include the cost of any of Lessee's
Personal Property or the installation thereof, which shall be performed by
Lessee at its sole cost and expense.
4. SPACE PLAN FOR TENANT IMPROVEMENTS.
4.1 PREPARATIONS BY SPACE PLANNER. The space plan ("Preliminary Plans")
for the Tenant Improvements will be prepared by Space Planner. Within five (5)
business days following execution of the Lease, Lessee shall meet with Space
Planner to develop the Preliminary Plans. As soon as reasonably practicable
after meeting with Lessee, Space Planner shall develop the Preliminary Plans and
shall provide them to Lessee and Lessor for review. Lessor shall provide Lessee
with a space planning allowance of $5,496.75, which shall be paid directly to
Space Planner (or reimbursed to Lessee to the extent Lessee has already paid
Space Planner in full) upon issuance of the building permit for the Tenant
Improvements.
4.2 REVIEW AND APPROVAL. Lessor and Lessee will either approve the
Preliminary Plans in writing, or note changes to be made to the Preliminary
Plans in writing, and shall provide such written approval or proposed changes to
Space Planner and the other party within five (5) business days after receipt of
the Preliminary Plans from Space Planner. Failure to timely
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send notice shall be deemed approval of the Preliminary Plans. In the event
changes are necessary, Space Planner shall make such changes following receipt
of the written changes from Lessor and/or Lessee and shall provide the revised
Preliminary Plans to Lessee and Lessor for approval in writing.
4.3 APPROVED PRELIMINARY PLANS. The Preliminary Plans which are approved
by both Lessor and Lessee in writing ("Approved Preliminary Plans"), and shall
be used by Space Planner to develop the Construction Plans.
5. CONSTRUCTION PLANS FOR TENANT IMPROVEMENTS.
5.1 PREPARATION BY SPACE PLANNER. Within fifteen (15) business days
following execution of the Lease, Space Planner shall provide Lessee with
completed Construction Plans showing (i) Lessee's partition layout and the
location and details; (ii) the location of telephone and electrical outlets;
(iii) the location, style and dimension of any desired special lighting; (iv)
the location, design and style of all doors, floor coverings and wall coverings;
(v) the location, design, style and dimensions of cabinets and casework; and
(vi) all details, including "cut sheets," for the Tenant Improvements, which
shall be in conformity with the Approved Preliminary Plans. The Construction
Plans shall be in a form satisfactory to appropriate governmental authorities
responsible for issuing permits and licenses required for construction of the
Tenant Improvements.
5.2 LESSEE'S REVIEW OF CONSTRUCTION PLANS FOR TENANT IMPROVEMENTS. Within
five (5) business days after receipt of the Construction Plans, Lessee shall
notify Lessor in writing of any reasonable changes necessary to bring the
Construction Plans into substantial conformity with the Approved Preliminary
Plans. Failure of Lessee to deliver to Lessor written notice of the changes
within the five (5) business day period shall constitute approval by Lessee of
the Construction Plans. If any changes requested by Lessee are reasonably
necessary to bring the Construction Plans into substantial conformity with the
Approved Preliminary Plans, Space Planner shall make such changes and the
revised Construction Plans shall be deemed approved by Lessee.
6. CONSTRUCTION COSTS. Once the Construction Plans have been reviewed and
approved by Lessor and Lessee, Contractor shall deliver to Lessor and Lessee its
bid price for constructing the Tenant Improvements (the "Bid") in conformity
with the Construction Plans. Within five (5) business days following delivery of
the Bid, Lessee shall provide Lessor, in writing, with its approval or
disapproval of the amount of the Bid. In the event that Lessee approves the Bid
(the "Approved Bid"), it shall be deemed that Lessee has agreed to pay all
Tenant Improvement Costs up to the total amount of the Approved Bid. In the
event that Lessee disapproves the Bid, Lessee shall as soon as practicable
thereafter, meet with Space Planner and the Contractor and revise the
Construction Plans to reduce the amount of the Bid. Any changes to the
Construction Plans proposed by Lessee in order to reduce the amount of the Bid
shall require Lessor's written consent, not to be unreasonably withheld. Once
Lessee has approved the Bid in writing and Lessor and Lessee have approved in
writing the revised Construction Plans the Approved Bid is based upon (the
"Approved Construction Plans"), it shall be deemed that Lessee has agreed to pay
all Tenant Improvement Costs in excess of the Base Tenant Improvement Allowance.
7. BUILDING PERMIT. Lessor shall be responsible for obtaining a building
permit ("Building Permit") for the Tenant Improvements. To the extent requested
by Lessor, Lessee shall assist Lessor in obtaining the Building Permit. After
approval by Lessor and Lessee of the Construction Plans as provided above,
Lessor or its Contractor shall submit the Approved Construction Plans to the
appropriate governmental body for plan checking and a Building Permit. Lessor,
with Lessee's cooperation, shall cause to be made any change in the Approved
Construction Plans necessary to obtain the Building Permit.
8. CHANGE REQUESTS.
8.1 APPROVAL. No changes to the Approved Construction Plans requested by
Lessee (each, a "Change Request") shall be made without Lessor's prior written
approval, which
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approval shall not be unreasonably withheld or delayed, subject to the
following:
(i) No Change Request shall affect the structure or operating systems
of the Building;
(ii) Lessor may require Lessee to pay to Lessor within thirty (30) days
of written notice from Lessor, the amount by which the Tenant Improvement Cost,
after implementation of the Change Request, is reasonably estimated by Lessor to
exceed the Base Tenant Improvement Allowance, including without limitation,
increases in construction costs and other charges payable hereunder caused by
any delay in construction of the Tenant Improvements as a result of a Change
Request;
(iii) A Change Request shall constitute an agreement by Lessee to any
reasonable delay in completion of the Tenant Improvements caused by Lessor's
reviewing, processing and implementing the Change Request, all of which delays
shall be deemed a Lessee Delay;
(iv) Lessor shall accept only Change Requests signed by Lessee's
representative, . Lessee may from time to time designate a different
representative to authorize ________________________ Change Requests.
(v) Any delays in completion of the Tenant Improvements caused as a
result of a Change Request shall not delay the commencement of the term of the
Lease from the date the term of the Lease would otherwise have commenced had it
not been for the Change Request. Lessee agrees that the Lease and all
obligations of Lessee thereunder (including without limitation the obligation to
pay rent) shall commence on the date that the term of the Lease would otherwise
have commenced had it not been for the Change Request.
8.2 PROCEDURE. Except with respect to the mechanical and electrical
systems of the Building, within five (5) business days after receipt of a
written Change Request from Lessee, Lessor shall notify Lessee verbally of
Lessor's approval or disapproval of the Change Request; Lessor shall confirm, in
writing, Lessor's approval or disapproval within five (5) business days after
receipt of Lessee's written Change Request. All reasonable costs paid by Lessor
to unaffiliated parties in connection with review of proposed Change Requests
shall be part of the Tenant Improvement Cost. With respect to Change Request
related to the Building's mechanical and electrical systems, Lessor shall have
five (5) business days to respond orally and ten (10) business days to confirm
its decision in writing. If Lessor fails to notify Lessee of Lessor's approval
of the Change Request within the required period, the Change Request shall be
deemed approved.
8.3 PERIOD OF REVIEW. The period of Lessor's review of a proposed Change
Request, and the period during which Lessee has the right to revoke a Change
Request, shall be deemed Lessee Delays.
8.4 MINOR CHANGES IN WORK. Lessor shall have the authority, without the
consent of Lessee, to order any changes to the Tenant Improvements required by
applicable laws or regulations, and to order minor changes in the Tenant
Improvements not involving an increase in cost to Lessee, a delay in the
completion of the Tenant Improvements or a diminution in the quality of the
Tenant Improvements. Lessor shall use reasonable efforts to give Lessee notice
of such minor changes. Delays caused by Lessor's compliance with laws or
regulations shall not be deemed delays within Lessor's control, and Lessor shall
have no responsibility or liability with respect thereto.
9. PAYMENT OF CONTRACTOR. Once Lessor and Lessee have agreed upon the
Approved Bid, and a contract for the construction of the Tenant Improvements has
been entered into with the Contractor, Lessor shall be responsible for making
monthly progress payments to Contractor in accordance with the construction
contract, subject to reimbursement by Lessee pursuant to the following
procedure. Once the Approved Bid has been agreed upon, if the total Approved Bid
is in excess of the Base Tenant Improvement Allowance, Lessee shall reimburse
Lessor each month,
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within twenty (20) days of receipt of bills or invoices representing the current
months' payment obligation to the Contractor (the "Monthly Payment"), for that
portion of the Monthly Payment determined by taking a fraction, the numerator of
which is the difference between the Bid Price and the Base Leasehold Improvement
Allowance, and the denominator of which is the Approved Bid, and multiplying the
Monthly Payment by such fraction. Lessor shall have no obligation to pay
Contractor unless and until Lessor shall have received such sum from Lessee. Any
delays in construction of the Tenant Improvements caused as a result of Lessee's
failure to timely Lessor as provided herein, shall be deemed to be a Lessee
Delays for which Lessee shall be solely responsible.
10. COMMENCEMENT AND COMPLETION OF TENANT IMPROVEMENTS. As soon as the
Construction Plans have been prepared, reviewed and approved as specified
herein, Lessor has obtained the Building Permit and other necessary
authorizations for the construction of the Tenant Improvements from the City of
Bothell and any other governmental, quasi-governmental or regulatory agency,
Lessor and Lessee have agreed upon the Approved Bid and Lessor has entered into
a contract with the Contractor for the construction of the Tenant Improvements,
Lessor shall cause the construction of the Tenant Improvements to commence and
shall diligently pursue same until completion.
11. PUNCHLIST INSPECTION AND COMPLETION. No later than five business days
after notice from Lessor that such Tenant Improvements are Substantially
Complete, Lessee shall inspect the Premises and identify in writing to Lessor
any items that are not complete, are defective or are at variance with the
Construction Plans ("Punchlist Items") . If Lessee fails to so inspect the
Tenant Improvements within such period and provide Lessor with a written list of
Punchlist Items, Lessee shall be deemed to have accepted the condition of the
Tenant Improvements. The existence of Punchlist Items shall not delay
Substantial Completion from having occurred or delay the Commencement Date or
Rent Commencement Date under the Lease unless those Punchlist Items are so
material in nature that the existence of such Punchlist Items or the disruption
likely to be caused by Lessor's correction of such Punchlist Items would
materially and adversely impair Lessee's ability to occupy and use the Premises.
Lessor shall proceed to complete the Punchlist Items, if any, arising out of the
Punchlist Inspection, as soon as soon as reasonably practicable and in any event
within 30 days following the Substantial Completion Date, except for those items
that, despite Lessor's diligent and reasonable efforts, require additional time
due to the unavailability of materials within such 30 day period.
12. PAYMENT OF ADDITIONAL COSTS. Following Substantial Completion of the
Tenant Improvements and determination of the total Tenant Improvement Cost, to
the extent the Tenant Improvement Cost exceeds the Base Tenant Improvement
Allowance (the "Additional Costs"), Lessee shall be solely responsible for
payment of such Additional Costs. Lessee shall pay to Lessor, within ten (10)
days after written notice from Lessor (accompanied by statement evidencing such
Additional Costs incurred), the amount of the Additional Costs. Lessee shall
have the right to approve or reject any change order giving rise to Additional
Costs prior to Lessor committing to the same.
13. IMPORTANCE OF TIME PERIODS. The time periods set forth in this
Agreement are to be strictly adhered to and extensions of time shall be granted
only when the circumstances are such that it is clear that the party requesting
the additional time is without fault as to the delay.
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EXHIBIT E
ACKNOWLEDGEMENT OF COMMENCEMENT
This Acknowledgement of Commencement is made as of _______________, 199_, with
reference to that certain Lease Agreement (hereinafter referred to as the
"Lease") dated _____________, 199_, by and between Bedford Property Investors,
Inc., as "Lessor" therein, and ___________________ as "Lessee", for the Leased
Premises situated at __________________________________________.
The undersigned hereby confirms the following:
1. That the Lessee accepted possession of the Leased Premise on
_______________, 199_ and acknowledges that, subject to Lessor's completion of
the Punchlist Items, if any previously identified by Lessee, the Leased Premises
are as represented by Lessor and in good order, condition and repair, and that
the improvements, if any, required to be constructed for Lessee by Lessor under
the Lease have been so constructed and are satisfactorily completed in all
respects.
2. That all conditions of said Lease to be performed by Lessor prerequisite
to the full effectiveness of said Lease have been satisfied and that the Lessor
has fulfilled all of its duties of an inducement nature.
3. That in accordance with the provisions of said Lease the commencement
date of the Term is ________________________ , and that, unless sooner
terminated, the original Term thereof expires on ____________________________.
4. That said Lease is in full force and effect and that the same represents
the entire agreement between Lessor and Lessee concerning said Lease, except as
follows: _______________________________.
5. That there are no existing defenses which Lessee has against the
enforcement of said Lease by Lessor, and no offsets or credits against rentals,
except as follows: _______________________________.
6. That the minimum rental obligation of said Lease is presently in effect
and that all rentals, charges and other obligations on the part of Lessee under
said lease commenced to accrue on _____________________.
7. That the undersigned has not made any prior assignment, hypothecation or
pledge of said Lease or of the rents hereunder, except as follows:
_______________________________.
LESSEE:
By:________________________________
By:________________________________
Date:______________________________
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EXHIBIT F
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed or printed or affixed on the Building or to any part thereof, or which
is visible from the outside of the Building, without the written consent of
Lessor, first had and obtained and Lessor shall have the right to remove any
such sign, placard, picture, advertisement, name or notice without notice to and
at the expense of Lessee. All approved signs or lettering on doors shall be
printed, affixed or inscribed at the expense of Lessee by a person approved by
Lessor.
2. If a directory is located at the Building, it is provided exclusively for the
display of the name and location of Lessee only and Lessor reserves the right to
exclude any other names therefrom.
3. The sidewalks, passages, exits, entrances, and stairways in and around the
Building shall not be obstructed by Lessee or used by it for any purpose other
than for ingress to and egress from the Premises. The passages, exits,
entrances, stairways and roof are not for the use of the general public and
Lessor shall in all cases retain the right to control and prevent access thereto
by all persons whose presence in the judgement of Lessor shall be prejudicial to
the safety, character, reputation and interests of the Building and its tenants,
provided that nothing herein contained shall be construed to prevent such access
to persons with whom Lessee normally deals in the ordinary course of Lessee's
business unless such persons are engaged in illegal activities. Neither Lessee
nor any employees or invitees of Lessee shall go upon the roof of the Building.
4. Lessee shall not be permitted to install any additional lock or locks on any
door in the Building unless written consent of Lessor shall have first been
obtained. Two keys will be furnished by Lessor for every room.
5. The toilets and urinals shall not be used for any purpose other than those
for which they were constructed, and no rubbish, newspapers or other substances
of any kind shall be thrown into them. Waste and excessive or unusual use of
water shall not be allowed. Lessee shall be responsible for any breakage,
stoppage or damage resulting from the violation of this rule by Lessee or its
employees or invitees.
6. Lessee shall not overload the floor of the Leased Premises or mark, drive
nails, screw or drill into the woodwork or in any way deface the Leased Premises
or any part thereof. Unless Lessor otherwise agrees, Lessee shall be responsible
for patching, painting and priming any nail or screw holes in the walls at the
time that Lessee surrenders the Premises.
7. Lessee shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in any manner offensive or objectionable to Lessor or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with Lessees or those having business therein.
8. The Leased Premises shall not be used for the storage of merchandise, for
washing clothes, for lodging, or for any improper, objectionable or immoral
purposes.
9. Lessee shall not use or keep in the Leased Premises or the Building any
kerosene, gasoline, or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Lessor.
10. Lessor will direct electricians as to the manner and location in which
telephone and telegraph wires are to be introduced. No boring or cutting for
wires will be allowed without the consent of Lessor. The location of telephones,
call boxes, and other office equipment affixed to the Premises shall be subject
to the approval of Lessor.
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11. Lessee shall not lay linoleum, tile, carpet or other similar floor covering
so that the same shall be affixed to the floor of the Leased Premises in any
manner except as approved by Lessor. The expense of repairing any damage
resulting from a violation of this rule or removal of any floor covering shall
be borne by Lessee.
12. Any window covering desired by Lessee shall be approved by Lessor.
13. Lessor reserves the right to exclude or expel from the Building any person
who, in the judgement of Lessor, is intoxicated or under the influence of liquor
or drugs, or who shall in any manner do any act in violation of the rules and
regulations of the Building.
14. Canvassing, soliciting and peddling is prohibited in the Building and Lessee
shall cooperate to prevent the same. Lessee shall not disturb, solicit, or
canvass any occupant of the Building.
15. Without the written consent of Lessor, Lessee shall not use the name of the
Building in connection with or in promoting or advertising the business of
Lessee except as Lessee's address.
16. Lessee shall not permit any contractor or other person making any
alterations, additions or installations within the Leased Premises to use the
hallways, lobby, or corridors as storage or work areas without the prior written
consent of Lessor. Lessee shall be liable for and shall pay the expense of any
additional cleaning or other maintenance required to be performed by Lessor as a
result of the transportation or storage of material or work performed within the
Building by or for Lessee.
17. Lessee shall be entitled to use parking spaces as mutually agreed upon
between Lessee and Lessor subject to such reasonable conditions and regulations
as may be imposed from time to time by Lessor. Lessee agrees that vehicles of
Lessee or its employees or agents shall not park in driveways nor occupy parking
spaces or other areas reserved for any use such as Visitors, Delivery, Loading,
or other tenants. Lessor or its agents shall have the right to cause or be
removed any car of Lessee, its employees or agents, that may be parked in
unauthorized areas, and Lessee agrees to save and hold harmless Lessor, its
agents and employees from any and all claims, losses, damages and demands
asserted or arising in respect to or in connection with the removal of any such
vehicle. Lessee, its employees, or agents shall not park campers, trucks or cars
on the Building parking areas overnight or over weekends. Lessee will from time
to time, upon request of Lessor, supply Lessor with a list of license plate
numbers of vehicles owned or operated by its employees and agents.
18. Lessor is not responsible for the violation of any rule contained herein by
any tenants.
19. Lessor may waive any one or more of these rules for the benefit of any
particular tenant, but no such waiver shall be construed as a waiver of Lessor's
right to enforce these rules against any or all tenants occupying the Building.
20. Lessee is responsible for purchasing and installing a security system if
required by law or ordinance. The cost of purchasing , installing, maintaining
and operating any such system shall be at the sole cost and expense of Lessee.
21. The display, carrying, and use of pistols, rifles, shotguns and other
firearms is prohibited in and about the Building , the parking lots and other
common areas, except for authorized municipal, state and federal law enforcement
personnel. Lessee and its employees, agents and invitees shall not display,
carry or use any firearms within the Building, parking lots or other common
areas.
22. Lessor reserves the right to make modifications hereto and such other and
further rules and regulations as in its sole judgement may be required for the
safety, care and cleanliness of the Leased Premises and the Building and for the
preservation of good order therein. Lessee agrees to abide by all such rules and
regulations so long as the same are reasonable and consistent with the Lease.
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Seattle Form
<PAGE> 56
EXHIBIT G
LETTER OF CREDIT
[BANK LETTERHEAD]
__________________, 199__
BEDFORD PROPERTY INVESTORS, INC.
270 LAFAYETTE CIRCLE
LAFAYETTE, CA 94549
Attention: Legal
Re: Highlands Campus Tech Centre - Building A
IRREVOCABLE LETTER OF CREDIT No. ______________________
Gentlemen:
We hereby issue our irrevocable standby letter of credit ("Letter of Credit") in
your favor in the amount of One Hundred Fifty Thousand and No/100ths Dollars
($150,000.00). The following are the terms of this Letter of Credit:
1. An amount equal to One Hundred Fifty Thousand and No/100ths Dollars
($150,000.00) is available against presentation of certification purportedly
signed by an officer of Bedford Property Investors, Inc. ("BPI") stating that
Infowave Software, Inc. ("Lessee") is in default under the terms of the written
lease ("Lease") dated as of __________________, 1999, between Bedford Property
Investors, Inc., a Maryland corporation and Lessee, covering the space commonly
known as 21520 30th Avenue S.E., located in Bothell, Washington.
2. Notwithstanding the foregoing, the total amount drawn by BPI under this
Letter of Credit shall not exceed One Hundred Fifty Thousand and No/100ths
Dollars ($150,000.00).
3. Each draft must be marked: "Drawn under irrevocable Letter of Credit No.
___________, dated __________________, 199__."
4. This Letter of Credit expires at the counters of ____________________,
Letter of Credit Department, currently located at
________________________________________ on __________________, 19____.
5. The reference herein to the Lease is for identification purposes only
and it is not intended that the lease either be incorporated in or made a part
of this Letter of Credit.
6. We hereby engage with you that drafts and documents drawn under and in
strict compliance with the terms of this Letter of Credit will be duly honored
upon presentation to us.
7. This Letter of Credit is subject to the "Uniform Customs and Practice
for Documentary Credits (1983 Revision), The International Chamber of Commerce
Publication No. 400."
Very truly yours,
[NAME OF BANK]
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
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<PAGE> 57
EXHIBIT H
JANITORIAL SPECIFICATIONS
EXTERIOR AREAS:
I. DAILY CLEANING SERVICE
A. Empty waste cans and cigarette holders at entrances and exits of all
applicable garage levels and other entrances. Trashcans shall have
liners replaced and the cans cleaned and polished. Change sand in urns
when needed.
B. Pick-up all debris at entrances and exits.
C. Wet mop obvious spills at entrances and exits.
D. Patrol dumpster and recycling area and dispose of any debris
accordingly. Instruct cleaning staff on the proper operation of
compactor.
II. OTHER
A. Apply ice-melt for snow removal to all sidewalks, entrances and exit
areas as necessary. Owner will furnish ice melt products. Performed at
an extra charge to Owner.
B. Plow snow from parking area as directed by owner. Performed at an
extra charge to Owner.
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BUILDING A HIGHLAND CAMPUS TECH CENTRE
CLEANING SPECIFICATIONS. OFFICE AREAS
I. REGULAR DAILY CLEANING SERVICE
A. Empty wastebaskets and recycle containers, insert liners as required,
remove and deposit trash and recycle in designated containers.
