<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER ____, 1999
REGISTRATION NO. 333-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM F - 1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SIDEWARE SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
BRITISH COLUMBIA, CANADA ____________________________ __________________
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
930 West First Street, Suite 102, North Vancouver,
British Columbia, Canada V7P 3N4
Telephone (604) 988-0440
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
National Registered Agent
1090 Vermont Avenue, Suite 910
Washington, D.C. 20005
Telephone (202) 371-8090
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
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<S> <C> <C>
Bradley Furber Paul Hildebrand Grant Sutherland, Chairman
Jie Cao Dale W. Wilcox, A Law Corp. Sideware Systems Inc.
Van Valkenberg Furber Law Group P.P.L.C. 1910 - 777 Hornby Street 1600 - 777 Hornby Street
1325 Fourth Avenue Vancouver, British Columbia Vancouver, British Columbia
Seattle, Washington 98101-2509 V6Z 1S4 V7Y 1K4
Telephone (206) 464-0460 Telephone (604) 687-1374 Telephone (604) 688-0047
Facsimile (206) 464-2857 Facsimile (604) 687-2731 Facsimile (604) 688-0094
</TABLE>
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement
becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box. [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
___________________________________________________________________________________________________
Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Share(1) Price(1) Registration Fee
___________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Common Shares 5,493,666 $1.90 $10,437,965 $2,901.49
___________________________________________________________________________________________________
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
The date of this Prospectus is November 4, 1999
<PAGE>
SIDEWARE SYSTEMS INC.
Cross Reference Sheet to Item 501(b) of Regulation S-K Showing Location in
Prospectus of Information Required by Items of Form F-1
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<CAPTION>
REGISTRATION STATEMENT ITEM NUMBER LOCATION OR CAPTION IN PROSPECTUS
<S> <C> <C>
1. Forepart of Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover Pages
Pages of Prospectus
3. Summary Information, Risk Factors Prospectus Summary; Risk Factors; Selected Consolidated
Financial Data
Ratio of Earnings to Fixed Changes Not applicable
4. Use of Proceeds Prospectus Summary; Use of Proceeds
5. Determination of Offering Price Risk Factors; Exchange Rates; Nature of Trading Market;
Plan of Distribution
6. Dilution Not Applicable
7. Selling Security Holders Selling Shareholders
8. Plan of Distribution Plan of Distribution
9 Description of Securities to be Registered Description of Capital Stock
10. Interests of Named Experts and Counsel Not applicable
11. Information with respect to the Registrant
(a) (1) Description of Business Prospectus Summary; Business - The Company
(2) Description of Property Business - Description of Property
(3) Legal Proceedings Business - Legal Proceedings
(4) Control of Registrant Principal Shareholders
(5) Nature of Trading Market Nature of Trading Market
(6) Exchange Controls and Other Enforcement of Civil Liabilities; Description of
Limitations Affecting Security Holders Capital Stock - Exchange Controls and Other Limitations
Affecting Security Holders; Exchange Rates
(7) Taxation Certain Tax Considerations
(8) Selected Financial Data Selected Consolidated Financial Data; Exchange Rates
(9) Management's Discussion and Analysis Management's Discussion and Analysis of Financial
of Financial Condition and Results Condition and Results of Operations
of Operations
(10) Quantitative and Qualitative Not Applicable
Disclosures about Market Risk
(11) Directors and Officers of Registrant Management - Directors, Executive Officers and
Key Employees
(12) Compensation of Directors and Officers Management - Executive Compensation
(13) Options to Purchase Securities from Management - Executive Compensation; Description of
the Registrant or Subsidiaries Capital Stock - Options to Purchase Securities from the
Company
(n) (14) Interest of Management in Certain Transactions
Certain Transactions
(b) Financial Statements Financial Statements
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liability
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 29, 1999
PROSPECTUS
[INSERT LOGO]
SIDEWARE SYSTEMS INC.
5,493,666 Shares of Common Stock
This Prospectus relates to the offering of up to an aggregate of 5,493,666
shares of Sideware Systems Inc. common stock, which may be offered from time
to time by the persons named in this Prospectus under the heading "Selling
Shareholders."
The shares offered for sale pursuant to this Prospectus consist of 2,746,833
shares (the "Shares") and 2,746,833 additional shares (the "Warrant Shares")
issuable upon the exercise of 2,746,833 share purchase warrants (the
"Warrants"). Each Warrant entitles the holder to acquire one Warrant Share at
any time up to September 14, 2001, at a price of US$1.64 per Warrant Share up
to September 14, 2000 or US$1.89 per Warrant Share up to September 14, 2001.
The Selling Shareholders acquired the shares and share purchase warrants
pursuant to a private placement of 2,746,833 units completed in September
1999. Each unit consisted of one Share and one Warrant. The price of the
units was US$1.64 per unit. The Warrants are non-transferable.
The Shares and Warrant Shares may be offered for sale from time to time by
each Selling Shareholder acting as principal for its own account or in
brokerage transactions at prevailing market prices or in transactions at
negotiated prices. No representation is made that any Shares or Warrant
Shares will or will not be offered for sale, or that any of the share
purchase warrants will or will not be exercised by any of the Selling
Shareholders. We will not receive any proceeds from the sale of the Shares or
Warrant Shares. It is not possible at the present time to determine the price
to the public in any sale of the Shares or Warrant Shares by the Selling
Shareholders and each Selling Shareholder reserves the right to accept or
reject, in whole or in part, any proposed purchaser of Shares or Warrant
Shares. Accordingly, the public offering price and the amount of any
applicable sales or underwriting discounts or commissions will be determined
at the time of such sale by the Selling Shareholders. We will pay all costs,
expenses and fees incurred in connection with the registration of the Shares
and Warrant Shares, estimated to be approximately US$160,000. However, all
selling and other expenses incurred by the Selling Shareholders will be borne
by the Selling Shareholders. See "PLAN OF DISTRIBUTION".
Our common shares trade on both the Vancouver Stock Exchange and the OTC
Bulletin Board. See "NATURE OF TRADING MARKET".
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF OFFERED
HEREBY, SEE "RISK FACTORS".
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE.
<PAGE>
[PRODUCT DISPLAY PHOTOGRAPH]
<PAGE>
1
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission in Washington D.C.
a Registration Statement on Form F-1 under the United States Securities Act
of 1933, as amended (the "Securities Act"), with respect to the securities
offered hereby. This Prospectus, which is a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which (including the schedule and
exhibits) are omitted in accordance with the rules and regulations of the
Commission. In addition, we are subject to the reporting requirements of the
Exchange Act applicable to foreign private issuers, and, in accordance
therewith, file reports, including annual reports on Form 20-F, and other
information with the Commission. The Registration Statements and the
schedules and exhibits thereto and the reports and other information we have
filed with the Commission under the Exchange Act may be inspected and copied
by the public at the public reference facilities maintained by the Commission
at Room 1024, Judicial Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
ENFORCEMENT OF CIVIL LIABILITIES
The enforcement by investors of civil liabilities under the federal
securities laws of the United States may be adversely affected by the fact
that we are incorporated and organized under the laws of a province of
Canada, that some or all of our directors and officers may be residents of
Canada, that some or all of the experts named in the registration statement
may be residents of Canada, and that all or a substantial portion of our
assets and the assets of those persons may be located outside the United
States. As a result, it may be difficult for holders of the Shares or Warrant
Shares to effect service of process within the United States upon our
directors and officers who are not residents of the United States, or upon
experts named in the registration statement who are not residents of the
United States, or to realize in the United States upon judgments of courts of
the United State predicated upon civil liabilities under the federal
securities laws of the United States.
We have been advised by Dale W. Wilcox, a Law Corporation, our Canadian
counsel, that there is doubt as to the enforceability in Canada against us or
our directors or officers who are not residents of the United States or
experts named in the registration statement who are not residents of the
United States in original actions, or in actions for enforcement of judgments
of United States courts of liabilities predicated solely upon the federal
securities laws of the United States.
CONVENTIONS AND CURRENCY OF PRESENTATION
Except where the context requires otherwise, disclosure in this Prospectus
relates to Sideware Systems Inc. and it subsidiaries, and the term "Company"
refers to Sideware Systems Inc.
Unless otherwise indicated: (i) financial information herein is expressed in
Canadian dollars ("$" or "Cdn$"), unless specifically expressed in United
States dollars ("US$"), (ii) financial data in this Prospectus are
represented in accordance with generally accepted accounting principles as
applied in Canada ("Canadian GAAP") and, when required, such financial data
contains a reconciliation to generally accepted accounting principles as
applied in the United States ("US GAAP").
<PAGE>
2
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES
THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
______________________________________________________________________________
THE COMPANY
We provide software which facilitates Internet commerce. Our principal
product, Dr. Bean, allows companies operating e-commerce Web sites to open
direct, real time communication with their customers over the Web. Dr. Bean
thus gives e-commerce vendors the best of both worlds - the range and
flexibility of the Internet combined with the personalised service of
traditional marketing methods.
The Internet is growing rapidly in importance as a medium for conducting
business. In addition to retail trade, the Internet is becoming a centre of
business-to-business commerce. In May 1998, Forrester Research projected
that, by 2002, business trade conducted over the Internet will reach US$327
billion, while retail trade over the Internet will reach US$17 billion.
We released the initial version of Dr. Bean for commercial distribution in
April 1999. In June 1999, we released version 2.0, our current version. In
October 1999, we commenced beta testing of version 3.0, which is scheduled
for release in November 1999. Dr. Bean 3.0 will include a major upgrade in
the features available to Dr. Bean users. Following the release of Dr. Bean
3.0, we plan to release additional enhancements during the fourth quarter of
1999 and the first half of 2000. We believe that with the additional features
now under development, Dr. Bean will be able to perform a broad and valuable
range of e-CRM (Electronic Customer Relations Management) functions. See
"BUSINESS - Products - Dr. Bean."
In July 1999, we initiated the Sideware Partner Program, to enlist value
added resellers for Dr. Bean. We presently have 8 value added resellers. We
believe that value added resellers will be the chief distribution channel for
Dr. Bean. See "BUSINESS - Dr. Bean - Marketing."
We have a limited operating history, and have not yet generated material
operating revenues. An investment in our shares is speculative and involves a
high degree of risk. The principal risks affecting our business and
securities are set out below under the heading "RISK FACTORS".
THE OFFERING
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<S> <C>
Common Shares being offered by the 5,493,666
Selling Shareholders in the Offering:
Common Shares to be outstanding 50,773,028
after the Offering:
Use of Proceeds We will not receive any proceeds from the sale
of the shares of Common Shares offered hereby.
Vancouver Stock Exchange Symbol SYD.U
<PAGE>
3
OTC Bulletin Board Symbol SDWSF
Risk Factors Investment in the Common Shares offered hereby
involves certain risks. Each prospective investor
should carefully consider all of the matters
described herein under "RISK FACTORS."
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary consolidated historical financial and
operating data for the periods indicated. The summary data is qualified by,
and should be read in conjunction with, the Consolidated Financial Statements
and the related notes thereto and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS", contained elsewhere herein.
The historical financial data is not necessarily indicative of our future
results.
<TABLE>
<CAPTION>
Six months Eight months Year ended Year ended Year ended
Ended June 30 ended Dec. 31, April 30, April 30, April 30,
1999 1998 1998 1997 1996
(000's) (000's) (000's) (000's) (000's)
<S> <C> <C> <C> <C> <C>
Sales Revenue $ 134 $ 158 $ 27 $ 70 $ 28
Profit (Loss) (2,200) (1,892) (2,409) (4,587) (850)
for the period
(Cdn. GAAP)
Profit (Loss) (2,200) (1,937) (2,409) (2,003) (898)
for the period
(US GAAP)
(Loss) per share (0.07) (0.07) (0.11) (0.29) (0.07)
for the period
(Cdn. GAAP)
(Loss) per share (0.07) (0.07) (0.11) (0.29) (0.07)
for the period
(US GAAP)
</TABLE>
______________________________________________________________________________
<PAGE>
4
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH BELOW
IN ADDITION TO OTHER INFORMATION CONTAINED AND INCORPORATED IN THIS
PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.
RISKS RELATING TO OUR BUSINESS
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<S> <C>
WE HAVE A LIMITED We commenced operations under new management in May
OPERATING AND SALES 1995. The first version of our principal product,
HISTORY ON WHICH TO Dr. Bean, was released in April 1999. Dr. Bean is in
EVALUATE OUR PROSPECTS an early stage of development, and is being offered
in a new and rapidly changing market. The prospects
for Dr. Bean are difficult to predict and may change
rapidly and without warning. We have not at any time
generated substantial sales revenue from any of our
products, including Dr. Bean.
As a result of our limited operating and sales
history, we do not have information from which we
can make reliable estimates of future revenues,
expenses or profits.
WE HAVE INCURRED We have incurred operating losses consistently since
SUBSTANTIAL OPERATING entering the field of software development. As at
LOSSES AND MAY NOT BE June 30, 1999, we had an accumulated deficit during
PROFITABLE IN THE FUTURE the development phase of $14.5 million. We have
not at any time generated substantial revenues,
while increasing expenditures in all areas,
including research and development and sales and
marketing. We have no assurance that we will be
able to generate sufficient revenue to achieve
profitable operation, to achieve positive cash flow,
or to continue our business as a going concern.
Failure to achieve profitability within the time
frame expected by our investors may adversely affect
the market price of our common shares.
OUR PRODUCTS MAY NOT We do not have an established history or record of
GAIN MARKET ACCEPTANCE sales. We cannot assure that our services or
products will gain sufficient market acceptance, or
achieve sufficient sales revenue, to allow us to
achieve profitable operation, to achieve positive
cash flow, or to continue our business as a going
concern.
<PAGE>
5
DISAPPOINTING QUARTERLY Our quarterly revenue and operating results are
REVENUE OR OPERATING difficult to predict and may fluctuate significantly
RESULTS COULD CAUSE THE from quarter to quarter. If our quarterly revenue
PRICE OF OUR COMMON or operating results fall below the expectations of
SHARES TO FALL investors or securities analysts, the price of our
common shares could fall substantially.
Our quarterly revenue may fluctuate as a result of a
number of factors, many of which are outside our
control, including the following:
- the market for interactive Web-based electronic
business solutions is in an early stage of
development and it is therefore difficult to
predict customer demand accurately;
- the response of the market to Dr. Bean, and our
ability to gain market share in a highly
competitive market, are also difficult to
predict; and
- the sales cycle of our products may be long and
may vary substantially from customer to
customer, making it difficult for us to
determine whether and when we will receive
revenue from specific customers.
Most of our expenses, such as employee compensation
and rent, are relatively fixed in the short term.
Moreover, our expense levels are based, in part, on
our expectations regarding future revenue levels.
If revenue for a particular quarter is below our
expectations, we will not be able to reduce
operating expenses proportionately. The revenue
shortfall could thus have a disproportionate effect
on our operating results for the quarter.
OUR FUTURE OPERATING We do not have sufficient operating history to make
COSTS ARE UNCERTAIN accurate projections of our future operating costs.
In order to achieve profitable operation, we will
have to hire substantial additional personnel in a
number of fields, including research and
development, marketing, and product service and
support. As well, we will have to incur substantial
marketing and overhead costs. As a result of our
limited operating history, we are not able to make
reliable projections as of the number of additional
personnel that will be required, the cost of
employing additional personnel, or the level of
marketing and overhead expenses we will incur.
<PAGE>
6
CONTINUED ADOPTION OF Our products address a new and emerging market for
WEB-BASED ELECTRONIC Web-based, interactive electronic business
BUSINESS SOLUTIONS IS solutions. Therefore, our future success depends
NECESSARY FOR OUR FUTURE substantially upon the widespread adoption of the
GROWTH Web as a primary medium for commerce and business
applications. The failure of this market to
develop, or a delay in the development of this
market, would have a material adverse effect on our
business, financial condition and operating results.
The Web has experienced, and is expected to continue
to experience, significant user and traffic growth.
This, at times, has caused user frustration with
slow access and download times. The Web
infrastructure may not be able to support the
demands placed on it by the continued growth upon
which our success depends. Moreover, important
issues concerning the commercial use of the Web,
such as security, reliability, cost, accessibility
and quality of service, remain unsolved and may
negatively affect the growth of Web use or the
attractiveness of commerce and business
communication over the Web. In addition, Web-based
commerce could become less attractive through delays
in the development or adoption of new standards and
protocols to handle increased activity, or through
increased government regulation and taxation of
Internet commerce.
GOVERNMENT LAWS AND Federal, state or foreign agencies may adopt laws or
REGULATIONS COULD LIMIT regulations affecting the use of the Web as a
THE MARKET FOR OUR commercial medium. If enacted, these laws or
PRODUCTS AND SERVICES regulations could limit the market for our products,
which could materially affect our business,
financial condition, and operating results.
Although many of these laws or regulations may not
apply to our business directly, laws and regulations
relating to use privacy, pricing, or content and
quality of products and services could affect our
business indirectly. It is possible that these laws
or regulations could expose companies involved in
Web commerce to liability, which could limit the
growth of Web commerce generally.
<PAGE>
7
WE FACE SIGNIFICANT The market for interactive Web-based electronic
COMPETITION FROM OTHER business solutions is highly competitive and rapidly
TECHNOLOGY COMPANIES changing. If we are unable to compete effectively
our business, financial condition and operating
results will be materially adversely affected.
Many of our current and potential competitors have
longer operating histories, greater name recognition
and substantially greater financial, technical,
marketing, management, service, support and other
resources than we have. Our competitors may be able
to expand and develop their technologies more
quickly than we can, to devote greater resources to
the development and marketing of their products, or
to respond more quickly to changing opportunities or
technologies.
In addition, we expect that new competitors will
enter the market with competing products as the size
and visibility of the market opportunity increases.
We also expect that competition will increase as a
result of software industry consolidations and
formations of alliances among industry participants.
Increased competition could result in pricing
pressures, reduced margins, or the failure of our
products to achieve or maintain market acceptance.
The market for computer software is also dominated
by large corporations which have assets much greater
than ours, and which might be able to develop
software duplicating the features of our products at
modest cost. We face a continual risk that market
opportunities or product features which we intend to
exploit can, within a short period of time, become
dominated by much larger and wealthier corporations,
rendering our products obsolete or non-competitive.
WE MAY NOT BE ABLE TO To be competitive, we must develop and introduce, on
DEVELOP NEW PRODUCTS OR a timely basis, new products and product
ENHANCE EXISTING enhancements which meet the demands of the
PRODUCTS ON A TIMELY marketplace. We cannot assure that we will be able
BASIS to do so, or to respond effectively to technological
changes or new product announcements by others.
Failure to introduce new products or enhancements
could have a material adverse impact on our
business, operating results, and financial
condition.
<PAGE>
8
FAILURE TO EXPAND OUR We do not have established distribution channels for
RELATIONSHIPS WITH our products. Our present marketing plans depend
RESELLERS COULD IMPEDE heavily on the recruitment of value added resellers
ACCEPTANCE OF OUR for our products, and on sales expected to be
PRODUCTS AND GROWTH generated by such value added resellers. Failure to
recruit a sufficient number of value added
resellers, or failure of our value added resellers
to market our products effectively, could have a
material adverse impact on our business, operating
results and financial condition. Failure by our
value added resellers to install or implement our
products successfully for their clients could also
have a material adverse impact on our business,
operating results and financial condition.
FAILURE TO MANAGE GROWTH We could experience rapid growth in orders,
PROPERLY COULD STRAIN revenues, personnel, marketing activities, and
RESOURCES AND AFFECT OUR complexity of products. We cannot assure that we
BUSINESS will be able to manage the significant strains that
future growth may place on our administrative
infrastructure, systems, and controls.
Qualified technical personnel are in great demand
throughout the software industry. Increased sales
of our products may require us to hire additional
personnel to install and support our products. We
will also be required to hire additional technical
personnel to continue development of our products.
Our success will depend to a substantial degree on
our ability to attract, train, motivate and retain
qualified personnel. Inability to do so may have a
material adverse impact on our business, operating
results and financial condition.
</TABLE>
<PAGE>
9
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<S> <C>
LOSS OF KEY PERSONNEL Our success is substantially dependent on the
COULD ADVERSELY AFFECT performance of our employees, many of whom have
OUR BUSINESS worked together for a short period of time. Our
work force is relatively small, and we thus employ
only a small number of employees in specific fields
important to our business.
The success of our marketing efforts is
substantially dependent on our President, the
President of Sideware Corp., the Vice President of
Channel Sales and Marketing for Sideware Corp., and
the Vice President of Federal Sales and Marketing
for Sideware Corp.
Continued development of our products and our
technical work are substantially dependent on our
President, our General Manager of e-business
solutions, and our programmers.
The departure of a single employee or a small
number of employees could materially adversely
affect our business. We cannot assure that we will
be able to attract and retain qualified personnel on
acceptable terms. We do not have key man insurance
on any of our employees.
WE MAY BE UNABLE TO We rely heavily on our proprietary software
PROTECT OUR PROPRIETARY technology. To protect our proprietary technology
TECHNOLOGY we rely on confidentiality agreements with key
employees and third parties and on trade secret,
trademark, and copyright laws. Although we attempt
to maintain confidentiality of, and prevent improper
disclosure of, our software technology, we cannot
assure that we have adequately protected our
technology from misappropriation. In addition,
others may attempt to "reverse engineer" our
products in order to determine their method of
operation and introduce competing products.
Similarly, others may develop competing technology
independently. Such developments could have a
material adverse affect on our business, operating
results and financial condition.
<PAGE>
10
OTHER COMPANIES MAY If any of our products violate third party
CLAIM THAT OUR PRODUCTS proprietary rights we may be required to re-engineer
INFRINGE THEIR our products or seek to obtain licenses from third
COPYRIGHTS OR PATENTS parties. We have no reason to believe any of our
products infringe the proprietary rights of third
parties. However, we do not conduct comprehensive
patent searches to determine whether the technology
used in our products infringes any third party
patents.
Some of the markets in which we compete are
characterised by the existence of a large number of
patents and frequent litigation for financial gain
based on patents with broad, and sometimes
questionable, application. As the number of our
products increases, the markets in which our
products are sold expands, and the functionality of
those products grows and overlaps with products
offered by competitors, our products may become
increasingly subject to infringement claims.
Although we have no reason to believe any of our
products infringe the proprietary rights of third
parties, there can be no assurance that infringement
claims will not be asserted against us in the future
or that any such claims will not require us to enter
into royalty arrangements or result in costly
litigation.
WE MAY LOSE ACCESS TO Our Dr. Bean product incorporates software licensed
THIRD PARTY TECHNOLOGY from third parties. We have no reason to believe
USED IN OUR PRODUCTS that our license rights in respect of such software
will be terminated. However, we cannot assure that
such license rights will continue to be available to
us. Loss of such license rights would require us to
license software performing similar functions from
other parties, to develop software performing such
functions independently, or to re-engineer our
products to operate without such licensed software.
This could result in interruptions or delays in our
ability to sell or continue development of our
products, or in loss of important features of our
products. See "BUSINESS - Intellectual Property".
<PAGE>
11
OUR BUSINESS COULD Software products are complex. Our products may
SUFFER IF OUR PRODUCTS contain undetected errors, or bugs, which result in
FAIL TO PERFORM PROPERLY product failures, or which may be incompatible with
other software or hardware used by a substantial
number of our potential customers. Product
performance failures could result in loss of or
delay in revenues, loss of market share, failure to
achieve market acceptance, or injury to our
reputation.
During the week of April 26, 1999, we implemented
the initial version of Dr. Bean on IBM platforms,
including principally the S390, AS400 and RS6000
platforms, and also the Windows NT, Linux and Sun
Solaris operating systems, at IBM facilities.
During the implementation and testing, the initial
version of Dr. Bean operated successfully on the
platforms and operating systems tested. However, as
Dr. Bean has not yet been in significant commercial
use, there can be no assurance that the program will
operate free of material errors or defects. In
addition, there can be no assurance that
enhancements or modifications of Dr. Bean do not
include errors or defects.
WE COULD INCUR If any of our products fail, a customer may assert a
SUBSTANTIAL COSTS AS A claim for substantial damages against us, regardless
RESULT OF PRODUCT of whether we are responsible for the failure.
LIABILITY CLAIMS Product liability claims could require us to spend
significant time and money in litigation or to pay
significant damages.
We currently carry limited insurance, which may not
cover claims against us for financial losses, and
which will not be sufficient in amount to cover
large claims. In addition, there can be no
assurance that any insurance coverage will be
available in the future on reasonable terms, that
insurance we purchase will be sufficient to cover
any claims against us, or that insurers will not deny
coverage with respect to any future claim.
WE MAY BE AFFECTED BY Many existing computer systems and software products
UNEXPECTED YEAR 2000 do not properly recognise dates after December 31,
PROBLEMS 1999. This Year 2000 problem could result in
miscalculations, data corruption, system failures or
disruptions of operations. To the best of our
knowledge, all of our products and internal systems
are Year 2000 compliant. However, we are subject to
the possibility of Year 2000 problems affecting our
products, our customers' systems, our internal
systems and the systems of vendors, any one of which
could have a material adverse effect on our
business, operating results and financial condition.
<PAGE>
12
WE MAY NOT BE ABLE TO We will require additional capital to continue the
RAISE THE ADDITIONAL development of our services and products, to pay the
CAPITAL WE NEED costs of marketing those products, and to cover
operating losses until we are able to become
profitable. Owing to the speculative and uncertain
nature of our business, we are unable to calculate
the amount of additional capital which we may have
to raise, although such amounts may be substantial.
The extent and timing of such capital requirements
will depend on many factors, including continued
progress in our product development programs, and
the market response to our products.
Our ability to raise capital will depend on our
perceived ability to develop and bring to the
market products capable of generating sales
revenue at profitable levels. To raise
additional capital, we may have to issue
additional shares, which may dilute the interests
of existing shareholders substantially.
Alternatively, we may have to borrow large sums,
and assume obligations to make substantial
interest and capital payments. We may also have
to sell significant interests in some or all of
our products. We cannot assure that we will be
able to raise the amount of capital we require,
or that we will be able to raise capital on terms
that enhance the value of our common shares.
GOVERNMENTS MAY We are party to agreements with non-arm's length
CHALLENGE OUR TAX parties, including Sideware Corp. and Sideware
RETURNS International SRL, in jurisdictions outside Canada.
We believe that these agreements have been
implemented in accordance with taxation laws,
regulations, treaties, and assessment practices
prevailing in Canada, the United States, and the
other jurisdictions involved. However, Canadian or
U.S. taxation authorities may challenge the terms or
tax effect of these agreements, and issue taxation
assessments requiring us to pay additional income
taxes beyond the amounts we consider to be owing.
Such assessments could lead to tax liabilities
substantially greater than we expect, or to
duplicate tax liabilities in different
jurisdictions on the same income.
<PAGE>
13
COMPANY DIRECTORS ARE We have agreements with BrainTech, Inc. and TechWest
INVOLVED IN OTHER Management Inc. which may be material to our future
COMPANIES DOING BUSINESS profitability. BrainTech, Inc. is a public company
WITH US whose shares trade on the OTC Bulletin Board. Grant
Sutherland, Owen Jones, and James Speros, members of
our board of directors, are also directors of
BrainTech, Inc. TechWest Management Inc. is a
private company whose shareholders include Owen
Jones and Grant Sutherland.
One of our agreements with BrainTech Inc. is a cost
sharing agreement pursuant to which costs relating
to our business premises and certain personnel are
shared. BrainTech, Inc. is a development stage
software company which has not achieved profitable
operation. There can be no assurance that
BrainTech, Inc. will be able to pay the costs for
which it is responsible under the cost sharing
arrangement, with the result that our cash
requirements to continue operation may be
substantially increased. From time to time, either
our payments or those of BrainTech, Inc. pursuant to
the cost sharing agreement described above may
exceed that company's proportionate share.
Accordingly, those payments are reconciled and
adjusted from time to time, as required. See
"CERTAIN TRANSACTIONS".
WE ARE INVOLVED IN COURT We are presently involved in several court
PROCEEDINGS proceedings with former management. The principal
court proceedings are described under "BUSINESS -
Legal Proceedings." In those proceedings, claims
totalling approximately $1.8 million have been
advanced against us.
We are prosecuting our claims and defending our
position in all of the litigation proceedings.
While we believe that our positions will be
sustained, there is a risk of losing some of the
court actions. The results could include substantial
pecuniary judgements against us and the appointment
of a receiver of our assets.
RISKS ASSOCIATED WITH THIS OFFERING OF COMMON SHARES
<PAGE>
14
OUR COMMON SHARES ARE The stock market in general has recently experienced
PARTICULARLY VOLATILE extreme price and volume fluctuations. In addition,
the market prices of securities of technology
companies, particularly Web-related companies, have
been extremely volatile, and have experienced price
fluctuations that have often been unrelated or
disproportionate to the operating performance of
these companies. These broad fluctuations could
adversely affect the price of our common shares.
We believe that factors such as the announcement of
new products or technologies by us or by our
competitors and quarterly fluctuations in financial
results are expected to cause the market price of
the common shares to vary substantially. In
addition, our net sales or results of operations in
future quarters may be below the expectations of
public market securities analysts and investors. In
such event, the price of our common shares would
likely decline, perhaps substantially.