Cleaning staff will only empty recycle contains that have been marked
for emptying. Cleaning staff shall ensure that "prudent care" is
exercised to make the recycling program effective and the percentage
of recycled material is maximized.
B. Vacuum all high traffic carpeted areas and entrance mats. Spot vacuum
as needed in private office, conference room, and cubical areas.
C. Remove stains from carpeting as they occur. When spots are too large
for removal or will not come out report in Communication logs.
D. Dust desk, credenzas, filing cabinets, handrails, countertops,
banisters and other horizontal surfaces throughout the facility which
have been cleared of papers and which are accessible without the use
of a ladder. Remove noticeable handprints and spill from all
workstation surfaces.
E. Clean all entry door glass to suites.
F. Spot clean relight glass as needed around conference room and private
offices.
G. Dust mop, sweep or vacuum all hard surface floors.
H. Damp mop hard surface floors.
I. Remove all noticeable smudges, splatters, drips from walls.
J. Arrange furniture for next day's business.
K. Maintain all building and tenant service logs.
L. Leave notice advising of any irregularities noted during servicing.
(i.e. defective plumbing fixtures, shortages of restroom materials,
etc.)
II. WEEKLY CLEANING SERVICE OFFICE AREAS
A. Clean desk cleared of all books, paperwork, pencils, and office
equipment.
B. Completely vacuum all carpeted areas.
C. Clean and polish chrome and bright metal, entrance doors, kick and
push plate and thresholds.
D. Wipe clean the tops of all partitions.
E. Clean and remove smudges and spills from fronts of cabinet doors.
F. Clean and disinfect all telephones.
III. MONTHLY CLEANING SERVICE
A. High dust molding, door and window casings to a height of 8 feet
without the use of a ladder.
B. Polish office furniture that has been cleared of all books, pencils,
with Johnson's furniture polish.
C. Remove smudges from switch plate covers for tenant lighting.
D. Dust light fixtures to the height of 12 feet with the use of a 6 foot
ladder.
E. Dust ventilator ducts and vents; vacuum surrounding ceiling areas
where applicable.
F. Scrub and reapply floor finish to all VCT flooring, burnish to high
luster after finish has cured.
IV. QUARTERLY CLEANING SERVICE
A. Wash exposed surfaces of filing cabinets, storage cabinets, and other
storage units.
B. Dust window blinds.
C. Vacuum upholstered furniture.
D. Conduct Customer Satisfaction Survey for all building maintenance
service provided by Regional Building Services Corporation.
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ADDENDUM TO LEASE AGREEMENT
BETWEEN
BEDFORD PROPERTY INVESTORS (LESSOR)
AND INFOWAVE SOFTWARE, INC. (LESSEE)
Dated 11/23, 1999
I. Option to Extend the Terms - Negotiated Rental:
1. Notice of Exercise. Lessee shall have the right to extend the initial
term hereof for one additional period of five (5) years upon the same terms and
conditions as stated herein, except for Minimum Monthly Rent. Minimum Monthly
Rent for the option period shall be at Fair Market Rental. The extension is
herein referred to as "Extended Term." Lessee must exercise its right, if at
all, by written notification (the "Notice of Exercise") to Lessor not less than
270 days prior to the expiration of the initial term hereof, provided that
Lessee is not then in default of any of the provisions of this Lease beyond any
applicable notice and cure period.
2. Fair Market Rental. If Lessee exercises the right to extend the term,
then the Minimum Monthly Rent shall be adjusted to equal the Fair Market Rental
for the premises as of the date of the commencement of such Extended Term,
pursuant to the procedures hereinafter set forth. The term "Fair Market Rental"
means the Minimum Monthly Rent chargeable for the Leased Premises based upon the
following factors applicable to the Leased Premises or any comparable premises:
(a) Rental rates being charged for comparable premises in the same
geographical location;
(b) The relative locations of the comparable premises;
(c) Improvements, or allowances provided for improvements, or to be
provided;
(d) Rental adjustments, if any, or rental concessions;
(e) Services and utilities provided or to be provided;
(f) Use limitations or restrictions;
(g) Any other relevant Lease terms or conditions.
In no event, however, shall the Fair Market Rental be less than the Minimum
Monthly Rent in effect immediately prior to the commencement date of the
Extended Term in question. The Fair Market Rental evaluation may include
provision for further rent adjustments during the Extended Term if such
adjustments are commonly required in the market place for similar types of
leases.
3. Determination of Fair Market Rental. Upon exercise of the right to
extend the term, and included within the Notice of Exercise, Lessee shall notify
Lessor of its opinion of Fair Market Rental as above defined for the Extended
Term. If Lessor disagrees with Lessee's opinion of the Fair Market Rental, it
shall so notify Lessee ("Lessor's Value Notice") within thirty (30) days after
receipt of Lessee's Notice of Exercise. If the parties are unable to resolve
their differences within ten (10) business days thereafter, either party may
apply for Arbitration as provided below. If neither party applies for
Arbitration within ten (10) business days after receipt by Lessee of Lessor's
Value Notice, Lessee shall be bound to the Fair Market Rental stated in Lessor's
Value Notice. Should either party elect to arbitrate, and if the arbitration is
not concluded before the commencement of the Extended Term, Lessee shall pay
Minimum Monthly Rent to Lessor in an amount equal to the Fair Market Rental set
forth in Lessor's Value Notice, until the Fair Market Rental is determined in
accordance with the arbitration provisions hereof ("Arbitration"). If the Fair
Market Rental as determined by Arbitration differs from that stated in Lessor's
Value Notice, then any adjustment required to correct the amount previously paid
by Lessee shall be made by payment by the appropriate party within thirty (30)
days after the determination of Fair Market Rental by Arbitration has been
concluded, as provided herein, together with interest thereon, which shall be
deemed to have accrued from the date of overpayment or underpayment until the
date of the corrective payment at the interest rate specified in Section 49.16..
Lessee shall be obligated to make payment during the entire Extended Term of
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LESSOR'S INITIALS
<PAGE> 60
the Minimum Monthly Rent determined in accordance with the Arbitration
procedures hereunder.
4. Arbitration. In the event either party seeks Arbitration of Fair Market
Rental under the provisions hereof for the Extended Term, the other party shall
be bound to submit the matter for determination by Arbitration. The Arbitration
shall be conducted and determined in the County where the Leased Premises are
located.
5. Demand for Arbitration. A party demanding Arbitration hereunder shall
make its demand in writing ("Demand Notice") within ten (10) business days after
service of Lessor's Value Notice. A copy of the Demand Notice shall be sent to
the President of the Real Estate Board for the county in which the Leased
Premises are located. If there is no Real Estate Board of Board President for
the county in which the premises are located, then a copy of the Demand Notice
shall be sent to the Presiding Judge of the highest trial court in such county
for the state in which the Leased Premises are located. The Board President, or
Presiding Judge, whichever is applicable, is hereinafter referred to as the
"Appointer".
The Appointer, acting in his personal, private capacity, shall appoint
within ten (10) days thereafter a disinterested, independent real estate
appraiser who is a member of the American Institute of Real Estate Appraisers
with at least seven (7) years' experience appraising properties in the same
county for the general type of use to which the Leased Premises are devoted
under the terms of this Lease, i.e. Shopping Center, Office, Retail. The
Arbitrator shall be a person who would be qualified to serve as an expert
witness and to give opinion testimony addressed to the issue in a court of
competent jurisdiction. Such a party is hereinafter referred to as the
"Arbitrator". The parties may, however, before sending the Demand Notice to the
Appointer, mutually agree upon an Arbitrator of their own choice, in which event
such appointment shall nullify the necessity of appointment of an Arbitrator by
an Appointer.
6. Decision of the Arbitrator. The Arbitrator so selected shall, within
twenty (20) days after his appointment, state in writing his determination as to
whether Lessor's valuation, or Lessee's valuation of Fair Market Rental, most
closely approximates his own. The Arbitrator may not state his own opinion of
Fair Market Rental, but is strictly limited to the selection of Lessor's Fair
Market Rental evaluation as stated in Lessor's Value Notice or Lessee's Fair
Market Rental evaluation as stated in the Notice of Exercise. The Arbitrator
shall have the right to consult experts and competent authorities with factual
information or evidence pertaining to a determination of Fair Market Rental, but
any such consultation shall be made in the presence of both parties with full
right to cross examine. The Arbitrator shall have no right to propose a middle
ground or any modification of either of the proposed valuations, and shall have
no power to modify the provisions of this Lease. The valuation so chosen as most
closely approximating that of the Arbitrator shall constitute the decision of
the Arbitrator and shall be final and binding upon the parties, absent fraud or
gross error. The Arbitrator shall render a decision and award in writing, with
counterpart copies to each party and judgment thereon may be entered in any
court of competent jurisdiction.
7. Successor Arbitrator; Fees and Expenses. In the event of failure,
refusal, or inability of the Arbitrator to act in a timely manner, a successor
shall be appointed in the same manner as such Arbitrator was first chosen
hereunder, if such Arbitrator was chosen by an Appointer. If chosen by mutual
agreement, the parties shall, in this succeeding instance, choose the Arbitrator
through means of the procedure for the Appointer. The fees and expenses of the
Arbitrator and the administrative hearing fee, if any, shall be divided equally
between the parties. Each party shall bear its own attorneys' fees and other
expenses including fees for witnesses in presenting evidence to the Arbitrator.
II. Parking:
Lessor will maintain a parking ratio of 4.18 vehicles per 1,000 rentable
square feet at no cost to Lessee during the Lease Term or any extensions.
III. Tenant Signage:
Lessor shall provide Lessee with Building standard directory and interior
building signage
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<PAGE> 61
at Lessor's cost.
IV. Broker:
Lessor recognizes Jeffery H. Cole as Lessee's exclusive representative and
recognizes Paul Jerue of Broderick Group, Inc. as Lessor's exclusive
representative and shall be responsible for payment of a real estate leasing
commission to them in accordance with the terms of Lessor's separate listing
agreement.
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EXHIBIT 10.16
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 16th day of September 1999.
BETWEEN Infowave Software, Inc., having an office at Suite 188 - 4664 Lougheed
Highway, Burnaby, B.C., Canada, ("Employer") and Todd Carter ("Employee").
WHEREAS the Employer desires to secure the services of the Employee which are
considered by the Employer to be valuable to it;
AND WHEREAS the Employee desires to enter into the full and active employ of the
Employer in accordance with the terms and conditions herein set forth;
AND WHEREAS the Employee acknowledges that in the performance of the services
contemplated by this agreement he will create or be privy to Trade Secrets and
other confidential information, inventions, works, designs and other
intellectual property, all of which are valuable to the Employer;
AND WHEREAS there may exist previous agreements between the Employer and the
Employee;
NOW THEREFORE in consideration of the Employer employing or continuing the
employment of the Employee and for other good and valuable consideration, the
parties hereto hereby agree as follows:
1. DEFINITIONS
1.1. "Confidential Information" means information concerning the Employer's
scientific and business interests including the Technology which is not
generally available to third parties and which is treated by the Employer, in
accordance with its policies, as confidential information or a trade secret.
1.2 "Technology" means the research and development carried out by the Employer
during the term of this agreement, and the research and development that during
the term of this agreement the Employer comes to anticipate carrying out in the
future.
1.3 "Work Product" means any work, research or development produced or created
by the Employee of a technical, scientific, or business nature pertinent to the
Employer's scientific or business interests including that relating to the
Technology or Confidential Information.
1.4 "Compete" means to research, develop, manufacture, distribute, or market,
other than as instructed by the Employer a product or service which performs a
similar function to a product or service (a) which during the term of this
agreement the Employer researches, develops, manufactures, distributes, or
markets, or (b) which during the term of this agreement the Employer comes to
anticipate researching, developing, manufacturing, distributing, or marketing in
the future.
1.5 "Homework" means either and both of the following:
(a) information or material which was legally in the possession of the
Employee prior to this agreement;
(b) information or material which the Employee develops or obtains during
the term of this agreement without using the Technology, Confidential
Information, Work Product, or equipment, materials, or facilities belonging to
or provided by the Employer, and which the Employee intends to use, though not
necessarily exclusively, in a way that does not relate to the Work Product and
that does not Compete.
1.6 "Office" means any of the Employer's normal places of business.
1.7 "Termination" means the termination of the Employee's employment with the
Employer.
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<PAGE> 2
1.8 "Layoff" means a temporary suspension of the Employee's employment with the
Employer which is affected by the Employer.
2. REPLACEMENT OF PREVIOUS AGREEMENTS
2.1 This agreement completely replaces any and all previous agreements between
the Employer and the Employee relating to the employment of the Employee with
the Employer.
3. DURATION OF AGREEMENT
3.1 This agreement shall be deemed to come into effect (a) on the day and year
first above written.
3.2 This agreement shall remain in effect until Termination.
3.3 Termination may be affected by either party at any time provided that any
legal requirements of notice before Termination and/or compensation after
Termination are met by the parties.
3.4 In the event of a Layoff, this agreement shall remain in effect during the
Layoff.
3.5 In the event of a Layoff, the Employee shall have the right during the
Layoff to affect Termination effective immediately upon notifying the Employer.
4. EMPLOYMENT, RENUMERATION AND BENEFITS
4.1 The Employer hereby employs the Employee as
4.2 The Employer shall pay and the Employee agrees to accept as compensation for
all of the services to be rendered hereunder a base salary to be determined by
the Employer and the Employee and set out in a separate letter of engagement.
Such base salary shall commence on the date established in the aforesaid letter
and shall be adjusted for merit from time to time thereafter during the
continuation of this agreement.
4.3 In addition to the salary set forth above, the Employee may participate in
any incentive or bonus plan established for the employees of the Employer.
4.4 The Employee may participate in and be entitled to all benefits payable
under the Employer's group term life insurance, medical and dental plans, long
term disability coverages, pensions and/or profit sharing plan (if any) and any
other benefit plans that the Employer may establish on the same terms and
conditions as apply to all other employees of the Employer.
4.5 The Employee shall be entitled to vacation periods in line with the policies
of the Employer applicable to all employees, provided however that the Employee
shall in any event be entitled after one year of employment to a minimum paid
vacation of two weeks in any calendar year during the term of this agreement.
5. WORK PRODUCT AND HOMEWORK OF EMPLOYEE
5.1 The Employee has expended or will expend time and effort, and may have
expended or may expend money in the research and development relating to the
Technology resulting in Work Product being created on behalf of the Employer.
The parties wish to acknowledge that any and all Work Product has been carried
out on behalf of the Employer and all proprietary right, title, and interest in
and to the Work Product and the Technology remains that of the Employer.
5.2 The Employer recognizes the right of the Employee to create Homework.
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<PAGE> 3
6. OWNERSHIP OF WORK PRODUCT AND HOMEWORK
6.1 The Employee agrees that any Work Product created by the Employee in
furtherance of any identifiable project carried out by the Employer either
developed solely or jointly with any other party will be the sole and exclusive
property of the Employer. The Employer is and will be the sole owner of all
copyrights, patents, and other intellectual property rights in the Work Product
and the Technology.
6.2 The Employee hereby assigns to the Employer any rights the Employee may have
or acquire in the Work Product, excepting any rights the Employee may obtain
from the Employer in a separate written agreement. At any and all times, either
during or after termination of the Employee's employment with the Employer the
Employee will promptly, on the request of the Employer, perform all such acts
and execute and deliver all such documents that may be necessary to vest in the
Employer the entire right, title, and interest in and to any such Work Product.
Should any such services be rendered after termination of employment with the
Employer a reasonable compensation will be paid to the Employee by the Employer
upon a per diem basis in addition to reasonable traveling and accommodation
expenses incurred as a result of rendering such services.
6.3 If the Employee removes any Work Product from the Office, and makes
modifications to the Work Product using either his or her own equipment or the
Employer's equipment, the Employee agrees that all modifications done to the
Work Product are owned by the Employer.
6.4 The Employer agrees that any and all Homework is the sole property of the
Employee unless the Homework becomes part of any Work Product. When Homework
becomes part of the Work Product the Employer retains exclusive rights and
ownership.
6.5 The Employer grants to the Employee the right to use its equipment and
facilities for the purpose of obtaining computer software or information which
is in the public domain, or which is distributed by the copyright holder free of
charge or as shareware, provided that these activities do not impede or delay
the creation of Work Product. Any information or materials developed by the
Employee with the aid of computer software or information obtained by the
Employee in this way shall be deemed to be Homework if it would have been
Homework had it been developed without the aid of said computer software or
information.
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<PAGE> 4
7. CONFIDENTIAL INFORMATION AND NON-DISCLOSURE
7.1 The Employee will not, either during the term of his or her employment or at
any time thereafter, disclose to any person other than to the Employer or make
use of other than as directed by the Employer any Confidential Information which
the Employee may receive or create as a result of his or her employment or
retainer, unless the Employee can clearly prove that the information (a) is or
has become readily available to the public in the same form, other than through
a breach of this agreement, (b) was lawfully obtained in the same form by the
Employee from an independent third party without breach of this agreement and
which did not originate from the Employer, or (c) was in the Employee's
possession in the same form prior to the Employee's disclosure of such
information and did not originate from the Employer.
7.2 The Employee hereby certifies that he or she has not brought and will not
bring with the Employee to the Employer or use while performing his or her
employment duties for the Employer or incorporate into any Work Product any
materials or documents of a former employer or a third party which are not
generally available to the public. The Employee understands that while employed
by the Employer, the Employee is not to breach any obligation of confidence or
duty that the Employee may have to a former employer or third parties and the
Employee agrees that he or she will fulfill all such obligations during his or
her retainer or employment with the Employer.
7.3 The Employee will not remove any Confidential Information from the Office
unless permitted by the Employer.
8. CONFLICT OF INTEREST AND NON-COMPETITION
8.1 The Employee agrees that during the term of this agreement and for a period
of one year after Termination the Employee will neither Compete, assist a third
party to Compete, nor manage or operate an organization that Competes.
8.2 The Employee acknowledges and agrees that there can be no geographical limit
to his or her covenant not to Compete due to the nature of the business of the
Employer and the technologies with which the Employer is involved.
8.3 In the event that a dispute arises concerning whether or not the research,
development, manufacture, distribution or marketing of a product of service was,
during the term of this agreement, anticipated by the Employer, such
anticipation shall be presumed to not have occurred unless the Employer can
clearly show otherwise.
9. GENERAL PROVISIONS
9.1 This agreement applies to all Work Product whether created by the Employee
prior or subsequent to the date of this agreement.
9.2 All obligations of confidence and non-disclosure of the Work Product, all
provisions of assistance by the Employee in obtaining intellectual property
protection, and all provisions of avoidance of previous agreements contained in
this agreement will survive termination of this agreement.
9.3 The Employee hereby covenants that he is not a party to any existing
employment agreement which could limit the scope of the work to be performed by
the Employee pursuant to this Agreement.
- page 4 of 5 -
<PAGE> 5
9.4 This agreement will be binding upon and enure the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
assigns. This agreement will not be assignable by the Employee.
9.5 The Employee hereby acknowledges and agrees that the Employer's trade
secrets and other confidential information constitute extremely valuable
proprietary property of the Employer and that the Employer and its licensees
will suffer irreparable harm if unauthorized parties gain access to the
Employer's secrets. The Employee accordingly agrees that if any of the
Employer's secrets are disclosed, copied, or used in violation hereof, then the
Employer shall have, in addition to any other remedies available to it, the
right to injunctive relief (including interlocutory injunctive relief) enjoining
such action and the Employee hereby acknowledges and agrees that other remedies
and inadequate to fully protect the Employer's proprietary rights.
9.6 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 intent and meaning of
this agreement.
9.7 If any term, covenant, or condition of this agreement or the application
thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this agreement or the application of such term,
covenant, or condition to persons or circumstance other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this agreement shall be valid and enforced to the
full extent permitted by law.
9.8 All references to a party whether a party to this agreement or not, will be
read with such changes in number and gender as the context or reference
requires.
9.9 This agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the parties hereby attorn to the
jurisdiction of the Courts of the Province of British Columbia.
IN WITNESS WHEREOF, the parties have executed this agreement as of the day and
year first above written.
INFOWAVE SOFTWARE, INC.
Per: /s/ Jim McIntosh
Jim McIntosh
/s/ Todd Carter
Todd Carter
September 16, 1999
Date
- page 5 of 5 -
<PAGE> 1
EXHIBIT 10.19
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AGENCY AGREEMENT -- SPECIAL WARRANT PRIVATE PLACEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT dated for reference June 18, 1999, is made
BETWEEN
INFOWAVE SOFTWARE, INC., Suite 188, 4664 Lougheed Highway, Burnaby,
British Columbia, V5C 6B7
(the "Issuer");
AND
CANACCORD CAPITAL CORPORATION, Suite 2200, 609 Granville Street,
Vancouver, British Columbia, V7Y 1H2
AND
YORKTON SECURITIES INC., Suite 3100, 181 Bay Street, Toronto,
Ontario, M5J 2T3
AND
SPROTT SECURITIES LIMITED, Suite 3450, Royal Bank Plaza, South
Tower, Toronto, Ontario, M5J 2J2;
AND
TAURUS CAPITAL MARKETS LTD., Suite 3000, Scotia Plaza, 40 King
Street West, Toronto, Ontario, M5H 3Y2
(individually, an "Agent" and collectively, the "Agents").
WHEREAS:
A. The Issuer wishes to privately place with purchasers up to 2,750,000
Special Warrants at a price of $3.25per Special Warrant;
B. The Issuer wishes to appoint the Agents to distribute the Special
Warrants, and the Agents are willing to accept such appointment on the terms and
conditions of this Agreement;
THE PARTIES to this Agreement therefore agree:
1. DEFINITIONS
1.1 In this Agreement and the Recitals hereto:
(a) "1933 Act" means the Securities Act of 1933 (United States), as
amended;
(b) "1934 Act" means the Securities and Exchange Act of 1934 (United
States),as amended;
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(c) "Acts" means the Securities Acts or comparable legislation of the
Selling Provinces;
(d) "Agents' Special Warrants" means special warrants of the Issuer
having the terms provided in this Agreement and in the certificates
representing such special warrants;
(e) "Agents' Warrants" means share purchase warrants of the Issuer
having the terms provided in this Agreement and the certificates
representing such share purchase warrants;
(f) "Agents' Warrant Shares" means previously unissued common shares in
the capital of the Issuer, as presently constituted, which will be
issued upon the exercise of the Agents' Warrants;
(g) "Applicable Legislation" means the Acts, the regulations and rules
made thereunder and all administrative policy statements, blanket
orders and rulings, notices, and other administrative directions
issued by the Commissions;
(h) "Clearing Date" means that day which falls 90 days from the date of
the first Closing;
(i) "Closing" means the completion of the sale of some or all of the
Special Warrants;
(j) "Commissions" means the securities regulatory authorities in the
Selling Provinces;
(k) "Directed Selling Efforts" means directed selling efforts as that
term is defined in Regulation S. Without limiting the foregoing, but
for greater clarity, it means, subject to the exclusions from the
definition of directed selling efforts contained in Regulation S,
any activity undertaken for the purpose of, or that could reasonably
be expected to have the effect of, conditioning the market in the
United States for any of the Securities, and includes the placement
of any advertisement in a publication with a general circulation in
the United States that refers to the offering of the Securities;
(l) "Disclosure Record" means all press releases, Material Change
reports, prospectuses, financial statements and other documents
which the Issuer is required to file with the securities regulatory
authorities in those jurisdictions where it is a "reporting issuer"
under the Acts or has equivalent status as at the date hereof;
(m) "Distribution" means the proposed issuance of Shares and Warrants to
the holders of the Special Warrants on the deemed exercise of the
Special Warrants, free of any resale restrictions in the Filing
Provinces other than those imposed on a "control person", as that
term is defined in Applicable Legislation;
(n) "Escrowed Funds" has the meaning defined in Section 9.3;
(o) "Exchange" means the Vancouver Stock Exchange;
(p) "Exemptions" means exemptions from the prospectus requirements of
Acts;
(q) "Filing Deadline" means the day the rules and policies of the
Exchange require that the subscription forms and other documentation
in connection with the Private Placement must be filed with the
Exchange, or any extension thereof;
(r) "Filing Provinces" means those of the Selling Provinces where the
Special Warrants are actually sold, provided that if, after the
final Closing, a Selling Province (other than British Columbia)
shall cease to be a Filing Province if, pursuant to a transfer of
Special Warrants by holders thereof, holders of Special Warrants no
longer reside in such province;
(s) "Foreign Issuer" means a foreign issuer as that term is defined in
Regulation S. Without limiting the foregoing, but for greater
clarity, it means any issuer which is:
<PAGE> 3
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(i) the government of any foreign country or of any political
subdivision of a foreign country; or
(ii) a corporation or other organization incorporated under the
laws of any foreign country, except an issuer meeting the
following conditions:
(A) more than 50 percent of the outstanding voting
securities of such issuer are held of record either
directly or through voting trust certificates or
depository receipts by residents of the United States;
and
(B) any of the following:
(I) the majority of the executive
officers or directors are United
States citizens or residents;
(II) more than 50 percent of the assets of
the Issuer are located in the United
States, or
(III) the business of the Issuer is
administered principally in the United
States;
(t) "Institutional Accredited Investor" means an institutional
"accredited investor" as defined in Rule 501(a)(1), (2), (3) and (7)
of Regulation D;
(u) "Material Change" has the meaning defined in the Acts, as
supplemented by National Policy No. 40;
(v) "Material Fact" has the meaning defined in the Acts;
(w) "Misrepresentation" has the meaning defined in the Acts;
(x) "Offering Memorandum" has the meaning defined in Applicable
Legislation;
(y) "Private Placement" means the offering of the Special Warrants on
the terms and conditions of this Agreement;
(z) "Prospectus" means a preliminary and (final) prospectus, including
any amendments made thereto, which upon issuance of a receipt
therefore by the Commissions in the Filing Provinces, will qualify
the Distribution;
(aa) "Purchasers" means the purchasers of Special Warrants pursuant to
the Private Placement;
(ab) "Qualification Date" means the date on which a receipt for the
(final) Prospectus has been issued by the last of the Commissions to
do so ;
(ac) "Regulation D" means Regulation D adopted by the SEC under the 1933
Act;
(ad) "Regulation S" means Regulation S adopted by the SEC under the 1933
Act;
(ae) "Regulatory Authorities" means the Commissions and the Exchange;
(af) "SEC" means the United States Securities and Exchange Commission;
(ag) "Securities" means the Special Warrants, the Shares, the Warrants,
the Warrant Shares, ;
<PAGE> 4
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(ah) "Selling Provinces" means British Columbia, Alberta, Ontario and
such other Canadian provinces as the Agents and the Company may
agree;
(ai) "Shares" means previously unissued common shares in the capital of
the Issuer, as presently constituted, which will be issued upon the
exercise or deemed exercise of the Special Warrants;
(aj) "Special Warrants" means special warrants of the Issuer having the
terms provided in the Special Warrant Indenture;
(ak) "Special Warrant Indenture" means an indenture to be made between
the Trustee and the Issuer providing for the issuance of Special
Warrants;
(al) "Substantial U.S. Market Interest" means substantial U.S. market
interest as that term is defined in Regulation S;
(am) "Trustee" means Montreal Trust Company of Canada;
(an) "United States" means the United States of America, its territories
and possessions, any state of the United States, and the District of
Columbia;
(ao) "Units" means units comprised of one Share and one half of one
Warrant;
(ap) "U.S. Person" means a U.S. person as that term is defined in
Regulation S;
(aq) "Warrant Shares" means previously unissued common shares in the
capital of the Issuer, as presently constituted, which will be
issued upon exercise of the Warrants; and
(ar) "Warrants" means share purchase warrants of the Issuer having the
terms provided in the certificates representing such warrants.
2. APPOINTMENT OF AGENTS
2.1 The Issuer appoints the Agents as its exclusive agents and the Agents
accept the appointment and agree to act as the exclusive agents of the Issuer to
use their commercially reasonable efforts to find and introduce to the Issuer
potential purchasers to purchase up to 2,750,000 Special Warrants, at a price of
$3.25 per Special Warrant, by way of private placement under the Exemptions.
2.2 The Special Warrants will be offered for sale to potential purchasers
residing in the Selling Provinces.
2.3 The rights and obligations of the Agents under this Agreement, including
but not limited to the right and obligation to offer the Special Warrants and
the entitlement to the Agents' Fee and Agents' Special Warrants, will be several
(as distinguished from joint) rights and obligations for each Agent.
2.4 Except as otherwise specifically provided in this Agreement, the rights
and obligations of the Agents will be divided in the proportions in which the
Agents participate in the Private Placement.
2.5 The Agents will participate in the Private Placement as follows:
Canaccord Capital Corporation 35%
("Canaccord")
Sprott Securities Limited 25%
Taurus Capital Markets Ltd. 5%
<PAGE> 5
-5-
Yorkton Securities Inc. 35%
2.6 This Agreement will be construed in relation to each Agent as if separate
agreements had been made between the Issuer and each Agent.
3. SPECIAL WARRANTS, WARRANTS, AGENTS' SPECIAL WARRANTS AND AGENTS' WARRANTS
SPECIAL WARRANTS
3.1 The Special Warrants will be issued and registered in the names of the
Purchasers or their nominees.
3.2 The Special Warrant Indenture will be satisfactory in form and substance
to the Agents.
3.3 The Issuer covenants with the Agents, and the Special Warrant Indenture
will provide (among other things):
(a) that each Special Warrant will entitle the holder to acquire one
Unit, without payment of further consideration, on the exercise or
deemed exercise of the Special Warrant;
(b) that each Special Warrant may be exercised by the holder in whole or
in part at any time after the Closing on which the Special Warrant
was issued. Any unexercised Special Warrants will be deemed to be
exercised on that day which falls on the earlier of;
(i) 330 days from the Closing on which such Special Warrants were
issued;
(ii) the fifth business day after the Qualification Date; and
(iii) the date on which all of the Special Warrants have been
exercised;
(c) that the Issuer will use its reasonable efforts to file and obtain
receipts for the preliminary and (final) Prospectus from the
Commissions on or before the Clearing Date;
(d) that if the Issuer has not obtained receipts for the (final)
Prospectus from each of the Commissions on or before the Clearing
Date, then:
(i) holders of Special Warrants will thenceforth receive upon
exercise or deemed exercise of Special Warrants, without
payment of further consideration, 1.1 Units; and
(ii) the Issuer will nevertheless continue to use its best efforts
to obtain a receipt for the (final) Prospectus from each of
the Commissions prior to that day which falls 330 days from
the date of the final Closing;
(e) that upon exercise or deemed exercise, the Special Warrants will be
automatically cancelled and will have no further force or effect.
(f) that the Special Warrants will be transferable, subject to
Applicable Legislation and the rules and policies of the Exchange;
(g) for the appropriate adjustment in the class and number of the
securities to be issued upon exercise of the Special Warrants upon
the occurrence of certain events, including any subdivision,
<PAGE> 6
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consolidation or reclassification of the common shares of the
Issuer, the payment of stock dividends and the amalgamation of the
Issuer;
(h) that the Issuer will use its best efforts to remain a "reporting
issuer" in the Selling Provinces, not in default of Applicable
Legislation therein, for one year from the date of the final
Closing; and
(i) that the Trustee will hold the Escrowed Funds in escrow, and release
the Escrowed Funds to the Issuer upon that day which falls on the
earlier of
(i) issue of a receipt for the (final) Prospectus by the last of
the Commissions; and
(ii) 330 days from the final Closing.
3.4 The issuance of the Special Warrants will not restrict or prevent the
Issuer from obtaining any other financing, or from issuing additional securities
or rights prior to the deemed exercise of the Special Warrants.
WARRANTS
3.5 The Warrants will be registered in the names of the Purchasers or their
nominees.
3.6 The certificates representing the Warrants will be satisfactory in form
and substance to the Agents.
3.7 The Issuer covenants with the Agents, and the certificates representing the
Warrants will provide (among other things):
(a) that each whole Warrant will entitle the holder, on exercise, to
acquire one Warrant Share, at a price of $3.75 per Warrant Share;
(b) that each Warrant may be exercised by the holder in whole or in part
for one year after the first Closing;
(c) that the Warrants will not be transferable; and
(d) for the appropriate adjustment in the class and number of the
securities to be issued upon exercise of the Warrants upon the
occurrence of certain events, including any subdivision,
consolidation or reclassification of the common shares of the
Issuer, the payment of stock dividends and the amalgamation of the
Issuer.
3.8 The issuance of the Warrants will not restrict or prevent the Issuer from
obtaining any other financing, or from issuing additional securities or rights
prior to the expiry of the Warrants.
AGENTS' SPECIAL WARRANTS
3.9 The Agents' Special Warrants will be represented by certificates, and will
be registered in the names of the Agents or members of their selling group.
3.10 The certificates representing the Agents' Special Warrants will be
satisfactory in form and substance to the Agents, and will provide, among other
things,:
(a) that each Agent's Special Warrant will be exercisable, for no
additional consideration, to acquire one Agents' Warrant;
<PAGE> 7
-7-
(b) that the Agents' Special Warrants may be exercised by the holders
thereof in whole or in part at any time after the Closing on which
they are issued. Any unexercised Agents' Special Warrants will be
deemed to be exercised on the fifth business day after the
Qualification Date;
(c) that upon exercise or deemed exercise, the Agents' Special Warrants
will be automatically cancelled and will have no further force or
effect;
(d) that the Agents' Special Warrants will not be transferable, except
as provided any order issued by either of the Commissions; and
(e) for the appropriate adjustment in the class and number of the
securities to be issued upon exercise of the Agents' Special
Warrants upon the occurrence of certain events, including any
subdivision, consolidation or reclassification of the common shares
of the Issuer, the payment of stock dividends and the amalgamation
of the Issuer.
AGENT'S WARRANTS
3.11 The Agents' Warrants will be represented by certificates, and will be
issued and registered in the name of the Agents or members of their selling
group.
3.12 The certificates representing the Agents' Warrants will be satisfactory in
form and substance to the Agents, and will provide, among other things:
(a) that the right to purchase a Warrant Share upon exercise of an
Agents' Warrant may be exercised at any time until the close of
business on that day which falls 12 months from the Closing on which
the Agents' Special Warrant pursuant to which the Agents' Warrant
was acquired was issued;
(b) that one Agents' Warrant will entitle the holder, on exercise, to
purchase one Agents' Warrant Share at a price of $3.25 per Agents'
Warrant Share;
(c) that upon exercise or expiry, the Agents' Warrants will be
automatically cancelled and will have no further force and effect;
(d) that the Agents' Warrants will not be transferable, except in
accordance with any order which may be issued by any of the
Commissions; and
(e) for the appropriate adjustment in the class, number and price of the
Agents' Warrant Shares to be issued upon exercise of the Agents'
Warrants upon the occurrence of certain events, including any
subdivision, consolidation or reclassification of the Issuer's
common shares, the payment of stock dividends and the amalgamation
of the Issuer.
4. AGENTS' FEE AND AGENTS' SPECIAL WARRANTS
4.1 In consideration of the services performed by the Agents under this
Agreement, the Issuer agrees, on each Closing, to:
(a) pay to the Agents a commission equal to 7.5% of the gross proceeds
received by the Issuer from the sale of the Special Warrants on such
Closing (the "Agents' Fee"); and
(b) issue to the Agents a number of Agents' Special Warrants equal to
10% of the number of Special Warrants sold on such Closing.
4.2 The Issuer will not place a U.S. securities law restrictive legend on the
certificates representing the Agents' Special Warrants, the Agents' Warrants or
the Agents' Warrant Shares.
<PAGE> 8
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4.3 In consideration of Canaccord's services with the co-ordination and review
of the Private Placement and its review of the subsequent qualification of the
Distribution by the Prospectus, the Issuer will pay to Canaccord on the earlier
of the first Closing or the termination of this Agreement, a fee of $5,000, plus
G.S.T. (the "Administration Fee").
5. OFFERING RESTRICTIONS
5.1 The sale of the Special Warrants to the Purchasers will be effected only
pursuant to Exemptions which do not require the delivery or filing of an
Offering Memorandum.
5.2 Each of the Agents acknowledges that the Securities have not been and will
not be registered under the 1933 Act and may not be offered or sold except in
accordance with Regulation S or, for offers and sales within the United States,
pursuant to an exemption from the registration requirements of the 1933 Act.
Accordingly, each of the Agents represents, warrants and covenants to the Issuer
that:
(a) it has offered and sold, and will offer and sell, Securities only in
accordance with Rule 903 of Regulation S or as provided in
subsections (b) through (f) below. Accordingly, neither the Agents,
their affiliates nor any persons acting on their behalf, has made or
will make (except as permitted in subsections (b) through (f)
below):
(i) any offer to sell, or any solicitation of an offer to buy, any
Securities to any person in the United States,
(ii) any sale of Securities to any purchaser unless, at the time
the buy order was or will have been originated, the purchaser
was outside the United States, or the Agent, its affiliate or
person acting on behalf of either reasonably believed that
such purchaser was outside the United States, or
(iii) any Directed Selling Efforts in the United States with respect
to the Securities.
Terms used in this paragraph have the meanings given to them
by Regulation S;
(b) the Agent, acting through a U.S. broker-dealer, may only offer the
Securities in the United States to Institutional Accredited
Investors with which such Agent has a pre-existing relationship;
(c) immediately prior to soliciting such offerees, the Agent had
reasonable grounds to believe and did believe that each offeree was
an Institutional Accredited Investor;
(d) no form of general solicitation or general advertising (as those
terms are used in Regulation D) has been or will be used, including
advertisements, articles, notices or other communications published
in any newspaper, magazine, or similar media or broadcast over radio
or television, or any seminar or meeting whose attendees had been
invited by general solicitation or general advertising, in
connection with the offer or sale of the Securities in the United
States;
(e) any offer, sale or solicitation of an offer to buy Securities that
has been made or will be made in the United States was or will be
made only to Institutional Accredited Investors that are exempt or
in transactions that are exempt from registration under applicable
state securities laws; and
(f) it will not solicit offers for, offer to sell, or sell, the
Securities in any state or other jurisdiction where it is not
registered as a broker-dealer or otherwise exempt from such
registration.
(g) the subscription forms to be executed by Purchasers in the United
States will contain the representations and warranties of such
Purchasers set forth in Schedule "B" hereto; and
<PAGE> 9
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(h) at each Closing, each Agent with a U.S. broker-dealer affiliate
which sells Special Warrants in the United States will provide a
certificate, substantially in the form of Exhibit I attached hereto,
relating to the manner of the offer and sale of the Securities in
the United States.
5.3 The Issuer represents, warrants, covenants and agrees with the Agents
that:
(a) the Issuer is a Foreign Issuer with no Substantial U.S. Market
Interest in the Securities;
(b) except with respect to offers and sales to Institutional Accredited
Investors who are in the United States in reliance upon an exemption
from registration under Section 4(2) of the 1933 Act, neither the
Issuer nor any of its affiliates, nor any person acting on their
behalf, has made or will make:
(i) any offer to sell, or any solicitation of an offer to buy, any
Securities to a person in the United States; or
(ii) any sale of Securities unless, at the time the buy order was
or will have been originated, the purchaser is:
(A) outside the United States; or
(B) the Issuer, its affiliates, and any person acting on
their behalf reasonably believe that the purchaser is
outside the United States;
(c) during the period in which the Securities are offered for sale,
neither it nor any of its affiliates, nor any person acting on their
behalf has made or will make any Directed Selling Efforts in the
United States, or has taken or will take any action that would cause
the exemption afforded by Section 4(2) of the U.S. Securities Act or
Regulation S to be unavailable for offers and sales of the
Securities, pursuant to this Agreement;
(d) none of the Issuer, its affiliates or any person acting on its or
their behalf have engaged or will engage in any form of general
solicitation or general advertising (as those terms are used in
Regulation D) with respect to offers or sales of the Securities in
the United States, including advertisements, articles, notices or
other communications published in any newspaper, magazine or similar
media, or broadcast over radio, or television, or any seminar or
meeting whose attendees have been invited by general solicitation or
general advertising.
5.4 The Agents will only sell the Special Warrants to persons who represent
themselves as being persons:
(a) purchasing as principal or persons who are deemed by law or
discretionary order to be purchasing as principal; and
(b) qualified to purchase the Special Warrants under the Exemptions.
5.5 The Private Placement has not been and will not be advertised in any way.
5.6 No selling or promotional expenses will be paid or incurred in connection
with the Private Placement, except for professional services or for services
performed by a registered dealer.
6. SUBSCRIPTIONS
The Agents shall consult with the Issuer with respect to the acceptability to
the Issuer of prospective Purchasers and shall advise the Issuer within a
reasonable period of time prior to each Closing as to the proposed final list of
Purchasers. The Issuer shall, in its sole and absolute discretion, be entitled
to accept or reject any proposed Purchasers. The Agents will use their best
efforts to obtain from each Purchaser introduced by the Agents, and deliver to
the Issuer, on or before the Filing Deadline duly completed and signed
subscriptions in the form attached
<PAGE> 10
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as Schedule "A" (British Columbia, Alberta and Ontario Residents), Schedule "B"
(United States Residents) or in such other form consented to by the Issuer and
the Agents and executed by the Purchaser.
7. FILINGS WITH THE REGULATORY AUTHORITIES
7.1 The Issuer will forthwith give to the Exchange written notice of the terms
of this Agreement and the proposed Private Placement and all other information
required by the rules and policies of the Exchange (the "Notice").
7.2 The Issuer will forthwith provide the Agents and their solicitors with a
copy of the Notice, and, forthwith on receipt, a copy of the preliminary and
final letters from the Exchange accepting the Notice.
7.3 The Issuer will file all required documents, pay all required filing fees
and undertake any other reasonable actions required by the rules and policies of
the Exchange in order to obtain the approval of the Exchange for the Private
Placement.
7.4 Within 10 days of each Closing, the Issuer will:
(a) file with the Commissions any report required to be filed by
Applicable Legislation in the required form; and
(b) provide the Agents' solicitors with copies of the report or reports.
8. CLOSINGS
8.1 In this Section:
(a) "Certificates" means the certificates representing the Special
Warrants sold on a Closing in the names and denominations reasonably
requested by the Agents or the Purchasers; and
(b) "Net Proceeds" means the gross proceeds of the sale of Special
Warrants on a Closing, less:
(i) the Agents' Fee;
(ii) on the first Closing, the Administration Fee;
(iii) the reasonable expenses of the Agents in connection with the
Private Placement which have not been paid by the Issuer
subject to section 15.1 hereof; and
(iv) any amount which has been attached by garnishing order or
other form of attachment.
8.2 Closings will take place on such dates as may be agreed between the
Issuer and the Agent.
8.3 The Issuer will, on each Closing, issue and deliver the Certificates to
the Agents, or at the Agents' request, to the Purchasers, against payment of:
(a) 40% of the Net Proceeds (the "Escrowed Funds") to the Trustee to be
held in escrow under the Special Warrant Indenture; and
(b) the balance of the Net Proceeds to the Issuer.
<PAGE> 11
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8.4 If the Issuer has satisfied all of its material obligations under this
Agreement, the Agents will, on each Closing, pay the Escrowed Funds to the
Trustee and the balance of the Net Proceeds to the Issuer, against delivery of
the Certificates.
8.5 Where required by Applicable Legislation, the Issuer will endorse the
Certificates, and the certificates representing any Shares, Warrants, Warrant
Shares, issued prior to the earlier of the Qualification Date and the expiry of
the hold period applicable to such Securities in the Filing Jurisdictions, with
a statement that:
(a) the securities represented by the certificate are subject to a hold
period and may not be traded until the expiry of the hold period
except as permitted by Applicable Legislation; and
(b) specifies the date the hold period expires.