WE DO NOT EXPECT TO PAY We have never declared or paid cash dividends on our
DIVIDENDS IN THE capital stock. We currently intend to retain any
FORESEEABLE FUTURE earnings to finance the expansion and development of
our business and, therefore, do not anticipate
paying any cash dividends in the foreseeable future.
OUR SHARES ARE SUBJECT The Securities and Exchange Commission has adopted
TO RULES GOVERNING "LOW regulations which generally define "penny stock"
PRICED STOCK" to be any equity security that has a market price
(as defined in their regulations) less than
US$5.00 per share, subject to certain exceptions.
Our securities may be covered by the penny stock
rules, which impose additional sales practice
requirements on broker-dealers who sell to
persons other than established customers and
accredited investors (generally, institutions
with assets in excess of US$5,000,000 or
individuals with net worth in excess of
US$1,000,000 or annual income exceeding
US$200,000 or US$300,000 jointly with their
spouse). For transactions covered by this rule,
the broker-dealers must make a special
suitability determination for the purchase and
receive the purchaser's written agreement to the
transaction prior to the sale. Consequently, the
rule may affect the ability of broker-dealers to
sell our securities, and the ability of
shareholders to sell their shares in secondary
markets.
</TABLE>
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. These statements relate to future events or our future
financial performance, and are identified by terminology such as "may",
"will", "should", "scheduled", "plan", "intend", "estimate", "potential",
"continue", "believe," "anticipate," "expect" and similar expressions. These
statements are only predictions. Actual
<PAGE>
15
results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed under the heading "RISK
FACTORS". Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. We
undertake no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
USE OF PROCEEDS
We will not receive any proceeds from the sale of Shares or Warrant Shares
offered hereby, all of which will be received by the Selling Shareholders.
EXCHANGE RATES
The following table sets forth, for each period presented, the high and low
exchange rates, the average of the exchange rates on the last day of each
month during the period indicated, and the exchange rates at the end of the
period indicated for one Canadian dollar, expressed in United States dollars,
based on the noon buying rate in New York City for cable transfers payable in
Canadian dollars as certified for customs purposes by the Federal Reserve
Bank of New York.
______________________________________________________________________________
U.S. DOLLARS PER CANADIAN DOLLAR
______________________________________________________________________________
<TABLE>
<CAPTION>
PERIOD
PERIOD ENDED DECEMBER 31, JAN-SEPT
-----------------------------------------------------------
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Average $.7300 $.7305 $.7323 $.7220 $.6734 $.6714
High $.7632 $.7527 $.7513 $.7486 $.7052 $.6860
Low $.7103 $.7023 $.7235 $.6945 $.6351 $.6625
Period end $.7128 $.7323 $.7301 $.6998 $.6650 $.6805
______________________________________________________________________________
</TABLE>
On October 29, 1999, the exchange rate was US$0.679 per Cdn$1.00.
Our common shares are currently trading on the Vancouver Stock Exchange (the
"VSE") under the symbol "SYD.U", and over the OTC Bulletin Board under the
symbol "SDWSF". Trading over the OTC Bulletin Board was authorized to
commence October 29, 1999.
Prior to November 4, 1999, our shares traded on the VSE in Canadian dollars.
On November 4, 1999, at our request, the VSE changed the trading currency for
our shares to United States dollars.
The following table sets forth the high and low sale prices for our common
shares (in Canadian dollars), as reported by the VSE for the quarters
indicated.
<PAGE>
16
<TABLE>
<CAPTION>
High Low
($) ($)
--- ---
<S> <C> <C>
1999
Third Quarter $3.38 $2.20
Second Quarter $3.47 $0.94
First Quarter $0.85 $0.45
1998
Fourth Quarter $0.51 $0.33
Third Quarter $0.51 $0.30
Second Quarter $0.54 $0.26
First Quarter $0.81 $0.36
1997
Fourth Quarter $1.30 $0.60
Third Quarter $1.35 $0.76
Second Quarter $1.94 $0.58
First Quarter $1.05 $0.19
</TABLE>
On October 29, 1999, the closing price for our shares on the VSE was $2.42.
Our common shares were first listed on the VSE on November 7, 1983. Trading
was suspended by the VSE on November 28, 1994 as a result of concerns of the
VSE over irregularities in transactions between the Company and its former
President, Lawrence Kostiuk. Irregularities identified by the VSE included:
(a) the granting of a purported general security agreement to Mr. Kostiuk
without public disclosure or VSE approval;
(b) misrepresentations made to the VSE by former management in respect of
private placements completed in August 1991, January 1993 and July
1993; and
(c) potential breaches of our listing agreement with the VSE, including
the failure to file a management agreement between the Company
and Riva Yachts of Canada Ltd. (a company controlled by the family of
Mr. Kostiuk), the issuance of shares to Mr. Kostiuk without VSE approval
and the improper issuance of shares pursuant to incentive stock options.
Certain of the above transactions are the subject matter of legal disputes
between us and our former management. See "BUSINESS -- Legal Proceedings."
<PAGE>
17
A cease trade order was issued by the British Columbia Securities Commission
on March 7, 1995 when former management failed to file required financial
statements. New management took control on May 3, 1995. On September 10,
1996, the cease trade order and trading suspension were lifted and our shares
resumed trading. The principal steps that we were required to complete in
order to return our shares to trading status were the preparation and filing
of delinquent financial statements and the raising of approximately $1.6
million in private placement financing, to permit us to resume operations.
As at October 29, 1999, we have 48,026,195 common shares issued and
outstanding. Approximately 127 record holders of common shares are within
the United States, holding approximately 14.7 million shares (approximately
31% of the total shares issued and outstanding). Approximately 28 million
shares are registered in the name of CDS & Co., a Canadian depository
company. Approximately 8 million shares are registered in the name of CEDE &
Co., a United States depository. Owing to the large percentage of our shares
registered in the names of depositories, we do not have reliable information
as to the extent of beneficial ownership of our shares by US residents. We
believe that in excess of one third of our shares are owned beneficially by
United States residents.
Trading in our shares over the OTC Bulletin Board commenced pursuant to a
Form 15c-211 filed by National Securities Corp. of Chicago IL. We have
entered into a Financial Advisory and Consulting Agreement with National
Securities Corp. of Chicago Illinois, pursuant to which we have issued
250,000 shares of restricted stock to National Securities Corp.
DIVIDEND POLICY
We have never paid cash dividends on our capital stock. We currently intend
to retain all earnings, if any, to finance the growth and development of our
business. We do not anticipate paying any cash dividends in the foreseeable
future.
CAPITALIZATION
The following table sets forth our consolidated capitalization as of December
31, 1998. This table should be read in conjunction with "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
the Consolidated Financial Statements and related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
December 31, 1998
(dollars in millions)
(audited)
<S> <C>
Cash and cash equivalents .3
Short-term debt and current portion of
long-term debt: Nil
Short-term debt facility Nil
Current porting of long-term debt Nil
Total Nil
Long-term debt: Nil
Total .3
<PAGE>
18
Shareholder's equity:
Common Stock, 200 million shares authorized
27,269,959 shares issued and outstanding 12.7
Special Warrants 0.9
Commitment to issue shares 0.1
Retained earnings (12.3)
Total capitalisation 1.4
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for the eight month
period ended December 31, 1998 and the fiscal years ended April 30, 1998,
1997 and 1996 were derived from our audited consolidated financial
statements, which appear elsewhere in this Prospectus. The selected
consolidated financial data for the six month period ended June 30, 1999 were
derived from our unaudited consolidated financial statements, which also
appear elsewhere in this Prospectus, and which, in the opinion of the
management, have been prepared on the same basis as the audited consolidated
financial statements and contain all adjustments necessary for a fair
presentation of the financial condition and results of operations for such
period. The financial data should be read in conjunction with "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
our Consolidated Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>
Six Months ended Eight Months
June 30, ended Dec. 31, Years ended April 30
1999(1) 1998 1998 1995(3) 1994(2)
restated audited restated 1997 1996 restated restated
(000's) (000's) (000's) (000's) (000's) (000's) (000's)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Revenue $ 134 $ 158 $ 27 $ 70 $ 28 $ 371 $ 22
Profit (Loss) (2,200) (1,892) (2,409) (4,587) (850) (528) (1,250)
For the period
(Cdn. GAAP)
Profit (Loss) for the N/A (1,937) (2,409) (2,002) (898) (678) (1,735)
period (US GAAP)
Profit (Loss) per (0.07) (0.07) (0.11) (0.29) (0.07) (0.04) (0.11)
share (Cdn. GAAP)
Profit (Loss) per (0.07) (0.07) (0.12) (0.14) (0.15) (0.12) (0.37)
share (US GAAP)
Total assets (Cdn. 4,928 1,725 2,584 1,402 3,350 3,266 3,368
GAAP)
Total assets (US GAAP) 4,928 1,725 2,584 1,402 746 709 961
<PAGE>
19
Total S/H Equity 4,566 1,446 2,361 1,012 2,018 2,869 3,337
(Cdn. GAAP)
Total S/H Equity 4,566 1,446 2,361 1,012 (585) 312 930
(U.S. GAAP)
Total R&D expend. 395 353 301 129 Nil Nil Nil
(Cdn. GAAP)
</TABLE>
(1) Results reported for the six month period ended June 30, 1999 have been
restated as a result of the changes made, retroactive to January 1,
1999, to our cost sharing arrangement with BrainTech, Inc. See "CERTAIN
TRANSACTIONS." In addition, we have corrected certain information
relating to the number of incentive stock options and share purchase
warrants exercised during the six month period ended June 30, 1999.
(2) The circumstances surrounding the restatement of the financial data for
the fiscal years ending April 30, 1994 and April 30, 1995 are as
follows:
(a) In our audited financial statements for the fiscal year ending April
30, 1995, we reversed, as at April 30, 1995, the following previously
accrued amounts payable to Lawrence Kostiuk, the Company's former
President:
<TABLE>
<S> <C>
Professional Services $ 391,000
Development Costs 392,000
Interest Expenses 26,983
Consulting 128,007
Advertising 30,000
Travel and promotion 51,730
----------
Total $1,019,720
==========
</TABLE>
The reversals were made in respect of transactions under former
management, which present management considers to have been improper.
See "BUSINESS -- Legal Proceedings".
Of the $1,019,720 reversed, $64,983 had been accrued during the fiscal
year ending April 30, 1995, $522,000 had been accrued during the fiscal
year ending April 30, 1994, and $432,737 had been accrued in earlier
periods.
(b) For purposes of this Prospectus, we have restated our selected
financial data for the fiscal years ending April 30, 1995 and 1994 by
reversing, as at April 30, 1995, only those amounts accrued during the
fiscal year ending April 30, 1995 (totaling $64,983) and by reversing,
as at April 30, 1994, those amounts accrued during the fiscal year
ending April 30, 1994 (totaling $522,000). Accordingly, the accruals
reversed for the fiscal years ending April 30, 1994 and April 30, 1995
were:
<TABLE>
<S> <C>
1994:
Professional Services $ 36,000
Development Costs 2,000
Interest Expenses 26,983
Total $ 64,983
========
1995
Professional Services $132,000
Development Costs 390,000
Total $522,000
========
</TABLE>
<PAGE>
20
We have no long-term debt and has not paid any dividends. Claims totaling
approximately $1.8 million have been advanced against us in legal
proceedings. See "BUSINESS -- Legal Proceedings".
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and our consolidated financial
statements and the notes thereto included elsewhere in this Prospectus.
OVERVIEW
Following a change in management in May 1995, new management commenced
rebuilding the Company's business. The initial efforts of new management were
focused on raising sufficient financing to recommence business operations and
to permit the Company's shares to resume trading. Our shares resumed trading
on September 10, 1996. Our current focus is on the development and marketing
of Dr. Bean. As yet, we have not been able to generate significant sales
revenue from our products.
RESULTS OF OPERATIONS
SIX MONTH PERIOD ENDED JUNE 30, 1999 COMPARED WITH SIX-MONTH PERIOD
ENDED JULY 31, 1998
During the six month period ended June 30, 1999, we received $134,369 in
sales revenue compared with $58,511 during the six month period ended July
31, 1998. Substantially all of the revenue in each period came from hardware
sales to BrainTech, Inc. and Techwest Management, Inc. Commencing in the
summer of 1998, equipment for these companies has been purchased through us,
owing to favourable prices available to us under the IBM Business Partner
Reseller Program. In our initial equipment sales to BrainTech, Inc. and
Techwest Management, Inc., we charged a mark-up over our cost. The mark-up
was eliminated on subsequent transactions. Our current policy is to sell
equipment to BrainTech, Inc. and Techwest Management Inc. at cost.
Cost of sales increased from $50,630 for the six month period ending July 31,
1998 to $124,306 for the six month period ending June 30, 1999. The increase
resulted from an increase in the amount of hardware sold to BrainTech, Inc.
and Techwest Management, Inc.
Interest income decreased from $28,060 for the six month period ending July
31, 1998 to $2,631 for the six month period ending June 30, 1999. The
increase resulted from lower cash balances held by us.
Employee wages and benefits increased to $617,868 for the six month period
ended June 30, 1999 from $328,341 for the six month period ended July 30,
1998. The increase was due principally to additional personnel being hired
subsequent to July 31, 1998. In addition, the increase reflects the
adjustments made to our cost sharing agreement with BrainTech, Inc. See
"CERTAIN TRANSACTIONS". The figures for both periods reflect bonuses in the
amount of $100,000 paid to our President in April 1998 and April 1999.
<PAGE>
21
Filing and transfer fees increased to $26,363 from $3,552. The principal
reason for the increase was increased fees paid to our transfer agent in
connection with financing activities and the exercise of stock options and
share purchase warrants during the six month period ended June 30, 1999.
Investment advisory services decreased from $75,000 to nil. The $75,000
recorded as investment advisory services for the six month period ended July
31, 1998 represented the value of 125,000 Special Warrants issued to Golden
Capital Securities Ltd. services provided in connection with a proposed
prospectus filing. There was no corresponding expense during the six month
period ended June 30, 1999.
Office, printing and sundry expenses were $131,832 for the six month period
ending June 30, 1999 compared with $88,285 for the six month period ending
July 31, 1998. The principal reasons for the increase were our generally
higher level of business activity during the six month period ended June 30,
1999, as well as the increased costs associated with operating a second
office in Virginia.
Professional fees increased to approximately $306,785 for the six month
period ended June 30, 1999 from approximately $168,469 for the six month
period ended July 31, 1998. Accounting costs increased from approximately
$26,000 to approximately $96,000, principally as a result of costs associated
with registration of our shares pursuant to the Securities Exchange Act of
1934 and increased audit costs, owing to a higher level of activity in the
Company. Legal costs increased from approximately $79,000 to approximately
$170,000, principally as a result of costs associated with registration of
our shares under the Securities Exchange Act of 1934 and costs associated
with the financing activities which we carried out during the six month
period ended June 30, 1999.
Marketing expenses decreased to approximately $405,588 for the six month
period ended June 30, 1999 from approximately $519,329 for the six month
period ended July 31, 1998. The decrease resulted principally from a
reduction in trade show expenses from approximately $200,000 to approximately
$123,000 and a reduction in direct marketing costs from approximately
$143,000 to approximately $11,000. Direct marketing costs for the six month
period ended July 31, 1998 included approximately $132,000 paid to Sunset
Direct in connection with marketing of Net Notions. There were no
corresponding payments during the six month period ended June 30, 1999. The
reductions in trade show costs and direct marketing expenses were offset in
part by an increase in travel costs from approximately $27,000 to
approximately $83,000, due principally to costs associated with the opening
of our Virginia office.
Facilities costs increased to approximately $147,162 from approximately
$43,755. The principal reasons for the increase were the cost of additional
lease space which we occupied in North Vancouver beginning in September 1998
and the cost of the lease space which we occupied in Herndon, Virginia
beginning in February 1999. In addition, the increase reflects adjustments
made to our cost sharing agreement with BrainTech, Inc. See "CERTAIN
TRANSACTIONS".
Research and Development expenses increased to approximately $395,434 for the
six month period ended June 30, 1999 from approximately $168,875 for the
six month period ended July 31, 1998. The increase was due principally to an
increase in the number of our research and development personnel and to
higher salaries paid to research and development personnel. Our foreign
exchange gain decreased from approximately $90,280 to approximately $15,021.
Our foreign exchange gain results from changes in the value (as measured in
Canadian currency) of the funds which we hold in United States currency. The
decrease in the foreign exchange gain resulted primarily from reduced
exchange rate fluctuations.
<PAGE>
22
EIGHT MONTH PERIOD ENDED DECEMBER 31, 1998 COMPARED WITH THE TWELVE MONTH
PERIOD ENDED APRIL 30, 1998
During the eight month period ended December 31, 1998 we received $200,267 in
revenue compared with $54,679 during the twelve month period ended April 30,
1998. The principal reasons for the increase were as follows:
(a) Software sales increased from $26,782 to $29,383.
(b) Hardware sales increased from nil to $129,150. The hardware sales in
question were made to BrainTech, Inc. and Techwest Management, Inc.
(c) Interest revenue earned on cash balances increased from $27,897 to
$41,734, as a result of higher cash balances during the period ending
December 31, 1998.
Cost of sales increased from $18,178 for the fiscal year ending April 30,
1998 to $140,418 for the eight month period ending December 31, 1998. Cost of
hardware sold (including equipment sold to BrainTech, Inc. and Techwest
Management, Inc.) increased from nil to $120,068. Cost of software sold
increased from $18,178 to $20,350.
During the eight month period ending December 31, 1998 we also incurred a
bad debt expense of $30,801, writing off the balance of an account receivable
from Intermark Corporation. Intermark Corporation acted previously as our
marketing agent for Tagalongs in the United States. As at April 30, 1998, our
financial records showed $67,142 owing by Intermark Corporation. In our April
30, 1998 financial statements, we made a provision of $36,349 in respect of
the receivable from Intermark Corporation. The circumstances of that
provision are explained more fully below, under the heading "YEAR ENDED APRIL
30, 1998 COMPARED WITH YEAR ENDED APRIL 30, 1997". During the eight month
period ending December 31, 1998, we determined to write off the remaining
balance owing by Intermark Corporation, as it appeared that Intermark
Corporation might be in financial difficulty, such that legal proceedings
against Intermark Corporation to collect the amount owing might not be
worthwhile.
Employee wages and benefits increased to $401,843 for the eight month period
ending December 31, 1998 from $360,143 for the fiscal year ending April 30,
1998. The increase was due principally to additional personnel being hired.
Facilities costs increased to $94,705 from $76,707. The principal reason for
the increase was the cost of additional lease space which we occupied
effective September 1, 1998. Filing and transfer fees decreased to $12,241
from $21,907. The principal reason for the decrease was the shorter period of
time covered by the fiscal reporting period ending December 31, 1998, owing
to the change in our year end. Marketing expenses decreased to $581,764 from
$635,498, but were higher on a monthly average basis (averaging approximately
$72,500 per month during the eight month period ending December 31, 1998,
compared with approximately $53,000 per month during the fiscal year ending
April 30, 1998). Average monthly marketing expenses increased principally as
a result of higher travel and trade show expenses, which were approximately
$218,835 for the fiscal year ending April 30, 1998, compared with
approximately $382,909 for the eight month period ending December 31, 1998.
Increased travel and
<PAGE>
23
trade show expenses were offset in part by a reduction in fees paid to
marketing agents. During the fiscal year ending April 30, 1998, we paid
approximately $156,000 to marketing agents. There were no such payments
during the eight month period ending December 31, 1998.
Office, printing and sundry expenses were $124,375 for the eight month period
ending December 31, 1998 compared with $167,228 for the fiscal year ending
April 30, 1998. The principal reason for the decrease was the shorter period
of time covered by the fiscal reporting period ending December 31, 1998,
owing to the change in our year end. We also incurred a $141,047 foreign
exchange gain during the eight month period ending December 31, 1998,
compared with $33,479 for the fiscal year ending April 30, 1998. The
principal reason for the increase was the substantial appreciation in the US
dollar during the eight month period ending December 31, 1998.
Professional fees decreased to $356,820 from $620,845. A principal reason for
the decrease was a reduction in our legal and accounting costs. The reduction
in legal and accounting costs was offset in part by the cost of a business
plan (approximately $20,000) prepared during the eight month period ending
December 31, 1998. Research and development expenses (net of government
grants) increased to $353,238 from $301,258. The increase was due principally
to additional research and development personnel.
For U.S. GAAP purposes, we also incurred a compensation expense in the amount
of $44,400 during the eight month period ended December 31, 1998 in respect
of the issuance of incentive stock options. There was no such expense
incurred during the fiscal year ended April 30, 1998.
YEAR ENDED APRIL 30, 1998 COMPARED WITH YEAR ENDED APRIL 30, 1997
During the fiscal year ending April 30, 1998, we received revenue of $54,679,
compared with $70,613 for the fiscal year ending April 30, 1997. The
principal reason for the increase was an increase in interest earned on cash
balances, which increased from $865 for the fiscal year ending April 30, 1997
to $27,898 for the fiscal year ending April 30, 1998. The increase in
interest revenue was offset by a reduction in software sales, which decreased
from $69,748 to $26,782. The principal reason for the decrease was in
software sales was an interruption of our marketing efforts while our single
user product was being re-named from "JOT-IT!" to "Tagalongs" to comply with
our settlement agreement with 3M Corporation. In addition, sales were reduced
by a charge in the amount of $21,431 in respect of the disposal of obsolete
inventory in the possession of Intermark Corporation. Cost of software sold
increased from $9,094 to $18,178. Reduced sales were not accompanied by a
reduction in cost of software sold owing to the charge in respect of unsold
inventory, described above.
During the fiscal year ending April 30, 1998, we also incurred a bad debt
expense of $36,349. The bad debt expense arose from the failure of Intermark
Corporation, who were marketing our Tagalongs product, to remit funds which
they had received in respect of sales of Tagalongs, and which they were
obliged to remit to us. We recorded sales revenue of $69,874 and $16,827 for
software sold through Intermark Corporation for the fiscal years ending April
30, 1997 and April 30, 1998, respectively. We considered recognition of this
revenue appropriate as the transactions in question represented software
shipped by us through Intermark Corporation, for which Intermark Corporation
received payment, and for which Intermark Corporation was liable to pay us.
We did not make any allowance for a bad debt expense in our April 30, 1997
financial statements, as we believed we would ultimately recover all amounts
payable
<PAGE>
24
by Intermark Corporation.
As at April 30, 1998, our records showed $67,142 owing by Intermark
Corporation. Intermark Corporation signed an audit confirmation acknowledging
indebtedness to us in the amount of US$41,173.20, but did not remit the
amounts owing. Intermark Corporation also made an offer, which we accepted,
to settle the account from approximately $30,000. Accordingly, as at our
April 30, 1998 fiscal year end, we made a bad debt allowance of $36,349,
reducing the amount receivable from Intermark Corporation to approximately
$30,000. As stated above, the remaining balance owing from Intermark
Corporation has been written off as at December 31, 1998.
Employee wages and benefits increased to $360,144 during the fiscal year
ending April 30, 1998 from $176,361 during the fiscal year ending April 30,
1997. The increase was due to additional personnel being hired during the
fiscal year ending April 30, 1998 and to a payment of $100,000 made to our
President in April 1998 as a performance bonus. Filing and transfer fees
decreased to $21,907 from $49,360. Filing and transfer fees were higher
during 1997 due to costs incurred in issuing securities, costs incurred in
connection with the resumption in trading of our shares, and costs incurred
in resolving disputes concerning share ownership arising from the conduct of
prior management. Office, printing and sundry increased to $167,228 from
$107,575. The magnitude of this increase was such that no specific reason can
be given for it.
During the fiscal year ending April 30, 1998, we recorded an expense in the
amount of $75,000 for Investment Advisory Services. The $75,000 represented
the deemed value of Special Warrants issued to Golden Capital Securities Ltd.
in consideration for services rendered during the fiscal year ending April
30, 1998 in connection with an intended prospectus filing. Professional fees
decreased to $620,845 for the fiscal year ending April 30, 1998 from $961,245
for the fiscal year ending April 30, 1997. Several factors contributed to
this reduction. During the fiscal year ending April 30, 1997, we incurred
extraordinary accounting costs resulting from the resumption in trading of
our shares, and the preparation of historical financial data required in
connection therewith. Accounting and auditing costs decreased from $381,389
for the fiscal year ending April 30, 1997 to approximately $152,407 for the
fiscal year ending April 30, 1998. In addition, certain expenditures
including payments to our public relations firm and marketing agent, as well
as the salary costs of our Manager of Investor Relations and Vice President
Business Development, were allocated to "Professional fees" for the year
ending April 30, 1997, but were reallocated to other categories for the
fiscal year ending April 30, 1998.
Marketing expenses increased to $635,498 for the fiscal year ending April 30,
1998 from $418,764 for the fiscal year ending April 30, 1997. The principal
reasons for this increase were increased costs incurred to participate in
industry trade shows, which increased from approximately $109,652 to
approximately $183,026, and the reallocation of certain expenses from the
category "Professional fees". Research and development expenses increased to
$301,258 from $129,877. This increase was due principally to increased
salaries and performance bonuses paid to programming personnel.
For U.S. GAAP purposes, we also incurred a compensation expense in the amount
of $19,350 during the fiscal year ended April 30, 1997 in respect of the
issuance of incentive stock options. There was no such expense incurred
during the fiscal year ended April 30, 1998.
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25
YEAR ENDED APRIL 30, 1997 COMPARED WITH YEAR ENDED APRIL 30, 1996
During the fiscal year ending April 30, 1997, we received revenue of $70,613,
compared with $30,226 for the fiscal year ending April 30, 1996. Revenue from
the sale of software products was $69,748 during the fiscal year ending April
30, 1997. During the fiscal year ending April 30, 1996, we did not earn any
revenue from the sales of our software products. Revenue of $25,000 recorded
under the heading "Software" consisted of amounts paid by NetMedia Systems
Inc. pursuant to a license agreement dated November 2, 1995 (which agreement
has subsequently been terminated). Other revenue, consisting of interest
earned on cash balances, decreased from $2,254 for the fiscal year ending
April 30, 1996 to $865 for the fiscal year ending April 30, 1995.
Employee wages and benefits increased to $176,361 for the fiscal year ending
April 30, 1997 from $154,969 for the fiscal year ending April 30, 1996. The
magnitude of this increase is such that no specific reason can be given for
it. Filing and transfer fees increased to $49,360 from $5,222. Filing and
transfer fees were low during the fiscal year ending April 30, 1996 because
our shares did not trade during that fiscal year. Filing and transfer fees
were higher during the fiscal year ending April 30, 1997 due to costs
incurred in issuing securities, costs incurred in connection with the
resumption in trading of our shares, and costs incurred in resolving disputes
concerning share ownership arising from the conduct of prior management.
Office, printing and sundry increased to $107,575 from $44,703. The reason
for this increase was a generally increased level of business activity.
Professional fees increased to $961,245 for the fiscal year ending April 30,
1997 from $255,527 for the fiscal year ending April 30, 1996. Several factors
contributed to this increase. During the fiscal year ending April 30, 1997,
we incurred extraordinary accounting costs resulting from the resumption in
trading of our shares, and the preparation of historical financial data
required in connection therewith. In addition, we incurred substantial legal
expenses in connection with the resumption in trading of our shares and our
legal disputes with former management. Accounting and auditing costs for the
fiscal year ending April 30, 1997 were approximately $286,806, and legal
expenses for the corresponding period were approximately $381,389. Total
legal, accounting and auditing expenses for the fiscal year ending April 30,
1996 were approximately $116,000. In addition, professional fees recorded
during the fiscal year ending April 30, 1997 included payments to our public
relations firm and marketing agent and the salary costs of our Manager of
Investor Relations and Vice President Business Development (neither of whom
are still employed by us).
Marketing expenses increased to $418,764 for the fiscal year ending April 30,
1997 from $62,121 for the fiscal year ending April 30, 1996. The principal
reason for this increase was attendance at industry trade shows and the
initiation of significant marketing efforts during the fiscal year ending
April 30, 1997. Research and development increased to $129,877 from nil
principally because we adopted an accounting policy of expensing research and
development costs incurred currently, and because of an increase in the
number of our research and development personnel.
LIQUIDITY AND CAPITAL RESOURCES
We commenced operation under new management in May 1995. From that time, up
to June 30, 1999,
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26
we raised approximately $14 million in equity financing through private
placements (including the exercise of warrants issued pursuant thereto) and
the exercise of stock options.
In September 1999, we completed an additional private placement raising net
proceeds of approximately $6.4 million. In addition, subsequent to June 30,
1999, we have received approximately $1.8 million from the exercise of share
purchase warrants and incentive stock options. We have not generated
significant revenue from the sales of our products. Accordingly, we have been
dependent on the proceeds of equity financings to pay our ongoing operating
expenses. Inclusive of the private placement, warrant, and stock option
proceeds described above, our cash balance as at October 29, 1999 is
approximately $7.6 million.
As at October 29, 1999, we employ 25 full time and 6 part time officers and
employees in our Vancouver office and 12 full time employees in our Virginia
office. As at October 29, 1999, our monthly salary costs are approximately
$250,000 per month, exclusive of bonus payments and benefits.
Following the private placement of September 1999, we plan to hire
substantial additional personnel:
(a) We plan to hire a Chief Financial Officer, to work in the Virginia
office, by December 31, 1999.
(b) We plan to hire at least eight additional technical personnel,
including a Chief Technical Officer, by December 31, 1999. Technical
personnel will be required to continue development of Dr. Bean, and
also to provide support and integration services to Dr. Bean end users.