9. CONDITIONS OF CLOSINGS
9.1 The obligations of the Agents and the obligations of the Purchasers under
the Subscription Agreements on each Closing will be subject always to the
following:
(a) receipt by the Agents of subscriptions for a minimum of 1,230,770
Special Warrants on or before June 30, 1999. The Agents will hold
subscriptions and subscription funds pending receipt of
subscriptions for such number of Special Warrants. If subscriptions
for 1,230,770 Special Warrants have not been received by the Agents
on or before June 30, 1999, no Closing will take place and the
Agents will return subscriptions and subscription funds to
subscribers, without interest, penalty or other deduction;
(b) the Issuer will take all necessary corporate action in order to
validly, issue and sell the Special Warrants, the Shares, the
Warrants and the Warrant Shares to the Purchasers and the Agents'
Special Warrants, the Agents' Warrants and the Agents' Warrant
Shares to the Agents;
(c) the Issuer will make all necessary filings and obtain all necessary
approvals of the Regulatory Authorities, subject only to conditions
imposed by the rules and policies of the Exchange, to issue and sell
the Special Warrants to the Purchasers and the Agents' Special
Warrants to the Agents;
(d) the issue and sale of the Special Warrants and the Agents' Special
Warrants will be exempt from the prospectus requirement of the Acts
and the registration requirement of the 1933 Act;
(e) the issue of Units upon exercise of the Special Warrants, the issue
of Warrant Shares upon exercise of the Warrants, and the issue of
Agents' Warrant Shares upon exercise of the Agents' Warrants, will
be exempt from the prospectus requirement of the Acts and the
registration requirement of the 1933 Act;
(f) the Issuer will deliver to the Agents and their solicitors
favourable opinions of the Issuer's Canadian and United States
solicitors dated as of the date of such Closing, in form and
substance acceptable to the Agents and their solicitors, acting
reasonably, as to all legal matters reasonably requested by the
Agents relating to the business of the Issuer and the creation,
issuance and sale of the Securities;
(g) the Issuer will deliver to the Agents and their solicitors such
other certificates, comfort letters or opinions of its auditors or
other experts or other documents relating to the Private Placement
or the affairs of the Issuer as the Agents and their solicitors may
reasonably request; and
(h) each representation and warranty of the Issuer herein shall be true,
and the Issuer will perform or comply with all of its covenants and
obligations hereunder.
<PAGE> 12
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9.2 Each Closing and the obligations of the Issuer and the Agents to complete
the issue and sale of the Securities are subject to:
(a) receipt of all required regulatory approval for or acceptance of the
Private Placement;
(b) compliance by the Issuer with all relevant statutory and regulatory
requirements in connection with the Private Placement; and
(c) the removal or partial revocation of any cease trading order or
trading suspension made by any competent authority to the extent
necessary to complete the Private Placement.
10. MATERIAL CHANGES
10.1 The Issuer agrees that if, between the date of this Agreement and that day
which falls five days after the Qualification Date, a Material Change, or a
change in a Material Fact occurs, the Issuer will:
(a) as soon as practicable notify the Agents in writing, setting forth
the particulars of such change;
(b) as soon as practicable, issue and file with the Regulatory
Authorities a press release that is authorized by a senior officer
disclosing the nature and substance of the change;
(c) as soon as practicable file with the applicable Commissions the
report required by the Acts and in any event no later than 10 days
after the date on which the change occurs;
(d) provide copies of that press release, when issued, and that report,
when filed, to the Agents and their solicitors;
(e) if required under Applicable Legislation, amend the Prospectus to
reflect the change, provided it has first obtained the approval of
the Agents for the form and substance of the amendment, such
approval not to be unreasonably withheld; and
(f) if an amendment is prepared to the Prospectus, file such amendment
with each of the Commissions in the time limited by Applicable
Legislation, and provide the Agents without charge with as many
commercial copies of such amendment as it may reasonably require.
10.2 If the Issuer is uncertain as to whether there has been a Material Change,
or a change in a Material Fact, it will promptly provide the Agents with full
particulars of the event giving rise to the uncertainty, and will consult with
the Agents as to whether such event constitutes a Material Change, or a change
in a Material Fact.
11. PROSPECTUS
11.1 The Issuer will use its reasonable efforts to file a (final) Prospectus
with the Commissions in the Filing Provinces qualifying the Distribution and
obtain a receipt therefor within 90 days immediately following the first
Closing.
11.2 If the Qualification Date does not occur by the first business day 90 days
immediately following the first Closing, then the Issuer will continue to use
its reasonable efforts to have the Qualification Date occur prior to the date
which is 330 days after the first Closing.
11.3 The Prospectus will be satisfactory in form and substance to the Agents
and their solicitors, acting reasonably.
11.4 The Issuer will permit the Agents and their solicitors to participate in
the preparation of the Prospectus, to discuss the Issuer's business with its
corporate officials and auditors and to conduct such full and
<PAGE> 13
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comprehensive review and investigation of the Issuer's business, affairs,
capital and operations as the Agents and their solicitors reasonably consider to
be necessary to establish a due diligence defence under Applicable Legislation
to an action based on an allegation that the Prospectus contained a
Misrepresentation and to enable the Agents to responsibly execute the
underwriter's certificate in the Prospectus.
11.5 The Prospectus will contain a contractual right of rescission granted by
the Issuer to the Purchasers for Misrepresentations in the Prospectus.
11.6 Provided the Agents and their solicitors, acting reasonably, are satisfied
that the Prospectus contains full, true and plain disclosure of all Material
Facts relating to the Issuer and the Securities, and provided the Issuer has
delivered to the Agents the documents described in this Section to be delivered
on the date of the (final) Prospectus, the Agents will execute the underwriter's
certificate in the (final) Prospectus.
11.7 On the date of the (final) Prospectus, the Issuer will deliver the
following documents to the Agents and their solicitors, each of which will be in
form and substance satisfactory to the Agents and their solicitors, acting
reasonably:
(a) an opinion of the auditors of the Issuer, dated as of the date of
the (final) Prospectus and addressed to the Agents and their
solicitors, relating to the accuracy of the financial statements
included in the Prospectus and verification of the accuracy of the
financial, numerical and certain other information disclosed in the
Prospectus;
(b) a certificate of the Issuer issued to the Agents and their
solicitors, dated as of the date of the (final) Prospectus and
executed by the President of the Issuer or by another officer
approved by the Agents, certifying certain facts relating to the
Issuer and its affairs; and
(c) any other certificates, comfort letters or opinions in connection
with any matter related to the Prospectus which are reasonably
requested by the Agents or their solicitor.
11.8 On the Qualification Date, the Issuer will deliver the following documents
to the Agents and their solicitors, each of which will be in a form and
substance satisfactory to the Agents and their solicitors, acting reasonably:
(a) an opinion of counsel of the Issuer, dated as of the Qualification
Date and addressed to the Agents and their solicitors, relating to
any legal matters in connection with the Issuer and the Distribution
for which the Agents or their solicitor may reasonably request an
opinion; and
(b) any other certificates, comfort letters or opinions in connection
with any matter related to the Prospectus or the Distribution which
are reasonably requested by the Agents or their solicitors.
11.9 The Issuer will furnish to the Agents such number of copies of the
Prospectus and each amendment and supplement thereto and such other relevant
documents as the Agents may reasonably request.
11.10 The delivery by the Issuer to the Agents of the Prospectus and any
amendment or supplement thereto will constitute the Issuer's representation and
warranty to the Agents that all material information and statements contained
therein (other than information and statements supplied by or relating solely to
the Agents) is contained in the Prospectus, that the Prospectus does not contain
any Misrepresentation, and the Prospectus constitutes full, true and plain of
all Material Facts relating to the Issuer and the Securities.
11.11 When each of the Commissions has issued a receipt for the (final)
Prospectus, and the Issuer has delivered to the Agents copies of such receipts
and all documents required to be delivered to the Agents on the date of the
(final) Prospectus and the Qualification Date, the Agents will deliver, or cause
to be delivered as soon as practical, one copy of the Prospectus to each Special
Warrant holder.
<PAGE> 14
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12. TERMINATION
12.1 The Agents may terminate their obligations under this Agreement by notice
in writing to the Issuer at any time before the final Closing if:
(a) an adverse Material Change, or an adverse change in a Material Fact
relating to any of the Securities, occurs or is announced by the
Issuer;
(b) there is an event, accident, governmental law or regulation or other
occurrence of any nature which, in the opinion of the Agents,
seriously affects or will seriously affect the financial markets,
the market for the Issuer's securities in particular, the business
of the Issuer, the ability of the Agents to perform their
obligations under this Agreement, or a Purchaser's decision to
purchase the Special Warrants;
(c) following a consideration of the history, business, products,
property or affairs of the Issuer or its principals and promoters,
or of the state of the financial markets in general, or the state of
the market for the Issuer's securities in particular, the Agents
determine, in their sole discretion, that it is not in the interest
of the Purchasers to complete the purchase and sale of the Special
Warrants;
(d) an enquiry or investigation (whether formal or informal) in relation
to the Issuer, or the Issuer's directors, officers or promoters, is
commenced or threatened by an officer or official of any competent
authority;
(e) any order to cease, halt or suspend trading (including an order
prohibiting communications with persons in order to obtain
expressions of interest) in the securities of the Issuer prohibiting
or restricting the Private Placement or the Distribution is made by
a competent regulatory authority and that order is still in effect;
(f) the Issuer is in breach of any material term of this Agreement; or
(g) the Agents determine that any of the representations or warranties
made by the Issuer in this Agreement is false or has become false.
12.2 The Agents' obligations hereunder will terminate if the first Closing does
not occur within 90 days of the reference date of this Agreement, unless
otherwise agreed in writing by the Agents.
12.3 In addition to the other termination rights of the Agents, the Agents may
terminate their obligations under this Agreement with respect to the
Distribution and the Prospectus at anytime prior to the Qualification Date if:
(a) any order to cease trading (including an order prohibiting
communications with persons in order to obtain expressions of
interest) in the securities of the Issuer is made by a competent
regulatory authority and that order is still in effect;
(b) the Issuer is in breach of any material term of this Agreement; or
(c) the Agents determine that any of the representations or warranties
made by the Issuer in this Agreement is false or has become false.
13. WARRANTIES, REPRESENTATIONS AND COVENANTS
13.1 The Issuer warrants and represents to and covenants with the Agents that:
<PAGE> 15
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(a) the Issuer is a valid and subsisting corporation duly amalgamated
and in good standing under the laws of British Columbia, is a
"reporting issuer" under the Acts, and
(i) is in good standing and up to date with all filings required
under the Company Act (British Columbia);
(ii) is not in default of any provision of Applicable Legislation;
and
(iii) has the corporate power and capacity to enter into this
Agreement and to carry out the transactions herein
contemplated;
(b) as at the date hereof, the Issuer has no "subsidiaries" or
"affiliated" companies, each within the meaning of the Securities
Act (British Columbia), and does not otherwise own or control,
directly or indirectly, any equity interest in any corporation,
partnership or other form of business association.
(c) the Issuer is duly registered and licenced to carry on business in
the jurisdictions in which it carries on business or owns property
where so required by the laws of that jurisdiction, and holds all
material licences and permits that are required for carrying on its
business in the manner and in the jurisdictions in which such
business is presently being carried on;
(d) as at the date hereof, the authorized capital of the Issuer consists
of 100 million common shares of which 15,517,865 common shares are
issued and outstanding as fully paid and non-assessable;
(e) the Issuer will reserve or set aside sufficient shares in its
treasury to issue the Shares, the Warrant Shares and the Agents'
Warrant Shares, and all such shares will be duly and validly issued
as fully paid and non-assessable;
(f) the minute books of the Issuer contain all records of the
proceedings of the meetings of the Issuer's directors, shareholders
and committees of directors since its date of amalgamation;
(g) since the Audited Financial Statements, the business of the Issuer
has been carried on in the usual and ordinary course and the Issuer
has entered into no transaction out of the usual and ordinary course
of business;
(h) the Issuer has filed all documents which it is required to file
under the continuous disclosure provisions of the Acts, and the
Issuer has filed no Material Change reports on a confidential basis
with the securities regulatory authorities in these jurisdictions
where it is a "reporting issuer" which remain confidential;
(i) the Issuer's outstanding common shares are listed for trading on the
Exchange, and the Issuer is not in material breach of its Listing
Agreement with the Exchange;
(j) the Issuer is subject to no material mortgage, lien, lease,
agreement, instrument or any other restriction of any kind or
character which would prevent the consummation of the transactions
contemplated herein;
(k) except as qualified by the Disclosure Record, the Issuer is the
beneficial owner of the properties, business and assets or the
interests in the properties, business or assets referred to in the
Disclosure Record, all agreements by which the Issuer holds an
interest in a property, business or assets are in good standing
according to their terms and the properties are in good standing
under the applicable laws of the jurisdictions in which they are
situated;
(l) the Disclosure Record, subscription agreements and all other written
or oral representations made by the Issuer to a Purchaser or
potential Purchaser in connection with the Private Placement will be
accurate in all material respects and will omit no fact, the
omission of which will make such representations misleading or
incorrect at the time made;
<PAGE> 16
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(m) the audited financial statements of the Issuer for its fiscal year
ended December 31, 1998 (the "Audited Financial Statements) and the
unaudited interim financial statements of the Issuer for the period
ended March 31, 1999 (the "Interim Financial Statements") have been
prepared in accordance with Canadian generally accepted accounting
principles, accurately reflect the financial position and all
material liabilities (accrued, absolute, contingent or otherwise) of
the Issuer as at the date thereof, and there have been no adverse
Material Changes in the financial position or condition of the
Issuer or any damage, loss or other change of any kind whatsoever in
circumstances materially affecting the business or assets of the
Issuer or the right or capacity of the Issuer to carry on its
business since the date of the Audited Financial Statements, except
as recorded in the books of the Issuer and fully and plainly
disclosed in the Disclosure Record;
(n) no financial statements of the Issuer are publicly available as at
any date or for any period subsequent to the Interim Financial
Statements;
(o) all of the material transactions of the Issuer have been promptly
and properly recorded or filed in or with the books or records of
the Issuer;
(p) all of the material contracts of the Issuer are described in the
Disclosure Record and are in good standing in all material respects,
and the Issuer is not in default in any material respect thereof,
and the Issuer is not aware of any default in any material respect
by any other party to such contracts;
(q) the Issuer is party to no agreement, option, understanding or
commitment, or any right or privilege capable of becoming an
agreement, option, understanding or commitment, for the purchase of
any of the businesses, properties or assets or interests in the
businesses properties or assets referred to in the Disclosure
Record, except as may be disclosed in the Disclosure Record;
(r) the Issuer has complied and will comply fully with the requirements
of all applicable corporate and securities laws and administrative
policies and directions, including, without limitation, Applicable
Legislation, the Company Act (British Columbia), the 1933 Act and
the 1934 Act in relation to the issue and trading of its securities
and in all matters relating to the Private Placement and the
Distribution;
(s) there is not presently, and will not be until the closing of the
Distribution, any Material Change or change in any Material Fact
relating to the Issuer which has not been or will not be fully
disclosed to the Agents and in the Disclosure Record;
(t) the issue and sale of the Securities by the Issuer and the Agents
and the execution and delivery of this Agreement and the
Subscription Agreements and the performance of the transactions
contemplated thereby does not and will not conflict with, and does
not and will not result in a breach of, any of the terms of its
incorporating documents or any agreement or instrument to which the
Issuer is a party;
(u) as at the date hereof, the Issuer is not a party to any actions,
suits or proceedings which could materially affect its business or
financial condition, and to the best of the Issuer's knowledge no
such actions, suits or proceedings are contemplated or have been
threatened which are not disclosed in the Disclosure Record;
(v) as at the date hereof, there are no judgments against the Issuer
which are unsatisfied, nor are there any consent decrees or
injunctions to which the Issuer is subject;
(w) as at the date hereof, no order ceasing, halting or suspending
trading in securities of the Issuer nor prohibiting the sale of such
securities has been issued to and is outstanding against the Issuer
or its directors, officers or promoters or against any other
companies that have common directors, officers or promoters and no
investigations or proceedings for such purposes are pending or
threatened;
<PAGE> 17
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(x) the Issuer satisfies and will satisfy all necessary requirements of
the Issuer under the Exemptions in order to permit the sale of the
Special Warrants to Purchasers who are qualified to purchase the
Special Warrants under the Exemptions, pursuant to this Private
Placement;
(y) as at the date hereof, except as disclosed in Schedule "C" hereto,
no person has any right, agreement or option, present or future,
contingent or absolute, or any right capable of becoming such a
right, agreement or option, for the issue or allotment of any
unissued shares in the capital of the Issuer or any other security
convertible into or exchangeable for any such shares, or to require
the Issuer to purchase, redeem or otherwise acquire any of the
issued and outstanding shares in its capital;
(z) as at the date hereof, the Issuer has filed all federal, provincial,
local and foreign tax returns which are required to be filed, or has
requested extensions thereof, and has paid all taxes required to be
paid by it and any other assessment, fine or penalty levied against
it, to the extent that any of the foregoing is due and payable,
except for such assessments, fines and penalties which are currently
being contested in good faith;
(aa) as at the date hereof, the Issuer has established on its books and
records reserves which are adequate for the payment of all taxes not
yet due and payable and there are no liens for taxes on the assets
of the Issuer except for taxes not yet due, and there are no audits
of any of the tax returns of the Issuer which are known by the
Issuer's management to be pending, and there are no claims which
have been or may be asserted relating to any such tax returns which,
if determined adversely, would result in the assertion by any
governmental agency of any deficiency which would have a material
adverse effect on the properties, business or assets of the Issuer;
(ab) other than the Agents, no person, firm or corporation acting or
purporting to act at the request of the Issuer is entitled to any
brokerage, agency or finder's fee in connection with the
transactions described herein;
(ac) the Issuer will allow the Agents and their counsel to conduct all
due diligence investigations in connection with the Private
Placement and the Distribution which the Agents may reasonably
require;
(ad) this Agreement is, and the Special Warrant Indenture, the
certificates representing the Warrants, and the certificates
representing the Agents' Special Warrants and the Agents' Warrants
will be, upon execution and delivery by the Issuer, legal, valid and
binding agreements of the Issuer, enforceable against the Issuer in
accordance with their terms, subject only to customary
qualifications regarding the availability of equitable remedies; and
(ae) the Issuer owns or possesses adequate rights to use all material
patents, trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights and processes necessary for
the business of the Issuer as now conducted, without any conflict
with or infringement of the rights of others. The Issuer has
received no communication alleging that the Issuer has violated or,
by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, or
trade secrets or other proprietary rights of any other person or
entity. Neither the execution or delivery of this Agreement nor the
carrying on of the business of the Issuer by the employees of the
Issuer, nor the conduct of the business of the Issuer will conflict
with or result in a breach of the terms, conditions, or provisions
of or constitute a default under, any contract, covenant, or
instrument under which any of such employees is now obligated.
13.2 The representations and warranties of the Issuer contained herein will be
true and correct at each Closing, will survive each Closing, and no
investigation by or on behalf of the Agents will diminish in any respect their
right to rely on such representations and warranties.
13.3 Each of the Agents warrants and represents to the Issuer that:
<PAGE> 18
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(a) it is a valid and subsisting corporation under the law of the
jurisdiction in which it was incorporated;
(b) it is:
(i) registered as a dealer and an underwriter in British Columbia;
and
(ii) registered as a dealer and classified as a broker in Alberta
and Ontario;
(c) it is a member in good standing of the Exchange; and
(d) it will sell the Special Warrants in compliance with Applicable
Legislation.
14. EXPENSES OF AGENTS
14.1 The Issuer will pay all of the expenses of the Private Placement, the
Prospectus and the Distribution and all the expenses reasonably incurred by the
Agents in connection with the Private Placement, the Prospectus and the
Distribution including, without limitation, the reasonable fees and expenses of
the solicitors for the Agents. However, the Issuer and the Agents agree that the
Issuer will only pay the expenses of the Agents incurred in respect of legal and
travel costs in connection with the Private Placement, the Prospectus and the
Distribution to a maximum of $35,000 in fees (excepting taxes and disbursements,
all of which the Issuer shall pay) in respect of the fees and expenses of the
solicitors for the Agents and $20,000 in respect of the Agents' travel expenses.
14.2 The Issuer will pay the expenses referred to in the previous Subsection
even if the transactions contemplated by this Agreement are not completed or
this Agreement is terminated, unless the failure of acceptance or completion or
the termination is the result of a breach of this Agreement by the Agents.
14.3 The Agents may, from time to time, render accounts for their expenses in
connection with the Private Placement, the Prospectus and the Distribution to
the Issuer for payment on or before the dates set out in the accounts.
14.4 The Issuer authorizes the Agents to deduct their reasonable expenses in
connection with the Private Placement from the gross proceeds of the Private
Placement and any advance payments made by the Issuer, including expenses for
which an account has not yet been rendered.
15. GARNISHING ORDERS
15.1 If at any time, up to and including the final Closing, the Agents receive
a garnishing order or other form of attachment purporting to attach or garnish a
part or all of the sale price of any of the Special Warrants, the Agents will be
free to pay the amount purportedly attached or garnished into court.
15.2 Any payment by the Agents into court pursuant to a garnishing order will
be deemed to have been received by the Issuer as payment by the Agents against
the sale price of the Securities to the extent of the amount paid, and the
Issuer will be bound to issue and deliver the Securities proportionately to the
amount paid by the Agents.
15.3 The Agents will not be bound to ascertain the validity of any garnishing
order or attachment, or whether in fact it attaches any moneys held by the
Agents, and the Agents will be free to act with impunity in replying to any
garnishing order or attachment.
15.4 The Issuer will release, indemnify and save harmless the Agents in respect
of all damages, costs, expenses or liability arising from any acts of the Agents
under this Section.
<PAGE> 19
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16. INDEMNITY
16.1 The Issuer will indemnify the Agents and each of the Agents' agents,
directors, officers and employees (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties") and save them harmless against all
losses, claims, damages or liabilities:
(a) existing by reason of an untrue statement contained in the
Disclosure Record, subscription agreement or other written or oral
representation made by the Issuer to a Purchaser or potential
Purchaser in connection with the Private Placement, or in the
Prospectus or other written or oral representation made by the
Issuer in connection with the Distribution, or by reason of the
omission to state any fact necessary to make such statements or
representations not misleading (except for information and
statements supplied by or relating solely to the Agents);
(b) arising directly or indirectly out of any order made by any
regulatory authority based upon an allegation that any such untrue
statement or representation, or omission exists (except information
and statements supplied by or relating solely to the Agents), that
trading in or distribution of any of the Securities is to cease;
(c) resulting from the failure by the Issuer to obtain the requisite
regulatory approval to the Private Placement or the Prospectus
unless the failure to obtain such approval is the result of a breach
of this Agreement by the Agents;
(d) resulting from any failure by the Issuer to file Prospectus, or an
amendment or supplement thereto;
(e) resulting from the breach by the Issuer of any of the terms of this
Agreement;
(f) resulting from any representation or warranty made by the Issuer
herein not being true or ceasing to be true;
(g) if the Issuer fails to issue and deliver the certificates
representing the Securities in the form and denominations
satisfactory to the Agents at the time and place required by the
Agents with the result that any completion of a sale of the
Securities does not take place; or
(h) if, following the completion of a sale of any of the Securities, a
determination is made by any competent authority setting aside the
sale, unless that determination arises out of an act or omission by
the Agents.