(c) We plan to hire at least eight additional marketing personnel by
December 31, 1999.
We expect that by December 31, 1999, our monthly payroll costs will be
approximately $500,000 per month, exclusive of bonus payments and benefits.
In addition, we expect to spend approximately $300,000 on the development of
a telephony integration system, pursuant to a contract with Science
Applications International Corporation ("SAIC"). Hiring of additional
personnel, beyond those stated above, will depend on market response to Dr.
Bean and our financial resources.
During the period January - June 1999, our overhead expenses, exclusive of
payroll costs, were approximately $60,000 per month on average. We expect
that our overhead expenses will increase materially during the period up to
June 30, 2000.
(a) Additional personnel will result in additional overhead.
(b) Effective July 1, 1999, we occupied additional office space in Vancouver.
(c) We expect to open at least two branch sales offices by December 31, 1999.
We expect that by December 31, 1999 our monthly overhead expenses, exclusive
of payroll costs, will be approximately $250,000 on average. Opening of
additional offices, beyond those referred to in (c), will depend on market
response to Dr. Bean and our financial resources. We expect that if market
response to Dr. Bean is favourable, we may open as many as 12 additional
sales offices during the fiscal year ending December 31, 2000.
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27
Attendance at trade shows has been a major expense item in our two most
recent fiscal years. For the period up to June 30, 2000, we expect that we
will attend between 8 and 10 trade shows. One of the shows (Spring Internet
World - April 2000) will involve a substantial display, and is estimated to
cost approximately $150,000 - $200,000. Participation at the other shows will
be on a smaller scale, averaging approximately $8,000 per show. Accordingly,
we plan to spend approximately $275,000 on trade shows during the balance of
our current fiscal year and the first half of our next fiscal year.
We do not plan to incur large capital expenditures prior to June 30, 2000.
Our principal capital expenditures will be in acquiring new computer
equipment, and in fixturing additional leasehold space. We do not expect
capital expenditures prior to June 30, 2000 to exceed $500,000. Using
projected December 31, 1999 payroll and overhead costs of $750,000 per month
as an average, we estimate that our cash requirements for the period
September 1, 1999 to June 30, 2000 will be approximately $6,000,000 for
payroll and overhead, plus approximately $1,075,000 for trade show expenses,
capital expenditures, and the development of a telephony integration system.
Accordingly, we expect that our current cash balances will be sufficient to
sustain our operations to June 30, 2000 without the benefit of substantial
revenue or additional capital funding.
We will continue to seek additional capital funding. We will attempt to raise
an additional $6 million in private placement financing during the fourth
quarter of 1999. In addition, we will attempt to complete a substantial
public offering during the first half of 2000. Additional capital funding
will be used to hire additional marketing and development personnel, and to
carry out an extensive advertising and marketing campaign for Dr. Bean.
Investors are cautioned that our cost estimates are preliminary. Owing to our
brief operating history, we do not have sufficient information to prepare
accurate estimates of the number of additional personnel we will require or
the operating costs we will incur. Our future expenditures will also depend
in part on the financial resources available to us. Actual costs incurred may
differ substantially from the estimates stated above. In addition, there can
be no assurance that we will succeed in raising substantial additional
capital.
As disclosed in Note 2 to our financial statements for the eight months
ending December 31, 1998, our continuance as a going concern is dependent
upon our ability to obtain adequate equity financing, to reach profitable
levels of operation, and our success in defending existing legal claims.
We commenced marketing of Dr. Bean in May 1999. We expect that the release of
Dr. Bean will mark our transition from a development stage company to an
operating company. Historically, we have not had significant revenue. It is
essential for us to generate substantial revenue from Dr. Bean in order to
survive.
<PAGE>
28
YEAR 2000
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, computer systems and/or software used by
many companies may need to be upgraded to comply with such "Year 2000"
requirements.
Our Year 2000 compliance program has been conducted under the direction of
our systems administrator. Beginning in the middle of 1998, our systems
administrator commenced analyzing individual components of our computer
systems to identify any components which were not Year 2000 compliant.
Our systems administrator has confirmed that all of the individual computers
in our system are Year 2000 compliant. The only software component that was
identified as potentially non-compliant was our accounting system. In May
1999, we replaced our accounting system with a Year 2000 compliant system.
The cost of the system was approximately $60,000, which was shared with
BrainTech, Inc.
As we believe that all of our internal systems are Year 2000 compliant, we
have not developed any contingency plan, other than to continue with our
present program of analyzing the components of our system to identify
non-compliant components.
If we are able to generate substantial sales orders for Dr. Bean, we may
require sources of Year 2000 compliant network and web servers. However, we
expect no difficulty in obtaining Year 2000 compliant products, as the
products in question will likely be obtained from major suppliers in the
computer industry, all of whom have instituted extensive programs to ensure
that their products are Year 2000 compliant.
With the exception of the local electrical utility, we are unaware of any
present suppliers, on whom we are dependent, whose supply of goods or
services might be interrupted by Year 2000 problems. We have not made any
material investigations of any individual suppliers, and have not developed a
contingency plan.
All of our current products are Year 2000 compliant. We have not undertaken
any investigation to determine whether any of the products we have sold in the
past are non-compliant. However, given the small volume of our historical
sales, we do not foresee a material risk of liability arising in respect of
our past sales.
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29
EFFECTS OF FOREIGN CURRENCY EXCHANGE RATES AND INFLATION
Our revenues and/or expenses have been and may continue to be earned or
incurred in currencies other than the Canadian dollar, principally the United
States dollar. During the eight month period ended December 31, 1998, we
realized a foreign exchange gain of $141,047 as a result of the appreciation
in value of cash balances held in US funds. Otherwise, for the fiscal years
ending April 30, 1996, 1997, and 1998, the effects of fluctuations in
currency exchange rates have not been material. Fluctuations in exchange
rates between the United States dollar and other foreign currencies and the
Canadian dollar could materially affect our results of operations in the
future. As at October 29, 1999, we have not engaged in exchange rate hedging
activities. To the extent we implement such hedging activities in the future,
there can be no assurance that we will be successful.
While we believe that inflation has not had a material adverse affect on our
results of operations, there can be no assurance that inflation will not have
a material adverse effect on our results of operations in the future.
BUSINESS
THE COMPANY
SIDEWARE SYSTEMS INC. was incorporated under the laws of the Province of
British Columbia on April 11, 1983 under the name "Heart Minerals Ltd."
Initially, the Company was engaged in the business of mineral exploration.
On June 27, 1984, the Company changed its name to "SRO Entertainment
International Ltd.". This change of name accompanied a change in the
Company's business to the to the development and exploitation of theatrical
productions.
On January 30, 1990, the Company changed its name to "Pacrim Entertainment
Group Inc.". This change of name accompanied a capital reorganisation, in
which the shares of the Company were consolidated on a 2.5:1 basis.
On January 9, 1991, the Company changed its name to "Evergreen International
Technology Inc.". This change of name accompanied a change in the Company's
business to software development, and the acquisition of the assets of a
private company named "Evergreen Technology Corp."
On January 31, 1997, the Company changed its name to "JOT-IT! SOFTWARE
CORP.". This change of name was made to enhance the Company's image,
following a change in management.
On February 18, 1998, the Company changed its name to "Sideware Systems
Inc.", its present name. This change of name was made to comply with a
settlement agreement which the Company entered into with 3M Corporation,
following trademark infringement litigation in which 3M Corporation alleged
that the Company's name infringed its "Post-It" trademark.
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30
Our head office is located at West First Street, Suite 102, North Vancouver,
British Columbia, V7P 3N4. Our registered and records offices and address for
service of process in Canada are Suite 1910, 777 Hornby Street, Vancouver,
British Columbia, V6Z 1S4. Our registered agent for service of process in the
United States is National Registered Agent, 1090 Vermont Avenue, Suite 910,
Washington, D.C. 20005. Our outstanding common shares are listed and posted
for trading on the Vancouver Stock Exchange and through the OTC Bulleting
Board quotation service.
OUR SUBSIDIARIES
Sideware Systems Inc. has six wholly owned subsidiaries: Sideware Corp.,
3032650 Nova Scotia Corp., Sideware International SRL, 9050 Investments Ltd.,
Evergreen International Technology Inc., and 9123 Investments Ltd.
Sideware Corp. was incorporated as a wholly owned subsidiary on January 21,
1997 under the laws of the State of Washington, under the name "Collaborative
Groupware Inc." On August 13, 1998, Collaborative Groupware Inc. changed its
name to Sideware Corp. Sideware Corp. markets our products in the United
States.
Sideware International SRL was organised as a society with restricted
liability under the laws of Barbados on August 27, 1999. Sideware Systems
Inc. owns 99% of the quotas of Sideware International SRL, with the remaining
1% being owned by 3032650 Nova Scotia Company. 3032650 Nova Scotia Company is
another wholly owned subsidiary of Sideware Systems Inc., having been
incorporated under the laws of the Province of Nova Scotia on August 25, 1999.
Sideware Systems Inc. has entered into a Software License Agreement with
Sideware International SRL effective August 27, 1999, whereby Sideware
Systems Inc. granted a license to Sideware International SRL to use the Dr.
Bean software to develop, market, and sell derivative software products. The
derivative software products may include all or part of the Dr. Bean
software. Under the Software License Agreement, Sideware International SRL
will pay Sideware Systems Inc. a royalty based on the revenues realized by
Sideware International SRL from the commercial exploitation of the derivative
software products. The royalty rate has been initially set at 10% of gross
revenues. Either party may from time to time invoke a review and adjustment
of the royalty rate in accordance with the terms of the agreement.
Sideware Systems Inc. and Sideware International SRL have also entered into a
Software Development Cost Sharing Agreement effective August 27, 1999 whereby
the two companies agreed to pool their resources for the purposes of
conducting research and development of new software technology. The parties
will meet annually to agree upon a research program for each year and will
specify, amongst other things, the activities to be undertaken. The parties
will jointly own the software and intellectual property developed pursuant to
the research program, with Sideware International SRL having the right to
exploit the software and intellectual property worldwide except in Canada,
and Sideware Systems Inc. having the right to exploit the software and
intellectual property in Canada. The costs to be borne by each party will be
based upon the reasonably anticipated benefits to be derived by each party as
a result of the commercial exploitation of the technology developed. Based on
the parties' expectations of anticipated benefits, Sideware Systems Inc. will
bear 10% of the research and development costs and
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31
Sideware International SRL will bear the remaining 90% of the research and
development costs.
Sideware Systems Inc. and Sideware Corp. have entered into a Distribution and
Sales Agreement with Sideware Corp. effective January 1, 1999 whereby
Sideware Corp. was granted the non-exclusive right to market and sell copies
of Dr. Bean version 2.0 in the United States. Under this agreement, Sideware
Corp. purchases copies of the software from Sideware Systems Inc. at the
current list price, less a discount. The suggested list price and discount
are subject to change at the discretion of Sideware Systems Inc. Sideware
Corp. may appoint sub-distributors for the marketing and sale of the software
within its authorized area. Sideware Corp. has also agreed to provide
maintenance and support systems to end users and resellers of the software.
Additionally, Sideware Corp. or its resellers will be responsible for
installation and integration of the software and training of end users on the
use of the software. Sideware Corp. may in its discretion establish fees and
charges for the maintenance, support, installation, integration and training
services that it provides.
9050 Investments Ltd. was incorporated under the laws of the Province of
British Columbia on March 28, 1990 and became a subsidiary of Sideware
Systems Inc. through a series of transactions taking place between June 30,
1990 and May 31, 1991. 9050 Investments Ltd. does not carry on business.
Evergreen International Technology Inc. was incorporated on January 6, 1997
under the laws of the Province of British Columbia under the name of 9107
Investments Ltd. 9107 Investments Ltd. changed its name to Evergreen
International Technology Inc. on April 18, 1997. Evergreen International
Technology Inc. does not carry on business.
9123 Investments Ltd. was incorporated on December 5, 1997 under the laws of
the Province of British Columbia. 9123 Investments Ltd. has acquired the
rights of Canadian Western Bank in a British Columbia Supreme Court judgement
pronounced against The Plant Software Inc. and other parties, as well as
security granted by The Plant Software Inc. to secure its indebtedness. See
"BUSINESS -- Legal Proceedings." Otherwise, 9123 Investments Ltd. does not
carry on business.
Sideware Systems Inc. is also a one third shareholder in Concurrent Adaptive
Recognition Corp. ("Carr Corp."). Carr Corp. was formed as a joint venture
company between the Company, BrainTech, Inc., and NetMedia Systems Inc. At
present, Carr Corp. does not carry on business.
The description of our business contained in this Prospectus includes the
undertakings of Sideware Systems Inc., Sideware Corp., and Sideware
International SRL.
We operated historically with an April 30 fiscal year end. In December 1998,
we changed the end of our fiscal year from April 30 to December 31. Financial
results for periods subsequent to April 30, 1998 are reported with a December
31 year end.
GENERAL DEVELOPMENT
We are engaged in the business of developing and marketing computer software
technology solutions. The principal focus of our software is the emerging
market for e-commerce software.
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32
We entered the field of software development in 1991 by acquiring the assets
of a private company named Evergreen Technology Corp. Evergreen Technology
Corp. was the owner of a patent covering an Interactive Software Training
System (US Patent #4,622,013), a Concurrent Authoring System ("CAS"), and a
Concurrent Referencer System ("Ref") which permitted the creation of context
and content sensitive help or reference interfaces for MS-DOSTM based
applications.
In the first quarter of 1994, we released a program named "Evergreen Notes"
which permitted the user to create electronic "notes" in a Windows-TM-
environment. Essentially an electronic "sticky" note, Evergreen Notes allowed
a user to "stick" notes directly onto documents, applications, drop down
menus, text entry fields, and other locations, allowing notes to appear when
the user required them.
In November 1994, our former President resigned after a dissident director
identified irregularities in his transactions with the Company. On November
29, 1994, our shares were suspended from trading and a Cease Trade Order was
issued by the British Columbia Securities Commission on March 7, 1995.
On May 3, 1995, a new board of directors was elected at a court-ordered
annual general meeting.
Subsequent to the May 3, 1995 annual general meeting, we modified the
"Evergreen Notes" program and renamed the program "JOT-IT!" JOT-IT! 2.01, a
single-user product, was released in November 1995. In September 1996, we
obtained a revocation of the Cease Trade Order and our shares returned to
trading.
In July 1997, 3M Corporation commenced legal proceedings against us alleging
that the name "JOT-IT!" infringed trademarks owned by 3M Corporation. In
October 1997, we entered into a settlement agreement with 3M Corporation,
pursuant to which we agreed to change our corporate and product names. The
single user product was renamed "Tagalongs".
In November 1997, we released our first groupware product, "Net Notions", and
the most recent version of our single user product, "Tagalongs 3.0". Neither
Tagalongs nor Net Notions generated material revenue, and both products have
been discontinued as at the date of this Prospectus.
In the fall of 1997, we also commenced development of "Dr. Bean", now our
principal product. Dr. Bean creates direct real time communication between
customers and producers marketing their products through Internet e-commerce
sites. An alpha version of the Dr. Bean "client" software was demonstrated at
the fall Comdex exhibit in November 1997, and a beta version was demonstrated
at Internet World trade show in November 1998.
In April 1999, at the Spring Internet World trade show in Los Angeles, we
released the initial version of Dr. Bean for commercial distribution. In June
1999, at the JavaOne trade show in San Francisco, we released Dr. Bean 2.0.
Version 2.0 is the current version of Dr. Bean, and is in commercial
distribution.
In July 1999, we implemented the Sideware Partner Program, through which we
are enlisting value added resellers for Dr. Bean. As at the date of this
Prospectus, we have 8 value added resellers for Dr.
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33
Bean. We expect that value added resellers will be the principal distribution
channel for Dr. Bean.
With the development of Dr. Bean, the principal focus of our business has
become the emerging market for e-commerce software solutions. We have
commenced development of enhanced versions of Dr. Bean, which will enable Dr.
Bean to perform a broad and valuable range of e-CRM (Electronic Customer
Relations Management) functions. We believe that through the present version
of Dr. Bean, and through enhanced versions now under development, our
products can become prominent leaders in the e-commerce software field.
PRODUCTS - DR. BEAN
(i) DESCRIPTION OF DR. BEAN
Dr. Bean is intended for use on Internet e-commerce sites, and facilitates
direct communication over the Internet between customers and customer service
representatives.
Dr. Bean is written in the Java programming language, and is based on a
"client/server" model. A customer graphical user interface ("GUI") is
incorporated into the producer company's Internet "storefront", and is
downloaded to the machine of a customer browsing the storefront. Two versions
of the GUI are available, one written as a Java applet and one written in
HTML ("Hypertext Markup Language"). Server software is incorporated into the
website server, and monitors the actions of the customer.
Upon the occurrence of a specified triggering event (such as clicking a
designated icon), Dr. Bean opens an interactive peer-to-peer link between the
customer and a company sales representative ("CSR"). The CSR can view a
screen display that is identical to that shown to the customer, or can "push"
different web pages to the customer. The customer and the CSR communicate
through "real time" chat - messages typed by either party show up immediately
on the other's display screen. Dr. Bean thus supports direct interaction
between CSR's and consumers.
Additional features of Dr. Bean include the following:
(a) Data collection. Dr. Bean will support collection of statistical data
on the number of times specific web pages are accessed, the number of
calls directed to specific customer representatives, and similar
information.
(b) Queue administration. When customer service representatives are all
busy, Dr. Bean can establish a queue of customers waiting for service.
When they come available, CSR's can choose a new customer from the
queue.
(c) Customer history database. Customers can be asked to identify
themselves when Dr. Bean is enabled, permitting CSR's to identify
repeat or regular customers. Regular customers can be directed to a
specific CSR, or be given higher priority in a queue.
(d) Web page catalogue. A catalogue of web pages can be made available to
CSR's, to permit them
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34
to direct customers quickly to appropriate web pages.
Dr. Bean has been designed for integration into e-commerce internet sites
offering a comprehensive range of e-commerce services and middleware, such as
database creation and management, transaction servers (processing purchase
orders, credit card sales and other transactions), system security programs,
and financial management and accounting systems.
We demonstrated an alpha version of Dr. Bean's customer GUI at the Fall 1997
Comdex Exhibit. In November 1998, we demonstrated a beta version of Dr. Bean
at the Internet World trade show. In April 1999, at the Spring Internet World
trade show in Los Angeles, we released Dr. Bean version 1.0, the initial
version of Dr. Bean.
During the week of April 26, 1999, we implemented Dr. Bean 1.0 on IBM
platforms, including principally the S390, AS400 and RS6000 platforms, and
also the Windows NT, Linux and Sun Solaris operating systems, at IBM
facilities. During the implementation and testing, Dr. Bean 1.0 operated
successfully on the platforms and operating systems tested.
During the week of June 14, 1999, at the JavaOne conference in San Francisco,
we released Dr. Bean, version 2.0. Version 2.0 represents the current version
of Dr. Bean, and incorporates the following principal enhancements:
(a) Version 2.0 permits customer service representatives using Dr. Bean to
monitor the activities of other customer service representatives;
(b) Version 2.0 operates compatibly with system firewalls, by establishing
a secure communications channel between the secure and non-secure
portions of a system firewall; and
(c) Version 2.0 includes features to make Dr. Bean more easily adaptable to
particular customer installations.
Dr. Bean 2.0 also has scalable architecture, which permits it to support
(subject to system capacity) a virtually unlimited number of CSR users and
customer sessions simultaneously.
(ii) DR. BEAN - FUTURE DEVELOPMENTS
Enhancement of Dr. Bean is our principal development activity. We plan to
release two new versions of Dr. Bean during the final quarter of 1999, and
two additional versions during 2000.
Dr. Bean 3.0 is presently in beta testing, and is scheduled to be released
for commercial distribution in November 1999. Version 3.0 will include a
major upgrade in features, with the following principal enhancements.
<PAGE>
35
(a) A Collaborative Services feature will permit CSR's and supervisors to
transfer a customer from one CSR to another. The Collaborative Services
feature will also permit CSR's to send and receive real time messages
to other company employees while a customer session is ongoing. This
will allow a CSR, for example, to ask another company employee about
pricing for a particular product before responding to a customer he is
servicing.
(b) Intelligent Routing features will direct a customer to the most
appropriate CSR through a variety of methods.
(i) Dr. Bean icons located at different locations on a web site
(such as web pages showing different products) will direct the
customer to different CSR's.
(ii) Historical data profiles developed for specific customers can
be used to identify the most appropriate CSR for those
customers.
(iii) In the absence of historical data about a specific customer,
Version 3.0 will be able to route the customer's inquiry based
on the customer's IP address.
Version 3.0 will permit users to designate groups of CSR's who are best
suited to respond to inquiries from specific customers or specific
groups of customers. The Intelligent Routing features can be configured to
conform to the user's designated CSR groups.
(c) An AutoService feature will display automated questions for customer
response. Based on the response, the AutoService feature can:
(i) provide an automated response to the customer's inquiry;
(ii) display additional automated questions to elicit further
information from the customer; or
(iii) turn the customer over to the Intelligent Routing feature, to
route the customer to the most appropriate CSR.
The AutoService feature will be implemented in part through a feature
named "Wizmaster", which will permit Dr. Bean users to create
customised knowledge trees. The knowledge trees specify nodes and
links, corresponding to questions and possible responses, which
ultimately direct a customer either to a response to his inquiry, or to
the Intelligent Routing feature.
(d) An e-Mail Resolution feature will provide automated responses to
customer e-mail inquiries. The e-Mail Resolution feature can invoke
procedures similar to those of the AutoService feature, and can also
implement sequences of questions and responses developed by the
Wizmaster.
(e) A Spell Checking function will permit CSR's to send messages without
spelling errors.
(f) An improved Supervisor Module will permit supervisors to view, in
graphical form, data analysing CSR performance. The type of data
available will include such items as the average response time for a
particular CSR or group of CSR's, or average session length.
<PAGE>
36
(g) A Remote Administration feature will permit users to manage different
call centres from a centralized location.
(h) An Application Programmer's Interface ("API") feature will permit users
to adapt Dr. Bean to use historical customer data, developed by other
systems.
Dr. Bean, version 3.1 is scheduled to begin beta testing in early December
1999, and to be ready for commercial distribution prior to December 31, 1999.
Version 3.1 will include enhancements to the intelligent routing features of
version 3.0, designed principally to make those features more flexible, and
more easily adaptable to the requirements of individual users.
Dr. Bean version 3.2 is scheduled to begin testing in February 2000. The
principal enhancements planned for version 3.2 are in the ability of Dr. Bean
to assemble and use customer profile data, and an enhanced API, to maximise
the use that Dr. Bean can make of customer data created by other systems.
Dr. Bean NG is scheduled to begin beta testing in November 1999, and to be
ready for commercial distribution in the second quarter of 2000. Dr. Bean NG
will be designed for use with the Geoplex virtual private network platform
under development by AT&T. Dr. Bean NG will include features similar to those
to be incorporated into version 3.0 and will also be compatible with the
security and communications protocols of the Geoplex platform.
Pursuant to a contract with Science Applications International Corporation
("SAIC"), we are also developing a telephony integration system, to enable
Dr. Bean to be integrated with telephone call centre systems. We expect that
a prototype of the system will be available in the first quarter of 2000.
Investors are cautioned that owing to the rapidly changing nature of the
market for e-business software, our development plans may change
substantially and within a short period of time.
(iii) DR. BEAN - MARKETING
Dr. Bean is intended to service the rapidly growing market for software which
facilitates business over the Internet. In May 1998, Forrester Research
released a report analysing the present status and projected growth of
Internet commerce and the market for e-commerce software. Forrester Research
projects that by 2002, business trade conducted over the Internet will reach
US$327 billion, while retail trade over the Internet will reach US$17 billion.
A corresponding demand is predicted for software that facilitates Internet
commerce. Forrester Research predicted that the total market for e-commerce
software will increase from US$121 million in 1997 to approximately US$3.76
billion in 2002. The market segments analysed by Forrester Research include:
(a) the "Tools" segment, predicted to account for 1-3% of the total market;
(b) the "Integration" segment, predicted to account for 5-6% of the total
market;
(c) the "Security" segment, predicted to account for 5-7% of the market;
<PAGE>
37
(d) the "Customer Service" segment, whose portion of the market is
predicted to rise from 9% in 1997 (US$1.1 million) to 18% in 2002
(US$658 million);
(e) the "Sell-side" segment, predicted to account for 47% of the market
(US$57 million) in 1997 and 37% of the market (US$1.4 billion) in 2002;
and
(f) the "Buy-side" segment, predicted to account for 7% of the market (US$8
million) in 1997 and 13% of the market (US$490 million) in 2002.
Our objective is to capture, through our Dr. Bean product, significant market
share in both the "Customer Service" and "Sell-side" segments.
The suggested list price for Dr. Bean 2.0 is US$10,000, for a system
consisting of one server and 5 CSR workstations. Additional CSR workstations
cost $1,000 per seat for the first ten, with decreasing prices for larger
installations.
With the release of Dr. Bean 3.0, we intend to revise our price structure
substantially. We presently intend to offer Dr. Bean 3.0 at different prices,
depending on the platform and scale of the system in which it is installed.
Our intended pricing grid is as follows (with all prices stated in US$).
<TABLE>
<CAPTION>
UNIX-BASED
WINDOWS NT
WITH IBM S390 IBM S390 IBM S390
WINDOWS NT MULTI-PROCESSOR SMALL AVERAGE LARGE
PLATFORM SYSTEM/COMPONENT (US$) (US$) (US$) (US$) (US$)
<S> <C> <C> <C> <C> <C>
Basic System $10,000 $25,000 $40,000 $70,000 $100,000
Multiple Server Pack $5,000 $12,000 $20,000 $35,000 $ 50,000
Intelligent Router $5,000 $12,000 $20,000 $35,000 $ 50,000
Enterprise Reporting System $5,000 $12,000 $20,000 $20,000 $ 20,000
</TABLE>
In addition, we will charge an optional annual maintenance fee equal to 15%
of the list price for Dr. Bean 3.0. Payment of the maintenance fee will
entitle users of Dr. Bean 3.0 to receive maintenance releases and upgrade
versions of Dr. Bean, to version 3.x, free of charge.
We market Dr. Bean directly to end users through both our Vancouver and
Virginia offices. However, we expect that the principal distribution channel
for Dr. Bean will be through value added resellers. In July 1999, we
commenced the Sideware Partner Program through which we offers Dr. Bean to
value added resellers. As at the date of this Prospectus, we have signed
reseller agreements with the following companies:
- Science Applications International Corp., of McLean, Virginia.
- DriveAustralia of Crows Nest, Australia
<PAGE>
38
- SoftComp Inc. of Rockville, Maryland
- MIC of Arlington, Virginia
- GTSI of Chantily, Virginia
- SRL, Inc. of Arlington, Virginia
- Pyramid of Nepean, Ontario
- REALXpress of Del Mar, California
Value added resellers are entitled to purchase Dr. Bean at a 30% discount
from our list price. In addition, value added resellers receive 10% of any
annual maintenance fees paid by end users.
We will also market Dr. Bean through Teaming Agreements. Parties to Teaming
Agreements are entitled to market Dr. Bean to potential end users, but do not
act as re-sellers taking title to the product. We have signed a Teaming
Agreement with Windward Consulting of Vienna, Virginia.
Dr. Bean is presently installed and operating with the following companies:
- Science Applications International Corp. (for demonstration
in the e-commerce lab)
- SoftComp
- MIC
- ADI
- GTSI
- BoozAllen & Hamilton
- PriceWaterhouseCoopers
- Sytel
- Oracle Corp. (for testing purposes)
- Web of Care Ltd.
Additional marketing channels which we are presently pursuing include the
following.
(a) In September 1999, Dr. Bean was accepted into the EGO (Enterprise
Growth Opportunity) program of IBM. The EGO program is a marketing
initiative by which IBM will attempt to sell IBM System 390 servers to
IBM customers presently using smaller scale servers. We have agreed to
a 40% discount from list price for purchasers under the EGO program. In
addition, we will pay a commission equal to 15% of the net price paid
by end users to IBM re-sellers selling Dr. Bean under the EGO program.
(b) Dr. Bean has been accepted into the IBM BesTeam Software Program.
Participation in the BesTeam Software Program gives rise to the
following marketing opportunities:
- authorized resale of IBM hardware and software, and authorized
use of IBM logos and marketing material;
- introductions (through BesTeam personnel) to IBM VAR's and
customers;
- attendance at meetings and conferences of IBM small business
and e-business account managers.
<PAGE>
39
(iv) DR. BEAN - COMPETITIVE POSITION
Software to facilitate Internet commerce is an emerging field. Several
companies have already developed products which are competitive with at least
some of the features offered by Dr. Bean. Additional entrants into the field
can be expected and the market for e-business software matures.
We consider the following products to be most directly competitive with Dr.
Bean.
NetAgent (eShare Technologies of Commack NY) offers customer-CSR chat and
many of the other features offered by Dr. Bean. To the best of our knowledge,
NetAgent is compatible only with the Windows NT operating system, and is not
scalable. NetAgent is offered at a base price of US$7,500 for a server unit
plus 3 seats. Additional seats start at US$2,500 per seat, with decreasing
prices for larger installations.
WebCenter (Acuity of Austin TX) offers customer-CSR chat, and some of the
features to be included in Dr. Bean 3.0, including e-mail management and use
of customer profile data. WebCenter excludes some other features of Dr. Bean,
such as session management features and the ability to configure a customised
CSR interface. To the best of our knowledge, WebCenter is compatible only
with the UNIX operating system, and is not scalable. WebCenter costs
approximately US$150,000 - $200,000 for a complete system including a 10 seat
license.
Enterprise Interaction Center (Interactive Intelligence of Indianapolis, IN)
offers features which manage customer communications through a variety of
media, including Internet chat, e-mail, and fax. Interactive Intelligence
also offers a more restrictive product, Interaction Web, which offers
customer-CSR chat. Interaction Web omits certain features of Dr. Bean,
including the ability to configure a customised CSR interface. To the best of
our knowledge, neither product of Interactive Intelligence is scalable, or
allows for flexible data base connectivity. A complete system Enterprise
Interaction Center system costs approximately US$150,000 - $200,000.
Interaction Web, purchased separately, costs approximately US$3,000 -
US$5,000 per seat.
eService (Silknet of Manchester NH) offers features similar to those of
Enterprise Interaction Center, managing a wide range of customer
communications. An eService system costs approximately US$150,000 -
US$200,000. To the best of our knowledge, eService is compatible only with
the Windows NT operating system.
We believe that our competitive position in the marketplace will be enhanced
by the following features of Dr. Bean:
(a) Dr. Bean is a 100% java product, and can thus be made compatible with a
wide variety of operating systems and platforms. We believe that this
will enhance our ability to negotiate
<PAGE>
40
beneficial strategic alliances with leaders in the market for
e-commerce software.
(b) Dr. Bean incorporates highly flexible features, permitting a high
degree of customisation in its interfaces and functions. For example,
Dr. Bean can be connected to all major database software, to utilise
customer information generated by other programs.
Investors are cautioned that:
(a) The market for e-commerce software is, and is expected to remain,
intensely competitive.
(b) The list of competitors set out above is not exhaustive. We are aware
of approximately 30 other companies providing products or services
which are competitive to some degree with Dr. Bean.
(c) The information provided on the competitive products listed above is
accurate to the best of our knowledge. However, we do not have access
to complete or up to date information on those products. Our
descriptions of those products, and their features and pricing, may be
inaccurate, or may become inaccurate as our competitors modify their
products or marketing strategies.
ADDITIONAL PRODUCTS AND SERVICES
Through Advanced Contact Solutions Inc. ("ACS") of Torrance CA, we will offer
out-sourced call response services to users of Dr. Bean. ACS operates a
telephone call centre in the Philippines, which currently provides
out-sourced telephone customer service and support for a variety of clients.
Out-sourced call response services are intended for those users of Dr. Bean
who do not wish to incur the cost of employing CSR's internally. Inquiries to
the Websites of such Dr. Bean users can be routed to the facilities of ACS,
where ACS personnel will respond to the inquiries, performing the same
functions as a CSR employed by the Dr. Bean user.
We plan to offer out-sourced response services to suitable Dr. Bean users on
a fee for service basis. In September 1999, we entered into an agreement with
ACS pursuant to which ACS will act as our sub-contractor, providing call
response services to our customers at specified hourly rates. The Agreement
includes provisions and procedures for specifying the services to be provided
to specific Dr. Bean users, and for payment to value added resellers who
identify and enlist suitable Dr. Bean users. Our plans to offer out-sourced
call response service are contingent on generating significant sales of Dr.
Bean.
We also employ three developers, including our Vice President of Software
Development, in our Research Division. The mandate of the Research Division
is to identify and develop new product ideas. As at the date of this
Prospectus, we have not commenced development of any additional products.
PLAN OF OPERATION
Our principal objectives for the balance of the fiscal year ending December
31, 1999, and for the first half of our next fiscal year, are to:
<PAGE>
41
(a) develop and implement sales and distribution channels for Dr. Bean; and
(b) continue development of enhanced versions of Dr. Bean.
As at October 29, 1999, we employ 25 full time and 6 part time officers and
employees in our Vancouver office and 12 full time employees in our Virginia
office. As at October 29,1999 monthly salary costs are approximately $250,000
per month, exclusive of bonus payments and benefits.
In September 1999, we completed a private placement raising approximately
$6.4 million. In addition, subsequent to June 30, 1999, we have received
approximately $1.8 million from the exercise of share purchase warrants and
incentive stock options. Inclusive of the private placement, warrant and
option proceeds, our cash balances as at October 29, 1999 are approximately
$7.6 million.
Following the private placement completed in September 1999, we plan to hire
substantial additional personnel:
(a) We plan to hire a Chief Financial Officer, to work in the Virginia
office, by December 31, 1999.
(b) We plan to hire at least eight additional technical personnel,
including a Chief Technical Officer, by December 31, 1999. Technical
personnel will be required to continue development of Dr. Bean, and
also to provide support and integration services to Dr. Bean end users.
(c) We plan to hire at least eight additional marketing personnel by
December 31, 1999.
We expect that by December 31, 1999, our monthly payroll costs will be
approximately $500,000 per month, exclusive of bonus payments and benefits.
In addition, we expect to spend approximately $300,000 on the development of
a telephony integration system, pursuant to a contract with Science
Applications International Corporation ("SAIC"). Hiring of additional
personnel, beyond those stated above, will depend on market response to Dr.
Bean and our financial resources.
During the period January - June 1999, our overhead expenses, exclusive of
payroll costs, were approximately $60,000 per month on average. We expect
that our overhead expenses will increase materially during the period up to
June 30, 2000.
(a) Additional personnel will result in additional overhead.
(b) Effective July 1, 1999, we occupied additional office space in
Vancouver.
(c) We expect to open at least two branch sales offices by December 31,
1999.
We expect that by December 31, 1999 our monthly overhead expenses, exclusive
of payroll costs, will be approximately $250,000 on average. Opening of
additional offices, beyond those referred to in (c), will depend on market
response to Dr. Bean and our financial resources. We expect that if market
response to Dr. Bean is favourable, we may open as many as 12 additional
sales offices during the fiscal year
<PAGE>
42
ending December 31, 2000.
Attendance at trade shows has been a major expense item for us in our two
most recently completed fiscal years. For the balance of the fiscal year
ending December 31, 1999 and for the first six months of our next fiscal
year, we expect that it will attend between 8 and 10 trade shows. One of the
shows (Spring Internet World - April 2000) will involve a substantial
display, and is estimated to cost approximately $150,000 - $200,000.
Participation at the other shows will be on a smaller scale, averaging
approximately $8,000 per show. Accordingly, we plan to spend approximately
$275,000 on trade shows during the balance of our current fiscal year and the
first half of our next fiscal year.
We do not plan to incur large capital expenditures prior to June 30, 2000.
Our principal capital expenditures will be in acquiring new computer
equipment, and in fixturing additional leasehold space. We do not expect
capital expenditures prior to June 30, 2000 to exceed $500,000.
Using projected December 31, 1999 payroll and overhead costs of $750,000 per
month as an average, we estimate that our cash requirements for the period
September 1, 1999 to June 30, 2000 will be approximately $6,000,000 for
payroll and overhead, plus approximately $1,075,000 for trade show expenses,
capital expenditures, and the development of a telephony integration system.
Accordingly, we expect that our current cash balances will be sufficient to
sustain our operations to June 30, 2000 without the benefit of substantial
revenue or additional capital funding.
We will continue to seek additional capital funding. We will attempt to raise
an additional $6 million in private placement financing during the fourth
quarter of 1999. In addition, we will attempt to complete a substantial
public offering during the first half of 2000. Additional capital funding
will be used to hire additional marketing and development personnel, and to
carry out an extensive advertising and marketing campaign for Dr. Bean.
Investors are cautioned that our cost estimates are preliminary. Owing to our
brief operating history, we do not have sufficient information to prepare
accurate estimates of the number of additional personnel we will require or
the operating costs we will incur. Our future expenditures will also depend
in part on the financial resources available to us. Actual costs incurred may
differ substantially from the estimates stated above. In addition, there can
be no assurance that we will succeed in raising substantial additional
capital.
<PAGE>
43
INTELLECTUAL PROPERTY
Dr. Bean is protected by copyright. Under the COPYRIGHT ACT (Canada),
copyright protection lasts for a minimum of 50 years. We have not yet taken
steps to register Dr. Bean under any copyright legislation.
We have submitted pending applications to register the trademarks "Sideware"
and "Dr. Bean" under the TRADEMARK ACT of Canada, and also to the United
States Patent and Trademark office. We do not know of any specific facts or
circumstances which would prevent registration of our trademarks in Canada or
the United States, but there can be no assurance that registration of any of
our trademarks will successfully be registered.
Dr. Bean includes the following software which we have licensed from third
parties for use as part of Dr. Bean.
(a) Pursuant to a reseller agreement with Enterprise Soft of Cupertino,
California, we have licensed the "Enterprise Reports" software. The
Enterprise Reports software will be utilised in Dr. Bean 3.0 to
generate data and reports available through the Supervisor Module.
(b) Pursuant to a software license with ICEsoft AS of Bergen, Norway, we
have licensed the ICE Browser Lite software. The Browser Lite software
provides the browser used by the CSR component of Dr. Bean.
We expect to license additional third party software for use in the e-Mail
Response feature of Dr. Bean 3.0. As at the date of this Prospectus, we have
has not decided what software to license.
<PAGE>
44
DESCRIPTION OF PROPERTY
Our head office premises are located in North Vancouver, British Columbia,
Canada. Prior to September 1, 1998, the North Vancouver premises occupied
approximately 7,900 square feet. Effective September 1, 1998, additional
space was added to the premises, increasing the area to 14,867 square feet.
We share the North Vancouver premises with BrainTech, Inc., a software
development company. The term of the lease expires August 31, 2003.
The lease provides for annual minimum rent of approximately $197,271.00
(equal to $13.00 per square foot) for the first year of the lease commencing
September 1, 1998 and ending August 31, 1999. Annual minimum rent under the
lease escalates to $13.25 per square foot in the second year, $13.50 per
square foot in the third year, $13.75 per square foot in the fourth year, and
$14.00 per square foot in the fifth year. In addition, the lease requires
payment of additional costs relating to property taxes and common area
maintenance costs. Those costs are presently approximately $4.10 per square
foot.
We operate our head office premises under a Cost Sharing and Allocation
Agreement with BrainTech, Inc. Prior to October 1999, we shared the costs of
the premises with BrainTech, Inc. equally. In October 1999, we agreed with
BrainTech to re-allocate the premises costs 80% to us and 20% to BrainTech,
Inc. effective from January 1, 1999, as we employ substantially more
personnel, and thus makes greater use of the premises, than BrainTech, Inc.
The landlord under the lease is HOOPP Realty Inc., an arm's length company.
The tenant under the lease is Techwest Management Inc., a company of which
Owen Jones and Grant Sutherland are each directors, and in which Owen Jones
and Grant Sutherland are each one third shareholders. The costs of Techwest
Management Inc. under the lease are passed through to us and BrainTech, Inc.
without any additional charges or mark-up. We are a co-covenantor under the
lease, along with BrainTech, Inc. As a co-covenantor, we are liable to
perform all of the obligations of Techwest Management Inc.
Effective February 1, 1999, through Sideware Corp., we have also leased
premises at 208 Elden Street, Suite 200, Herndon VA 20170, to serve as office
premises for our US operations. The lease of the Virginia office premises
runs for a term of 5 years, to January 31, 2004. We received a two month rent
abatement, so that rent payments for the Virginia office commenced April 1,
1999. The rent commenced at US$11,652 per month, and will escalate by 3% each
year. The landlord of the Virginia premises is Elden Investments, LLC, an
arm's length to company.
Effective July 1, 1999, we have also occupied additional leasehold premises
in Vancouver, B.C. We have entered into:
(a) a lease covering the premises at Suite 1620, 777 Dunsmuir Street (the
"Original Premises") for the period July 1, 1999 to June 30, 2002, and
covering the premises at Suite 1600, 777 Dunsmuir Street (the "Extended
Premises") for the period December 1, 2000 to June 30, 2002; and
(b) an Assignment of Lease covering the Extended Premises for the period
July 1, 1999 to November 30, 2000.
<PAGE>
45
The total space included in the Original and Extended Premises is 8,325
square feet. The landlord of the Original and Extended Premises is Pacific
Center Leaseholds Limited, an arm's length company.
The tenant under the lease described in (a) is Techwest Management Inc. We
are an indemnifier under the lease, along with BrainTech, Inc. As an
indemnifier, we are liable to perform all of the obligations of the tenant
under the lease, including the payment of rent.
The assignor under the assignment described in (b) is SJM Management Ltd., a
private management company which holds a lease in respect of the Extended
Premises covering the period July 1, 1999 to November 30, 2000. Grant
Sutherland holds a one third beneficial interest in SJM Management Ltd. Prior
to July 1, 1999, the Extended Premises were occupied by the law firm
Sutherland Johnston MacLean, in which Mr. Sutherland was a partner. Under the
assignment, SJM Management Ltd. assigned its interest in respect of the
Extended Premises to Techwest Management Inc., which agreed to perform all of
the obligations of the tenant under the lease. We are an indemnifier under
the assignment, along with BrainTech, Inc. As an indemnifier, we are liable
to perform all of the obligations of the assignee, including the payment of
rent.
Under the lease described in (a), the rent payable with respect to the
Original Premises for the period July 1, 1999 to June 30, 2002 is $64,498.50
per annum ($16.50 per square foot) payable in equal monthly installments of
$5,374.88. The rent payable with respect to the Extended Premises for the
period December 1, 2000 to June 30, 2002 is $72,864.00 per annum ($16.50 per
square foot) payable in equal monthly installments of $6,072.00. In addition
to rent, monthly charges are payable for maintenance fees, utilities and
taxes. We anticipate that the additional monthly charges will be
approximately $5,000, based on initial invoices submitted by Pacific Centre
Leaseholds Limited.
Under the assignment described in (b), the rent payable with respect to the
Extended Premises for the period July 1, 1999 to November 30, 2000 is $64,032
per annum ($14.50 per square feet) payable in equal monthly installments of
$5,336.00. In addition, monthly charges of approximately $5,000 per month are
payable for maintenance fees, utilities, and taxes.
Sutherland Johnston, a law firm in which Grant Sutherland is a partner, will
continue to occupy a portion of the Extended Premises. BrainTech, Inc. and
Sutherland Johnston will be responsible for a portion of the costs relating
to the Original and Extended Premises depending on the relative use of those
premises by those parties. We expect that for the foreseeable future, we will
use the Original Premises exclusively, and will bear all of the costs
relating to the Original Premises. We also expect that for the foreseeable
future, we will bear approximately 45% of the costs relating to the Extended
Premises.
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46
LEGAL PROCEEDINGS
We are party to several court proceedings.
1. PROCEEDINGS INVOLVING FORMER MANAGEMENT
(I) EVERGREEN V. KOSTIUK ET AL; ACTION NO. C952721 IN THE BRITISH
COLUMBIA SUPREME COURT
On May 11, 1995, we commenced action against Lawrence Kostiuk, certain other
former directors of the company, and the former auditors and solicitors of
the company. The principal relief which we are claiming includes:
(a) damages for negligence and breach of fiduciary duty, and an
accounting of profits in respect of various stock transactions
between us and Mr. Kostiuk;
(b) an injunction restraining sale of a computer program known as
"E-Glue" by The Plant Software Inc., a company controlled by
the family of Mr. Kostiuk; and
(c) an order setting aside a general security agreement executed
by us in favor of Mr. Kostiuk in July 1994.
A counterclaim has been filed by 484117 B.C. Ltd. (as assignee of Mr.
Kostiuk) seeking judgment against us in the approximate amount of $1.5
million, and seeking to enforce the general security agreement. Another
counterclaim has been filed by Wolrige Mahon, our former auditors, claiming
approximately $58,000 for accounting and audit services.
On May 7, 1997, a receiving order was made against Lawrence Kostiuk pursuant
to the BANKRUPTCY AND INSOLVENCY Act. In November 1997, we were granted leave
to continue with Action C952721 against Lawrence Kostiuk. By agreement dated
September 8, 1998, we purchased all of the right, title and interest of
Lawrence Kostiuk and the Trustee in Bankruptcy of Lawrence Kostiuk in shares
of 484117 B.C. Ltd. On August 31, 1999, we filed an application to recover
title to 100% of the issued and outstanding shares of 484117 B.C. Ltd.
pursuant to the September 8, 1998 assignment. A decision on that application
is pending. We believe that if successful, the application will likely result
in the effective elimination of the counterclaim of 484117 B.C. Ltd. against
us.
We have set a trial date of April 2, 2001 for this action. We are of the view
that we have a strong case against Mr. Kostiuk, and against the other
defendants we have sued. We are also of the view that we will be successful
in resisting the counterclaims filed against us.
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47
(II) KOWALEWICH ET AL V. EVERGREEN ET AL; ACTION NO. C963748 IN THE
BRITISH COLUMBIA SUPREME COURT
On June 27, 1996, Len Kowalewich, Donald Mavinic, Klaus Nicolaus and Dale
Harvey commenced action against us and certain of our present directors and
employees claiming damages for libel. We and three of our directors and
employees have filed a counterclaim against the plaintiffs and Lawrence
Kostiuk, Scott Kostiuk and John Kostiuk as defendants by counterclaim. We
believe that there is no material risk of a judgment against us. The outcome
of our counterclaim is uncertain.
(III) KOWALEWICH V. EVERGREEN; ACTION NO. C963717 IN THE BRITISH
COLUMBIA SUPREME COURT
On June 26, 1996, Len Kowalewich commenced action against us to recover
$276,000 alleged to be owing by us for unpaid consulting fees (approximately
$96,000) and funds loaned to or advanced on our behalf (approximately
$180,000). We have filed a defense and counterclaim against the plaintiff and
Lawrence Kostiuk, Scott Kostiuk, John Kostiuk, Carolyn Kostiuk, Donald
Mavinic, Dale Harvey, Len Kowalewich, Klaus Nicolaus, The Plant Software Inc.
and certain shareholders and affiliates of The Plant Software Inc. as
defendants by counterclaim. We believe that we will be successful in
defending the claim of Mr. Kowalewich. The outcome of our counterclaim is
uncertain.
(IV) KOWALEWICH ET AL V. EVERGREEN; ACTION NO. A963030 IN THE
BRITISH COLUMBIA SUPREME COURT
On September 13, 1996, Len Kowalewich and 6 other petitioners filed an
application for leave to commence derivative proceedings against our present
directors. We believe the petition is without merit. By the nature of the
petition it cannot result in any form of pecuniary judgment against us.
(V) 9123 INVESTMENTS LTD. V. THE PLANT SOFTWARE INC. ET AL;
B.C.S.C. ACTION NO. C983489 IN THE BRITISH COLUMBIA SUPREME COURT
By Agreement dated November 18, 1998, 9123 Investments Ltd. has purchased the
rights of Canadian Western Bank in a judgment pronounced October 15, 1997
against The Plant Software Inc. and three of its shareholders, all members of
the family of Lawrence Kostiuk. We have calculated the amount owing under the
judgment by The Plant Software Inc. as $311,848.69 as at December 30, 1998.
We do not have precise calculations of the amounts owing by the other
judgment debtors, who are liable for portions only of the amount owing by The
Plant Software Inc. In addition, we have purchased the rights under a general
security agreement held by Canadian Western Bank securing the indebtedness of
The Plant Software Inc. The general security agreement covers all of the
assets and undertaking of The Plant Software Inc.
By decision dated March 9, 1999, the British Columbia Supreme Court upheld
the validity of the assignment, and ordered that 9123 Investments Ltd. be
substituted as Petitioner in Action No. C983489 in place of Canadian Western
Bank.
In consideration for the assignment, 9123 Investments Ltd. paid $20,000 to
Canadian Western Bank. In addition, we agreed to dismiss court proceedings in
which we had sought approximately $200,000 in
<PAGE>
48
damages from Canadian Western Bank.
The amount of any recovery under the judgment, and the value of any assets of
The Plant Software Inc. which may secure its indebtedness, are uncertain.
(VI) BANKRUPTCY OF LAWRENCE KOSTIUK; ACTION NO. 173352 VA 97 IN THE
BRITISH COLUMBIA SUPREME COURT
Pursuant to Agreements dated September 8, 1998, we have purchased from the
trustee in bankruptcy of Lawrence Kostiuk all of the right, title, and
interest of Lawrence Kostiuk and the trustee in The Plant Software Inc. and
484117 B.C. Ltd. No shares in either company are registered in the name of
Lawrence Kostiuk, with the result that any recovery of those assets requires
legal proceedings.
On October 15, 1998, we filed an application with the British Columbia
Supreme Court to recover title to 6,000,000 shares in The Plant Software Inc.
presently registered in the name of a company called "La Tache-DRC Inc." That
application has not yet come on for hearing.
On January 11, 1999, Lawrence Kostiuk filed an application with the British
Columbia Supreme Court seeking to set aside our transactions with the trustee
in bankruptcy. That application was dismissed on March 9, 1999.
On August 31, 1999, we filed an application to recover 100% of the issued and
outstanding shares in 484117 B.C. Ltd. A decision on that application is
pending.
In consideration for the assignments, we paid $20,000 to the Trustee in
Bankruptcy of the estate of Lawrence S. Kostiuk.
(VII) THE PLANT SOFTWARE INC. V. 9123 INVESTMENTS LTD.; ACTION A990400
IN THE SUPREME COURT OF BRITISH COLUMBIA
On January 11, 1999, The Plant Software Inc. filed an application for an
injunction to restrain 9123 Investments Ltd. from enforcing the general
security agreement referred to in (v), above. On March 9, 1999, the Petition
of The Plant Software Inc. was dismissed.
(VIII) THE PLANT SOFTWARE INC. ET AL V. SIDEWARE SYSTEMS INC. ET AL;
ACTION NO. C990136 IN THE SUPREME COURT OF BRITISH COLUMBIA
On January 11, 1999, The Plant Software Inc., Carolyn Kostiuk, John Kostiuk,
Scott Kostiuk, and Lawrence Kostiuk commenced legal proceedings claiming
damages for abuse of process in the purchase of the rights and interests
described in (v) and (vi), above. We believe that the action is without merit
and that there is no material risk of an adverse judgment.
2. CLAIMS INVOLVING THIRD PARTIES
We are also party to the following court actions not involving former
management.
<PAGE>
49
(I) BARRIGAR & MOSS V. EVERGREEN; ACTION NO. C961984 IN THE
BRITISH COLUMBIA SUPREME COURT
On April 1, 1996, a Vancouver law firm sued us for $12,000 in legal fees. We
are defending on the grounds, inter alia, that the account is excessive.
(II) NIKIFORUK V. EVERGREEN; ACTION NO. C943435 IN THE BRITISH COLUMBIA
SUPREME COURT
In July 1994, Michael Nikiforuk commenced action against both us and Lawrence
Kostiuk. As against us, the Plaintiff seeks damages for breach of a stock
option agreement. No steps have been taken in the proceedings in over a year.
(III) RBS MANAGEMENT V. EVERGREEN; ACTION NO. J950168 IN THE BRITISH
COLUMBIA SUPREME COURT
In March 1995, our former solicitors commenced proceedings to recover
approximately $37,000 alleged to be owing in legal fees. A taxation hearing
set in May of 1995 was adjourned generally by consent. No steps have been
taken in the proceeding in over a year.
<PAGE>
50
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information, as of October 29, 1999,
with respect to our directors, executive officers and key employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Owen L.J. Jones 48 President, Chief Executive Officer and Director
W. Grant Sutherland 53 Chairman of the Board of Directors
James L. Speros 40 Director and President of Sideware Corp
Jay H. Nussbaum 55 Director
Peter Kozicki 66 Director
Edward A. White 54 Director
Tim Reilly 33 Vice President of Software Development
John Wedel 38 General Manager of e-business Solutions
Marie Russell 37 Vice President Channel Sales and Marketing
Michael Peacock 38 Vice President Federal Sales and Marketing
</TABLE>
OWEN L.J. JONES. Director, President, Chief Executive Officer. Mr. Jones been
a director since May 3, 1995 and has been our President and Chief Executive
Officer since July 1995. Since December 1993, Mr. Jones has also been a
director and the President and Chief Executive Officer of BrainTech, Inc., a
software development company whose shares trade on the NASDAQ OTC-Bulletin
Board. Prior to becoming a director of the BrainTech, Inc., Mr. Jones was
employed as the V.P. Sales, Marketing and Technology of the Company.
W. GRANT SUTHERLAND. Director and Chairman of the Board. Mr. Sutherland has
been a director since May 1993. Since May 3, 1995 Mr. Sutherland has held the
position of Chairman of the Board. Since December 1995, Mr. Sutherland has
also been a director and the Chairman of the Board of BrainTech, Inc. Mr.
Sutherland is a licensed lawyer in the Province of British Columbia, and has
been engaged in the private practice of law for 26 years, currently as a
partner in the Vancouver law firm Sutherland Johnston.
JAMES L. SPEROS. Director and President of Sideware Corp. Mr. Speros was
appointed a director, and the President and Chief Operating Officer of
Sideware Corp., on August 5, 1998. Since February 28, 1997, Mr. Speros has
served as President and Chief Executive Officer of Exploration Mirandor Inc.,
a publicly held mining exploration company. Between June 1993 and April 1997,
Mr. Speros was the President and owner of two professional sports franchises,
the Baltimore Stallions and Montreal Alouettes of the Canadian Football
League. From 1994 to 1997, Mr. Speros was a member of the Board of Governors
of the Canadian Football League, and acted as Vice Chairman of the Board in
1995 and 1996.
JAY H. NUSSBAUM. Director. Mr. Nussbaum was appointed a director on June 14,
1999. Mr. Nussbaum is the Executive Vice President of Oracle Service
Industries and a member of the Executive Committee
<PAGE>
51
of Oracle. Mr. Nussbaum joined Oracle after a 24-year career with Xerox
Corp., that culminated with his position as President, Integrated Systems
Operations. While at Xerox, Mr. Nussbaum was responsible for integration and
consulting services in commercial and federal government markets. Mr.
Nussbaum joined Oracle in 1992 as the Senior Vice President and General
Manager of what was then Oracle Federal. Mr. Nussbaum received a bachelor's
degree in business from the University of Maryland. He is a member of the
university's Chancellor's Advisory Board and also serves on the advisory
board of James Madison University. Mr. Nussbaum is on the board of directors
of the Armed Forces Communications and Electronics Association and is active
in several other business and charitable organizations in the Washington area.
PETER KOZICKI. Director. Mr. Kozicki was elected a director on May 3, 1995.
Mr. Kozicki is a consulting engineer, who has been engaged in private
practice in that field for over 12 years. He obtained his B.Sc. degree in
Civil Engineering from the University of Saskatchewan and a M.Sc. degree in
Soil Mechanics from the University of Alberta. Mr. Kozicki is President of
PKM Consultants Ltd., a private company providing consulting engineering
services in North America and overseas. PKM Consultants Ltd. specializes in
the installation of deep foundations and vertical barriers for containment of
hazardous wastes.
EDWARD A. WHITE. Director. Mr. White was appointed a director on October 14,
1995. Mr. White is a member of the British Columbia Institute of Chartered
Accountants, and has practiced as a self-employed chartered accountant for
over 20 years. Mr. White has been a director and officer of Oro Bravo
Resources Ltd. since February 1987, and a director of Liquid Gold Resources
Inc. since March 1993. Mr. White also served as a director of American
Woolastonite Mining Corp. from January 1989 to May 1995.
TIM REILLY. Vice President of Software Development. Mr. Reilly obtained a
Bachelor's Degree in Computer Science from the University of Western Ontario
in 1988. From January 1989, to December 1993, Mr. Reilly worked for SACDA
Inc., a subsidiary of Honeywell Canada Inc., in various positions relating to
applications programming and analysis. From March 1993 to September 1994, Mr.
Reilly worked as a developer with the IBM Research Laboratory in Don Mills,
Ontario. From November 1994 to July 1995, Mr. Reilly worked for SumMetrix
System Integration as a Software Engineer. Mr. Reilly joined us in September
1995 as a Senior Programmer and was promoted to the position of Manager of
Product Development in June 1996, and then to the position of Vice President,
Product Development, in April 1999.
JOHN WEDEL. General Manager of e-business Solutions. Mr. Wedel joined us in
December 1997. From December 1992 to December 1995, Mr. Wedel worked for Exan
Research and Development as a senior developer. From December 1995 to
December 1997, Mr. Wedel worked for TransAct Systems Inc. as a Senior
Technologist. Mr. Wedel joined us in December 1997. Mr. Wedel holds a
Bachelor's Degree in Computer Science from Simon Fraser University
MARIE RUSSELL. Vice President Channel Sales and Marketing. Ms. Russell joined
us in May 1999. From August 1993 to April 1999, Ms. Russell worked for
Newbridge Networks as an Assistant Vice President Channel Marketing. Ms.
Russell holds a Bachelor's Degree in Science - Marketing from Pennsylvania
State University and a Master's Degree in Business Administration from
<PAGE>
52
George Washington University.
MICHAEL PEACOCK. Vice President Federal Sales and Marketing. Mr. Peacock
joined us in April 1999. From February 1991 to April 1998, Mr. Peacock worked
as an account manager for Litton / PRC Inc. From April 1998 to March 1999,
Mr. Peacock worked as a Strategic Account Manager for Ascent Communications.