16.2 If any action or claim is brought against an Indemnified Party in respect
of which indemnity may be sought from the Issuer pursuant to this Agreement, the
Indemnified Party will promptly notify the Issuer in writing.
16.3 The Issuer will assume the defence of the action or claim, including the
employment of counsel and the payment of all expenses.
16.4 The Indemnified Party will have the right to employ separate counsel, and
the Issuer will pay the fees and expenses of such counsel.
16.5 The indemnity provided for in this Section will not be limited or
otherwise affected by any other indemnity obtained by the Indemnified Party from
any other person in respect of any matters specified in this Agreement and will
continue in full force and effect until all possible liability of the
Indemnified Parties arising out of the transactions contemplated by this
Agreement has been extinguished by the operation of law.
16.6 If indemnification under this Agreement is found in a final judgment (not
subject to further appeal) by a court of competent jurisdiction not to be
available for reason of public policy, the Issuer and the Indemnified Parties
will contribute to the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) for which such indemnification is held unavailable
in such proportion as is appropriate to reflect the relative benefits to and
fault of the Issuer, on the one hand, and the Indemnified Parties on the other
hand, in connection with the matter
<PAGE> 20
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giving rise to such losses, claims, damages, liabilities or expenses (or actions
in respect thereof). No person found liable for a fraudulent Misrepresentation
will be entitled to contribution from any person who is not found liable for
such fraudulent Misrepresentation.
16.7 To the extent that any Indemnified Party is not a party to this Agreement,
the Agents will obtain and hold the right and benefit of this section in trust
for and on behalf of such Indemnified Party.
17. ASSIGNMENT AND SELLING GROUP PARTICIPATION
17.1 The Agents will not assign this Agreement or any of their rights under
this Agreement or, with respect to the Securities, enter into any agreement in
the nature of an option or a sub-option unless and until, for each intended
transaction, the Agents have obtained the consent of the Issuer, and any
required notice has been given to and accepted by the Regulatory Authorities.
17.2 The Agents may offer selling group participation in the normal course of
the brokerage business to selling groups of other licensed dealers, brokers and
investments dealers, who may or who may not be offered part of the Agents' Fee
or Agents' Special Warrants.
18. NOTICE
18.1 Any notice under this Agreement will be given in writing and must be
delivered, sent by facsimile transmission or mailed by prepaid post and
addressed to the party to which notice is to be given at the address indicated
above, or at another address designated by the party in writing.
18.2 If notice is sent by facsimile transmission or is delivered, it will be
deemed to have been given at the time of transmission or delivery.
18.3 If notice is mailed, it will be deemed to have been received 48 hours
following the date of mailing of the notice.
18.4 If there is an interruption in normal mail service due to strike, labour
unrest or other cause at or prior to the time a notice is mailed the notice will
be sent by facsimile transmission or will be delivered.
19. TIME
Time is of the essence of this Agreement and will be calculated in accordance
with the provisions of the Interpretation Act (British Columbia).
20. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties, and covenants of the Issuer contained in this
Agreement will survive the final Closing for a period of two years.
21. LANGUAGE
This Agreement is to be read with all changes in gender or number as required by
the context.
<PAGE> 21
-21-
22. ENUREMENT
This Agreement enures to the benefit of and is binding on the parties to this
Agreement and their successors and permitted assigns.
23. HEADINGS
The headings in this Agreement are for convenience of reference only and do not
affect the interpretation of this Agreement.
24. COUNTERPARTS
This Agreement may be executed in two or more counterparts and may be delivered
by facsimile transmission, each of which will be deemed to be an original and
all of which will constitute one agreement, effective as of the reference date
given above.
25. LAW
This Agreement is governed by the law of British Columbia, and the parties
hereto irrevocably attorn and submit to the jurisdiction of the courts of
British Columbia with respect to any dispute related to this Agreement.
This document was executed and delivered as of the date given above:
The common seal of INFOWAVE )
SOFTWARE, INC. )
was hereunto affixed in the presence of: )
)
/s/ G.A. Watson
- -------------------- )
Authorized Signatory ) c/s
)
)
Authorized Signatory )
The common seal of CANACCORD CAPITAL )
CORPORATION was hereunto affixed in the )
presence of: )
)
/s/ illegible
- -------------------- )
Authorized Signatory ) c/s
)
)
Authorized Signatory )
<PAGE> 22
-22-
The common seal of YORKTON SECURITIES )
INC. was hereunto affixed in the presence of: )
)
/s/ Brian Campbell )
- -------------------- )
Authorized Signatory ) c/s
)
)
Authorized Signatory )
The common seal of SPROTT SECURITIES )
LIMITED was hereunto affixed in the presence of: )
)
)
Authorized Signatory ) c/s
)
/s/ illegible )
- -------------------- )
Authorized Signatory )
The common seal of TAURUS CAPITAL )
MARKETS LTD. was hereunto affixed in )
the presence of: )
)
)
Authorized Signatory ) c/s
)
/s/ illegible )
- -------------------- )
Authorized Signatory )
<PAGE> 23
SCHEDULE "A"
SUBSCRIPTION AGREEMENT FOR NON-U.S. SUBSCRIBERS
<PAGE> 24
SCHEDULE "A"
SUBSCRIPTION FOR SPECIAL WARRANTS
(NON-UNITED STATES RESIDENTS)
TO: INFOWAVE SOFTWARE, INC.
(the "Corporation")
AND TO: CANACCORD CAPITAL CORPORATION
YORKTON SECURITIES INC.
SPROTT SECURITIES INC.
TAURUS CAPITAL MARKETS INC.
(collectively, the "Agents")
The undersigned (the "Subscriber") hereby irrevocably (subject to Section
3(w) hereof) subscribes for and agrees to purchase _______________________
special warrants (the "Special Warrants") of the Corporation for an aggregate
consideration of Cdn.$ ___________________ (the "Subscription Price"),
representing a subscription price of Cdn.$3.25 per Special Warrant, on the terms
and conditions set out in sections 1 to 15 below. Each Special Warrant shall
entitle the holder thereof to acquire, at no additional cost, one common share
in the capital of the Corporation (a "Common Share") and one-half of one
non-transferrable common share purchase warrant (each whole such warrant a
"Purchase Warrant"). Each Purchase Warrant will entitle the holder to purchase
one Common Share (a "Warrant Share") at $3.75 per Warrant Share for 12 months
from the Closing Date (as hereinafter defined). The Special Warrants shall have
the attributes described in Schedule "A" attached to and forming part of this
subscription.
DATED at the City of ____________________________, in the
_________________ of ___________________________, this _________ day of
_________ , 1999.
- --------------------------------------- ------------------------------------
(Name of Subscriber - please print) Subscriber's Address
- --------------------------------------- ------------------------------------
(Subscriber's Address)
by:
----------------------------------- ------------------------------------
(Official Capacity or Title -
please print)
- --------------------------------------- ------------------------------------
Authorized Signature (Telephone Number)
- --------------------------------------- ------------------------------------
(Please print name of individual whose (Facsimile Number)
signature appears above if different
than the name of the Subscriber
printed above).
DETAILS OF BENEFICIAL PURCHASER IF NOT SAME AS SUBSCRIBER:
- --------------------------------------- ------------------------------------
(Name - please print) (Beneficial Purchaser's Address)
- --------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------
(if space is inadequate please attach a
schedule containing the necessary
information)
<PAGE> 25
-2-
REGISTRATION INSTRUCTIONS: DELIVERY INSTRUCTIONS:
- --------------------------------------- ------------------------------------
Name Name
- --------------------------------------- ------------------------------------
Account reference, if applicable Account reference, if applicable
- --------------------------------------- ------------------------------------
Address Contact Name
- --------------------------------------- ------------------------------------
Address
- --------------------------------------- ------------------------------------
Telephone Number
- --------------------------------------- ------------------------------------
Facsimile Number
* * * *
1. TERMS OF SPECIAL WARRANTS. The Special Warrants shall have the attributes
described in Schedule "A" hereto and shall be duly and validly created and
issued in the name of the Subscriber or the Subscriber's nominee pursuant to the
terms of a Special Warrant Indenture (the "SPECIAL WARRANT INDENTURE") to be
entered into between the Corporation and Montreal Trust Company of Canada, as
warrant agent (the "WARRANT AGENT").
2. AGENCY AGREEMENT. The Subscriber acknowledges that the Agents and the
Corporation are currently negotiating, or intend to negotiate, an agreement (the
"AGENCY AGREEMENT") under which the Corporation will appoint the Agents to act
as agents to use their commercially reasonable efforts to offer the Special
Warrants on a private placement basis. The acceptance of this subscription by
the Corporation and the closing of the transactions contemplated hereby are
subject to the negotiation and entering into of the Agency Agreement. Provided
that the Agency Agreement is entered into, the transactions contemplated in this
Agreement will occur in accordance with the terms of the Agency Agreement.
3. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. By executing this subscription,
the Subscriber represents, warrants and covenants to the Corporation and the
Agents (and acknowledges that the Corporation and the Agents are relying
thereon) that:
(a) the Subscriber has been independently advised as to the applicable
hold period imposed in respect of the Special Warrants by securities
legislation in the jurisdiction in which it resides and confirms
that no representation has been made respecting the applicable hold
periods for the Special Warrants and is aware of the risks and other
characteristics of the Special Warrants and of the fact that the
Subscriber may not be able to resell the Special Warrants, Common
Shares, Purchase Warrants and Warrant Shares except in accordance
with the applicable securities legislation and regulatory policy;
<PAGE> 26
-3-
(b) the Subscriber has not received, nor has it requested, nor does it
have any need to receive, any offering memorandum, or any other
document (other than financial statements or any other document the
content of which is prescribed by statute or regulation) describing
the business and affairs of the Corporation which has been prepared
for delivery to, and review by, prospective purchasers in order to
assist them in making an investment decision in respect of the
Special Warrants and it has not become aware of any advertisement in
printed media of general and regular paid circulation, radio,
television or otherwise with respect to the distribution of the
Special Warrants;
(c) the Subscriber has relied solely upon the publicly available
information relating to the Corporation and not upon any verbal or
written representation as to fact or otherwise made by or on behalf
of the Corporation or the Agents, such publicly available
information having been delivered to the Subscriber without
independent investigation or verification by the Corporation or the
Agents, and agrees that the Corporation and the Agents assume no
responsibility or liability of any nature whatsoever for the
accuracy, adequacy or completeness of the publicly available
information;
(d) the Subscriber acknowledges that the Agents are acting as agents in
this transaction and the Subscriber hereby acknowledges that all
warranties, conditions, representations or stipulations, whether
express or implied and whether arising hereunder or under prior
agreement or statement or by statute or at common law are expressly
those of the Corporation, other than those relating solely to the
Agents. The Subscriber acknowledges that no information or
representation concerning the Corporation has been provided to the
Subscriber by the Corporation or the Agents other than those
contained in this Agreement and in all press releases, prospectuses
and filing statements filed with any regulatory authorities (the
"DISCLOSURE RECORD") and that the Subscriber is relying entirely
upon this Agreement and the Disclosure Record. Any information given
or statement made is given or made without liability or
responsibility howsoever arising on the part of the Agents. No
person in the employment of, or acting as agent of, the Agents has
any authority to make or give any representation or warranty
whatsoever in relation to the Corporation or the Special Warrants.
Any information given or statement made is given or made without
liability or responsibility howsoever arising on the part of the
Agents, and the Corporation and the Subscriber hereby release the
Agents from any claims that may arise in respect thereof;
(e) the Subscriber and any beneficial purchaser for whom it is acting
are resident in the province or jurisdiction set out on the first
page of this subscription above as the "Subscriber's Address" or the
"Beneficial Purchaser's Address", as the case may be;
(f) the Subscriber:
<PAGE> 27
-4-
(i) is not, and is not purchasing Special Warrants for the account
or benefit of, a U.S. Person (as that term is defined in
Regulation S under the United States Securities Act of 1933
("REGULATION S"));
(ii) was not offered the Special Warrants in the United States (as
that term is defined in Regulation S), (the "UNITED STATES");
and
(iii) did not execute or deliver this subscription in the United
States.
(g) the Subscriber:
(i) A. is purchasing the Special Warrants as principal
for its own account, not for the benefit of any other
person, and not with a view to the resale or
distribution of all or any of the Special Warrants; or
B. if it is not purchasing as principal, it is duly
authorized to enter into this subscription and to
execute all documentation in connection with the
purchase on behalf of each beneficial purchaser, it
acknowledges that the Corporation may be required by law
to disclose on a confidential basis to certain
regulatory authorities the identity of each beneficial
purchaser of Special Warrants for whom it may be acting;
and
I. it is resident in British Columbia, is (a) a trust
company, insurance company or financial
institution that has been authorized to do
business under the Financial Institutions Act
(British Columbia) (b) an adviser who manages the
investment portfolio of clients through
discretionary authority granted by one or more
clients and who is registered as a portfolio
manager under the Securities Act (British
Columbia) or is exempt from such registration, and
it is purchasing the Special Warrants as an agent
or trustee for accounts that are fully managed by
it; or
II. it is resident in Alberta, is trading for accounts
fully managed by it and is a trust corporation
trading as trustee or an agent, a portfolio
manager trading as an agent, or a person or
company trading as an agent that, except for an
exemption under the Securities Act (Alberta) or
the rules and regulations thereunder, is required
to be registered as a portfolio manager; or
III. it is resident in Ontario, is a trust company
registered under the Loan and Trust Corporations
Act (Ontario), and is purchasing the Special
Warrants as trustee or as agent for accounts fully
managed by it; or
<PAGE> 28
-5-
IV. it is a resident outside of Canada and is a
portfolio manager in a jurisdiction other than
Canada and has provided the "Additional
Undertaking and Certification - Foreign Portfolio
Manager" in the Corporate Placee Registration Form
in Schedule "B" hereto, the certifications made
therein being repeated to the Corporation and the
Agents herein; or
V. it is acting as agent for one or more disclosed
principals, each of which principals is purchasing
as a principal for its own account, not for the
benefit of any other person, and not with a view
to the resale or distribution of all or any of the
Special Warrants and each of which principals
complies with one of paragraphs (ii), (iii), (iv),
or (v) below, as applicable;
(ii) if it is an individual or corporation, it would have an
aggregate acquisition cost of purchasing the Special
Warrants of not less than $97,000 ($150,000 if resident
in Ontario);
(iii) if it is a resident in British Columbia or outside of
Canada and is not a corporation or an individual but is
a syndicate, partnership or other form of unincorporated
organization, every participant in the syndicate,
partnership or unincorporated organization would have an
aggregate acquisition cost of not less than $97,000 for
the Special Warrants purchased if the participant were
acquiring its proportionate interest in the Special
Warrants purchased;
(iv) if it is resident in Alberta and is a corporation,
syndicate, partnership or other form of unincorporated
organization, it pre-existed the offering of the Special
Warrants and has a bona fide purpose other than
investment in the Special Warrants or, if created to
permit such investment, the individual share of the
aggregate acquisition cost for each participant is not
less than $97,000;
(v) if it is resident in Ontario and is a corporation, it
was not incorporated solely to permit the purchase of
the Special Warrants without the need for the filing of
a prospectus or if it is a corporation incorporated or
created for such a purpose and a resident in Ontario,
each shareholder of the corporation is an individual who
has contributed at least $150,000 to the corporation for
the purpose of investment by the corporation in the
Special Warrants;
(vi) if it is a resident in Ontario and is not a corporation
or an individual but is a syndicate, partnership, trust
or other unincorporated organization, it is purchasing
as principal for its own account; and
<PAGE> 29
-6-
A. each member of the syndicate, partnership, trust
or other unincorporated organization or each
beneficiary of the trust, as the case may be, is
an individual who has contributed at least
$150,000 for the Special Warrants purchased; or
B. the acquisition cost to such syndicate,
partnership, trust or other unincorporated
organization of the Special Warrants subscribed
for hereunder is not less than $150,000 and the
syndicate, partnership, trust or other
unincorporated organization falls within one of
the following categories: (i) pensions plans; (ii)
groups of pension plans under common management;
(iii) organizations of members of a family fund
formed to make investments of family funds; (iv)
testamentary trusts and estates; (v) organizations
which have primary ongoing business activities
other than investing in securities; (vi) mutual
funds other than private mutual funds within the
meaning of paragraph (a) of the definition of
"private mutual fund" in subsection 1(1) of the
Securities Act (Ontario); (vii) group registered
retirement savings plans or group deferred profit
sharing plans; or (viii) partnerships, interests
in which are offered by prospectus, where the
partnership invests in securities in reliance upon
section 72(1)(d) of the Securities Act (Ontario)
and section 27 of the Regulation made thereunder;
but subject nevertheless to the requirement that
it will not resell the Special Warrants or Common
Shares issued pursuant thereto, except in
accordance with the provisions of applicable
securities legislation and stock exchange rules;
(h) it is not a corporation, partnership, trust, fund, association, or
any other organized group of persons created solely, or used
primarily, to permit the purchase of Special Warrants (or similar
purchases) by a group of individuals whose individual share of the
aggregate acquisition cost of the Special Warrants is less than
$97,000;
(i) if an individual, the Subscriber has attained the age of majority
and is legally competent to execute this subscription and to take
all actions required pursuant hereto;
(j) if the Subscriber is a corporation it is duly incorporated and
validly subsisting under the laws of its jurisdiction of
incorporation and all necessary approvals by its directors,
shareholders and others have been given to authorize execution of
this Agreement on behalf of the Subscriber;
(k) the Subscriber is capable of assessing the proposed investment as a
result of the Subscriber's financial experience or as a result of
advice received from a registered person other than the Corporation
or any affiliates thereof;
<PAGE> 30
-7-
(l) if required by applicable securities legislation, policy or order or
by any securities commission, stock exchange or other regulatory
authority, the Subscriber will execute, deliver, file and otherwise
assist the Corporation in filing, such reports, undertakings and
other documents with respect to the issue of the Special Warrants,
Common Shares, Purchase Warrants and Warrant Shares issued pursuant
thereto, as may be required, including, without limitation:
(i) if the Subscriber is not an individual, the Corporate Placee
Registration Form required by the Vancouver Stock Exchange if
it has not already filed the same with the Vancouver Stock
Exchange attached hereto as Schedule "B"; and
(ii) if the Subscriber is an individual, the Form 20A(IP) attached
hereto as Schedule "C";
(m) this subscription has been duly and validly authorized, executed and
delivered by and constitutes a legal, valid, binding and enforceable
obligation of the Subscriber;
(n) the delivery of this subscription, the acceptance of it by the
Corporation, the issuance of the Special Warrants to the Subscriber
and the acquisition of the Common Shares and Purchase Warrants upon
the exercise of the Special Warrants and the acquisition of the
Warrant Shares upon exercise of the Purchase Warrants complies with
all applicable laws of the Subscriber's jurisdiction of residence or
domicile and all other applicable laws and will not cause the
Corporation to become subject to or comply with any disclosure,
prospectus or reporting requirements under any such applicable laws;
(o) if the Subscriber is not purchasing in accordance with subparagraph
(g) above, it is purchasing pursuant to an exemption from prospectus
or registration requirements (particulars of which are disclosed
herewith) available to it under applicable securities legislation
and shall deliver to the Corporation and the Agents such further
particulars of the exemption(s) and the Subscriber's qualification
thereunder as the Corporation and the Agents may reasonably request;
(p) the Subscriber acknowledges that no prospectus has been filed by the
Corporation with the British Columbia, Alberta or Ontario Securities
Commission (the "COMMISSIONS") in connection with the issuance of
the Special Warrants, the issuance is exempted from the prospectus
requirements of the Securities Acts of British Columbia, Alberta and
Ontario and the rules and regulations thereunder (the "APPLICABLE
LEGISLATION") and that:
(i) the Subscriber is restricted from using most of the civil
remedies available under the Applicable Legislation;
(ii) the Subscriber may not receive information that would
otherwise be required to be provided to him under the
Applicable Legislation; and
<PAGE> 31
-8-
(iii) the Corporation is relieved from certain obligations that
would otherwise apply under the Applicable Legislation;
(q) no person has made to the Subscriber any written or oral
representations:
(i) that any person will resell or repurchase the Special
Warrants, Common Shares or Warrant Shares issuable upon
exercise of the Purchase Warrants (the "SECURITIES");
(ii) that any person will refund the purchase price of the Special
Warrants;
(iii) as to the future price or value of any of the Securities; or
(iv) that the Securities will be listed and posted for trading on a
stock exchange or that application has been made to list and
post the Securities for trading on a stock exchange, other
than the Vancouver Stock Exchange;
(r) the Subscriber is not a "control person" of the Corporation as
defined in the Applicable Legislation, will not become a "control
person" by virtue of this purchase of any of the Securities, and
does not intend to act in concert with any other person to form a
control group of the Corporation;
(s) the Subscriber is at arm's length (as that term is customarily
defined) with the Corporation;
(t) the Subscriber acknowledges that the Securities have not been
registered under the United States Securities Act of 1933 (the "1933
ACT") and may not be offered or sold in the United States unless
registered under the 1933 Act and the securities laws of all
applicable states of the United States or an exemption from such
registration requirements is available, and that the Corporation has
no obligation or present intention of filing a registration
statement under the 1933 Act in respect of the Special Warrants,
Common Shares, Purchase Warrants or Warrant Shares;
(u) the Subscriber (or others for whom it is contracting hereunder) has
been advised to consult its own legal and tax advisors with respect
to applicable resale restrictions and tax considerations, and it (or
others for whom it is contracting hereunder) is solely responsible
for compliance with applicable resale restrictions and applicable
tax legislation;
(v) the Subscriber has no knowledge of a "material fact" or "material
change" (as those terms are defined in the Applicable Legislation)
in the affairs of the Corporation that has not been generally
disclosed to the public, save knowledge of this particular
transaction;
(w) the offer made by this subscription is irrevocable (subject to the
Subscriber's right to withdraw his subscription and to terminate his
obligations as set out in this Agreement) and requires acceptance by
the Corporation and approval of the Vancouver Stock Exchange;
<PAGE> 32
-9-
(x) the entering into of this Agreement and the transactions
contemplated hereby will not result in the violation of any of the
terms and provisions of any law applicable to, or the constating
documents of, the Subscriber or of any agreement, written or oral,
to which the Subscriber may be a party or by which he is or may be
bound;
(y) the Subscriber acknowledges that the Agents will receive a
commission from the Corporation in connection with this offering;
(z) the Subscriber acknowledges that the offering of Special Warrants is
restricted to purchasers in Canada that are resident in British
Columbia, Alberta and Ontario only, and in such other jurisdictions
outside of Canada and the United States, where such securities may
be lawfully offered for sale; and
(aa) if resident in Ontario or Alberta, the Subscriber acknowledges that
they are required to file a first trade report prepared in the
required form, within 10 days of the first trade in any of the
Securities.