Mr. Peacock holds a Bachelor's Degree in Arts from the University of
California at Bakersfield.
All of our officers work for us on a full-time basis. All directors receive
reimbursement of reasonable out-of-pocket expenses incurred in connection
with meetings of our Board of Directors. Under our articles, our directors
are elected at each annual general meeting.
EXECUTIVE COMPENSATION
Apart from incentive stock options, disclosed below, we do not presently
compensate our directors for services provided as directors. We provide
compensation to our directors, who are also officers, for services rendered
as officers.
We provide the following compensation to our officers:
OWEN JONES. Effective June 1, 1998, Mr. Jones receives payments totaling
$10,000 per month. We currently pay 80% of those monthly payments, with
BrainTech, Inc. paying the remaining 20%. Prior to June 1, 1998, Mr. Jones'
monthly payments (then shared equally between us and BrainTech, Inc.) were
$5,000 per month. In April 1998 and April 1999, we paid Mr. Jones bonus
payments of $100,000, to bring Mr. Jones' annual compensation in line with
amounts which our directors considered to be appropriate for a chief executive
officer of the Company. Mr. Jones also holds incentive stock options to
acquire 678,000 shares. Mr. Jones receives no other compensation from us or
any of our subsidiaries.
GRANT SUTHERLAND. Effective June 1, 1998, Mr. Sutherland receives payments
totaling $10,000 per month. We currently pay 80% of those monthly payments,
with BrainTech, Inc. paying the remaining 20%. Prior to June 1, 1998, we paid
Mr. Sutherland $5,000 per month. Mr. Sutherland also holds incentive stock
options to acquire 648,000 shares (inclusive of options to acquire 250,000
shares in respect of which an option agreement has been authorized, but not
yet executed - See "Incentive Stock Options"). In September 1999 Mr.
Sutherland exercised incentive stock options to acquire 250,000 shares. Mr.
Sutherland receives no other compensation from us or any of our subsidiaries.
JAMES L. SPEROS. Beginning in August 1998, we paid Mr. Speros a salary of
US$8,000 per month from us. Effective April 1, 1999, we increased Mr. Speros'
salary to US$11,500 per month. Effective November 1, 1999 we increased Mr.
Speros' salary further to US$15,000 per month. In October 1999, we paid Mr.
Speros a bonus in the amount of US$30,000. In addition, Mr. Speros holds
incentive stock options to acquire 375,000 shares. Mr. Speros receives no
other compensation from us or any of our subsidiaries.
TIM REILLY. Mr. Reilly currently receives a salary of $12,500 per month. In
addition, Mr. Reilly holds incentive stock options to acquire 260,000 shares
of the company. During the eight month period ended December 31, 1998, Mr.
Reilly received salary payments totaling $40,000 and bonus payments totaling
<PAGE>
53
$67,500. Mr. Reilly receives no other compensation from us or any of our
subsidiaries.
JOHN WEDEL. Mr. Wedel currently receives a salary of $12,500 per month. In
addition, Mr. Wedel holds incentive stock options to acquire 133,000 shares.
Mr. Wedel receives no other compensation from us or any of our subsidiaries.
MICHAEL PEACOCK. Mr. Peacock currently receives a salary of US$8,333 per
month and received a bonus of US$5,000 in August 1999. In addition, Mr.
Peacock holds incentive stock options to acquire 150,000 shares. Mr. Peacock
receives no other compensation from us or any of our subsidiaries.
MARIE RUSSELL. Ms. Russell currently receives a salary of US$10,000 per month
and received a bonus of US$5,000 in September 1999. In addition, Ms. Russell
holds incentive stock options to acquire 150,000 shares. Ms. Russell
receives no other compensation from us or any of our subsidiaries.
The aggregate amount of cash remuneration which we paid to our directors and
officers as a group was approximately $247,500 for the eight month period
ending December 31, 1998.
INCENTIVE STOCK OPTIONS
From time to time, we grant incentive stock options to directors, officers
and employees. The following table sets forth the incentive stock options
held by our directors and officers as at October 29, 1999.
<TABLE>
<CAPTION>
NAME OF OPTIONEE NUMBER OF SHARES EXERCISE PRICE EXPIRY DATE
<S> <C> <C> <C>
Owen L.J. Jones 300,000 $0.50 05/01/01
123,000 $0.36 02/12/02
75,000 $0.70 12/16/02
55,000 $0.36 07/06/03
125,000 $2.33 06/17/04
Grant Sutherland 198,000 $0.50 05/01/01
75,000 $0.70 12/16/02
250,000(1) $2.66 10/04/04
125,000 $2.33 06/17/04
Peter Kozicki 50,000 $0.50 05/01/01
25,000 $0.70 12/16/02
25,000 $2.33 06/17/94
<PAGE>
54
Edward White 100,000 $0.50 05/01/01
25,000 $0.70 12/16/02
25,000 $2.33 06/17/04
Tim Reilly 90,000 $0.70 12/16/02
150,000 $1.14 04/14/04
20,000 $2.33 06/17/04
James Speros 250,000 $0.36 07/06/03
125,000 $2.33 06/17/04
John Wedel 83,000 $1.14 04/14/04
50,000 $2.33 06/17/04
Michael Peacock 100,000 $1.14 04/14/04
50,000 $2.33 06/17/04
Marie Russell 100,000 $1.14 04/14/04
50,000 $2.33 06/17/04
</TABLE>
(1) Options authorized, but option agreement not yet executed as at October
29, 1999.
The total number of incentive stock options held by our directors and
officers as at October 29, 1999 is 2,644,000. Of the 260,000 stock options
held by Mr. Reilly, 190,000 are exercisable within 60 days of October 29,
1999. Of the 133,000 stock options held by Mr. Wedel, 83,000 are exercisable
within 60 days of October 29, 1999. Of the 150,000 options held by Marie
Russell, none are exercisable within 60 days of October 29, 1999. Of the
150,000 options held by Michael Peacock, 25,000 are exercisable within 60
days of October 29, 1999. All other options held by officers and directors
are exercisable within 60 days of the October 29,1999.
Subsequent to December 31, 1997, the following directors and officers have
exercised incentive stock options:
<TABLE>
<S> <C>
Tim Reilly 41,000 options
John Wedel 44,000 options (subsequent to July 1, 1999)
Grant Sutherland 250,000 options
</TABLE>
The figures stated above do not include incentive stock options held by our
Secretary, who does not exercise policy making functions for the Company.
<PAGE>
55
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our outstanding common shares as of October 29, 1999 by (i) each
of the directors and Named Executive Officers; (ii) each other person whom
we know to own beneficially more than 5% of the common zhares; and (iii) all
of our directors and executive officers as a group.
<TABLE>
<CAPTION>
TITLE OF AMOUNT PERCENT
CLASS IDENTITY OF PERSON OR GROUP OWNED OWNED(1)
<S> <C> <C> <C>
Common Owen Jones 5,059,800(2) 9.6%
Common Grant Sutherland 3,684,450(3) 7.2%
Common Peter Kozicki 941,400(4) 1.9%
Common Edward White 331,780(5) 0.6%
Common Tim Reilly 190,000(6) 0.4%
Common James Speros 3,573,600(7) 6.7%
Common John Wedel 76,000(8) 0.2%
Common Michael Peacock 689,500(9) 1.4%
Common Marie Russell 130,000(10) 0.3%
Common All Directors and Officers 14,683,530(11) 24.1%
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of October 29, 1999 are
deemed outstanding for computing the percentage of the person or group
of persons holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated in the footnotes to this table and pursuant to applicable
community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned.
(2) Includes shares issuable under the following securities:
- 678,000 shares issuable under incentive stock options exercisable
within 60 days of October 29, 1999; and
- 1,275,000 shares issuable under outstanding share purchase warrants
exercisable within 60 days of October 29, 1999.
(3) Includes shares issuable under the following securities:
- 648,000 shares issuable under incentive stock options exercisable
within 60 days of October 29, 1999; and
- 1,327,250 shares issuable under outstanding share purchase warrants
exercisable within 60 days of October 29, 1999.
(4) Includes shares issuable under the following securities:
- 100,000 shares issuable under incentive stock options exercisable
within 60 days of October 29, 1999; and
- 55,000 shares issuable under outstanding share purchase warrants
exercisable within 60 days of October 29, 1999.
(5) Includes shares issuable under the following securities:
- 150,000 shares issuable under incentive stock options exercisable
within 60 days of October 29, 1999.
(6) Includes shares issuable under the following securities:
- 190,000 shares issuable under incentive stock options exercisable
within 60 days of October 29, 1999.
(7) Includes shares issuable under the following securities:
- 375,000 shares issuable under incentive stock options exercisable
within 60 days of October 29, 1999; and
- 1,600,000 shares issuable under outstanding share purchase warrants
exercisable within 60 days of October 29, 1999.
(8) Includes shares issuable under the following securities:
- 76,000 shares issuable under incentive stock options exercisable
within 60 days of October 29, 1999.
(9) Includes shares issuable under the following securities:
- 25,000 shares issuable under incentive stock options exercisable
within 60 days of October 29, 1999; and
- 312,500 shares issuable under outstanding share purchase warrants
exercisable within 60 days of October 29, 1999.
(10) Includes shares issuable under the following securities:
<PAGE>
56
- 62,500 shares issuable under outstanding share purchase warrants
exercisable within 60 days of October 29, 1999.
(11) Includes shares issuable under the following securities:
- 2,217,000 shares issuable under incentive stock options exercisable
within 60 days of October 29, 1999; and
- 4,632,250 shares issuable under outstanding share purchase warrants
exercisable within 60 days of October 29, 1999.
The figures stated in notes (2), (3), and (11) above do not include share
purchase warrants which expired November 27, 1998, and in respect of which we
have sought regulatory approval of an extension. The figures stated include
securities owned by directors or officers through wholly owned holding
corporations. The figures stated above do not include securities owned by our
corporate Secretary, who does not exercise policy making functions for the
company.
We are unaware of any person who owns 10% or more of our voting securities.
We are unaware of any arrangements, the operation of which may at a
subsequent date result in a change of corporate control.
CERTAIN TRANSACTIONS
Within the last three fiscal years, we have entered into the transactions set
out below in which current directors or officers of the Company were
interested.
In October 1996, we entered into an agreement with BrainTech, Inc. effective
November 1, 1995 pursuant to which certain costs associated with our premises
and operations were shared with BrainTech, Inc. The costs subject to the
cost-sharing agreement included:
- - costs of the North Vancouver premises which we share with BrainTech, Inc.;
- - personnel costs (billed through Techwest Management Ltd. - see below)
including, inter alia, the salary costs of our President and accounting
personnel; and
- - miscellaneous office charges, such as office supplies and telephone and
fax charges.
Prior to October 1999, we shared the common costs equally with BrainTech,
Inc.. By a Cost Sharing and Allocation Agreement executed in October 1999, we
agreed with BrainTech, Inc. to re-allocate the common costs 80% to us and 20%
to BrainTech, Inc. effective from January 1, 1999. The reason for the
reallocation of costs was the substantially greater level of our business,
and our corresponding greater use of, the common premises and personnel.
BrainTech, Inc. is a software development company whose shares trade on the
OTC Bulletin Board. The directors of BrainTech, Inc. are Owen Jones, Grant
Sutherland and James Speros.
Shared costs under the Cost Sharing and Allocation Agreement are administered
by Techwest Management Ltd., a private management company. In addition,
services of certain of our personnel are provided to us through Techwest
Management Ltd. Techwest Management Ltd. is a private management company in
which Owen Jones and Grant Sutherland each hold a one third interest. The
personnel whose services are provided through Techwest Management Ltd.
include, INTER ALIA, Owen Jones and our accounting personnel. Effective June
1, 1998, Mr. Jones receives an annual salary of $120,000
<PAGE>
57
from Techwest Management Ltd. The cost of Mr. Jones' salary is currently
borne 80% by us and 20% by BrainTech, Inc.
From time to time, either our payments us or those BrainTech, Inc. exceed the
proportionate share required under the cost sharing agreement, giving rise to
indebtedness as between us, BrainTech, Inc. and Techwest Management Ltd.
Accordingly, the payments are reconciled and adjusted from time to time as
required. As at June 30, 1999, BrainTech, Inc. was indebted to us (either
directly or indirectly through Techwest Management Inc.) in the amount of
approximately $269,647. The indebtedness arose as a result of BrainTech, Inc.
not paying its proportionate share of the common operating costs during time
periods when BrainTech Inc. did not have cash available to do so.
Techwest Management Ltd. passes shared costs (including personnel costs)
through to us and BrainTech, Inc. at cost, without any markup. Computer
equipment for all three companies is generally purchased by us, owing to
favorable equipment pricing available to us, and is currently being passed on
at cost to BrainTech, Inc. or Techwest Management Inc.
We have entered into a Software Development and License Agreement dated
September 20, 1999 with BrainTech, Inc. Under the Software Development and
License Agreement, BrainTech, Inc. will develop a program named the
"Wizmaster", which will enable the user, through a user friendly
drop-and-drag procedure, to construct customized knowledge trees. We plan to
incorporate Wizmaster into Dr. Bean as one of the "AutoService" features of
Dr. Bean 3.0. Under the Software Development and License Agreement, Sideware
will pay for the cost of developing Wizmaster on a cost plus 10% basis.
Sideware will acquire, at no further charge, a perpetual worldwide license to
use Wizmaster as part of Dr. Bean. BrainTech, Inc. is prohibited from
licensing Wizmaster to any other software developer (but not to systems
integrators) for a period of one year starting from the date Wizmaster
becomes generally available to purchasers of Dr. Bean.
We have acquired accounting services from Edward White, a member of our board
of directors who practices as a chartered accountant. Prior to November 1996,
Mr. White rendered invoices to us totaling $41,195. In September 1996 we
issued 164,780 shares to Mr. White in satisfaction of those invoices. For the
period commencing November 1, 1996 and ending November 30, 1997, we paid Mr.
White $1,000 per month for accounting and financial services.
In September 1996, we issued 463,600 shares to Grant Sutherland, a member of
our board of directors, to reimburse Mr. Sutherland for $115,900.00 in out of
pocket expenses incurred on our behalf.
In September 1996, we issued 300,000 shares to Owen Jones, a member of our
board of directors and our President, to settle claims of Mr. Jones for
outstanding severance pay and for breach of a stock option agreement. The
claims related to Mr. Jones' previous employment with the Company (under
previous management) which terminated in January of 1994.
We have acquired legal services from Dale W. Wilcox, a Law Corporation, a law
firm with which Paul Hildebrand, our corporate Secretary and general counsel,
is associated. Since May 3, 1995 Dale W. Wilcox, a Law Corporation has
received payments totaling $542,122 in fees (exclusive of taxes and
disbursements) for legal services.
<PAGE>
58
We have granted the following incentive stock options to Mr. Hildebrand:
(a) options to purchase 100,000 shares at $0.50 per share expiring
May 1, 2001;
(b) options to purchase 75,000 shares at $0.70 per share expiring
December 16, 2002;
(c) options to purchase 55,000 shares at $1.35 per share expiring
April 29, 2004; and
(d) options to purchase 100,000 shares at $2.33 per share expiring
June 17, 2004.
In addition, Mr. Hildebrand and Alder Enterprises Ltd., a private company in
which Mr. Hildebrand owns a 45% interest, have participated in special
warrant private placements of our securities. See "RECENT SALES OF
UNREGISTERED SECURITIES." As at October 29, 1999 Mr. Hildebrand owns 415,000
common shares (including 125,000 performance shares) and 123,000 share
purchase warrants. As at October 29, 1999 Alder Enterprises Ltd. owns 545,250
shares and 305,250 share purchase warrants.
We have acquired legal services from the law firm Sutherland Johnston, of
which Grant Sutherland is a partner. The amount of such legal services prior
to December 31, 1998 was not material. Subsequent to December 31, 1998, we
have paid Sutherland Johnston $17,340.00 in legal fees (exclusive of taxes
and disbursements).
Forth & Company of Vancouver, British Columbia, acts as our Canadian
securities counsel. As at October 29, 1999, Clive Forth, the principal of
Forth & Company, owns 25,000 common shares.
Effective October 31, 1998, we purchased an interest in the proceeds of a
judgment in favor of BrainTech, Inc. in the amount of $406,390 pronounced
April 2, 1998 in British Columbia Supreme Court Action No. C972736. We paid
$200,000 on account of the purchase price, which was subject to adjustment
depending on the benefit ultimately received by us pursuant to the judgment.
On March 18, 1999, the British Columbia Court of Appeal allowed an appeal
from the judgment. As a result, BrainTech, Inc. repaid to us the $200,000 in
issue.
In November 1995, we entered into a License Agreement with NetMedia Systems
Inc., a private company in which Owen Jones and Grant Sutherland hold
interests, and a Joint Venture Agreement with NetMedia Systems Inc. and
BrainTech, Inc. None of the business contemplated by the agreements
proceeded, with the result that the agreements were terminated in October
1999.
Corporate insiders also hold incentive stock options and have acquired
shares, special warrants, and share purchase warrants in numerous private
placements. See "MANAGEMENT - Executive Compensation" "RECENT SALES OF
UNREGISTERED SECURITIES" and "DESCRIPTION OF CAPITAL STOCK - Options to
Purchase Securities from the Company."
<PAGE>
59
DESCRIPTION OF CAPITAL STOCK
SHARE CAPITAL
COMMON SHARES
The Shares and Warrant Shares are common shares without par value in our
capital stock. The holders of the common shares are entitled to receive
notice of, attend and vote at all meetings of our members. The common shares
carry one vote per share and have no par value. The holders of the common
shares are entitled to receive dividends if, as and when declared by our
board of directors. The common shares carry no pre-emptive rights, conversion
rights, redemption provisions, sinking fund provisions or liability to
further calls or to assessment. There are no restrictions on the repurchase
or redemption of the common shares by the Company except under applicable
securities laws and to the extent that any such repurchase or redemption
would render the Company insolvent.
Common shares without par value are the only class of shares authorised under
our memorandum of incorporation. As at October 29, 1999, we have 48,026,195
shares issued and outstanding.
OPTIONS TO PURCHASE SECURITIES FROM THE COMPANY
INCENTIVE STOCK OPTIONS
From time to time we grant incentive stock options to directors, officers and
employees. As at October 29, 1999, we have 3,667,000 incentive stock options
outstanding as follows:
(a) options to acquire 763,000 shares at $0.50 per share expiring
May 1, 2001;
(b) options to acquire 123,000 shares at $0.36 per share expiring
February 12, 2002;
(c) options to acquire 30,000 shares at $0.82 per share expiring
March 26, 2002;
(d) options to acquire 505,000 shares at $0.70 per share expiring
December 16, 2002;
(e) options to acquire 365,000 shares at $0.36 per share expiring
July 6, 2003;
(f) options to acquire 623,500 shares at $1.14 per share expiring
April 14, 2004;
(g) options to acquire 177,500 shares at $1.35 per share expiring
April 29, 2004; and
(h) options to acquire 1,080,000 shares at $2.33 per share expiring
June 17, 2004.
On October 25, 1999, we received approval from the VSE to issue 890,000
additional stock options to directors, officers, consultants, and employees.
As at October 29, 1999, option agreements have not been executed. Grant
Sutherland, as to 250,000 options, is one of the intended recipients of the
options.
We have also determined to issue an additional 250,000 incentive stock
options to directors, officers, consultants, and employees. As at October 29,
1999, we have not received VSE approval for the intended options.
SHARE PURCHASE WARRANTS
As at October 29, 1999 we have 10,703,153 outstanding share purchase warrants
as follows:
<PAGE>
60
(a) 600,000 share purchase warrants permit the holder thereof to purchase
one additional share at a price of $0.28 per share up to July 22, 1999
or a price of $0.32 per share up to July 22, 2000.
(b) 90,000 share purchase warrants permit the holder thereof to purchase
one additional share at a price of $0.32 per share up to October 31,
1999 or a price of $0.37 per share up to October 31, 2000.
(c) 746,685 share purchase warrants permit the holder thereof to purchase
one additional share at a price of US$0.265 per share up to December
22, 1999 or a price of US$0.305 per share up to December 22, 2000.
(d) 2,255,000 share purchase warrants permit the holder thereof to purchase
one additional share at a price of $0.35 per share up to December 23,
1999 or a price of $0.40 per share up to December 23, 2000.
(e) 125,000 share purchase warrants permit the holder thereof to purchase
one additional share at a price of $0.60 per share up to January 5,
2000 or a price of $0.75 per share up to January 5, 2001.
(f) 1,139,635 share purchase warrants permit the holder thereof to purchase
one additional share at a price of US$0.333 per share up to March 26,
2000 or a price of US$0.383 per share up to March 26, 2001.
(g) 3,000,000 share purchase warrants permit the holder thereof to purchase
one additional share at a price of $0.55 per share up to April 7, 2000
or a price of $0.63 per share up to April 7, 2001.
(h) 2,746,833 share purchase warrants permit the holder thereof to purchase
one additional share at a price of US$1.64 per share up to September
14, 2000 or a price of US$1.89 per share up to September 14, 2001.
Of the share purchase warrants listed above, the following are held by
management.
(a) Owen Jones holds 275,000 of the warrants described in (d) and 1,000,000
of the warrants described in (g);
(b) James Speros holds all of the warrants described in (a) and 1,000,000 of
the warrants described in (g);
(c) Grant Sutherland holds 327,250 of the warrants described in (d) and
1,000,000 of the warrants described in (g);
(d) Peter Kozicki holds 55,000 of the warrants described in (d);
(e) Michael Peacock holds 312,500 of the warrants described in (h); and
(f) Marie Russell holds 62,500 of the warrants described in (h).
The total number of common shares called for by all outstanding share
purchase warrants held by management as at October 29, 1999 is 4,882,250. In
addition, Paul Hildebrand owns all of the warrants described in (b) and Paul
Hildebrand and Alder Enterprises Ltd., respectively, own 33,000 and 327,250
of the warrants described in (e).
Subsequent to December 31, 1998, the following share purchase warrants have
been exercised beneficially by directors or officers:
<PAGE>
61
(a) Grant Sutherland exercised 300,000 warrants at $0.43 per share, 340,000
warrants at $0.465 per share and 500,000 warrants at $0.92 per share;
(b) Owen Jones exercised 1,000,000 warrants at $0.43 per share and 250,000
warrants at $0.92 per share; and
(c) Peter Kozicki exercised 300,000 warrants at $0.43 per share.
In addition, Paul Hildebrand exercised 35,000 warrants at $0.43 per share and
50,000 warrants at $0.92 per share and Alder Enterprises Ltd. exercised
35,000 warrants at $0.43 per share and 50,000 warrants at $0.92 per share.
3,075,400 share purchase warrants which we issued on November 8, 1996,
entitling the holders to purchase shares at a price of $0.575 per share, were
due to expire November 8, 1998. We have entered into agreements dated
November 23, 1998, April 14, 1999, and October 28, 1999 with the warrant
holders to:
(a) extend the term of the warrants to November 27, 1998 (pursuant to the
November 23, 1998 agreement);
(b) further extend the term of the warrants to April 16, 1999 (pursuant to
the November 23, 1998 agreement), with an increased exercise price of
$0.67 per share;
(c) further extend the term of the warrants to October 31, 1999 (pursuant
to the April 14, 1999 agreement) with an exercise price of $0.67 per
share; and
(d) further extend the term of the warrants to April 30, 2000 (pursuant to
the Agreement dated October 28, 1999) with an exercise price of $.77
per share.
The agreements are subject to obtaining required regulatory approvals. The
VSE has approved an extension to November 27, 1998 but no further extension.
Accordingly, the further extension will only come into effect upon obtaining
the required approval, or upon our regulatory status changing such that we do
not require VSE approval.
The beneficial holders of these share purchase warrants include the following
directors and officers:
<TABLE>
<S> <C> <C>
Owen Jones - 440,000 warrants
Grant Sutherland - 372,000 warrants
Peter Kozicki - 44,000 warrants
</TABLE>
In addition, Paul Hildebrand and Alder Enterprises Ltd. own, respectively,
110,000 and 220,000 of the warrants.
EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDER
There are no laws or governmental decrees or regulations in Canada that
restrict the export or import of capital, or affect the remittance of
dividends, interest or other payments to holders of the Company's securities
who are not residents of Canada, other than withholding tax requirements.
Reference is made to "Taxation."
<PAGE>
62
There are no limitation imposed by the laws of Company, the laws of British
Columbia or by the charter or other governing documents of the Company on the
right of a non-resident to hold or vote Common Shares of the Company, other
than as provided in the Investment Canada Act (the "Investment Act"). The
following summarizes the principal features of the Investment Act for a
non-resident who proposes to acquire Common Shares. The summary is of a
general nature only and is not intended to be more is it, a substitute of
independent advice from an investor's own advisor. The summary does not
anticipate statutory or regulatory amendments:
The Investment Act generally prohibits implementation of a reviewable
investment by an individual, government or agency thereof, corporation,
partnership, trust or joint venture that is not a "Canadian" as defined in
the Investment Act (a "non-Canadian"), unless after review, the minister
responsible for the Investment Act (the "Minister") is satisfied that the
investment is likely to be of a net benefit to Canada. Under the Investment
Act, a United States citizen qualifies as a "World Trade Organization
Investor." Subject to the restrictions noted below, an investment in a
Canadian business by a World Trade Organization Investor would be reviewable
under the Investment Act only if it is an investment to acquire control of
such Canadian business and the value of the assets of the Canadian business
as shown on its financial statements is not less than a specified amount,
which for 1999 is $184 million. An investment in the shares of a Canadian
business by a non-Canadian other than a "World Trade Organization Investor"
when the Company is not controlled by a World Trade Organization Investor,
would be reviewable under the Investment Act if it is an investment to
acquire control of the Canadian business and the value of the assets of the
Canadian business as shown on its financial statements is $5 million or more,
or if an order for review is made by the federal cabinet on the grounds that
the investment relates to Canada's cultural heritage or national identity.
A non-Canadian would acquire control of the Company for purposes of the
Investment Act if the non-Canadian acquired a majority of the common shares.
The acquisition of less than a majority but one-third or more of the common
shares would be presumed to be an acquisition of control of the Company
unless it could be established that, on acquisition, the Company was not
controlled in fact by the acquirer through the ownership of common shares.
Notwithstanding the review provisions, any transaction involving the
acquisition of control of a Canadian business or the establishment of a new
business in Canada by a non-Canadian is a notifiable transaction and must be
reported to Industry Canada by the non-Canadian making the investment either
before or within thirty (30) days after the investment.
Certain transactions relating to common shares are exempt from the Investment
Act, including:
(i) an acquisition of common shares by a person in the ordinary
course of that person's business as a trader or dealer in
securities;
(ii) an acquisition of control of the Company in connection with
the realization of security granted for a loan or other
financial assistance and not for a purpose related to the
provisions of the Investment Act; and
(iii) an acquisition of control of the Company by reason of an
amalgamation, merger, consolidation or corporate
reorganization, following which the ultimate direct or
indirect control in fact of the Company, through the ownership
of common shares, remained unchanged.
<PAGE>
63
COMPETITION ACT REVIEW
Investments giving rise to the acquisition or establishment, directly or
indirectly, by one or more persons of control over, or a significant interest
in the whole or part of a business of a competitor, supplier, customer or
other person are subject to substantive review by Canada's Competition Law
Authority, the Director of Investigation and Research (the "Director"). If or
when the Director concludes that a merger, whether by purchase or lease of
shares or assets, by amalgamation or by combination, or otherwise, prevents
or lessens, or is likely to prevent or lessen competition substantially, he
may apply as may be necessary to eliminate the substantial lessening or
prevention of competition. Such substantive merger review power applies to
all mergers, whether or not they meet limits for pre-notification under the
Competition Act.
In addition to substantive merger review, the Competition Act provides for a
pre-notification regime respecting mergers of certain size. The regime
applies in respect of share acquisitions, asset acquisitions, amalgamations
and combinations, for ease of reference. This filing refers specifically to
share acquisition, although the pre-notification regime applies, with the
appropriate modification, to other types of acquisition of control as well.
In order for a share acquisition transaction to be pre-notifiable, the
parties to the transaction (being the person or persons who proposed to
acquire shares, and the Corporation the shares of which are to be acquired),
together with their affiliates (being all firms with a 50% or more voting
shares linkage up and down the chain) must have:
(i) aggregate gross assets in Canada that exceed $400,000,000 in
value, as shown on their audited financial statements for the
most recently completed fiscal year (which must be within the
last fifteen (15) months); or
(ii) aggregate gross revenue from sales in, from or into Canada that
exceed $400,000,000 for the most recently completed fiscal year
shown on the said financial statements; and
(iii) the party being acquired or corporations controlled by that party
must have gross assets in Canada, or gross revenues from sales in
or from Canada, exceeding $35,000,000 as shown on the said
financial statements. Acquisition of shares carrying up to 20% of
the votes of a publicly traded corporation, or 35% of the votes
in a private corporation will not be subject to pre-notification,
regardless of the above thresholds. However, exceeding the 20% or
the 35% threshold, and again exceeding the 50% threshold, gives
rise to an obligation of notification if the size threshold is
met.
If a transaction is pre-notifiable, a filing must be made with the Director
containing the prescribed information with respect to the parties, and a
waiting period, (either seven or twenty-one days, depending on whether a long
or short form filing is chosen) must expire prior to closing.
As an alternative to pre-notification, the Director may grant an Advance
Ruling Certificate which exempts the transaction from pre-notification.
Advance Ruling Certificates are granted where the Director concludes, based
on the information provided to him, that he would not have sufficient grounds
on which to apply to the Competition Tribunal to challenge the Merger.
<PAGE>
64
TRANSFER AGENT
The transfer agent for our Common Shares is Montreal Trust Company 510
Burrard St., Vancouver, B.C. V6C 3B9.
CERTAIN TAX CONSIDERATIONS
The following summarizes the principal Canadian federal income tax
considerations applicable to the holding and disposition of common shares in
the capital of the Company by a holder of the Company's common shares who is
resident in the United States of America, who has never been a resident of
Canada, and who holds common shares solely as capital property (a "U.S.
Holder"). This summary is based on the current provisions of the Income Tax
Act (Canada) (the "ITA"), the regulations thereunder, all amendments thereto
publicly proposed by the government of Canada to the date hereof, the
published administrative practices of Revenue Canada, Taxation, and on
current provision of the Canada-United States Income Tax Convention, 1980, as
amended (the "Treaty"). Except as otherwise expressly provided, this summary
does not take account of any provincial, territorial or foreign tax law or
treaty. It has been assumed that all currently proposed amendments will be
enacted substantially as proposed and that there is no other relevant change
in any governing law or practice, although no assurance can be given in these
respects.
THIS SUMMARY IS NOT INTENDED TO INCLUDE ALL CIRCUMSTANCES IN WHICH A
DISPOSITION OF COMMON SHARES MIGHT OCCUR. THIS SUMMARY DOES NOT CONSTITUTE,
AND SHOULD NOT BE CONSTRUED TO CONSTITUTE, TAX ADVICE TO ANY PARTICULAR
INVESTOR. INVESTORS ARE, THEREFORE, ADVISED TO CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THEIR INDIVIDUAL CIRCUMSTANCES.
THIS SUMMARY CONTAINS INFORMATION RELATING ONLY TO PROVISIONS CANADIAN
FEDERAL INCOME TAX LAW, AS SET OUT ABOVE. THIS SUMMARY DOES NOT INCLUDE
INFORMATION RELATING TO THE PROVISIONS OF ANY TAXATION LEGISLATION OF THE
UNITED STATES OF AMERICA OR ANY STATE THEREOF. INVESTORS WHO ARE OR MAY BE
SUBJECT TO LIABILITY TO TAX UNDER ANY LEGISLATION OF THE UNITED STATES OF
AMERICA, OR ANY STATE THEREOF, ARE ADVISED TO CONSULT WITH THEIR OWN TAX
ADVISORS WITH RESPECT TO SUCH LIABILITY.
DIVIDENDS ON COMMON SHARES
Under the ITA, amounts paid or credited or deemed paid or credited on account
of dividends to holders of common shares that are resident in a country other
than Canada will be subject to withholding tax of 25% of the amount of the
dividend. The rate of withholding tax may be reduced pursuant to the terms of
a bilateral income tax treaty between Canada and the country in which a
holder of common shares is resident. In certain circumstances, the purchase
by the Company of its common shares may result in a deemed dividend.
Under the Treaty, if the recipient of a dividend on the common shares is the
beneficial owner of such dividends and is considered to be a resident of the
United States for purposes of the Treaty, the rate of Canadian withholding
tax on such dividends will generally be reduced to 15% of the amount of such
dividends or, if the recipient is a corporation which owns at least 10% of
the voting stock of the
<PAGE>
65
Company, to 5% of the amount of such dividends.
DISPOSITION OF COMMON SHARES
A holder of common shares who is not resident in Canada will not be subject
to tax under the ITA in respect of any capital gain, or be entitled to deduct
any capital loss, realized on a disposition of the common shares unless at
the time of such disposition such common shares constitute "Taxable Canadian
Property" of the holder for purposes of the ITA and the holder is not
entitled to relief under a bilateral income tax treaty between Canada and the
country in which the holder of the common shares is resident. If the holder
is not entitled to relief under a tax treaty, three-quarters of the gain
arising on a disposition of Taxable Canadian Property will be taxable at the
rates that approximate the rates applicable to residents of Canada.
The common shares of the Company will not generally constitute "Taxable
Canadian Property" at a particular time if they are listed on a prescribed
stock exchange (which includes the Vancouver Stock Exchange) at that time.
However, a holder's common shares and rights to acquire common shares or
interests in common shares will be considered "Taxable Canadian Property" if
the holder uses or holds, or is deemed to use or hold, such shares in, or in
the course of carrying on, a business in Canada, or if at any time during the
five year period immediately preceding the disposition of such common shares,
the non-resident holder and persons with whom the non-resident holder did not
deal at arm's length owned, had rights to acquire, or had interests in 25% or
more of the issued shares of any class of the Company.
Under the Treaty, any gain from a disposition of common shares by a person
who is considered a resident of the United States for purposes of the Treaty
may be exempt from Canadian tax even if the shares constitute Taxable
Canadian Property. This exemption will apply if, at the time of disposition,
the value of the common shares did not derive principally from Canadian real
property and such shares do not form part of the business property of a
permanent establishment of the holder in Canada or pertain to a fixed base
available to the holder in Canada for the purpose of performing independent
personal services.
<PAGE>
66
SELLING SHAREHOLDERS
The shares offered for sale pursuant to this Prospectus consist of 2,746,833
shares (the "Shares") and 2,746,833 shares (the "Warrant Shares") issuable
upon the exercise of 2,746,833 share purchase warrants (the "Warrants"). Each
Warrant entitles the holder to acquire one Warrant Share for a period of two
years at a price of US$1.64 per share up to September 14, 2000 and a price of
US$1.89 per share up to September 14, 2001. The Selling Shareholders acquired
the Shares and Warrants pursuant to a private placement of 2,746,833 units
completed in September 1999. Each unit consisted of one Share and one
Warrant. The price of the units was US$1.64 per unit. The Warrants are
non-transferable.
The following table sets forth, as of October 29, 1999, and upon completion
of the offering described in this Prospectus, information with regard to the
beneficial ownership of the Company's common shares by the Selling
Shareholders. Information in the column "Total Shareholdings After Completion
of Offering" is based on information provided to us by the Selling
Shareholders and is accurate to the best of the Company's knowledge. The
Selling Shareholders may not have a present intention of selling the Shares
or Warrant Shares and may offer less than the number of Shares and Warrant
Shares indicated.
<TABLE>
<CAPTION>
NO. OF WARRANT TOTAL SHAREHOLDINGS AFTER
SELLING SECURITY HOLDER NO. OF SHARES SHARES COMPLETION OF OFFERING(1)
<S> <C> <C> <C>
Richard & Marie Russell JOWROS(2) 62,500 62,500 5,000
Louis Capanelli(3) 487,805 487,805 820,000
Sisson & Ryan Inc. 62,500 62,500 Nil
Michael Hawes 62,500 62,500 19,000
Sharon Kleinman 62,500 62,500 Nil
Michael Colen(4) 182,927 182,927 891,660
Jack Spitzer 62,500 62,500 Nil
Michael Peacock(5) 312,500 312,500 64,500
Moldieco Plastics Products, Inc. 102,440 102,440 Nil
Edwin Yuan 62,500 62,500 8,000
Scott Lubore 243,903 243,903 400,000
Michael D. Reinke 62,500 62,500 14,000
John T. Fishetti 62,500 62,500 30,000
David Robison 62,500 62,500 1,219,790
MeadowBrooke Development Assoc. L.L.C. 76,220 76,220 Nil
Welcome Opportunities Ltd. 100,000 100,000 400,000
Sideware Partners, L.L.C. 520,000 520,000 Nil
George Cranwell 9,147 9,147 83,016
Maribeth A. Mullany 31,250 31,250 Nil
Johnathan S. Thomas 31,250 31,250 83,016
Robert E. Thomas 18,293 18,293 7,000
George Varoutsos 6,098 6,098 41,508
Frederick W. Weidinger 62,500 62,500 Nil
</TABLE>
<PAGE>
67
(1) Calculated on the assumption that all Shares and all Warrant Shares offered
by each selling security holder are sold. Figures stated include shares
issuable pursuant to incentive stock options and share purchase warrants
exercisable within 60 days of October 29, 1999.
(2) Marie Russell is the Vice President Channel Sales and Marketing of our
subsidiary, Sideware Corp.
(3) Louis Capanelli is a consultant to us. Total Shareholdings reported for
Mr. Capanelli include 50,000 shares issuable under stock options
exercisable within 60 days of October 29, 1999 and 160,000 shares
issuable under share purchase warrants exercisable within 60 days of
October 29, 1999.
(4) Michael Colen is a consultant to us. Total Shareholdings reported for Mr.
Colen include 200,000 shares issuable under stock options exercisable
within 60 days of October 29, 1999 and 16,060 shares issuable under share
purchase warrants exercisable within 60 days of October 29, 1999.
(5) Michael Peacock is a Vice President Federal Sales and Marketing of our
subsidiary, Sideware Corp. Total Shareholdings reported for Mr. Peacock
include 25,000 shares issuable under stock options exercisable within 60
days of October 29, 1999.
Jeffrey Lubore is the managing partner of MeadowBrooke Development Assoc.
L.L.C. Mr. Lubore owns 1,658,000 shares.
To the best of our knowledge, assuming that all of the Shares and Warrants
shares offered by each Selling Shareholder are sold, no selling security
other than MeadowBrooke Development Assoc. L.L.C., David Robison, Louis
Capanelli, or Michael Colen will own or control in excess of 1% of our voting
securities.
PLAN OF DISTRIBUTION
The Shares and Warrant Shares offered hereby may be sold from time to time by
the Selling Shareholders. These sales may be made privately, through the
Vancouver Stock Exchange or through OTC Bulletin Board quotation service or
otherwise, at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Shares and
Warrant Shares may be sold by each of the Selling Shareholders acting as
principal for its own account or in ordinary brokerage transactions and
transactions in which the broker solicits purchasers. In effecting sales,
broker-dealers engaged by the Selling Shareholders may arrange for other
broker-dealers to participate in the re-sales.
Broker-dealers or agents may receive compensation in the form of commissions,
discounts or concessions from Selling Shareholders in amounts to be
negotiated in connection with the sale. These broker-dealers and any other
participating broker-dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with these sales, and any such
commission, discount or concession may be deemed to be underwriting discounts
or commission under the Securities Act. In addition, any securities covered
by this Prospectus which qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus.
It is not possible at the present time to determine the price to the public
in any sale of the Shares or Warrant Shares by the Selling Shareholders and
each Selling Shareholder reserves the right to accept or reject, in whole or
in part, any proposed purchaser of Shares or Warrant Shares. Accordingly, the
public offering price and the amount of any applicable sales or underwriting
discounts or commissions will be determined at the time of such sale by the
Selling Shareholders. The aggregate proceeds to the Selling Shareholders from
the sale of the Shares and Warrant Shares will be the purchase price of the
Shares and
<PAGE>
68
Warrant Shares less all applicable commissions and underwriters' discounts,
if any. We will pay substantially all the expenses incident to the
registration, offering and sale of the Shares and Warrant Shares to the
public by the Selling Shareholders (currently estimated to be US$160,000),
other than fees, discounts and commissions of underwriters, dealers or
agents, if any, and transfer taxes.
LEGAL MATTERS
Certain legal matters relating to the legality of the issuance of the Common
Shares offered by this Prospectus under Canadian law will be passed upon by
Dale W. Wilcox a Law Corporation, Vancouver, British Columbia.
EXPERTS
The consolidated balance sheets of the Company as at December 31, 1998, and
April 30, 1998 and the consolidated statements of operations and deficit and
changes in financial position for the eight month period ended December 31,
1998 and the years ended April 30, 1998, 1997 and 1996 included herein and
elsewhere in this registration statement have been included in reliance upon
the report of KPMG LLP, independent chartered accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG LLP covering the December 31,
1998 consolidated financial statements contains additional comments for U.S.
readers and Canada - U.S. reporting differences with respect to conditions
that cause substantial doubt as to our ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of that uncertainty.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Change in Shareholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
69
_______________________________________________________________________________
_______________________________________________________________________________
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY
ANY SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Information........................................
Enforceability of Civil Liability.............................
Conventions and Currency of Presentation......................
Prospectus Summary............................................
Risk Factors..................................................
Cautionary Notice regarding Forward-Looking Statements........
Use of Proceeds...............................................
Exchange Rates................................................
Nature of Trading Market......................................
Dividend Policy...............................................
Capitalization................................................
Selected Consolidated Financial Data..........................
Management's Discussion and Analysis of Financial Condition
and Results of Operation....................................
Business......................................................
Management....................................................
Principal Shareholders........................................
Certain Transactions..........................................
Description of Capital Stock..................................
Certain Tax Considerations....................................
Selling Shareholders..........................................
Plan of Distribution..........................................
Legal Matters.................................................
Experts.......................................................
Index to Financial Statements................................. F-1
</TABLE>
UNTIL -, 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
SIDEWARE SYSTEMS INC.
5,493,666 COMMON SHARES
___________________
PROSPECTUS
__________________
- , 1999
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We will not receive any proceeds from the sale of Shares or Warrant Shares by
the Selling Shareholders.
We will pay substantially all the expenses incident to the registration,
offering and sale of the Shares and Warrant Shares to the public by the
Selling Shareholders other than fees, discounts and commissions of
underwriters, dealers or agents, if any, and transfer taxes. Those expenses
are estimated as follows:
<TABLE>
<CAPTION>
AMOUNT(1)
---------------
(STATED IN US$)
<S> <C>
SEC Registration Fee............................... $ 3,000
Legal Fees and Expenses............................ 750,000
Accounting Fees and Expenses....................... 30,000
Blue Sky Qualification Fees and Expenses........... 25,000
Printing........................................... 15,000
Transfer Agent and Registrar Fees.................. Nil
Miscellaneous Expenses and Qualification........... 12,000
Total.......................................... $160,000
</TABLE>
----------
(1) All amounts have been estimated except the SEC registration fee.
All of the above expenses will be payable by us.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Articles of Incorporation of the Company, subject to the provisions
of the Company Act British Columbia (the "Act"), the directors shall cause
the Company to indemnify a director or former director of the Company and the
directors may cause the Company to indemnify a director or former director of
a corporation of which the Company is or was a shareholder and the heirs and
personal representatives of any former director against all costs, charges
and expenses, including an amount to settle an action or satisfy a judgment,
actually and reasonably incurred by him or them including an amount paid to
settle an action or satisfy a judgment in a civil, criminal or administrative
action or proceeding to which he is or they are made a party by reason of his
being or having been a director including any action brought by the Company.
Each director of the Company on being elected or appointed shall be deemed to
have contracted with the Company on the terms of this indemnity.
Subject to the provisions of the Act, the directors may cause the Company to
indemnify any officer, employee or agent of the Company or of a corporation
of which the Company is or was a shareholder (notwithstanding that he is also
a director) and his heirs and personal representatives against all costs,
<PAGE>
71
charges and expenses whatsoever incurred by him or them and resulting from
his acting as an officer, employee or agent of the Company or the
corporation. In addition, the Company shall indemnify the Secretary or an
Assistant Secretary of the Company (if he shall not be a full-time employee
of the Company and notwithstanding that he is also a director) and his
respective heirs and legal representatives against all costs, charges and
expenses whatsoever incurred by him or them and arising out of the functions
assigned to the Secretary by the Act or Articles.
The failure of a director or officer of the Company to comply with the
provisions of the Act or of the Memorandum or the Articles shall invalidate
any indemnity to which he is entitled.
The directors may cause the Company to purchase and maintain insurance for
the benefit of any person who is or was serving as a director, officer,
employee or agent of the Company or as a director, officer, employee or agent
of any corporation of which the Company is or was a shareholder and his heirs
or personal representatives against any liability incurred by him as a
director, officer, employee or agent.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(i) Effective September 10, 1996, the Company issued 6,750,000 Special
Warrants at a price of $0.25 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within one year, without additional
consideration, into 1.1 units, with each unit comprised of one share and one
non-transferable share purchase warrant. Each share purchase warrant would
entitle the holder thereof to purchase one additional share of the Company
for a period of two years at a price of $0.50 per share for the first year
and $0.575 per share in the second year. The Special Warrants were exercised
on November 8, 1996. The purchasers of Special Warrants included the
following officers and directors of the Company:
<TABLE>
<S> <C>
Owen Jones 400,000 Special Warrants
Grant Sutherland 1,318,000 Special Warrants
Peter Kozicki 40,000 Special Warrants
</TABLE>
In addition, Paul Hildebrand and Alder Enterprises Ltd. acquired,
respectively, 100,000 and 200,000 Special Warrants. 100,000 of the Special
Warrants were issued to Gold Capital Securities Ltd. as consideration for
acting as the Company's sponsor in respect of its return to trading on the
Vancouver Stock Exchange.
(ii) Effective September 10, 1996, the Company issued 1,489,446 shares to
settle certain debts of the Company. The persons receiving the shares
included the following directors and officers of the Company:
<TABLE>
<S> <C>
Owen Jones 300,000 shares
Grant Sutherland 463,600 shares
Edward White 164,780 shares
</TABLE>
(iii) Effective September 10, 1996, the Company issued 750,000 performance
shares at a price of $0.01 per share. The persons receiving the shares
included the following directors and officers of the
<PAGE>
72
Company:
<TABLE>
<S> <C>
Owen Jones 275,000 shares
Grant Sutherland 275,000 shares
Edward White 25,000 shares
</TABLE>
In addition, Paul Hildebrand received 125,000 of the performance shares.
The performance shares will be held in escrow to be released, pro rata to the
holders of performance shares, on the basis of one share for each $0.18 in
cumulative cash flow of the Company, based on audited financial statements.
"Cumulative cash flow" for this purpose means, at any time, the aggregate
cash flow of the Company up to that time, net of any negative cash flow.
"Cash flow" means net income or loss before tax, adjusted to add back the
following expenses:
a. depreciation;
b. amortization of goodwill and deferred research and development
costs, excluding general and administrative costs;
c. expensed research and development costs, excluding general and
administrative costs; and
d. any other amounts permitted or required by the VSE.
As at the date of the registration statement, the Company has not had any
Cumulative Cash Flow for purposes of the escrow agreement, and none of the
750,000 performance shares have been released from escrow. Any performance
shares not released by September 10, 2001 will be subject to cancellation.
(iv) Effective October 30, 1996, the Company issued 268,000 Special
Warrants at a price of $0.25 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within one year, without additional
consideration, into one unit comprised of one share and one non-transferable
share purchase warrant. Each share purchase warrant would entitle the holder
thereof to purchase one additional share of the Company for a period of two
years at a price of $0.50 per share in the first year or $0.575 in the second
year. The Special Warrants were exercised on November 8, 1996.
(v) Effective April 14, 1997, the Company issued 450,000 Special Warrants
at a price of $0.375 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within one year, without additional
consideration, into one unit comprised of one share and one non-transferable
share purchase warrant. Each share purchase warrant would entitle the holder
thereof to purchase one additional share of the Company for a period of two
years at a price of $0.465 per share. The Special Warrants were exercised on
various dates on or before April 14, 1998. The purchasers of the Special
Warrants included the following directors and officers of the Company:
<PAGE>
73
<TABLE>
<S> <C>
Grant Sutherland 340,000 Special Warrants
</TABLE>
(vi) Effective April 14, 1997, the Company issued 3,000,000 Special
Warrants at a price of $0.375 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within one year, without additional
consideration, into one unit comprised of one share and one non-transferable
share purchase warrant. Each share purchase warrant would entitle the holder
thereof to purchase one additional share of the Company for a period of two
years at a price of $0.375 per share for the first year and $0.43 per share
in the second year. The Special Warrants were exercised on various dates on
or before April 14, 1998. The purchasers of the Special Warrants included the
following directors and officers of the Company:
<TABLE>
<S> <C>
Owen Jones 1,000,000 Special Warrants
Grant Sutherland 300,000 Special Warrants
</TABLE>
In addition, Paul Hildebrand and Alder Enterprises Ltd. acquired,
respectively, 35,000 and 70,000 Special Warrants.
(vii) Effective August 7, 1997, the Company issued 100,000 shares to Ian
Lovejoy, then a director of the Company, in consideration of the surrender to
the Company of certain royalty rights held by Mr. Lovejoy
(viii) Effective October 24, 1997, the Company issued 1,500,000 Special
Warrants at a price of $0.80 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within one year, without additional
consideration, into one unit comprised of one share and one non-transferable
share purchase warrant. Each share purchase warrant would entitle the holder
thereof to purchase one additional share of the Company for a period of two
years at a price of $0.80 per share for the first year and $0.92 per share in
the second year. The Special Warrants were exercised on various dates on or
before October 24, 1998. The purchasers of the Special Warrants included the
following directors and officers of the Company:
<TABLE>
<S> <C>
Owen Jones 200,000 Special Warrants
Grant Sutherland 500,000 Special Warrants
</TABLE>
In addition, Paul Hildebrand and Alder Enterprises Ltd. acquired,
respectively, 50,000 and 100,000 Special Warrants.
(ix) Effective December 28, 1998, the Company issued 500,000 Special
Warrants at a price of $0.35 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within a period of one year, without
additional consideration, into 1.1 units, with each unit comprised of one
share and one non-transferable share purchase warrant. Each share purchase
warrant would entitle the holder thereof to purchase one additional share of
the Company for a period of two years at a price of $0.35 per share for the
first year and $0.40 per share in the second year. The Special Warrants were
sold through Bolder Capital Corp. as broker. In consideration for acting as
broker, Bolder Capital Corp. received a cash commission of $13,125, as well
as 125,000 share purchase warrants.
<PAGE>
74
(x) Effective January 5, 1999, the Company issued 125,000 Special Warrants
to Golden Capital Securities Ltd. in consideration for services provided by
Golden Capital Securities Ltd. in connection with a proposed prospectus
filing by the Company during 1997. Each Special Warrant was exercisable,
without further consideration into one unit consisting of one share and one
share purchase warrant. Each share purchase warrant will entitle the holder
thereof to purchase one additional share for a period of two years at a price
of $0.60 in the first year and $0.75 in the second year. The Special Warrants
were exercised on June 4, 1999.
(xi) Effective January 14, 1999, the Company issued to James Speros, a
director of the Company, 600,000 Special Warrants at a price of $0.28 per
Special Warrant. Each Special Warrant was exercisable by its holder at any
time within one year, without additional consideration, into one unit
comprised of one share and one non-transferable share purchase warrant. Each
share purchase warrant would entitle the holder thereof to purchase one
additional share of the Company for a period of two years at a price of $0.28
per share for the first year and $0.32 per share in the second year. The
Special Warrants were exercised on June 4, 1999.
(xii) Effective January 7, 1999, the Company issued 1,432,805 Special
Warrants at a price of US$0.265 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within one year, without additional
consideration, into 1.1 units, with each comprised of one share and one
non-transferable share purchase warrant. Each share purchase warrant would
entitle the holder thereof to purchase one additional share of the Company
for a period of two years at a price of US$0.265 per share for the first year
and US$0.305 per share in the second year. The Special Warrants were
exercised on June 4, 1999.
(xiii) Effective November 19, 1998, (but with delivery in January 1999), the
Company issued to Paul Hildebrand, the Company's Secretary, 90,000 Special
Warrants at a price of $0.32 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within a period of one year, without
additional consideration, into one unit comprised of one share and one
non-transferable share purchase warrant. Each share purchase warrant would
entitle the holder thereof to purchase one additional share of the Company
for a period of two years from the date of issuance of the Special Warrants
at a price of $0.32 per share for the first year and $0.37 per share in the
second year. The Special Warrants were exercised on June 4, 1999.
(xiv) Effective January 7, 1999, the Company issued 2,050,000 Special
Warrants at a price of $0.35 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within a period of one year, without
additional consideration, into 1.1 units, with each unit comprised of one
share and one non-transferable share purchase warrant. Each share purchase
warrant would entitle the holder thereof to purchase one additional share of
the Company for a period of two years at a price of $0.35 per share for the
first year and $0.40 per share in the second year. The Special Warrants were
exercised on June 4, 1999. The purchasers of the Special Warrants included
the following directors and officers of the Company:
<TABLE>
<S> <C>
Owen Jones 250,000 Special Warrants
Grant Sutherland 297,500 Special Warrants
<PAGE>
75
Peter Kozicki 50,000 Special Warrants
</TABLE>
In addition, Paul Hildebrand and Alder Enterprises Ltd. acquired,
respectively, 30,000 and 277,500 Special Warrants.
(xv) Effective April 7, 1999, the Company issued 1,528,527 Special Warrants
at a price of $US0.333 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within a period of one year the Special
Warrants, without additional consideration, into one unit comprised of one
share and one non-transferable share purchase warrant. Each share purchase
warrant would entitle the holder thereof to purchase one additional share of
the Company for a period of two years at a price of US$0.333 per share for
the first year and US$0.383 per share in the second year. The Special
Warrants were exercised on June 4, 1999.
(xvi) Effective April 14, 1999, the Company issued 3,000,000 Special
Warrants at a price of $0.55 per Special Warrant. Each Special Warrant was
exercisable by its holder at any time within a period of one year, without
additional consideration, into one unit comprised of one share and one
non-transferable share purchase warrant. Each share purchase warrant would
entitle the holder thereof to purchase one additional share of the Company
for a period of two years at a price of $0.55 per share for the first year
and $0.63 per share in the second year. The Special Warrants were exercised
on June 4, 1999. The purchasers of the Special Warrants included the
following directors and officers of the Company:
<TABLE>
<S> <C>
Owen Jones 1,000,000 Special Warrants
Grant Sutherland 1,000,000 Special Warrants
Jim Speros 1,000,000 Special Warrants
</TABLE>
(xvii) Effective July 5, 1999, the Company issued 250,000 shares to National
Securities Corp. of Chicago, Illinois pursuant to a Financial Advisory and
Consulting Agreement.
(xviii) Effective September 14, 1999, the Company issued 2,746,833 units at a
price of US$1.64 per unit. Each unit consisted of one share and one share
purchase warrant. Each share purchase warrant entitles the holder thereof to
purchase one additional share of the Company for a period of two years at a
price of US$1.64 in the first year or US$1.89 in the second year. The Company
paid commissions US$133,000 to Heideman Law Group, P.C. and Venture
Consultants, LLC and US$13,120 to Bolder Investment Partners Ltd. in
connection with the private placement.
(xix) The Company has issued 1,556,000 shares on the exercise of incentive
stock options. See "DESCRIPTION OF CAPITAL STOCK - Share Capital."
(xix) The Company has issued 11,336,329 shares on the exercise of share
purchase warrants as follows:
(a) 3,000,000 shares at $0.43 per share;
(b) 450,000 shares at $0.465 per share;
(c) 1,500,000 shares at $0.92 per share;
(d) 388,829 shares at US$0.333 per share;
<PAGE>
76
(e) 829,400 shares at US$0.265 per share;
(f) 868,500 shares at $0.35 per share; and
(g) 4,299,600 shares at $0.50 per share.
See "DESCRIPTION OF CAPITAL STOCK - Share Capital."
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following is a complete list of Exhibits filed as part of this
Registration Statement and which are incorporated herein.
<TABLE>
<CAPTION>
NUMBER EXHIBIT
<S> <C>
3.1(1) Memorandum of Incorporation dated March 30, 1983
3.2(1) Articles of Incorporation dated March 30, 1983
3.3(1) Special Resolution dated January 12, 1984
3.4(1) Special Resolution dated June 15, 1989
3.5(1) Special Resolution dated September 27, 1990
3.6(1) Special Resolution dated December 18, 1996
3.7(1) Articles of Incorporation
3.8(1) Special Resolution dated January 29, 1998
4.1(1) Escrow Agreement dated June, 1996
4.2(1) Agreement dated November 23, 1998 between the Company and certain
warrant holders of the Company
4.3(1) Agreement dated April 14, 1999 between the Company and certain warrant
holders of the Company
4.4 Agreement dated October 28, 1999 between the Company and certain warrant
holders of the Company
5.1 Legal Opinion of Dale W. Wilcox, A Law Corporation
10.1(1) Operating Agreement between the Company and BrainTech, Inc., dated
October 18, 1996
10.2 Software Development and License Agreement dated September 20, 1999 between
the Company and BrainTech, Inc.
10.3 Software Development License between the Company and Sideware International
SRL effective August 27, 1999
10.4 Research and Development Cost Sharing Agreement between the Company and
Sideware International SRL effective August 27, 1999
10.5 Distribution and Sales Agreement between the Company and Sideware Corp.
effective January 1, 1999
10.6(1) Assignment of Lease and Modification of Lease Agreement dated August 17, 1998
between HOOPP Realty Inc., Techwest Management Inc., Sideware Systems Inc.,
and BrainTech, Inc.
10.7(1) Lease Agreement dated January 25, 1999 between Sideware Corp. and Elden
Investments, LLC with Addendum dated February 8, 1999
<PAGE>
77
10.8 Agreement between the Company and IBM for participation in the Enterprise
Growth Opportunity program
10.9 Reseller agreement between the Company and Enterprise Soft
10.10 Software license agreement between the Company and ICEsoft AS
10.11 Lease effective as of July 1, 1999 between the Company, Techwest Management
Ltd., BrainTech, Inc. and Pacific Centre Leaseholds Ltd.