The Subscriber agrees that the above representations, warranties and
covenants will be true and correct both as of the execution of this
subscription and as of the Closing Time and will survive the completion of
the issuance of the Special Warrants.
4. ACKNOWLEDGEMENT. The foregoing representations, warranties and covenants are
made by the Subscriber with the intent that they be relied upon by the
Corporation and the Agents in determining its suitability as a purchaser of
Special Warrants and the Subscriber hereby agrees to indemnify the Corporation
and the Agents against all losses, claims, costs, expenses and damages or
liabilities which any of them may suffer or incur caused or arising from
reliance thereon. The Subscriber undertakes to notify the Corporation
immediately at facsimile number (604) 473-3699 (Attention: Gord Watson) and the
Agents at facsimile number (604) 643-7733 (Attention: David Horton) and
(416)864-1043 (Attention: Cathy Tassone), of any change in any representation,
warranty or other information relating to the Subscriber set forth herein which
takes place prior to the Closing Time (as hereinafter defined).
The Subscriber acknowledges that a legend will be placed on the
certificates representing the Special Warrants (and any Common Shares or Warrant
Shares in the event the Special Warrants are exercised prior to the
Qualification Date (as defined in Schedule "A")) to the effect that the
securities represented by the certificates are subject to a hold period and may
not be traded in British Columbia until the expiry of such hold period except as
permitted by applicable securities legislation.
The Subscriber acknowledges that, although Special Warrants may be issued
to other purchasers under this offering concurrently with the Closing Date,
there may be other sales of Special Warrants under this offering, some or all of
which may close after the Closing Date. The Subscriber further acknowledges that
there is a risk that insufficient funds may be raised on the Closing Date to
fund the Corporation's objectives and that further closings may not take place
after the Closing Date.
5. CLOSING. The sale of the Special Warrants will be completed at the offices
of Blake, Cassels & Graydon, the Corporation's counsel, in Vancouver, British
Columbia at 10:00
<PAGE> 33
-10-
a.m. (Vancouver time), or such other time as the Agents and the Corporation may
agree (the "Closing Time") on June 22, 1999, or such other date or time as the
Agents and the Corporation may agree (the "Closing Date"). If by the Closing
Time, the terms and conditions contained in the Agency Agreement for the benefit
of the Agents have been complied with to the satisfaction of the Agents or
waived by the Agents, the Agents shall deliver to the Corporation all completed
subscriptions, including this subscription, against delivery by the Corporation
of the Special Warrants.
6. DELIVERY OF SUBSCRIPTION AGREEMENT. The Subscriber agrees to deliver to the
Agents not later than 9:00 a.m. (Vancouver time) on June 18, 1999 (or two days
before the Closing Date if such date is changed in accordance with paragraph 5
above and communicated to the Subscriber) the following:
(a) this duly completed and executed Subscription;
(b) if the Subscriber is not an individual, a manually signed and
completed copy of the Corporate Placee Registration Form required by
the Vancouver Stock Exchange as attached hereto as Schedule "B"
unless such form has already been provided to the Vancouver Stock
Exchange, in which case the Subscriber represents and warrants that
the information contained therein is accurate at the date hereof;
(c) if the Subscriber is an individual, a manually signed and completed
copy of the Form 20A (IP) as attached hereto as Schedule "C"; and
(d) such other documents as may be required as contemplated by
paragraph 3(l) hereof.
In addition, the Subscriber will arrange for the payment of the Subscription
Price in a manner acceptable to the Agents on or before 9:00 a.m. (Vancouver
time) on June 21, 1999 (or one day before the Closing Date if such date is
changed in accordance with paragraph 5 above and communicated to the
Subscriber).
This subscription is irrevocable except that the Subscriber reserves
the right to withdraw this subscription and to terminate its obligations
hereunder at any time before the Closing Date if the Agency Agreement is not
entered into or if the Agents terminate their obligations with respect to this
offering under the Agency Agreement and the Subscriber hereby appoints the
Agents as its agent for the purpose of notifying the Corporation of the
withdrawal or termination of this subscription.
7. RIGHTS OF RESCISSION. In the event that a holder of a Special Warrant who
acquires Common Shares and Purchase Warrants upon the exercise of the Special
Warrant, is or becomes entitled under applicable securities legislation to the
remedy of rescission by reason of a misrepresentation in the prospectus filed in
connection with the qualification of the Common Shares and Purchase Warrants to
be issued on exercise of the Special Warrants or any amendment thereto, such
holder shall, subject to available defenses and any limitation period under
applicable securities legislation, be entitled to rescission not only of the
holder's exercise of its Special Warrant(s) but also of the private placement
transaction pursuant to which the
<PAGE> 34
-11-
Special Warrant was initially acquired, and shall be entitled in connection with
such rescission to a full refund from the Corporation of all consideration paid
on the acquisition of the Special Warrant. In the event such holder is a
permitted assignee of the interest of the original Special Warrant Subscriber,
such permitted assignee shall be entitled to exercise the rights of rescission
and refund granted hereunder as if such permitted assignee was such original
Subscriber. The foregoing is in addition to any other right or remedy available
to a holder of the Special Warrant under the Applicable Legislation or otherwise
at law.
8. AUTHORITY OF AGENTS. The Subscriber hereby irrevocably authorizes each of
the Agents, individually or together, in its or their sole discretion:
(a) to act as the Subscriber's representative at the closing, to receive
certificates for Special Warrants subscribed for and to execute in
its name and on its behalf all closing receipts and documents
required;
(b) to negotiate and approve, among other things, the Special Warrant
Indenture, a Purchase Warrant Indenture (if any), the terms relating
to the escrow of net proceeds as further described in the Term Sheet
attached hereto as Schedule "A", and any related documents and any
opinions, certificates or other documents addressed to the
Subscriber; and
(c) to waive, in whole or in part, any representations, warranties,
covenants or conditions for the benefit of the Subscriber contained
herein or in any agreement or document ancillary or related thereto.
9. EXECUTION OF SUBSCRIPTION AGREEMENT. The Corporation and the Agents shall be
entitled to rely on delivery by facsimile machine of an executed copy of this
subscription, and acceptance by the Corporation of such facsimile copy shall be
equally effective to create a valid and binding agreement between the Subscriber
and the Corporation in accordance with the terms hereof.
10. CONDITIONAL UPON ACCEPTANCE BY CORPORATION. The Corporation reserves the
right to review and accept or reject any subscription for any reason, in its
sole and absolute discretion.
11. CONDITIONAL UPON VSE APPROVAL. Without limitation, this subscription and
the transactions contemplated hereby are conditional upon and subject to the
Corporation receiving the Vancouver Stock Exchange's approval of this
subscription and the transactions contemplated hereby.
12. GOVERNING LAW. The contract arising out of this subscription shall be
governed by and construed in accordance with the laws of the province of British
Columbia and the laws of Canada applicable therein.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants, representations
and warranties contained herein shall survive the closing of the transactions
contemplated hereby.
<PAGE> 35
-12-
14. ASSIGNMENT. This agreement is not assignable or transferable by the parties
hereto without the express written consent of the other party hereto.
15. TIME OF ESSENCE. Time shall be of the essence of this subscription.
ACCEPTANCE
INFOWAVE SOFTWARE, INC. hereby accepts the above subscription as of this
________ day of ________ 1999, and represents and warrants to the Subscriber
that the covenants, representations and warranties made by it to the Agents in
the Agency Agreement are true and correct as of this date and that the
Subscriber is entitled to rely thereon as if they were embodied herein. The
Corporation will, upon request by the Subscriber, provide the Subscriber with an
extract from the Agency Agreement setting forth such covenants, representations
and warranties, without charge.
INFOWAVE SOFTWARE, INC.
By: ____________________________________
Title: _________________________________
<PAGE> 36
SCHEDULE "A"
TERM SHEET
SUMMARY OF PRINCIPAL TERMS OF AN OFFERING
OF SPECIAL WARRANTS EXERCISABLE FOR COMMON SHARES
ISSUER: Infowave Software, Inc.
OFFERING: A minimum of 1,230,770 Special Warrants.
AMOUNT: A minimum of $4,000,000 at a price of $3.25 per
Special Warrant.
TERMS OF SPECIAL Each Special Warrant shall entitle the holder thereof to
WARRANTS: acquire, at no additional cost, one unit comprised of
one common share in the capital of the Corporation (a
"COMMON SHARE") and one-half of a non-transferrable
common share purchase warrant (each whole such warrant a
"PURCHASE WARRANT").
MINIMUM SUBSCRIPTION: $97,000 in the Provinces of British Columbia and Alberta
and $150,000 in the Province of Ontario.
CLOSING DATE: June 22, 1999, or such other date as is agreed upon by
the Agents and the Corporation (the "CLOSING DATE").
Subscription funds and subscription agreements will be
held by the Agents pending closing of the Offering. In
the event subscriptions for a minimum of 1,230,770
Special Warrants are not received on or before June 30,
1999, no subscriptions will be accepted and all
subscription funds will be returned to the subscribers
without interest or deduction.
SELLING AND QUALIFYING British Columbia, Alberta and Ontario (collectively, the
JURISDICTIONS: "QUALIFYING JURISDICTIONS") and offshore.
SPECIAL WARRANTS: The Special Warrants will be issued pursuant to a
special warrant indenture. The Special Warrants are
exercisable by the holders thereof at any time after
their issuance and, if not previously exercised, will be
deemed to be exercised immediately prior to 4:00 p.m.
(Vancouver time) on the earlier of: (i) the fifth
business day after a receipt is issued by the last of
the securities regulatory authorities in each of the
Qualifying Jurisdictions for a (final) prospectus
qualifying the issuance of the Common Shares and the
Purchase Warrants (the "UNDERLYING SECURITIES") upon
<PAGE> 37
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exercise of the Special Warrants; and (ii) the date
which is 330 days after the Closing Date (the "EXPIRY
DATE"). The Special Warrants are transferable.
PURCHASE WARRANT Each Purchase Warrant will entitle the holder to
TERMS: purchase one Common Share (a "Warrant Share") at $3.75
per Warrant Share for 12 months from the Closing Date.
PROSPECTUS FILING: The Corporation will use its reasonable efforts to file
a preliminary prospectus qualifying the Underlying
Securities to be issued upon exercise of the Special
Warrants in all Qualifying Jurisdictions as soon as
practicable after the Closing Date. The Corporation will
use reasonable efforts to obtain a receipt for the
(final) prospectus (the "FINAL PROSPECTUS") within 90
days after the Closing Date. If the Corporation does not
obtain such receipt for the Final Prospectus within 90
days after the Closing Date, Special Warrants exercised
after that date shall, subject to regulatory approval,
entitle the holder to receive 1.1 Common Shares without
payment of any further consideration.
ESCROW: 40% of the net proceeds from the sale of the Special
Warrants will be held in escrow by Montreal Trust
Company of Canada, to be released on the earlier of: (a)
the day the last of the securities regulatory
authorities in each of the Qualifying Jurisdictions have
issued a receipt for the Final Prospectus; and (b) 330
days from the Closing Date.
AGENTS: Canaccord Capital Corporation, Yorkton Securities Inc.,
Sprott Securities Inc. and Taurus Capital Markets Inc.
(the "Agents") are acting as agents of the Corporation
for this commercially reasonable efforts offering and
will be paid at the closing of the sale of Special
Warrants a commission of 7.5% of the gross proceeds of
the offering. In addition, the Agents shall receive a
Special Agent's Warrant, exercisable to acquire an
Agent's Warrant which, upon exercise will entitle the
Agents to purchase such number of Common Shares equal to
10% of the number of Special Warrants sold by the
Agents, for a period of 12 months from the Closing Date,
at a price of $3.25 per Common Share. The issuance of
the Special Agent's Warrant is subject to regulatory
approval.
SUBSCRIPTION: Persons wishing to subscribe for Special Warrants must
complete and sign a Subscription Form and deliver a
cheque in the amount of $3.25 per Special Warrant to
either
<PAGE> 38
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of the Agents not later than two business days prior to
the Closing Date. The Corporation shall be entitled to
accept or reject any subscription, in its sole and
absolute discretion.
<PAGE> 39
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USE OF PROCEEDS: The proceeds from the sale of the Special Warrants will
be used by the Corporation to expand product development
and market development of the Corporation's wireless
computing business and for working capital purposes.
RESALE RESTRICTIONS: The Special Warrants will be issued pursuant to
exemptions from prospectus requirements of applicable
securities legislation and will be subject to resale
restrictions under that legislation.
If the Corporation is unable to obtain a receipt for the
Final Prospectus in any Qualifying Jurisdiction, the
Underlying Securities will be subject to statutory hold
periods during which time these securities may not be
resold in such Qualifying Jurisdictions. In addition, if
any Special Warrants are exercised prior to the day of
issuance of receipts for a Final Prospectus by the
securities commissions (the "QUALIFICATION DATE") in any
of the Qualifying Jurisdictions, the Underlying
Securities will be subject to statutory restrictions on
resale. The Special Warrants and the Underlying
Securities are also subject to restrictions on resale
imposed by the Vancouver Stock Exchange. Investors are
advised to consult their own legal advisers in this
regard.
The Corporation intends to file a prospectus to qualify
the Underlying Securities only in the Qualifying
Jurisdictions. Accordingly, Underlying Securities that
are acquired outside of the Qualifying Jurisdictions may
be subject to additional resale restrictions. Investors
are advised to consult their own legal advisers in this
regard.
<PAGE> 40
SCHEDULE "B"
CORPORATE PLACEE REGISTRATION FORM
Where subscribers to a private placement are not individuals, the Exchange
requires that the following information about the placee be provided.
This Form will remain on file with the Exchange, therefore the corporation or
other entity (the "corporation") need only file it once, and it will be
referenced for all subsequent private placements in which it participates. If
any of the information provided in this Form changes, the corporation must
notify the Exchange prior to participating in further placements with Exchange
listed companies.
1. Name of Corporation:
________________________________________________________________________________
2. Address of Corporation's Head Office:
________________________________________________________________________________
3. Jurisdiction of Incorporation:
________________________________________________________________________________
4. (a) If the corporation will be purchasing securities as principal, [ ]
please check the box at right and include the names and addresses
of person/s having a greater than 10% beneficial interest in the
corporation:
_______________________________________________________________________
_______________________________________________________________________
(b) If the corporation will be purchasing as a portfolio manager, [ ]
please check the box at right and complete the Additional
Undertaking and Certification set out below.
ADDITIONAL UNDERTAKING AND CERTIFICATION - PORTFOLIO MANAGER
If the undersigned is a portfolio manager purchasing as agent for accounts that
are fully managed by it, the undersigned acknowledges that it is bound by the
provisions of the Securities Act (British Columbia) (the "Act"), and undertakes
to comply with all provisions of the Act relating to ownership of, and trading
in, securities including, without limitation, the filing of insider reports and
reports pursuant to Section 111 of the Act.
If the undersigned carries on business as a portfolio manager in a jurisdiction
outside of Canada, the undersigned certifies that:
a) it is purchasing securities of the Issuer on behalf of managed
accounts over which it has absolute discretion as to purchasing and
selling, and in respect of which it
<PAGE> 41
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receives no instructions from any person beneficially interested in
such accounts or from any other person;
b) it carries on the business of managing the investment portfolios of
clients through discretionary authority granted by those clients (a
"portfolio manager" business) in ______________________
[jurisdiction], and it is permitted by law to carry on a portfolio
manager business in that jurisdiction;
c) it was not created solely or primarily for the purpose of purchasing
securities of the Issuer;
d) the total asset value of the investment portfolios it manages on
behalf of clients is not less than $20,000,000;
e) it does not believe, and has no reasonable grounds to believe, that
any resident of British Columbia has a beneficial interest in any of
the managed accounts for which it is purchasing; and
f) the Company has provided it with a list of the directors, senior
officers and other insiders of the Company and the persons that
carry on investor relations activities for the Company:
Gary Macintosh
Jim Macintosh
Scot Land
David Neale
David Wedge
Michael Blackstock
Gordon Watson
Bijan Sanii
Todd Carter
Ron Jasper
Kevin Jampole
The Investor Relations Group
and it does not believe, and has no reasonable grounds to believe,
that any of those persons has a beneficial interest in any of the
managed accounts for which it is purchasing, except as follows:
_______________________________________________________________________
_______________________________________________________________________
(Name of insider(s) or person(s) carrying on investor relations
activities for the Company that have a beneficial interest in an
account)
<PAGE> 42
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5. The undersigned acknowledges that it is bound by the provisions of the
British Columbia Securities Act including, without limitation, sections 87
and 111 concerning the filing of insider reports and reports of
acquisitions.
Dated at ___________________ this _____ day of ____________________ 19___
--------------------------------------
(Name of Purchaser - please print)
--------------------------------------
(Authorized Signature)
--------------------------------------
(Official Capacity - please print)
--------------------------------------
(please print name of individual whose
signature appears above, if different
from name of purchaser printed above)
THIS IS NOT A PUBLIC DOCUMENT
<PAGE> 43
SCHEDULE "C"
FORM 20A (IP)
SECURITIES ACT (BRITISH COLUMBIA)
ACKNOWLEDGEMENT OF INDIVIDUAL PURCHASER
1. I have agreed to purchase from Infowave Software, Inc. (the
"Issuer") _________________________________________ [number of
securities] Special Warrants (the "Securities") of the Issuer. Each
Special Warrant is exercisable to acquire one common share and
one-half of one common share purchase warrant, subject to adjustment
in certain events.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of
the Securities.
3. I have not received an offering memorandum describing the Issuer and
the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities, AND
(b) there is no government or other insurance covering the Securities,
AND
(c) I may lose all of my investment, AND
(d) there are restrictions on my ability to resell the Securities and it
is my responsibility to find out what those restrictions are and to
comply with them before selling the Securities, AND
(e) I will not receive a prospectus that the British Columbia Securities
Act (the "Act") would otherwise require be given to me because the
Issuer has advised me that it is relying on a prospectus exemption,
AND
(f) because I am not purchasing the Securities under a prospectus, I
will not have the civil remedies that would otherwise be available
to me, AND
(g) the Issuer has advised me that it is using an exemption from the
requirement to sell through a dealer registered under the Act,
except purchases referred to in paragraph 5(g), and as a result I do
not have the benefit of any protection that might have been
available to me by having a dealer act on my behalf.
5. I also acknowledge that: [circle one]
(a) I am purchasing Securities that have an aggregate acquisition cost
of $97,000 or more, OR
(b) my net worth, or my net worth jointly with my spouse at the date of
the agreement of purchase and sale of the securities, is not less
than $400,000, OR
<PAGE> 44
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(c) my annual net income before tax is not less than $75,000, or my
annual net income before tax jointly with my spouse is not less than
$125,000, in each of the two most recent calendar years, and I
reasonably expect to have annual net income before tax of not less
than $75,000 or annual net income before tax jointly with my spouse
of not less than $125,000 in the current calendar year, OR
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior officer
or director of the Issuer, or of an affiliate of the Issuer, OR
(f) I am a close personal friend of a senior officer or director of the
Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000 -
registrant required) of the Rules, and I have spoken to a person
[NAME OF REGISTERED PERSON: N/A (THE "REGISTERED PERSON")] who has
advised me that the Registered Person is registered to trade or
advise in the Securities and that the purchase of the Securities is
a suitable investment for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or
5(d), I acknowledge that, on the basis of information about the Securities
furnished by the Issuer, I am able to evaluate the risks and merits of the
Securities because: [circle one]
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person [NAME OF ADVISER: N/A (THE
"ADVISER")] who has advised me that the Adviser is:
(i) registered to advise, or exempted from the requirement to be
registered to advise, in respect of the Securities, and
(ii) not an insider of, or in a special relationship with, the
Issuer.
The statements made in this report are true.
DATED ______________________________, 1999.
------------------------------------
Signature of Purchaser
------------------------------------
Name of Purchaser
------------------------------------
------------------------------------
<PAGE> 45
SCHEDULE "B"
SUBSCRIPTION AGREEMENT FOR U.S. SUBSCRIBERS
<PAGE> 46
SCHEDULE "B"
SUBSCRIPTION FOR SPECIAL WARRANTS
(UNITED STATES RESIDENTS)
TO: INFOWAVE SOFTWARE, INC.
(the "Corporation")
AND TO: THE U.S. AGENT THROUGH WHICH
THIS SUBSCRIPTION IS BEING MADE
The undersigned (the "Subscriber") hereby irrevocably (subject
to Section 3(o) below) subscribes for and agrees to purchase through the U.S.
Agent _______________________ special warrants (the "Special Warrants") of the
Corporation for an aggregate consideration of Cdn.$ ___________________ (the
"Subscription Price"), representing a subscription price of Cdn.$3.25 per
Special Warrant, on the terms and conditions set out in sections 1 to 15 below.
Each Special Warrant shall entitle the holder thereof to acquire, at no
additional cost, one common share in the capital of the Corporation (a "Common
Share") and one-half of one non-transferrable common share purchase warrant
(each whole such warrant a "Purchase Warrant"). Each Purchase Warrant will
entitle the holder to purchase one Common Share (a "Warrant Share") at $3.75 per
Warrant Share for 12 months from the Closing Date (as hereinafter defined). The
Special Warrants shall have the attributes described in Schedule "A" attached to
and forming part of this subscription.