10.12 Assignment Agreement effective as of July 1, 1999 between the Company,
Techwest Management Ltd., BrainTech, Inc., and SJM Management Ltd.
10.13 Cost Sharing and Allocation Agreement dated October 29, 1999 between the
Company and BrainTech, Inc.
10.14 Agreement between the Company and Advanced Contact Solutions Inc.
10.15 Contract Agreement No. SDW001 between the Company and Science Applications
International Corp.
21.1 List of Subsidiaries
23.1 Consent of KPMG LLP
27.1 Financial Data Schedule for the six month period ended June 30, 1999
27.2 Financial Data Schedule for the eight month period ended December 31, 1998
27.3 Financial Data Schedule for the fiscal year ended April 30, 1998
</TABLE>
- ----------
(1) Exhibit already on file as a result of the filing of the Company's Form
20-F registration statement and Form 20-F transition report.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
<PAGE>
78
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) To file a post-effective amendment to the Registration
Statement to include any financial statements required by Rule 3-19.
<PAGE>
79
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form F-1 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in Vancouver, British Columbia, on November 8, 1999.
SIDEWARE SYSTEMS INC.
By: "W. Grant Sutherland"
----------------------------------
W. Grant Sutherland
Chairman of the Board of Directors
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
W. Grant Sutherland, as attorney-in-fact, with full power of substitution, to
execute in the name and on behalf of such person, individually and in each
capacity stated below, and to file, any and all amendments to this
registration statement, including any and all post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
"W. Grant Sutherland" Director, Chairman of November 8, 1999
- ---------------------------- the Board of Directors,
W. Grant Sutherland Principal Financial Officer
"Owen L.J. Jones" President, Chief Executive November 8, 1999
- ---------------------------- Officer and Director
Owen L.J. Jones (Principal Executive Officer)
"Peter Kozicki" Director November 8, 1999
- ----------------------------
Peter Kozicki
"Edward A. White" Director November 8, 1999
- ----------------------------
Edward A. White
</TABLE>
<PAGE>
Consolidated Financial Statements of
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
(expressed in Canadian dollars)
Six months ended June 30, 1999
(Prepared by management)
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Balance Sheets
(expressed in Canadian dollars)
(Prepared by management)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
June 30, July 31,
1999 1998
- -------------------------------------------------------------------------------------------------------------
(restated -
note 6(e))
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,269,596 $ 763,816
Accounts receivable 57,740 92,282
Due from related parties (note 4(b)) 269,647 316,730
Inventory 31,857 49,009
Prepaid expenses 308,303 121,004
--------------------------------------------------------------------------------------------------------
3,937,143 1,342,841
Deposit on leases 25,807 8,213
Capital assets (note 5) 965,979 538,183
- -------------------------------------------------------------------------------------------------------------
$ 4,928,929 $ 1,889,237
- -------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 354,928 $ 126,592
Capital tax payable 7,100 7,100
--------------------------------------------------------------------------------------------------------
362,028 133,692
Shareholders' equity:
Share capital (note 6) 19,015,084 11,516,774
Special warrants (note 6(d)) - 1,200,000
Commitment related to investment advisory services (note 6(e)) 75,000 75,000
Deficit accumulated during the development stage (14,523,183) (11,036,229)
--------------------------------------------------------------------------------------------------------
4,566,901 1,755,545
Future operations (note 2)
Litigation (note 8)
Commitments (note 9)
Uncertainty due to the Year 2000 Issue (note 10)
- -------------------------------------------------------------------------------------------------------------
$ 4,928,929 $ 1,889,237
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
Approved by the Board:
Director Director
- ---------------------- ----------------------
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Statements of Operations and Deficit
(expressed in Canadian dollars)
(Prepared by management)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Six months Six months
ended ended
June 30, 1999 July 31, 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Sales $ 134,369 $ 58,511
--------------------------------------------------------------------------------------------------------
Cost of sales (exclusive of amortization and
other costs disclosed separately below): 124,306 50,630
- -------------------------------------------------------------------------------------------------------------
Gross margin 10,063 7,881
Interest income 2,631 28,060
- -------------------------------------------------------------------------------------------------------------
12,694 35,941
Operating expenses:
Amortization 134,705 91,921
Employee wages and benefits 617,868 328,231
Filing and transfer fees 26,384 3,552
Investment advisory services (note 6(e)) - 75,000
Office, printing and sundry 131,832 88,285
Professional fees 324,785 168,469
Marketing 407,573 519,329
Facilities 189,818 43,757
Research and development 395,434 168,875
Foreign exchange loss (gain) (15,021) (90,280)
Capital taxes - 7,100
--------------------------------------------------------------------------------------------------------
2,213,378 1,404,239
- -------------------------------------------------------------------------------------------------------------
Loss for the period, carried forward 2,200,684 1,368,298
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Statements of Operations and Deficit, Continued
(expressed in Canadian dollars)
(Prepared by management)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Six months Six months
ended ended
June 30,1999 July 31, 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(restated -
note 6(e))
Loss for the period, brought forward $ 2,200,684 $ 1,368,298
Deficit, accumulated during the development
stage, beginning of period 12,322,499 9,667,931
- -------------------------------------------------------------------------------------------------------------
Deficit, accumulated during the development
stage, end of period $ 14,523,183 $ 11,036,229
- -------------------------------------------------------------------------------------------------------------
Loss per share $ 0.07 $ 0.05
- -------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 30,928,378 26,505,738
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Statements of Changes in Financial Position
(expressed in Canadian dollars)
(Prepared by management)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Six months Six months
ended ended
June 30, 1999 July 31, 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(restated -
note 6(e))
Cash provided by (used for):
Operations:
Loss for the period $ (2,200,684) $ (1,368,298)
Items not involving the use of cash:
Amortization 134,705 91,921
Investment advisory services to be
settled by equity instruments (note 6(e)) - 75,000
Changes in non-cash operating working capital:
Accounts receivable 177,441 (41,683)
Due from related parties 105,668 (191,706)
Inventory 12,248 (49,009)
Prepaid expenses (209,895) (9,891)
Accounts payable and accrued liabilities 83,290 (77,263)
--------------------------------------------------------------------------------------------------------
(1,897,227) (1,570,929)
Financing:
Shares issued for cash on exercise of
warrants and options 2,350,388 22,000
Special warrants issued for cash 2,970,840 -
--------------------------------------------------------------------------------------------------------
5,321,228 22,000
Investments:
Purchase of capital assets (454,155) (184,199)
Deposit on lease, net (17,594) -
--------------------------------------------------------------------------------------------------------
(471,749) (184,199)
- -------------------------------------------------------------------------------------------------------------
Increase (decease) in cash and cash equivalents 2,952,252 (1,733,128)
Cash and cash equivalents, beginning of period 317,344 2,496,944
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 3,269,596 $ 763,816
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(expressed in Canadian dollars)
Six months ended June 30, 1999
with comparative figures for the six months ended July 31, 1998
(Prepared by management)
- --------------------------------------------------------------------------------
1. GENERAL:
The Company was incorporated in 1983 under the Company Act (British
Columbia). Its principal business activity is developing and marketing of
software. During the year ended April, 1998, the Company changed its name
from Jot-It! Software Corp. to Sideware Systems Inc. Effective December 31,
1998, the fiscal year end of the company was changed from April 30th to
December 31st.
2. FUTURE OPERATIONS:
At June 30, 1999, the Company is in the business of developing and
marketing computer software technology solutions with a principal focus on
the e-commerce market. To date, the Company has not generated significant
revenues from these operations. For financial reporting purposes, the
Company is considered to be in the development stage and the accompanying
financial statements are those of a development stage enterprise.
As at June 30, 1999, the Company has an accumulated deficit of $14,523,183
and incurred a loss of $2,200,684 during the six months ended June 30,
1999. In addition, the Company is the defendant in a number of legal
proceedings and claims, the maximum potential losses under which are
material (note 9). The Company has filed counterclaims on certain of these
claims. These financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern.
Accordingly, they do not give effect to adjustments that would be necessary
should the Company be unable to continue as a going concern. The Company's
continuance as a going concern is dependent upon its ability to obtain
adequate equity financing, to reach profitable levels of operation and its
success in defending existing legal claims all of which are consistent with
management's intentions. There is no certainty that such conditions can be
achieved. In the next twelve months, management of the Company also intends
on applying financing received to the continued development of products in
process and to identify sales or strategic alliance opportunities with
respect to such products. At the date of these consolidated financial
statements significant additional financing sources have not been
identified.
3. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in Canada. The
consolidated financial statements include the accounts of the company,
and its subsidiaries, 9050 Investments Ltd., Sideware Corp. (formerly
Collaborative Groupware Inc.), Evergreen International Technology Inc.
(which is inactive) and 9123 Investments Ltd., all of which are
wholly-owned. In addition, the Company accounts by the equity method
for its one-third interest in Concurrent Adoptive Recognition Corp.
(which is inactive). All material intercompany balances and
transactions have been eliminated.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 2
(expressed in Canadian dollars)
Six months ended June 30, 1999
with comparative figures for the six months ended July 31, 1998
(Prepared by management)
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(a) Basis of presentation (continued):
The consolidated financial statements as at June 30, 1999 and for the
periods ended June 30, 1999 and July 31, 1998 are unaudited; however,
such financial statements reflect all adjustments, consisting solely
of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair statement of the results for the
periods presented. Reference should be made to Note 13 to the
consolidated financial statements of the Company as at and for the
eight month ended December 31, 1998 for information on differences
between Canadian and United States generally accepted accounting
principles as they apply to the Company. There are no additional
reconciling differences in the six months ended June 30, 1999. In
addition, if these unaudited interim consolidated financial statements
had been prepared in accordance with generally accepted accounting
principles in the United States, there would be no material
differences in the reported loss for the period ended June 30, 1999.
(b) Cash and cash equivalents:
Cash and cash equivalents have terms to maturity at the date of
acquisition of not more than three months.
(c) Capital assets:
Capital assets are carried at cost less accumulated amortization.
Amortization is calculated annually as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
Asset Basis Rate
-----------------------------------------------------------------------
<S> <C> <C>
Furniture and fixtures declining-balance 20%
Computer equipment declining-balance 30%
Trade show assets declining balance 20%
Computer software straight-line 50%
Leasehold improvements straight-line lease term
-----------------------------------------------------------------------
</TABLE>
(d) Income taxes:
The Company follows the tax allocation method of accounting. Under this
method, deferred income taxes are provided on timing differences
between income reported for tax purposes and accounting income. In
addition, the Company records those investment tax credits, for which
it has reasonable assurance of realization, as a reduction of the
expenses or the cost of capital assets to which they relate.
(e) Research and development costs:
Research costs are expensed as incurred. Development costs are deferred
if they meet certain specified criteria which relate to the
identification of costs, future benefits and funding requirements.
Where development costs do not meet such criteria, they are expensed as
incurred. Government grants, which are not refundable are disclosed as
a reduction of the related cost. Management periodically assesses the
underlying value of deferred development costs by reference to business
plans and estimated future cash flows and records write-downs where
appropriate.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 3
(expressed in Canadian dollars)
Six months ended June 30, 1999
with comparative figures for the six months ended July 31, 1998
(Prepared by management)
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(f) Revenue recognition:
The Company recognizes revenue when title has passed to the customer,
the collectability of the consideration is measurable and the Company
has no significant remaining performance obligations. This includes
revenues from sales to resellers which are recorded in accordance with
their terms when the resellers have no right of return and the Company
has no other remaining performance obligations. The Company recognizes
sales of equipment, to related parties, in revenues and related costs
in cost of sales as the Company takes title to and holds the equipment,
bearing all of the risks and rewards of ownership, prior to sale, and
bears the same risks as for sales to unrelated parties after sale,
including the risks related to collection of receivables.
(g) Financial instruments:
The Company accounts for financial instruments at cost. The carrying
amounts reported in the balance sheet for cash, accounts receivable,
due from related parties, accounts payable and accrued liabilities,
capital tax payable and due to directors and officers are estimated by
management to approximate their fair values, due to the short-term
maturity of these instruments. The Company has no outstanding
derivative instruments, or other instruments with credit or interest
rate risk.
(h) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant areas requiring
the use of management estimates relate to the collectability of the
amounts due from related parties. Actual amounts may differ from these
estimates.
4. RELATED PARTY TRANSACTIONS:
(a) Transactions with related parties:
During the period, the Company was charged $129,059 (July 31, 1998 -
$93,309), for services rendered and $264,754 (July 31, 1998 - $169,500)
in salaries.
Included in revenues and cost of sales are revenues and related costs
associated with equipment sales to BrainTech, Inc. and Techwest
Management Inc., companies with certain common shareholders and
directors to the Company.
(b) Due from related parties:
At June 30, 1999, the Company was owed $269,647 (July 31, 1998 -
$316,730) with respect to costs incurred by the Company on behalf of
BrainTech Inc. and TechWest Management Inc., companies with directors
in common. These amounts are unsecured, payable on demand and bear no
interest.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 4
(expressed in Canadian dollars)
Six months ended June 30, 1999
with comparative figures for the six months ended July 31, 1998
(Prepared by management)
- --------------------------------------------------------------------------------
5. CAPITAL ASSETS:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
June 30,
1999
-----------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and fixtures $ 358,300 $ 100,286 $ 258,014
Computer equipment 691,639 326,925 364,714
Trade show assets 124,343 18,506 105,837
Computer software 152,344 69,858 82,486
Leasehold improvements 710,388 555,460 154,928
-----------------------------------------------------------------------------------
$ 2,037,014 $ 1,071,035 $ 965,979
-----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
July 31,
1998
-----------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and fixtures $ 122,253 $ 77,886 $ 44,367
Computer equipment 422,691 232,232 190,459
Trade show assets 52,731 1,318 51,413
Computer software 95,577 46,431 49,146
Leasehold improvements 686,736 483,938 202,798
-----------------------------------------------------------------------------------
$ 1,379,988 $ 841,805 $ 538,183
-----------------------------------------------------------------------------------
</TABLE>
6. SHARE CAPITAL:
Authorized:
94,148,696 common shares without nominal or par value.
Issued:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Number
of shares Amount
---------------------------------------------------------------------------------------
<S> <C> <C>
Balance, April 30, 1995 12,719,217 $ 5,451,969
Cancellation of escrow shares (a) (1,926,908) -
---------------------------------------------------------------------------------------
Balance, April 30, 1996 10,792,309 5,451,969
Shares issued on exercise of special warrants 7,683,000 1,754,500
Shares issued on exercise of non-transferable warrants 404,500 202,250
Cancellation of shares (a) (3,924,396) -
Shares issued for settlement of debt 1,489,446 372,362
Performance shares issued for cash 750,000 7,500
Shares issued on exercise of options 123,000 44,280
Less share issue costs - (93,437)
---------------------------------------------------------------------------------------
Balance, April 30, 1997, carried forward 17,317,859 7,739,424
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 5
(expressed in Canadian dollars)
Six months ended June 30, 1999
with comparative figures for the six months ended July 31, 1998
(Prepared by management)
- --------------------------------------------------------------------------------
6. SHARE CAPITAL (CONTINUED):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Number
of shares Amount
---------------------------------------------------------------------------------------
<S> <C> <C>
Balance, April 30, 1997, brought forward 17,317,859 $ 7,739,424
Shares issued on exercise of non-transferable warrants 4,203,100 2,106,500
Shares issued on exercise of options 699,000 352,100
Shares issued to a director in satisfaction
of a royalty claim 100,000 25,000
Special warrants converted to shares 4,450,000 1,293,750
---------------------------------------------------------------------------------------
Balance, April 30, 1998 26,769,959 11,516,774
Special warrants converted to shares 500,000 1,200,000
---------------------------------------------------------------------------------------
Balance, December 31, 1998 27,269,959 12,716,774
Shares issued on exercise of non-transferable warrants 4,137,500 2,060,500
Shares issued on exercise of options 429,000 274,820
Special warrants converted to shares 9,724,611 3,962,990
---------------------------------------------------------------------------------------
Balance, June 30, 1999 41,561,070 $19,015,084
---------------------------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, common shares issued for non-cash consideration
are valued at their market value at date of issuance.
(a) Escrow shares:
Included in issued shares at June 30, 1999 are 1,030,378 shares (July
31, 1998 - 1,030,378) held in escrow to be released based on a cash
flow formula.
On November 22, 1995, 1,926,908 escrowed shares held by a former
director were cancelled by the Company. During the year ended April 30,
1997 the Company offered one free trading share in exchange for 6.4
escrow shares held under safekeeping agreement dated January 11, 1991.
As a result, 3,924,396 shares were cancelled and 726,758 shares were
released from escrow.
(b) Stock options:
(i) The following stock options were outstanding at June 30, 1999:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
---------------------------------------------------------------------------------------
<S> <C> <C>
865,000 $ 0.50 May 1, 2001
246,000 $ 0.36 February 12, 2002
50,000 $ 0.82 March 26, 2002
645,000 $ 0.70 December 16, 2002
430,000 $ 0.36 October 6, 2003
685,000 $ 1.14 April 24, 2004
220,000 $ 1.35 April 29, 2004
---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 6
(expressed in Canadian dollars)
Six months ended June 30, 1999
with comparative figures for the six months ended July 31, 1998
(Prepared by management)
- --------------------------------------------------------------------------------
6. SHARE CAPITAL (CONTINUED):
(b) Stock options (continued):
(ii) The following stock options were outstanding at July 31, 1998:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
---------------------------------------------------------------------------------------
<S> <C> <C>
941,000 $ 0.50 May 1, 2001
267,000 $ 0.36 February 12, 2002
60,000 $ 0.50 February 12, 2002
93,000 $ 0.82 March 26, 2002
760,000 $ 0.70 December 16, 2002
555,000 $ 0.36 October 6, 2003
---------------------------------------------------------------------------------------
</TABLE>
Stock options are granted five years prior to the expiry date at
exercise prices that are based on market prices at the date of grant.
(c) Share purchase warrants:
(i) The following non-transferable share purchase warrants were
outstanding at June 30, 1999:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
---------------------------------------------------------------------------------------
<S> <C> <C>
937,500 $ 0.92 October 23, 1999
90,000 $ 0.32 To November 19, 1999
$ 0.37 From November 20, 1999
to November 19, 2000
125,000 $ 0.60 To January 5, 2000
$ 0.75 From January 6, 2001
to January 5, 2001
600,000 $ 0.28 To January 14, 2000
$ 0.32 From January 15, 2001
to January 14, 2001
1,567,084 $ 0.265 U.S. To January 7, 2000
$ 0.305 U.S. From January 6, 2000
to January 7, 2001
2,805,000 $ 0.35 To January 7, 2000
$ 0.37 From January 8, 2000
to January 7, 2001
1,528,527 $ 0.383 U.S. To April 7, 2000
$ 0.385 U.S. From April 8, 2000
to April 7, 2001
3,000,000 $ 0.55 To April 14, 2000
$ 0.63 From April 15, 2000
to April 14, 2001
---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 7
(expressed in Canadian dollars)
Six months ended June 30, 1999
with comparative figures for the six months ended July 31, 1998
(Prepared by management)
- --------------------------------------------------------------------------------
6. SHARE CAPITAL (CONTINUED):
At July 31, 1998, 3,075,400 share purchase warrants were
outstanding and due to expire on November 7, 1998. At June 30,
1999, the Company was awaiting regulatory approval to have these
warrants extended to October 31, 1999, therefore, these warrants
are not disclosed as outstanding at June 30, 1999.
(ii) The following non-transferable share purchase warrants were
outstanding at July 31, 1998:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
---------------------------------------------------------------------------------------
<S> <C> <C>
3,075,400 $ 0.575 November 7, 1998
450,000 $ 0.465 April 16, 1999
3,000,000 $ 0.43 April 16, 1999
1,000,000 $ 0.80 To October 23, 1998
$ 0.92 From October 24, 1998
to October 23, 1999
---------------------------------------------------------------------------------------
</TABLE>
Share purchase warrants are generally issued two years prior to their
expiry date.
(c) Special warrants:
(i) As at June 30, 1999 all special warrants had been exercised.
(ii) At July 31, 1998, 500,000 special warrants were outstanding which
can be exercised in exchange for one common share and one
non-transferable share purchase warrant by October 24, 1998. The
non-transferable share purchase warrants will have the following
terms:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
---------------------------------------------------------------------------------------
<S> <C> <C>
500,000 $ 0.80 To October 23, 1998
$ 0.92 From October 24, 1998
to October 23, 1999
---------------------------------------------------------------------------------------
</TABLE>
(e) Commitment related to investment advisory services:
At July 31, 1998, the Company had entered into an agreement which,
subject to receipt of regulatory approval, provides for the issuance of
100,000 common shares and 125,000 share purchase warrants exercisable
at $0.60 - $0.75 per share for a two year period. The value assigned to
these equity instruments of $75,000 has been expensed during the fiscal
period ending July 31, 1998 and deficit, accumulated during the
development stage, as at July 31, 1998 has been increased by $75,000
from the amount previously reported.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 8
(expressed in Canadian dollars)
Six months ended June 30, 1999
with comparative figures for the six months ended July 31, 1998
(Prepared by management)
- --------------------------------------------------------------------------------
7. INCOME TAXES:
The Company has non-capital losses for income tax purposes of approximately
$10,155,000 which are available to reduce taxable income of future years,
the benefit of which has not been recorded in the accounts and which expire
as follows:
<TABLE>
<S> <C>
1999 $ 770,000
2000 1,285,000
2001 -
2002 650,000
2003 3,600,000
2005 2,200,000
2006 1,650,000
----------------------------------
$ 10,155,000
==================================
</TABLE>
8. LITIGATION:
The Company is engaged in the following litigation:
(a) During the year ended July 31, 1997, a former director of the Company
commenced legal proceedings against the Company for $276,000 alleged to
be owing to him for unpaid consulting fees and funds loaned or advanced
on behalf of the Company. The Company has filed a defense and
counterclaim.
(b) During the year ended July 31, 1997, four former directors commenced
legal proceedings against the Company and certain of its present
directors claiming unspecified damages for libel. The Company has filed
a defense.
(c) During the year ended July 31, 1996 the Company commenced legal
proceedings against former directors and officers of the Company,
companies related to a former director, and the Company's former
solicitors and auditors. The relief claimed included damages for breach
of fiduciary duty and negligence, an injunction preventing the sale of
a computer program named "E-Glue", and an order setting aside a
disputed general security agreement against the Company's assets.
484117 B.C. Ltd., a company controlled by a former director, filed a
counterclaim alleging that the Company was indebted to it in the amount
of $1,495,594 as at November 4, 1994, and seeking to enforce the
disputed general security agreement. The Company's former auditors
filed a counterclaim for approximately $50,000 alleged to be owing for
professional services.
(d) On January 11, 1999 parties related to a former director commenced
proceedings against the Company claiming damages for abuse of process.
The Company has filed a defense and counterclaim.
While the ultimate outcomes of these claims are uncertain, management of
the Company believes it will be successful in defending these actions and
accordingly no amounts have been provided in these financial statements.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 9
(expressed in Canadian dollars)
Six months ended June 30, 1999
with comparative figures for the six months ended July 31, 1998
(Prepared by management)
- --------------------------------------------------------------------------------
9. COMMITMENTS:
The Company has the following minimum lease payments under operating leases
for its premises:
<TABLE>
<S> <C>
1999 $ 236,000
2000 418,000
2001 428,000
2002 445,000
2003 379,000
----------------------------------
$ 1,906,000
==================================
</TABLE>
Pursuant to an agreement with a company with certain common shareholders
and directors of the Company, approximately $100,000 of these amounts are
recoverable for the fiscal years from 1999 to 2002, and approximately
$70,000 for the fiscal year ending 2003.
10. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems, which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure, which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
<PAGE>
Consolidated Financial Statements of
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
<PAGE>
[LETTERHEAD]
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Sideware Systems Inc. as
at December 31, 1998 and April 30, 1998 and the consolidated statements of
operations and deficit and changes in financial position for the eight months
ended December 31, 1998 and the years ended April 30, 1998, 1997 and 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with 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 consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December
31, 1998 and April 30, 1998 and the results of its operations and the changes
in its financial position for the eight months ended December 31, 1998 and
years ended April 30, 1998, 1997 and 1996 in accordance with generally
accepted accounting principles in Canada. As required by the Company Act
(British Columbia) we report that, in our opinion, these principles have been
applied on a basis consistent with that of the preceding period.
Significant measurement differences between Canadian and United States
accounting principles as they affect these consolidated financial statements
are explained and quantified in note 13.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
April 15, 1999, except as
to note 12 which is as of
April 30, 1999
<PAGE>
[LETTERHEAD]
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-U.S. REPORTING CONFLICT
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 cause
substantial doubt on the Company's ability to continue as a going concern,
such as those described in note 2 to the financial statements. Our report to
the shareholders dated April 15, 1999, except as to note 12 which is as of
April 30, 1999, 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.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
April 15, 1999, except as
to note 12 which is as of
April 30, 1999
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Balance Sheets
(expressed in Canadian dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, April 30,
1998 1998
- -------------------------------------------------------------------------------------------------------------
(restated -
note 6(e))
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 317,344 $ 1,837,779
Accounts receivable:
Trade 35,181 51,340
Other (note 4(a)) 200,000 -
Due from related parties (note 4(b)) 375,315 2,237
Inventory 44,105 -
Prepaid expenses 98,408 133,104
- -------------------------------------------------------------------------------------------------------------
1,070,353 2,024,460
Deposit on lease 8,213 8,213
Capital assets (note 5) 646,529 551,396
- -------------------------------------------------------------------------------------------------------------
$ 1,725,095 $ 2,584,069
- -------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 197,768 $ 215,411
Capital tax payable 7,100 7,100
Due to officer (note 4(c)) 73,870 -
- -------------------------------------------------------------------------------------------------------------
278,738 222,511
Shareholders' equity:
Share capital (note 6) 12,716,774 11,516,774
Special warrants (note 6(d)) 977,082 1,200,000
Commitment related to investment advisory services (note 6(e)) 75,000 75,000
Deficit accumulated during the development stage (12,322,499) (10,430,216)
- -------------------------------------------------------------------------------------------------------------
1,446,357 2,361,558
Future operations (note 2)
Litigation (note 9)
Commitments (note 10)
Uncertainty due to the Year 2000 Issue (note 11)
Subsequent events (note 12)
- -------------------------------------------------------------------------------------------------------------
$ 1,725,095 $ 2,584,069
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
Approved by the Board:
____________________________ Director ____________________________ Director
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Statements of Operations and Deficit
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Eight months
ended Years ended April 30,
December 31, ------------------------------------------
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(restated-
note 6(e))
<S> <C> <C> <C> <C>
Revenue:
Sales to unrelated parties $ 29,383 $ 26,782 $ 69,748 $ 25,000
Equipment sales to related parties 129,150 - - -
(note 4(a)) License fee - - - 2,972
- ------------------------------------------------------------------------------------------------------------------
158,533 26,782 69,748 27,972
Cost of sales (exclusive of amortization and other costs disclosed separately
below):
Sales to unrelated parties 20,350 18,178 9,094 382
Equipment sales to related parties 120,068 - - -
(note 4(a))
- ------------------------------------------------------------------------------------------------------------------
140,418 18,178 9,094 382
- ------------------------------------------------------------------------------------------------------------------
Gross margin 18,115 8,604 60,654 27,590
Interest income 41,734 27,897 865 2,254
- ------------------------------------------------------------------------------------------------------------------
59,849 36,501 61,519 29,844
Operating expenses:
Bad debts 30,801 36,349 - -
Amortization 137,392 152,335 122,674 196,714
Employee wages and benefits 401,843 360,143 176,731 154,969
Filing and transfer fees 12,241 21,907 49,360 5,222
Investment advisory services (note 6(e)) - 75,000 - -
Office, printing and sundry 124,375 167,228 107,575 44,703
Professional fees 356,820 620,845 961,245 255,527
Marketing 581,764 635,498 418,764 62,131
Facilities 94,705 76,707 72,667 66,606
Research and development, net of government
grants of $25,730 (April 30, 1998,
1997 and 1996 - $nil) 353,238 301,258 129,877 -
Foreign exchange loss (gain) (141,047) (33,479) 6,139 -
Capital taxes - 7,100 - -
- ------------------------------------------------------------------------------------------------------------------
1,952,132 2,420,891 2,045,032 785,872
- ------------------------------------------------------------------------------------------------------------------
Loss before non-operating items 1,892,283 2,384,390 1,983,513 756,028
Value assigned to shares issued to a
director in satisfaction of a royalty claim - 25,000 - -
Write-down of deferred development costs
and software - - 2,604,115 -
Other items (note 8) - - - 94,269
- ------------------------------------------------------------------------------------------------------------------
- 25,000 2,604,115 94,269
- ------------------------------------------------------------------------------------------------------------------
Loss for the period, carried forward 1,892,283 2,409,390 4,587,628 850,297
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Statements of Operations and Deficit, Continued
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Eight months
ended Years ended April 30,
December 31, ------------------------------------------
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(restated-
note 6(e))
<S> <C> <C> <C> <C>
Loss for the period, brought forward $ 1,892,283 $ 2,409,390 $ 4,587,628 $ 850,297
Deficit, accumulated during the development
stage, beginning of period 10,430,216 8,020,826 3,433,198 2,582,901
- ------------------------------------------------------------------------------------------------------------------
Deficit, accumulated during the development
stage, end of period $ 12,322,499 $ 10,430,216 $ 8,020,826 $ 3,433,198
- ------------------------------------------------------------------------------------------------------------------
Loss per share $ 0.07 $ 0.11 $ 0.29 $ 0.07
- ------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 26,908,735 21,430,724 15,705,723 11,594,747
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Statements of Changes in Financial Position
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Eight months
ended Years ended April 30,
December 31, ------------------------------------------
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(restated-
note 6(e))
<S> <C> <C> <C> <C>
Cash provided by (used for):
Operations:
Loss for the period $ (1,892,283) $ (2,409,390) $ (4,587,628) $ (850,297)
Items not involving the use of cash:
Amortization 137,392 152,335 122,674 196,714
Write-down of deferred development
costs and software - - 2,604,115 -
Investment advisory services to be
settled by equity instruments - 75,000 - -
(note 6(e))
Changes in non-cash operating working
capital:
Accounts receivable (183,841) 81,475 (86,445) (21,543)
Due from related parties (373,078) 173,633 (81,370) (94,500)
Inventory (44,105) 7,651 (7,651) -
Prepaid expenses 34,696 (91,841) 37,684 (78,947)
Accounts payable and accrued liabilities (17,643) 75,931 (81,941) (8,076)
- ------------------------------------------------------------------------------------------------------------------
(2,338,862) (1,935,206) (2,080,562) (856,649)
Financing:
Payable to directors and officers 73,870 (243,233) (60,143) 156,446
Shares issued for cash on exercise of
warrants and options - 2,458,600 1,907,593 -
Special warrants issued for cash 977,082 1,200,000 1,293,750 -
Shares issued for settlement of debt - - 372,362 -
Performance shares issued for cash - - 7,500 -
Value assigned to shares issued in
satisfaction of a royalty claim - 25,000 - -
Share subscriptions receivable - - (776,104) 776,104
- ------------------------------------------------------------------------------------------------------------------
1,050,952 3,440,367 2,744,958 932,550
Investments:
Purchase of capital assets (232,525) (336,803) (3,498) (3,501)
Deferred development costs - - - (47,857)
Deposit on lease, net - - 8,212 (11,292)
- ------------------------------------------------------------------------------------------------------------------
(232,525) (336,803) 4,714 (62,650)
- ------------------------------------------------------------------------------------------------------------------
Increase (decease) in cash and cash equivalents (1,520,435) 1,168,358 669,110 13,251
Cash and cash equivalents, beginning of period 1,837,779 669,421 311 (12,940)
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 317,344 $ 1,837,779 $ 669,421 $ 311
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
1. GENERAL:
The Company was incorporated in 1983 under the Company Act (British
Columbia). Its principal business activity is developing and marketing of
software. During the year ended April 30, 1998, the Company changed its
name from Jot-It! Software Corp. to Sideware Systems Inc.