DATED at the City of ____________________________, in the of
___________________________, this _________ day of _________ , 1999.
_________________________________ __________________________________
(Name of Subscriber - please print) Subscriber's Address
_________________________________ __________________________________
(Subscriber's Address)
by: _____________________________
(Official Capacity or Title
- please print)
_________________________________ __________________________________
Authorized Signature (Telephone Number)
_________________________________ __________________________________
(Please print name of individual (Facsimile Number)
whose signature appears above
if different than the name of
the Subscriber printed above).
DETAILS OF BENEFICIAL PURCHASER IF NOT SAME AS SUBSCRIBER:
_________________________________ __________________________________
(Name - please print) (Beneficial Purchaser's Address)
_________________________________ __________________________________
_________________________________ __________________________________
(if space is inadequate please
attach a schedule containing
the necessary information)
<PAGE> 47
-2-
REGISTRATION INSTRUCTIONS: DELIVERY INSTRUCTIONS:
_________________________________ __________________________________
Name Name
_________________________________ __________________________________
Account reference, if applicable Account reference, if applicable
_________________________________ __________________________________
Address Contact Name
_________________________________ __________________________________
Address
_________________________________ __________________________________
Telephone Number
_________________________________ __________________________________
Facsimile Number
* * * *
1. TERMS OF SPECIAL WARRANTS. The Special Warrants shall have the attributes
described in Schedule "A" hereto and shall be duly and validly created and
issued in the name of the Subscriber or the Subscriber's nominee pursuant to the
terms of a Special Warrant Indenture (the "SPECIAL WARRANT INDENTURE") to be
entered into between the Corporation and Montreal Trust Company of Canada, as
warrant agent (the "WARRANT AGENT").
2. AGENCY AGREEMENT. The Subscriber acknowledges that Canaccord Capital
Corporation, Yorkton Securities Inc., Sprott Securities Inc.
and Taurus Capital Markets Inc. (collectively the "Agents") and the Corporation
are currently negotiating, or intend to negotiate, an agreement (the "AGENCY
AGREEMENT") under which the Corporation will appoint the Agents to act as agents
to use their commercially reasonable efforts to offer the Special Warrants on a
private placement basis. The acceptance of this subscription by the Corporation
and the closing of the transactions contemplated hereby are subject to the
negotiation and entering into of the Agency Agreement. Provided that the Agency
Agreement is entered into, the transactions contemplated in this Agreement will
occur in accordance with the terms of the Agency Agreement. A portion of the
Special Warrants are being offered in the United States by U.S. registered
broker dealers (the "U.S. Agents"), as authorized agent in the United States for
the Agents, in reliance on exemptions from the registration requirements of the
United States Securities Act of 1933, as amended (the "U.S. Securities Act").
3. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. By executing this
subscription, the Subscriber represents, warrants and covenants to the
Corporation, the Agents and the U.S. Agents (and acknowledges that the
Corporation, the Agents and the U.S. Agents are relying thereon) that:
<PAGE> 48
-3-
(a) the Subscriber has been independently advised as to the applicable hold
period imposed in respect of the Special Warrants by securities
legislation in Canada and confirms that no representation has been made
respecting the applicable hold periods for the Special Warrants and is
aware of the risks and other characteristics of the Special Warrants
and of the fact that the Subscriber may not be able to resell the
Special Warrants, Common Shares, Purchase Warrants and Warrant Shares
in Canada except in accordance with the applicable securities
legislation and regulatory policy;
(b) the Subscriber has not received, nor has it requested, nor does it have
any need to receive, any offering memorandum, or any other document
(other than financial statements or any other document the content of
which is prescribed by statute or regulation) describing the business
and affairs of the Corporation which has been prepared for delivery to,
and review by, prospective purchasers in order to assist them in making
an investment decision in respect of the Special Warrants and it has
not become aware of any advertisement in printed media of general and
regular paid circulation, radio, television or otherwise with respect
to the distribution of the Special Warrants;
(c) the Subscriber has relied solely upon the publicly available
information relating to the Corporation and not upon any verbal or
written representation as to fact or otherwise made by or on behalf of
the Corporation, the Agents or the U.S. Agents, such publicly available
information having been delivered to the Subscriber without independent
investigation or verification by the Corporation, the Agents and the
U.S. Agents, and agrees that the Corporation, the Agents and the U.S.
Agents assume no responsibility or liability of any nature whatsoever
for the accuracy, adequacy or completeness of the publicly available
information;
(d) the Subscriber acknowledges that the Agents and the U.S. Agents are
acting as agents in this transaction and the Subscriber hereby
acknowledges that all warranties, conditions, representations or
stipulations, whether express or implied and whether arising hereunder
or under prior agreement or statement or by statute or at common law
are expressly those of the Corporation, other than those relating
solely to the Agents or the U.S. Agents. The Subscriber acknowledges
that no information or representation concerning the Corporation has
been provided to the Subscriber by the Corporation, the Agents or the
U.S. Agents other than those contained in this Agreement and in all
press releases, prospectuses and filing statements filed with any
regulatory authorities (the "DISCLOSURE RECORD") and that the
Subscriber is relying entirely upon this Agreement and the Disclosure
Record. Any information given or statement made is given or made
without liability or responsibility howsoever arising on the part of
the Agents or the U.S. Agents. No person in the employment of, or
acting as agent of, the Agents or the U.S. Agents has any authority to
make or give any representation or warranty whatsoever in relation to
the Corporation or the Special Warrants. Any information given or
statement made is given or made without liability or responsibility
howsoever arising on the part of the Agents or the U.S. Agents, and
<PAGE> 49
-4-
the Corporation and the Subscriber hereby release the Agents and the
U.S. Agents from any claims that may arise in respect thereof;
(e) the Subscriber:
(i) A. is purchasing the Special Warrants as principal having an
aggregate acquisition cost of at least $97,000 either: (i)
for its own account, not for the benefit of any other
person, and not with a view to the resale or distribution of
all or any of the Special Warrants; or (ii) for one or more
accounts as to which it exercises sole investment discretion
and each such account is purchasing Special Warrants having
such an aggregate acquisition cost; or
B. if it is not purchasing as principal, it is duly authorized
to enter into this subscription and to execute all
documentation in connection with the purchase on behalf of
each beneficial purchaser, it acknowledges that the
Corporation may be required by law to disclose on a
confidential basis to certain regulatory authorities the
identity of each beneficial purchaser of Special Warrants
for whom it may be acting; and
I. it is a portfolio manager in a jurisdiction other than
Canada and has provided the "Additional Undertaking and
Certification - Foreign Portfolio Manager" in the
Corporate Placee Registration Form in Schedule "B"
hereto, the certifications made therein being repeated
to the Corporation, the Agents and the U.S. Agents; or
II. it is acting as agent for one or more disclosed
principals, each of which principals is purchasing as a
principal for its own account, not for the benefit of
any other person, and not with a view to the resale or
distribution of all or any of the Special Warrants and
each of which principals complies with one of
paragraphs (ii) or (iii) below, as applicable;
(ii) if it is an individual or corporation, it would have an
aggregate acquisition cost of purchasing the Special
Warrants of not less than $97,000; and
(iii) if it is not a corporation or an individual but is a
syndicate, partnership or other form of unincorporated
organization, every participant in the syndicate,
partnership or unincorporated organization would have an
aggregate acquisition cost of not less than $97,000 for the
Special Warrants purchased if the participant were acquiring
its proportionate interest in the Special Warrants
purchased;
<PAGE> 50
-5-
(f) if the Subscriber is a corporation it is duly incorporated and validly
subsisting under the laws of its jurisdiction of incorporation and all
necessary approvals by its directors, shareholders and others have been
given to authorize execution of this Agreement on behalf of the
Subscriber;
(g) the Subscriber is capable of assessing the proposed investment as a
result of the Subscriber's financial experience or as a result of
advice received from a registered person other than the Corporation or
any affiliates thereof;
(h) if required by applicable securities legislation, policy or order or by
any securities commission, stock exchange or other regulatory
authority, the Subscriber will execute, deliver, file and otherwise
assist the Corporation in filing, such reports, undertakings and other
documents with respect to the issue of the Special Warrants, Common
Shares, Purchase Warrants and Warrant Shares issued pursuant thereto,
as may be required, including, without limitation:
(i) if the Subscriber is not an individual, the Corporate Placee
Registration Form required by the Vancouver Stock Exchange
attached hereto as Schedule "B" if it has not already filed
the same with the Vancouver Stock Exchange; and
(ii) if the Subscriber is an individual, the Form 20A(IP)
attached hereto as Schedule "C";
(i) this subscription has been duly and validly authorized, executed and
delivered by and constitutes a legal, valid, binding and enforceable
obligation of the Subscriber;
(j) no person has made to the Subscriber any written or oral
representations:
(i) that any person will resell or repurchase the Special
Warrants, Common Shares or Warrant Shares issuable upon
exercise of the Purchase Warrants (the "SECURITIES");
(ii) that any person will refund the purchase price of the
Special Warrants;
(iii) as to the future price or value of any of the Securities; or
(iv) that the Securities will be listed and posted for trading on
a stock exchange or that application has been made to list
and post the Securities for trading on a stock exchange,
other than the Vancouver Stock Exchange;
(k) the Subscriber is not a "control person" of the Corporation as defined
in the Securities Act (British Columbia), will not become a "control
person" by virtue of this purchase of any of the Securities, and does
not intend to act in concert with any other person to form a control
group of the Corporation;
<PAGE> 51
-6-
(l) the Subscriber is at arm's length (as that term is customarily defined)
with the Corporation;
(m) the Subscriber (or others for whom it is contracting hereunder) has
been advised to consult its own legal and tax advisors with respect to
applicable resale restrictions and tax considerations, and it (or
others for whom it is contracting hereunder) is solely responsible for
compliance with applicable resale restrictions and applicable tax
legislation;
(n) the Subscriber has no knowledge of a "material fact" or "material
change" (as those terms are defined in the applicable legislation) in
the affairs of the Corporation that has not been generally disclosed to
the public, save knowledge of this particular transaction;
(o) the offer made by this subscription is irrevocable (subject to the
Subscriber's right to withdraw his subscription and to terminate his
obligations as set out in this Agreement) and requires acceptance by
the Corporation and approval of the Vancouver Stock Exchange;
(p) the entering into of this Agreement and the transactions contemplated
hereby will not result in the violation of any of the terms and
provisions of any law applicable to, or the constating documents of,
the Subscriber or of any agreement, written or oral, to which the
Subscriber may be a party or by which he is or may be bound;
(q) the Subscriber acknowledges that the Agents and the U.S. Agent will
receive a commission from the Corporation in connection with this
offering;
(r) it understands that the Special Warrants and the Common Shares and the
Warrant Shares have not been and will not be registered under the U.S.
Securities Act or any applicable state securities laws and that the
sale contemplated hereby is being made in reliance on an exemption from
such registration requirements and exemptions from registration under
applicable state securities laws;
(s) it understands that the offers and sales of the Special Warrants in the
United States are being made in reliance on a private placement
exemption to a limited number of institutional "accredited investors"
as defined in Rule 501(a)(1), (2), (3) and (7) under the U.S.
Securities Act through a U.S. Agent or other United States registered
broker/dealers;
(t) it has had access to such additional information, if any, concerning
the Corporation as it has considered necessary in connection with its
investment decision to acquire the Special Warrants, Common Shares and
Purchase Warrants and it has not received, nor has it requested, nor
does it have any need to receive any offering memorandum, or any other
document (other than financial statements or any other document the
content of which is prescribed by statute, or regulation) describing
the business and affairs of the Corporation which has been prepared for
delivery to, and review by, prospective purchasers in order to assist
<PAGE> 52
-7-
them in making an investment decision in respect of the Special
Warrants, Common Shares and Purchase Warrants;
(u) it has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of its investment
in the Special Warrants, Common Shares and Purchase Warrants and is
able to bear the economic risks of such investment;
(v) it and any beneficial purchaser for which it is purchasing Special
Warrants, Common Shares and Purchase Warrants are resident in the
United States at the address or addresses set forth on the first page
hereof;
(w) it is an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) and (7), under the U.S. Securities Act), and is
acquiring the Special Warrants for its own account or an institutional
"accredited investor", as to which the Subscriber exercises sole
investment discretion and as to which the Subscriber has the authority
to make the statements set forth in this Agreement, and not with a view
to any resale, distribution or other disposition of the Special
Warrants in any transaction that would be in violation of the United
States securities laws, subject to the disposition of the Subscriber's
property being at all times within its control;
(x) it acknowledges that it has not purchased Special Warrants as a result
of any "general solicitation" or "general advertising", as such terms
are used in Rule 502(c) under the U.S. Securities Act, including
advertisements, articles, notices or other communications published in
any newspaper, magazine or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees have been invited
by general solicitation or general advertising;
(y) it agrees that if it decides to offer, sell or otherwise transfer any
of the Special Warrants, Common Shares or Warrant Shares, it will not
offer, sell or otherwise transfer any of such securities, directly or
indirectly, unless:
(i) the sale is to the Corporation; or
(ii) (A) the sale is to an Institutional Accredited Investor and
is of a number of Special Warrants, Common Shares or Warrant
Shares having an aggregate market value at the time of such
sale of not less than $97,000, and (B) a purchaser's letter
containing representations, warranties and agreements
substantially similar to those contained in this Agreement
(except that such purchaser's letter need not contain the
representation set forth in paragraph 3(t) above), and
satisfactory to the U.S. Agent and the Corporation, is
executed by the purchaser and delivered to the U.S. Agent
and the Corporation prior to the sale; or
(iii) the sale is made outside the United States in compliance
with the requirements of Rule 904 of Regulation S and in
compliance with applicable local laws and regulations; or
<PAGE> 53
-8-
(iv) the sale is made pursuant to an exemption from registration
under the U.S. Securities Act provided by Rule 144
thereunder, if available; or
(v) the Special Warrants, Common Shares or Warrant Shares are
sold in a transaction that does not require registration
under the U.S. Securities Act or any applicable United
States state laws and regulations governing the offer and
sale of securities, and it has therefore furnished to the
U.S. Agent and the Corporation an opinion of counsel of
recognized standing reasonably satisfactory to the U.S.
Agent and the Corporation;
(z) it understands and acknowledges that upon the original issuance
thereof, and until such time as the same is no longer required under
the U.S. Securities Act or applicable state securities laws, the
certificates representing the Special Warrants, the Common Shares and
the Warrant Shares, and all certificates issued in exchange therefor or
in substitution thereof, shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR UNDER
ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF
THE CORPORATION THAT SUCH SECURITIES MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
CORPORATION, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
U.S. SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION
FROM REGISTRATION UNDER THE U.S. SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (D)
IN COMPLIANCE WITH CERTAIN OTHER PROCEDURES
SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS
CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN
SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN
CANADA. A NEW CERTIFICATE, BEARING NO LEGEND,
DELIVERY OF WHICH WILL CONSTITUTE "GOOD DELIVERY",
MAY BE OBTAINED FROM MONTREAL TRUST COMPANY OF CANADA
UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED
DECLARATION, IN A FORM SATISFACTORY TO MONTREAL TRUST
COMPANY OF CANADA AND THE CORPORATION, TO THE EFFECT
THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS
BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION
S UNDER THE U.S. SECURITIES ACT";
<PAGE> 54
-9-
provided, that if any such securities are being sold under
paragraph (y)(iii) above, any such legend may be removed by
providing a declaration to the registrar and transfer agent
for such securities, to the effect set forth in Schedule "D"
hereto (or as the Corporation may prescribe from time to time)
and provided, further, that, if any Special Warrants, Common
Shares or Warrant Shares are being sold under paragraph
(y)(iv) above, the legend may be removed by delivery to the
registrar and transfer agent of an opinion of counsel, of
recognized standing reasonably satisfactory to the
Corporation, that such legend is no longer required under
applicable requirements of the U.S. Securities Act or state
securities laws;
(aa) it consents to the Corporation making a notation on its
records or giving instructions to any transfer agent of the
Special Warrants, Common Shares or Warrant Shares in order to
implement the restrictions on transfer set forth and described
herein;
The Subscriber agrees that the above representations, warranties and
covenants will be true and correct both as of the execution of this
subscription and as of the Closing Time and will survive the completion
of the issuance of the Special Warrants.
4. ACKNOWLEDGEMENT. The foregoing representations, warranties and covenants are
made by the Subscriber with the intent that they be relied upon by the
Corporation, the Agents and the U.S. Agents in determining its suitability or
(if applicable) the suitability of others on whose behalf it is contracting
hereunder as a purchaser of Special Warrants and the Subscriber hereby agrees to
indemnify the Corporation, the Agents and the U.S. Agents against all losses,
claims, costs, expenses and damages or liabilities which any of them may suffer
or incur caused or arising from reliance thereon. The Subscriber undertakes to
notify the Corporation, the Agents and the U.S. Agents immediately of any change
in any representation, warranty or other information relating to the Subscriber
set forth herein which takes place prior to the Closing Time (as hereinafter
defined).
The Subscriber acknowledges that a legend will be placed on
the certificates representing the Special Warrants (and any Common Shares or
Warrant Shares in the event the Special Warrants are exercised prior to the
Qualification Date (as defined in Schedule "A")) to the effect that the
securities represented by the certificates are subject to a hold period and may
not be traded in British Columbia until the expiry of such hold period except as
permitted by applicable securities legislation.
The Subscriber acknowledges that, although Special Warrants
may be issued to other purchasers under this offering concurrently with the
Closing Date, there may be other sales of Special Warrants under this offering,
some or all of which may close after the Closing Date. The Subscriber further
acknowledges that there is a risk that insufficient funds may be raised on the
Closing Date to fund the Corporation's objectives and that further closings may
not take place after the Closing Date.
5. CLOSING. The sale of the Special Warrants will be completed at the offices of
Blake, Cassels & Graydon, the Corporation's counsel, in Vancouver, British
Columbia at 10:00 a.m. (Vancouver time), or such other time as the Agents and
the Corporation may agree (the
<PAGE> 55
-10-
"Closing Time") on June 22, 1999, or such other date or time as the Agents and
the Corporation may agree (the "Closing Date"). If by the Closing Time, the
terms and conditions contained in the Agency Agreement for the benefit of the
Agents have been complied with to the satisfaction of, or waived by the Agents,
the Agents and the U.S. Agents shall deliver to the Corporation all completed
subscriptions, including this subscription, against delivery by the Corporation
of the Special Warrants.
6. DELIVERY OF SUBSCRIPTION AGREEMENT. The Subscriber agrees to deliver to the
U.S. Agent not later than 9:00 a.m. (Vancouver time) on June 18, 1999 (or two
days before the Closing Date if such date is changed in accordance with
paragraph 5 above and communicated to the Subscriber) the following:
(a) this duly completed and executed Subscription;
(b) if the Subscriber is not an individual, a manually signed and completed
copy of the Corporate Placee Registration Form required by the
Vancouver Stock Exchange attached hereto as Schedule "B" unless such
form has already been provided to the Vancouver Stock Exchange, in
which case the Subscriber represents and warrants that the information
contained therein is accurate at the date hereof;
(c) if the Subscriber is an individual, a manually signed and completed
copy of the Form 20A (IP) as attached hereto as Schedule "C"; and
(d) such other documents as may be required as contemplated by paragraph
3(h) hereof.
In addition, the Subscriber will arrange for the payment of the Subscription
Price in a manner acceptable to the U.S. Agent on or before 9:00 a.m. (Vancouver
time) on June 21, 1999 (or one day before the Closing Date if such date is
changed in accordance with paragraph 5 above and communicated to the
Subscriber).
This subscription is irrevocable except that the Subscriber
reserves the right to withdraw this subscription and to terminate its
obligations hereunder at any time before the Closing Date if the Agency
Agreement is not entered into or if the Agents terminate their obligations with
respect to this offering under the Agency Agreement and the Subscriber hereby
appoints each of the Agents and the U.S. Agents, individually or together, as
its agent for the purpose of notifying the Corporation of the withdrawal or
termination of this subscription.
<PAGE> 56
-11-
7. RIGHTS OF RESCISSION. In the event that a holder of a Special Warrant who
acquires Common Shares and Purchase Warrants upon the exercise of the Special
Warrant, is or becomes entitled under applicable securities legislation to the
remedy of rescission by reason of a misrepresentation in the prospectus filed in
connection with the qualification of the Common Shares and Purchase Warrants to
be issued on exercise of the Special Warrants or any amendment thereto, such
holder shall, subject to available defenses and any limitation period under
applicable securities legislation, be entitled to rescission not only of the
holder's exercise of its Special Warrant(s) but also of the private placement
transaction pursuant to which the Special Warrant was initially acquired, and
shall be entitled in connection with such rescission to a full refund from the
Corporation of all consideration paid on the acquisition of the Special Warrant.
In the event such holder is a permitted assignee of the interest of the original
Special Warrant Subscriber, such permitted assignee shall be entitled to
exercise the rights of rescission and refund granted hereunder as if such
permitted assignee was such original Subscriber. The foregoing is in addition to
any other right or remedy available to a holder of the Special Warrant under the
Applicable Legislation or otherwise at law.
8. AUTHORITY OF AGENTS. The Subscriber hereby irrevocably authorizes each of the
Agents and the U.S. Agents, individually or together, in its or their sole
discretion:
(a) to act as the Subscriber's representative at the closing, to
receive certificates for Special Warrants subscribed for and
to execute in its name and on its behalf all closing receipts
and documents required;
(b) to negotiate and approve, among other things, the Special
Warrant Indenture, a Purchase Warrant Indenture (if any), the
terms relating to the escrow of net proceeds as further
described in the Term Sheet attached hereto as Schedule "A",
and any related documents and any opinions, certificates or
other documents addressed to the Subscriber; and
(c) to waive, in whole or in part, any representations,
warranties, covenants or conditions for the benefit of the
Subscriber contained herein or in any agreement or document
ancillary or related thereto.
9. EXECUTION OF SUBSCRIPTION AGREEMENT. The Corporation, the Agents and the U.S.
Agents shall be entitled to rely on delivery by facsimile machine of an executed
copy of this subscription, and acceptance by the Corporation of such facsimile
copy shall be equally effective to create a valid and binding agreement between
the Subscriber and the Corporation in accordance with the terms hereof.
10. CONDITIONAL UPON ACCEPTANCE BY CORPORATION. The Corporation reserves the
right to review and accept or reject any subscription for any reason, in its
sole and absolute discretion.
11. CONDITIONAL UPON VSE APPROVAL. Without limitation, this subscription and the
transactions contemplated hereby are conditional upon and subject to the
Corporation receiving the Vancouver Stock Exchange's approval of this
subscription and the transactions contemplated hereby.
<PAGE> 57
-12-
12. GOVERNING LAW. The contract arising out of this subscription shall be
governed by and construed in accordance with the laws of the province of British
Columbia and the laws of Canada applicable therein.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants, representations
and warranties contained herein shall survive the closing of the transactions
contemplated hereby.
14. ASSIGNMENT. This agreement is not assignable or transferable by the parties
hereto without the express written consent of the other party hereto.
15. TIME OF ESSENCE. Time shall be of the essence of this subscription.
ACCEPTANCE
INFOWAVE SOFTWARE, INC. hereby accepts the above subscription as of this
________ day of ________ 1999, and represents and warrants to the Subscriber
that the covenants, representations and warranties made by it to the Agents in
the Agency Agreement are true and correct as of this date and that the
Subscriber is entitled to rely thereon as if they were embodied herein. The
Corporation will, upon request by the Subscriber, provide the Subscriber with an
extract from the Agency Agreement setting forth such covenants, representations
and warranties, without charge.
INFOWAVE SOFTWARE, INC.
By: _________________________________
Title: ______________________________
<PAGE> 58
SCHEDULE "A"
TERM SHEET
SUMMARY OF PRINCIPAL TERMS OF AN OFFERING
OF SPECIAL WARRANTS EXERCISABLE FOR COMMON SHARES
ISSUER: Infowave Software, Inc.
OFFERING: A minimum of 1,230,770 Special Warrants.
AMOUNT: A minimum of $4,000,000 at a price of $3.25 per
Special Warrant.
TERMS OF SPECIAL Each Special Warrant shall entitle the
WARRANTS: holder thereof to acquire, at no additional
cost, one unit comprised of one common share in the
capital of the Corporation (a "COMMON SHARE") and
one-half of a non-transferrable common share purchase
warrant (each whole such warrant a "PURCHASE
WARRANT").
MINIMUM SUBSCRIPTION: $97,000 in the Provinces of British Columbia and
Alberta and $150,000 in the Province of Ontario.
CLOSING DATE: June 22, 1999, or such other date as is agreed
upon by the Agents and the Corporation (the "CLOSING
DATE").
Subscription funds and subscription agreements will
be held by the Agents pending closing of the
Offering. In the event subscriptions for a minimum of
1,230,770 Special Warrants are not received on or
before June 30, 1999, no subscriptions will be
accepted and all subscription funds will be returned
to the subscribers without interest or deduction.
SELLING AND QUALIFYING British Columbia, Alberta and Ontario
JURISDICTIONS: (collectively, the "QUALIFYING JURISDICTIONS")
and offshore.
SPECIAL WARRANTS: The Special Warrants will be issued pursuant to a
special warrant indenture. The Special Warrants are
exercisable by the holders thereof at any time after
their issuance and, if not previously exercised, will
be deemed to be exercised immediately prior to 4:00
p.m. (Vancouver time) on the earlier of: (i) the
fifth business day after a receipt is issued by the
last of the securities regulatory authorities in each
of the Qualifying Jurisdictions for a (final)
prospectus qualifying the issuance of the Common
Shares and the Purchase Warrants (the "UNDERLYING
SECURITIES") upon
<PAGE> 59
-2-
exercise of the Special Warrants; and (ii) the date
which is 330 days after the Closing Date (the "EXPIRY
DATE"). The Special Warrants are transferable.
PURCHASE WARRANT TERMS: Each Purchase Warrant will entitle the holder
to purchase one Common Share (a "WARRANT SHARE")
at $3.75 per Warrant Share for 12 months from
the Closing Date.
PROSPECTUS FILING: The Corporation will use its reasonable
efforts to file a preliminary prospectus qualifying
the Underlying Securities to be issued upon exercise
of the Special Warrants in all Qualifying
Jurisdictions as soon as practicable after the
Closing Date. The Corporation will use reasonable
efforts to obtain a receipt for the (final)
prospectus (the "FINAL PROSPECTUS") within 90 days
after the Closing Date. If the Corporation does not
obtain such receipt for the Final Prospectus within
90 days after the Closing Date, Special Warrants
exercised after that date shall, subject to
regulatory approval, entitle the holder to receive
1.1 Common Shares without payment of any further
consideration.
ESCROW: 40% of the net proceeds from the sale of the Special
Warrants will be held in escrow by Montreal Trust
Company of Canada, to be released on the earlier of:
(a) the day the last of the securities regulatory
authorities in each of the Qualifying Jurisdictions
have issued a receipt for the Final Prospectus; and
(b) 330 days from the Closing Date.
AGENTS: Canaccord Capital Corporation and Yorkton Securities
Inc., Sprott Securities Inc. and Taurus Capital
Markets Inc. (the "Agents") are acting as agents of
the Corporation for this commercially reasonable
efforts offering and will be paid at the closing of
the sale of Special Warrants a commission of 7.5% of
the gross proceeds of the offering. In addition, the
Agents shall receive a Special Agent's Warrant,
exercisable to acquire an Agent's Warrant which, upon
exercise will entitle the Agents to purchase such
number of Common Shares equal to 10% of the number of
Special Warrants sold by the Agents, for a period of
12 months from the Closing Date, at a price of $3.25
per Common Share. The issuance of the Special Agent's
Warrant is subject to regulatory approval.
<PAGE> 60
-3-
SUBSCRIPTION: Persons wishing to subscribe for Special Warrants
must complete and sign a Subscription Form and
deliver a cheque in the amount of $3.25 per Special
Warrant to either of the Agents not later than two
business days prior to the Closing Date. The
Corporation shall be entitled to accept or reject any
subscription, in its sole and absolute discretion.
USE OF PROCEEDS: The proceeds from the sale of the Special Warrants
will be used by the Corporation to expand product
development and market development of the
Corporation's wireless computing business and for
working capital purposes.
RESALE RESTRICTIONS: The Special Warrants will be issued pursuant to
exemptions from prospectus requirements of applicable
securities legislation and will be subject to resale
restrictions under that legislation.
If the Corporation is unable to obtain a receipt for
the Final Prospectus in any Qualifying Jurisdiction,
the Underlying Securities will be subject to
statutory hold periods during which time these
securities may not be resold in such Qualifying
Jurisdictions. In addition, if any Special Warrants
are exercised prior to the day of issuance of
receipts for the Final Prospectus by the securities
commissions (the "QUALIFICATION DATE") in any of the
Qualifying Jurisdictions, the Underlying Securities
will be subject to statutory restrictions on resale.
The Special Warrants and the Underlying Securities
are also subject to restrictions on resale imposed by
the Vancouver Stock Exchange. Investors are advised
to consult their own legal advisers in this regard.
The Corporation intends to file a prospectus to
qualify the Underlying Securities only in the
Qualifying Jurisdictions. Accordingly, Underlying
Securities that are acquired outside of the
Qualifying Jurisdictions may be subject to additional
resale restrictions. Investors are advised to consult
their own legal advisers in this regard.
U.S. PURCHASERS: Sales to U.S. accredited investors will be made
pursuant to the registration exemptions provided by
Section 4(2) of the U.S. Securities Act of 1933 and
Rule 506 made thereunder.
<PAGE> 61
SCHEDULE "B"
CORPORATE PLACEE REGISTRATION FORM
Where subscribers to a private placement are not individuals, the Exchange
requires that the following information about the placee be provided.
This Form will remain on file with the Exchange, therefore the corporation or
other entity (the "corporation") need only file it once, and it will be
referenced for all subsequent private placements in which it participates. If
any of the information provided in this Form changes, the corporation must
notify the Exchange prior to participating in further placements with Exchange
listed companies.
1. Name of Corporation:
_______________________________________________________________________________
2. Address of Corporation's Head Office:
_______________________________________________________________________________
3. Jurisdiction of Incorporation:
_______________________________________________________________________________
4. (a) If the corporation will be purchasing securities as [ ]
principal, please check the box at right and include the
names and addresses of person/s having a greater than 10%
beneficial interest in the corporation:
______________________________________________________________
______________________________________________________________
(b) If the corporation will be purchasing as a portfolio [ ]
manager, please check the box at right and complete the
Additional Undertaking and Certification set out below.
ADDITIONAL UNDERTAKING AND CERTIFICATION - PORTFOLIO MANAGER
If the undersigned is a portfolio manager purchasing as agent for accounts that
are fully managed by it, the undersigned acknowledges that it is bound by the
provisions of the Securities Act (British Columbia) (the "Act"), and undertakes
to comply with all provisions of the Act relating to ownership of, and trading
in, securities including, without limitation, the filing of insider reports and
reports pursuant to Section 111 of the Act.
If the undersigned carries on business as a portfolio manager in a jurisdiction
outside of Canada, the undersigned certifies that:
<PAGE> 62
-2-
a) it is purchasing securities of the Issuer on behalf of managed accounts
over which it has absolute discretion as to purchasing and selling, and
in respect of which it receives no instructions from any person
beneficially interested in such account or from any other person;
b) it carries on the business of managing the investment portfolios of
clients through discretionary authority granted by those clients (a
"portfolio manger" business) in ______________________ [jurisdiction],
and it is permitted by law to carry on a portfolio manager business in
that jurisdiction;
c) it was not created solely or primarily for the purpose of purchasing
securities of the Issuer;
d) the total asset value of the investment portfolios it manages on behalf
of clients is not less than $20,000,000;
e) it does not believe, and has no reasonable grounds to believe, that any
resident of British Columbia has a beneficial interest in any of the
managed accounts for which it is purchasing; and
f) the Company has provided it with a list of the directors, senior
officers and other insiders of the Company and the persons that carry
on investor relations activities for the Company:
Gary Macintosh
Jim Macintosh
Scot Land
David Neale
David Wedge
Michael Blackstock
Gordon Watson
Bijan Sanii
Todd Carter
Ron Jasper
Kevin Jampole
The Investor Relations Group
and it does not believe, and has no reasonable grounds to believe, that
any of those persons has a beneficial interest in any of the managed
accounts for which it is purchasing, except as follows:
_______________________________________________________________________________
_______________________________________________________________________________
(Name of insider(s) or person(s) carrying on investor relations activities for
the Company that have a beneficial interest in an account)
<PAGE> 63
-3-
5. The undersigned acknowledges that it is bound by the provisions of the
British Columbia Securities Act including, without limitation, sections 87
and 111 concerning the filing of insider reports and reports of
acquisitions.
Dated at ___________________ this _____ day of ____________________ 19___
_________________________________________
(Name of Purchaser - please print)
_________________________________________
(Authorized Signature)
_________________________________________
(Official Capacity - please print)
_________________________________________
(please print name of individual
whose signature appears above, if
different from name of purchaser
printed above)
THIS IS NOT A PUBLIC DOCUMENT
<PAGE> 64
SCHEDULE "C"
FORM 20A (IP)
SECURITIES ACT
ACKNOWLEDGEMENT OF INDIVIDUAL PURCHASER
1. I have agreed to purchase from Infowave Software, Inc. (the "Issuer")
_________________________________________ [number of securities] Special
Warrants (the "Securities") of the Issuer. Each Special Warrant is
exercisable to acquire one common share and one-half of one common share
purchase warrant, subject to adjustment in certain events.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I have not received an offering memorandum describing the Issuer and the
Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has reviewed
or passed on the merits of the Securities, AND
(b) there is no government or other insurance covering the Securities, AND
(c) I may lose all of my investment, AND
(d) there are restrictions on my ability to resell the Securities and it
is my responsibility to find out what those restrictions are and to
comply with them before selling the Securities, AND
(e) I will not receive a prospectus that the British Columbia Securities
Act (the "Act") would otherwise require be given to me because the
Issuer has advised me that it is relying on a prospectus exemption,
AND
(f) because I am not purchasing the Securities under a prospectus, I will
not have the civil remedies that would otherwise be available to me,
AND
(g) the Issuer has advised me that it is using an exemption from the
requirement to sell through a dealer registered under the Act, except
purchases referred to in paragraph 5(g), and as a result I do not have
the benefit of any protection that might have been available to me by
having a dealer act on my behalf.
5. I also acknowledge that: [circle one]
(a) I am purchasing Securities that have an aggregate acquisition cost of
$97,000 or more, OR
(b) my net worth, or my net worth jointly with my spouse at the date of
the agreement of purchase and sale of the securities, is not less than
$400,000, OR
<PAGE> 65
-2-
(c) my annual net income before tax is not less than $75,000, or my annual
net income before tax jointly with my spouse is not less than
$125,000, in each of the two most recent calendar years, and I
reasonably expect to have annual net income before tax of not less
than $75,000 or annual net income before tax jointly with my spouse of
not less than $125,000 in the current calendar year, OR
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior officer or
director of the Issuer, or of an affiliate of the Issuer, OR
(f) I am a close personal friend of a senior officer or director of the
Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000 - registrant
required) of the Rules, and I have spoken to a person [NAME OF
REGISTERED PERSON: N/A (THE "REGISTERED PERSON")] who has advised me
that the Registered Person is registered to trade or advise in the
Securities and that the purchase of the Securities is a suitable
investment for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d), I
acknowledge that, on the basis of information about the Securities furnished by
the Issuer, I am able to evaluate the risks and merits of the Securities
because: [circle one]
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person [NAME OF ADVISER: N/A (THE
"ADVISER")] who has advised me --------- that the Adviser is:
(i) registered to advise, or exempted from the requirement to be
registered to advise, in respect of the Securities, and
(ii) not an insider of, or in a special relationship with, the Issuer.
The statements made in this report are true.
DATED ______________________________, 1999.
------------------------------------
Signature of Purchaser
------------------------------------
Name of Purchaser
<PAGE> 66
SCHEDULE "D"
FORM OF DECLARATION FOR REMOVAL OF LEGEND
Montreal Trust Company of Canada
as registrar and transfer agent
for the Special Warrants
and the Common Shares (the "Securities")
for Infowave Software, Inc.
The undersigned (a) acknowledges that the sale of the Securities to which this
declaration relates is being made in reliance on Rule 904 of Regulation S under
the United States Securities Act of 1933, as amended (the "U.S. Securities
Act") and (b) certifies that (1) the undersigned is not an "affiliate" (as
defined in Rule 405 under the U.S. Securities Act) of Infowave Software, Inc.,
(2) the offer of such securities was not made to a person in the United States
and either (A) at the time the buy order was originated, the buyer was outside
the United States, or the seller and any person acting on its behalf reasonably
believe that the buyer was outside the United states or (B) the transaction was
executed on or through the facilities of the Vancouver Stock Exchange and
neither the seller nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United States, and (3)
neither the seller nor any person acting on its behalf engaged or will engage
in any directed selling efforts in connection with the offer and sale of such
securities. Terms used herein have the meanings given to them by Regulation S.
Dated:______________________________
By: __________________________________
Name:
Title:
<PAGE> 67
SCHEDULE "C"
OUTSTANDING OPTIONS
<PAGE> 68
SCHEDULE "C"
OUTSTANDING OPTIONS
AS AT JUNE 30, 1999
<TABLE>
<CAPTION>
NUMBER OF COMMON EXERCISE MARKET VALUE ON
DESIGNATION OF OPTIONEE SHARES UNDER OPTION PRICE(8) EXPIRY DATE DATE OF GRANT
- ------------------------ ------------------- -------- ----------- ---------------
<S> <C> <C> <C> <C>
Executive Officers
(1 person)(1) 350,043 $1.00 September 8, 2002 $1.00
(2 persons)(2) 168,505 $1.00 September 8, 2002 $1.00
(1 person)(5) 80,000 $1.00 September 23, 2002 $1.00
(1 person)(2) 23,624 $1.00 October 10, 2002 $1.00
(1 person)(7) 33,000 $2.55 May 21, 2003 $2.50
(3 persons) (2) 194,000 $1.21 October 26, 2003 $1.43
(1 person)(2) 40,000 $1.56 January 21, 2004 $1.68
Directors not
Executive Officers
(1 person)(2) 100,000 $1.00 October 10, 2002 $1.00
(1 person)(3) 100,000 $2.55 May 27, 2003 $2.50
(1 person)(4) 35,000 $2.55 May 27, 2003 $2.50
(1 person)(4) 35,000 $1.39 April 7, 2004 $1.38
Employees
(29 persons)(2) 218,818 $1.00 September 8, 2002 $1.00
(1 person)(2) 9,668 $1.58 December 15, 2002 $2.50
(1 person)(2) 20,000 $1.55 December 17, 2002 $2.50
(1 person)(2) 12,890 $1.81 January 5, 2003 $2.50
(1 person)(2) 6,445 $2.91 February 9, 2003 $2.80
(1 person)(2) 9,668 $2.91 March 27, 2003 $2.80
(1 person)(2) 6,000 $2.55 May 27, 2003 $2.50
(4 persons)(2) 28,558 $1.97 July 15, 2003 $1.75
(8 persons) (2) 25,784 $1.28 September 21, 2003 $1.57
(2 persons) (2) 19,336 $1.56 January 21, 2004 $1.68
(3 persons) (2) 16,114 $1.39 April 7, 2004 $1.38
(7 persons) (2) 59,005 $3.97 June 1, 2004 $4.02
Consultants
(1 person)(6) 58,000 $1.81 January 5, 2003 $2.50
(2 person)(6) 56,500 $2.91 March 27, 2003 $2.80
---------
Total: 1,705,958
=========
</TABLE>
Notes:
(1) These options vest as follows: a total of 200,043 of the options
vest on September 8, 1998 with 1/8th of the remaining options
vesting each three months thereafter so that all such options will
be vested by September 8, 2000, three years after the date of grant.
(2) These options vest as follows: 30% of the options vest one year
after the date of grant, with 1/8th of the remaining options vesting
each three months thereafter so that all such options will be vested
by three years after the date of grant.
(3) These options vest at a rate of 1/36th per month commencing as of
the date of grant.
(4) These options vest at a rate of 1/12th per month commencing as of
the date of grant.
(5) These options vest at a rate of 1/36th per month commencing as of
October 14, 1997.
(6) These options are fully vested.
(7) These options vest at a rate of 1/36th per month commencing as of
January 1, 1998.
(8) All options exercisable at $1.00 per share were issued prior to the
initial public offering at the Corporation but the exercise price
was set at the offering price of $1.00. The exercise price on the
date of grant for all other options is determined in accordance with
the rules of the Vancouver Stock Exchange.
<PAGE> 69
EXHIBIT I
AGENTS' CERTIFICATE
In connection with the private placement of Special Warrants of Infowave
Software, Inc. (the "Corporation"), with U.S. institutional investors ("U.S.
Private Placees") pursuant to U.S. Subscription Agreements dated as of various
dates and accepted by the corporation July 8, 1999, the undersigned does hereby
certify that:
(a) Yorkton Securities Inc. is a duly registered broker or dealer with
the United States Securities and Exchange Commission and is a member
of, and in good standing with, the National Association of
Securities Dealers, Inc. on the date hereof;
(b) all offers and sales of the Securities in the United States were
made to __________________ institutional "accredited investors" (as
defined below) by all Agents;
(c) all offers and sales of the Securities in the United States have
been effected in accordance with all applicable U.S. broker-dealer
requirements;
(d) immediately prior to our transmitting the U.S. Subscription
Agreement to such offerees, we had reasonable grounds to believe and
did believe that each offeree was an institutional "accredited
investor" as defined in Rule 501(a)(1), (2), (3) and (7) under the
United States Securities Act of 1933, as amended (the "U.S.
Securities Act"), and, on the date hereof, we continue to believe
that each U.S. Private Placee is an institutional accredited
investor within the meaning of Regulation D under the U.S.
Securities Act ("Regulation D"); and
(e) no form of general solicitation or general advertising (as those
terms are used in Regulation D) was used by us, including
advertisements, articles, notices or other communications published
in any newspaper, magazine or similar media or broadcast over radio
or television, or any seminar or meeting whose attendees had been
invited by general solicitation or general advertising, in
connection with the offer or sale of the Securities in the United
States or to U.S. persons.
Terms used in this Certificate have the meanings given to them in the Agency
Agreement unless otherwise defined herein.
Dated this 8th day of July, 1999.
Yorkton Securities Inc. Yorkton Capital Inc.
By: /s/ Brian Campbell By: /s/ illegible
------------------ -------------
Name: Name:
Title: Director Title: President
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
To the Board of Directors
Infowave Software Inc.
We consent to the incorporation by reference in the registration statement (No.
333-11260) on Form S-8 of Infowave Software Inc. of our report dated February 4,
2000 and our comments by auditor for U.S. readers on Canada -- U.S. reporting
difference dated February 4, 2000, with respect to the balance sheets of
Infowave Software Inc. as of December 31, 1999 and 1998, and the related
statements of operations, deficit and cash flows for each of the years in the
three year period ended December 31, 1999 and all related schedules, which
report appears in the December 31, 1999 annual report on Form 10-K of Infowave
Software Inc. Our comments by auditor for U.S. readers on Canada -- U.S.
reporting difference states that reporting standards for auditors in the United
States would require the addition of an explanatory paragraph (following the
opinion paragraph) when the financial statements are affected by conditions and
events that cast substantial doubt on the Company's ability to continue to
operate as a going concern, such as those described in note 1(a) to the
financial statements. The financial statements referred to above do not include
any adjustments that might result from the outcome of that uncertainty.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,359,090
<SECURITIES> 0
<RECEIVABLES> 1,970,700
<ALLOWANCES> (53,739)
<INVENTORY> 588,981
<CURRENT-ASSETS> 7,035,694
<PP&E> 2,345,113
<DEPRECIATION> (1,360,415)
<TOTAL-ASSETS> 8,054,492
<CURRENT-LIABILITIES> 1,014,673
<BONDS> 0
0
0
<COMMON> 12,526,949
<OTHER-SE> (5,487,130)
<TOTAL-LIABILITY-AND-EQUITY> 8,054,492
<SALES> 7,530,331
<TOTAL-REVENUES> 7,530,331
<CGS> 2,692,462
<TOTAL-COSTS> 8,156,794
<OTHER-EXPENSES> 87,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,288,251)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,288,251)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,288,251)
<EPS-BASIC> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