2. FUTURE OPERATIONS:
At December 31, 1998, the Company is in the business of developing and
marketing computer software technology solutions with a principal focus on
the e-commerce market. To date, the Company has not generated significant
revenues from these operations. For financial reporting purposes, the
Company is considered to be in the development stage and the accompanying
financial statements are those of a development stage enterprise.
As at December 31, 1998, the Company has an accumulated deficit of
$12,322,499 and incurred a loss of $1,892,283 during the eight months ended
December 31, 1998. In addition, the Company is the defendant in a number of
legal proceedings and claims, the maximum potential losses under which are
material (note 9). The Company has filed counterclaims on certain of these
claims. These financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern.
Accordingly, they do not give effect to adjustments that would be necessary
should the Company be unable to continue as a going concern. The Company's
continuance as a going concern is dependent upon its ability to obtain
adequate equity financing, to reach profitable levels of operation and its
success in defending existing legal claims all of which are consistent with
management's intentions. There is no certainty that such conditions can be
achieved. In the next twelve months, management of the Company also intends
on applying financing received to the continued development of products in
process and to identify sales or strategic alliance opportunities with
respect to such products. At the date of these consolidated financial
statements significant additional financing sources have not been
identified.
3. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in Canada
which, except as set out in note 13, also comply in all material
respects with generally accepted accounting principles in the United
States. The consolidated financial statements include the accounts of
the company, and its subsidiaries, 9050 Investments Ltd., Sideware
Corp. (formerly Collaborative Groupware Inc.), Evergreen International
Technology Inc. (which is inactive) and 9123 Investments Ltd., all of
which are wholly-owned. In addition, the Company accounts by the equity
method for its one-third interest in Concurrent Adoptive Recognition
Corp. (which is inactive). All material intercompany balances and
transactions have been eliminated.
(b) Cash and cash equivalents:
Cash and cash equivalents have terms to maturity at the date of
acquisition of not more than three months.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 2
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(c) Capital assets:
Capital assets are carried at cost less accumulated amortization.
Amortization is calculated annually as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Asset Basis Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Furniture and fixtures declining-balance 20%
Computer equipment declining-balance 30%
Trade show assets declining balance 20%
Computer software straight-line 50%
Leasehold improvements straight-line lease term
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(d) Income taxes:
The Company follows the tax allocation method of accounting. Under this
method, deferred income taxes are provided on timing differences
between income reported for tax purposes and accounting income. In
addition, the Company records those investment tax credits, for which
it has reasonable assurance of realization, as a reduction of the
expenses or the cost of capital assets to which they relate.
(e) Research and development costs:
Research costs are expensed as incurred. Development costs are deferred
if they meet certain specified criteria which relate to the
identification of costs, future benefits and funding requirements.
Where development costs do not meet such criteria, they are expensed as
incurred. Government grants, which are not refundable are disclosed as
a reduction of the related cost. Management periodically assesses the
underlying value of deferred development costs by reference to business
plans and estimated future cash flows and records write-downs where
appropriate.
(f) Revenue recognition:
The Company recognizes revenue when title has passed to the customer,
the collectability of the consideration is measurable and the Company
has no significant remaining performance obligations. This includes
revenues from sales to resellers which are recorded in accordance with
their terms when the resellers have no right of return and the Company
has no other remaining performance obligations. The Company recognizes
sales of equipment, to related parties, in revenues and related costs
in cost of sales as the Company takes title to and holds the equipment,
bearing all of the risks and rewards of ownership, prior to sale, and
bears the same risks as for sales to unrelated parties after sale,
including the risks related to collection of receivables.
(g) Financial instruments:
The Company accounts for financial instruments at cost. The carrying
amounts reported in the balance sheet for cash, accounts receivable,
due from related parties, accounts payable and accrued liabilities,
capital tax payable and due to directors and officers are estimated by
management to approximate their fair values, due to the short-term
maturity of these instruments. The Company has no outstanding
derivative instruments, or other instruments with credit or interest
rate risk.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 3
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(h) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant areas requiring
the use of management estimates relate to the collectability of the
amounts due from related parties. Actual amounts may differ from these
estimates.
(i) Loss per share:
Loss per share is calculated based on the weighted average number of
shares outstanding.
Fully diluted loss per share has not been presented as outstanding
options, warrants and special warrants are anti-dilutive.
4. RELATED PARTY TRANSACTIONS:
(a) Transactions with related parties:
During the period, the Company was charged $120,222 (April 30, 1998 -
$214,596, April 30, 1997 - $440,514, April 30, 1996 - $20,840) for
services rendered, $106,880 (April 30, 1998 - $178,000; April 30, 1997
- $42,000; April 30, 1996 - $20,840) in salaries and $nil (April 30,
1998 - $25,000; April 30, 1997 and 1996 - $nil) in settlement of claims
by certain directors of the Company.
The accounts receivable - other includes $200,000 representing the cost
of an interest in a court judgment purchased from a company related
through certain common shareholders and directors. Subsequent to
December 31, 1998 the judgment was reversed on appeal and the $200,000
purchase price was returned to the Company.
Included in revenues and cost of sales are revenues and related costs
associated with equipment sales to BrainTech, Inc. and Techwest
Management Inc., companies with certain common shareholders and
directors to the Company.
(b) Due from related parties:
At December 31, 1998, the Company was owed $375,315 (April 30, 1998 -
$2,237) with respect to costs incurred by the Company on behalf of
BrainTech Inc. and TechWest Management Inc., companies with directors
in common. These amounts are unsecured, payable on demand and bear no
interest.
(c) Due to officer:
The amount due to officer represents advances from and amounts owing
for services provided by a current officer of the Company. These
amounts are unsecured, payable on demand and bear no interest.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 4
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
5. CAPITAL ASSETS:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
December 31,
1998
- -------------------------------------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and fixtures $ 146,602 $ 83,378 $ 63,224
Computer equipment 517,674 277,913 239,761
Trade show assets 111,721 7,448 104,273
Computer software 99,352 51,194 48,158
Leasehold improvements 707,509 516,396 191,113
- -------------------------------------------------------------------------------------------------------------
$ 1,582,858 $ 936,329 $ 646,529
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
April 30,
1998
- -------------------------------------------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and fixtures $ 121,731 $ 75,564 $ 46,167
Computer equipment 470,167 223,911 246,256
Computer software 71,699 34,029 37,670
Leasehold improvements 686,736 465,433 221,303
- -------------------------------------------------------------------------------------------------------------
$ 1,350,333 $ 798,937 $ 551,396
- -------------------------------------------------------------------------------------------------------------
</TABLE>
6. SHARE CAPITAL:
Authorized:
94,148,696 common shares without nominal or par value.
Issued:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number
of shares Amount
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, April 30, 1995 12,719,217 $ 5,451,969
Cancellation of escrow shares (a) (1,926,908) -
- -------------------------------------------------------------------------------------------------------------
Balance, April 30, 1996 10,792,309 5,451,969
Shares issued on exercise of special warrants 7,683,000 1,754,500
Shares issued on exercise of non-transferable warrants 404,500 202,250
Cancellation of shares (a) (3,924,396) -
Shares issued for settlement of debt 1,489,446 372,362
Performance shares issued for cash 750,000 7,500
Shares issued on exercise of options 123,000 44,280
Less share issue costs - (93,437)
- -------------------------------------------------------------------------------------------------------------
Balance, April 30, 1997, carried forward 17,317,859 7,739,424
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 5
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
6. SHARE CAPITAL (CONTINUED):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number
of shares Amount
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, April 30, 1997, brought forward 17,317,859 $ 7,739,424
Shares issued on exercise of non-transferable warrants 4,203,100 2,106,500
Shares issued on exercise of options 699,000 352,100
Shares issued to a director in satisfaction of a royalty claim 100,000 25,000
Special warrants converted to shares 4,450,000 1,293,750
- -------------------------------------------------------------------------------------------------------------
Balance, April 30, 1998 26,769,959 11,516,774
Special warrants converted to shares 500,000 1,200,000
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 27,269,959 $ 12,716,774
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, common shares issued for non-cash consideration
are valued at their market value at date of issuance.
(a) Escrow shares:
Included in issued shares at December 31, 1998 are 1,030,378 shares
(April 30, 1998 and 1997 - 1,030,378; April 30, 1996 - 4,931,532) held
in escrow to be released based on a cash flow formula.
On November 22, 1995, 1,926,908 escrowed shares held by a former
director were cancelled by the Company. During the year ended April 30,
1997, the Company offered one free trading share in exchange for 6.4
escrow shares held under safekeeping agreement dated January 11, 1991.
As a result, 3,924,396 shares were cancelled and 726,758 shares were
released from escrow.
(b) Stock options:
(I) The following stock options were outstanding at December 31, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
885,000 $ 0.50 May 1, 2001
267,000 $ 0.36 February 12, 2002
40,000 $ 0.50 February 12, 2002
93,000 $ 0.82 March 26, 2002
740,000 $ 0.70 December 16, 2002
555,000 $ 0.36 October 6, 2003
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 6
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
6. SHARE CAPITAL (CONTINUED):
(b) Stock options (continued):
(II) The following stock options were outstanding at April 30, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
941,000 $ 0.50 May 1, 2001
267,000 $ 0.36 February 12, 2002
60,000 $ 0.50 February 12, 2002
93,000 $ 0.82 March 26, 2002
760,000 $ 0.70 December 16, 2002
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Stock options are granted five years prior to the expiry date at
exercise prices that are based on market prices at the date of grant.
(c) Share purchase warrants:
(i) The following non-transferable share purchase warrants were
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
450,000 $ 0.465 April 16, 1999
3,000,000 $ 0.43 April 16, 1999
1,500,000 $ 0.92 October 23, 1999
- -------------------------------------------------------------------------------------------------------------
</TABLE>
At April 30, 1998, 3,075,400 share purchase warrants were
outstanding and due to expire on November 7, 1998. At December 31,
1998, the Company was awaiting regulatory approval to have these
warrants extended to October 31, 1999, therefore, these warrants
are not disclosed as outstanding at December 31, 1998.
(ii) The following non-transferable share purchase warrants were
outstanding at April 30, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3,075,400 $ 0.575 November 7, 1998
450,000 $ 0.465 April 16, 1999
3,000,000 $ 0.43 April 16, 1999
1,000,000 $ 0.80 To October 23, 1998
$ 0.92 From October 24, 1998
to October 23, 1999
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Share purchase warrants are generally issued two years prior to
their expiry date.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 7
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
6. SHARE CAPITAL (CONTINUED):
(d) Special warrants:
(i) At December 31, 1998, 90,000 special warrants were outstanding
which can be exercised in exchange for one common share and one
non-transferable share purchase warrant by November 19, 2000. The
non-transferable share purchase warrants have the following terms:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
90,000 $ 0.32 To November 19, 1999
$ 0.37 From November 20, 1999
to November 19, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998, the Company had announced three special
warrant private placements which were not approved until
subsequent to year end. These private placements represented the
issuance of an aggregate of 4,582,805 special warrants at prices
ranging from $0.28 to $0.41 each. Each special warrant under these
placements is exchangeable for one common share and one share
purchase warrant exercisable for a two year period. Agreements
relating to 4,072,805 of the special warrants provide that the
number of shares and share purchase warrants will be increased by
10% if the Company does not file documents to qualify the shares
for resale within a specified period. Management of the Company
believes that the 10% increase will become effective. At December
31, 1998, the Company had received subscriptions aggregating
$948,282 towards the issuance of special warrants under these
private placements which is included in the special warrants
balance of $977,082 as at December 31, 1998.
(ii) At April 30, 1998, 500,000 special warrants were outstanding which
can be exercised in exchange for one common share and one
non-transferable share purchase warrant by October 24, 1998. The
non-transferable share purchase warrants will have the following
terms:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number Exercise price
of shares per share Expiry date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
500,000 $ 0.80 To October 23, 1998
$ 0.92 From October 24, 1998
to October 23, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(e) Commitment related to investment advisory services:
At April 30, 1998, the Company had entered into an agreement which,
subject to receipt of regulatory approval, provides for the issuance of
100,000 common shares and 125,000 share purchase warrants exercisable
at $0.60 - $0.75 per share for a two year period. The value assigned to
these equity instruments of $75,000 has been expensed during the fiscal
year ending April 30, 1998 and deficit, accumulated during the
development stage, as at April 30, 1998 has been increased by $75,000
from the amount previously reported.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 8
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
7. INCOME TAXES:
The Company has non-capital losses for income tax purposes of approximately
$10,155,000 which are available to reduce taxable income of future years,
the benefit of which has not been recorded in the accounts and which expire
as follows:
<TABLE>
<S> <C>
1999 $ 770,000
2000 1,285,000
2001 -
2002 650,000
2003 3,600,000
2005 2,200,000
2006 1,650,000
- ----------------------------------------------------------------------------------------
$ 10,155,000
- ----------------------------------------------------------------------------------------
</TABLE>
8. OTHER ITEMS:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Eight months
ended Years ended April 30,
December 31, -------------------------------------------------
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Settlement of previously accrued
accounts payable (a) $ - $ - $ - $ (38,731)
Settlement of claim of director (b) - - - 75,000
Settlement of claim (c) - - - 58,000
- ------------------------------------------------------------------------------------------------------------------
$ - $ - $ - $ 94,269
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Company negotiated reductions in amounts previously accrued in
accounts payable by making settlements with creditors for payment of an
agreed upon portion of the amount owing. The amount of discount
accepted by the creditors in settlement was recognized in income by the
Company.
(b) A claim by a director for outstanding severance pay and for breach of a
stock option agreement of the Company was accrued during 1996 for
$75,000. In 1997, the claim was settled for 300,000 common shares of
the Company at $0.25 per share.
(c) A claim for unpaid salary relating to a former officer's employment
with the Company in prior years was settled for $58,000 and accrued in
1996. In 1997, the claim was settled for 232,000 common shares of the
Company at $0.25 per share.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 9
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
9. LITIGATION:
The Company is engaged in the following litigation:
(a) During the year ended April 30, 1997, a former director of the Company
commenced legal proceedings against the Company for $276,000 alleged to
be owing to him for unpaid consulting fees and funds loaned or advanced
on behalf of the Company. The Company has filed a defense and
counterclaim.
(b) During the year ended April 30, 1997, four former directors commenced
legal proceedings against the Company and certain of its present
directors claiming unspecified damages for libel. The Company has filed
a defense.
(c) During the year ended April 30, 1996 the Company commenced legal
proceedings against former directors and officers of the Company,
companies related to a former director, and the Company's former
solicitors and auditors. The relief claimed included damages for breach
of fiduciary duty and negligence, an injunction preventing the sale of
a computer program named "E-Glue", and an order setting aside a
disputed general security agreement against the Company's assets.
484117 B.C. Ltd., a company controlled by a former director, filed a
counterclaim alleging that the Company was indebted to it in the amount
of $1,495,594 as at November 4, 1994, and seeking to enforce the
disputed general security agreement. The Company's former auditors
filed a counterclaim for approximately $50,000 alleged to be owing for
professional services.
(d) On January 11, 1999 parties related to a former director commenced
proceedings against the Company claiming damages for abuse of process.
The Company has filed a defense and counterclaim.
While the ultimate outcomes of these claims are uncertain, management of
the Company believes it will be successful in defending these actions and
accordingly no amounts have been provided in these financial statements.
10. COMMITMENTS:
The Company has the following minimum lease payments under operating leases
for its premises:
<TABLE>
<S> <C>
1999 $ 354,000
2000 418,000
2001 428,000
2002 445,000
2003 379,000
- ----------------------------------------------------------------------------------------
$ 2,024,000
- ----------------------------------------------------------------------------------------
</TABLE>
Pursuant to an agreement with a company with certain common shareholders
and directors of the Company, approximately $100,000 of these amounts are
recoverable for the fiscal years from 1999 to 2002, and approximately
$70,000 for the fiscal year ending 2003.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 10
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
11. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems, which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure, which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
12. SUBSEQUENT EVENTS:
(a) Stock options:
Subsequent to December 31, 1998, 221,000 stock options were exercised
and converted to common shares for total cash proceeds of $115,260.
On April 14 and 29, 1999, the Company granted 760,000 and 220,000 stock
options, respectively, all subject to regulatory approval, exercisable
at prices of $1.14 and $1.35 per share until April 2004.
(b) Share purchase warrants:
Subsequent to December 31, 1998, 3,612,500 share purchase warrants were
exercised and converted to common shares for total cash proceeds of
$1,648,750.
(c) Special warrants:
Subsequent to December 31, 1998, the Company issued, through private
placements, 9,111,333 special warrants, 4,582,805 of which were
announced prior to year end (see note 6(d)), at prices ranging from
$0.28 to $0.51 each, for total proceeds of $4,076,000. Each special
warrant is exercisable into one common share and one non-transferable
share purchase warrant. Each share purchase warrant will entitle the
holder thereof to purchase one common share at prices ranging from
$0.28 to $0.59 for a two year period from the date of special warrant
issuance.
On January 5, 1999, the Company issued 125,000 special warrants at
$0.60. Each special warrant is excercisable into one common share and
one non-transferable share purchase warrant. Each share purchase
warrant entitles the holder thereof to purchase one common share at
prices ranging from $0.60 to $0.75 until January 3, 2001. All special
warrants were immediately exercised and converted to 125,000 common
shares and 125,000 share purchase warrants.
Certain special warrants are subject to a 10% increase in the number of
shares and share purchase warrants to be issued upon exercising (see
note 6(d)).
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 11
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
13. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles ("GAAP") the measurement
principles of which conform, in all material respects, with those of the
United States except as described below:
(a) Income taxes:
Under the asset and liability method of United States Statement of
Financial Accounting Standards No. 109 ("FAS 109"), deferred income tax
assets and liabilities are measured using enacted tax rates for the
future income tax consequences attributable to differences between the
financial statement carrying amount of existing assets and liabilities
and their respective tax bases. The application of the provisions of
FAS 109 on the Company's balance sheet would result in no net
difference in deferred taxes from that reported under Canadian GAAP. At
December 31, 1998, the gross deferred tax asset amount relating to a
non-capital loss carry forward was $4,062,300 which is reduced by a
valuation allowance of $4,062,300 as management does not consider that
it is more likely than not that such assets will be realized in the
carry forward period. There was no deferred tax liability.
(b) Stock-based compensation:
For United States GAAP purposes, the Company has elected to follow the
disclosure-only provisions under Statement of Financial Accounting
Standards No. 123 ("FAS 123"), "Accounting for Stock-Based
Compensation", and applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its stock-based compensation to
employees. Accordingly, the Company's stock-based compensation expense
is measured based on the intrinsic value of the option on the date of
grant. FAS 123 requires companies that continue to follow APB 25 to
disclose the impact of applying the fair value method of FAS 123.
Under the intrinsic value method of APB 25, the stock option
compensation is the excess, if any, of the quoted market value of the
stock at the measurement date of the grant over the amount an optionee
must pay to acquire the stock. Accordingly, stock-based compensation
for the period ended December 31, 1998, and the years ended April 30,
1998, 1997 and 1996, for United States GAAP purposes, would be $44,000,
$nil, $19,350 and $nil, respectively.
Had stock compensation expense for the Company's stock option plan been
determined based on the fair value methodology under FAS 123, the
Company's net loss would have increased for the period ended December
31, 1998, and the years ended April 30, 1998, 1997 and 1996 by
$118,016, $291,793, $261,248 and $nil, respectively. In addition, the
Company's loss per share under United States GAAP for the period ended
December 31, 1998, and the years ended April 30, 1998, 1997 and 1996
would have been $0.80, $0.13, $0.15 and $0.15, respectively.
The fair value for the options was estimated using the Black-Scholes
option pricing model with the following assumptions: Expected
volatility of 70%, risk-free interest rate ranging from 5.3% to 6.3%,
expected life of five years, and a 0% dividend yield.
The weighted-average fair value of stock options granted for the period
ended December 31, 1998 and the years ended April 30, 1998, 1997 and
1996, are $0.29, $0.39, $0.22 and $nil, respectively.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 12
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
13. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(b) Stock-based compensation (continued):
A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
Outstanding Options
----------------------------------
Number of Weighted average
shares exercise price
--------- ----------------
<S> <C> <C>
Balances at April 30, 1996 - -
Options granted 1,285,000 0.49
Options exercised (123,000) 0.36
Options canceled - -
--------- ----------
Balances at April 30, 1997 1,162,000 0.50
Options granted 740,000 0.70
Options exercised (699,000) 0.50
Options canceled - -
--------- ----------
Balances at April 30, 1998 1,203,000 0.62
Options granted 555,000 0.36
Options exercised - -
Options canceled - -
--------- ----------
Balances at December 31, 1998 1,758,000 0.54
========= ==========
</TABLE>
(c) Development stage enterprises:
For United States GAAP purposes, Statement of Financial Accounting
Standards No. 7, "Development Stage Enterprises", the Company would be
defined to be a development stage enterprise which would require the
following additional disclosures:
(i) The amounts in the consolidated statement of operations and
deficit accumulated during the development stage would be
presented on a cumulative basis from the Company's inception which
is summarized as follows:
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Revenues $ 1,213,427
Cost of sales (exclusive of amortization and
other costs disclosed separately below) 236,047
- -------------------------------------------------------------------------------------------------------------
977,380
Operating expenses:
Amortization 942,199
Bad debts 261,867
Employee wages and benefits 1,492,055
Filing and transfer fees 165,472
Investment advisory services 75,000
Marketing 2,578,962
Office, printing and sundry 1,442,073
Professional fees 3,774,871
Research and development 3,388,488
- -------------------------------------------------------------------------------------------------------------
14,120,987
- -------------------------------------------------------------------------------------------------------------
Loss before undernoted 13,143,607
Other income (375,355)
- -------------------------------------------------------------------------------------------------------------
Loss accumulated during the development stage under U.S. GAAP $ 12,768,252
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 13
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
13. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(c) Development stage enterprises (continued):
(ii) The amounts in the consolidated statement of cash flows would also
be presented on a cumulative basis from the Company's inception
which is summarized as follows:
<TABLE>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Operating activities:
Loss accumulated during the development stage $ (12,768,252)
Items not involving the use of cash:
Amortization 942,199
Other 190,336
Changes in non-cash operating working capital items (458,019)
- -------------------------------------------------------------------------------------------------------------
(12,093,736)
Investing activities (749,439)
Financing activities 13,160,576
- -------------------------------------------------------------------------------------------------------------
Increase in cash during the development stage 317,401
Cash, inception of development stage (57)
- -------------------------------------------------------------------------------------------------------------
Cash, October 31, 1998 $ 317,344
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 14
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
13. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(c) Development stage enterprises (continued):
(iii) A cumulative statement of stockholders' equity would be presented
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Share capital Retained
------------------------ Special earnings
Number Assigned warrants (deficit)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, inception of development stage 1,044,719 $ 526,961 $ - $ 382,003
Shares issued for cash 400,000 100,000 - -
Loss for the year - - - (90,976)
- -------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1990 1,444,719 626,961 291,027
Shares issued for acquisition
of subsidiary 6,660,452 1,105,231 - -
Shares issued as settlement for debt 900,000 225,000 - -
Loss for the year - - - (2,237,102)
- -------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1991 9,005,171 1,957,192 - (1,946,075)
Shares issued for cash 500,000 200,000 - -
Shares issued for cash 220,000 198,000 - -
Loss for the year - - - (431,506)
- -------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1992 9,725,171 2,355,192 - (2,377,581)
Shares issued for cash 783,000 567,250 - (781,817)
Loss for the year - - - -
- -------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1993 10,508,171 2,922,442 - (3,159,398)
Shares issued as a finders fee 53,881 92,675 - -
Shares issued for cash 1,588,550 1,671,710 - -
Shares issued as settlement for debt 406,450 705,141 - -
Loss for the year - - - (2,256,961)
- -------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1994 12,557,052 5,391,968 - (5,416,359)
Shares issued as settlement for debt 162,165 60,001 - -
Earnings for the year - - - 277,200
- -------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1995 12,719,217 5,451,969 - (5,139,159)
Cancellation of escrow shares (1,926,908) - - -
Loss for the year - - - (898,154)
- -------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1996, carried
forward 10,792,309 5,451,969 - (6,037,313)
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 15
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
13. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(c) Development stage enterprises (continued):
(iii) A cumulative statement of stockholders' equity would be presented
(continued):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Share capital Retained
------------------------ Special earnings
Number Assigned warrants (deficit)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, April 30, 1996, brought
forward 10,792,309 $ 5,451,969 $ - $ (6,037,313)
Special warrants issued - - 3,250,500 -
Shares issued on exercise of
special warrants 7,683,000 1,754,500 (1,754,500) -
Shares issued on exercise of
non-transferable warrants 404,500 202,250 (202,250) -
Cancellation of shares (3,924,396) - - -
Shares issued as settlement
for debt 1,489,446 372,362 - -
Performance shares issued for cash 750,000 7,500 - -
Shares issued on exercise of
options 123,000 44,280 - -
Share issue costs - (93,437) - -
Loss for the year - - - (2,002,863)
- -------------------------------------------------------------------------------------------------------------
Balance, April 30, 1997 17,317,859 7,739,424 1,293,750 (8,040,176)
Shares issued on exercise of
non-transferable warrants 4,203,100 2,106,500 - -
Shares issued on exercise of
options 699,000 352,100 - -
Shares issued in satisfaction of
a royalty claim 100,000 25,000 - -
Special warrants converted to
shares 4,450,000 1,293,750 (1,293,750) -
Special warrants issued - - 1,200,000 -
Loss for the year - - - (2,409,390)
- -------------------------------------------------------------------------------------------------------------
Balance, April 30, 1998 26,769,959 11,516,774 1,200,000 (10,449,566)
Shares issued on exercise
of special warrants 500,000 1,200,000 (1,200,000) -
Special warrant subscriptions - - 997,082 -
Loss for the period - - - (1,936,683)
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 27,269,959 $ 12,716,774 $ 997,082 $ (12,386,249)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Identification as a development stage enterprise would not impact
the measurement principles applied.
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 16
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
13. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(d) Research and development:
For United States GAAP purposes, Statement of Financial Accounting
Standards No. 2, "Research and Development Expenditures", requires
development costs to be expensed as incurred. Accordingly:
- Deferred development costs of $47,857 which were capitalized
during the year ended April 30, 1996 would be expensed as incurred;
- Prior to the year ended April 30, 1996, the Company capitalized
acquired intellectual property under development with an assigned
value of $1,921,500 from the acquisition of a subsidiary which
would be expensed as incurred;
- Deferred development costs of $634,758 which were capitalized
prior to the year ended April 30, 1996 would be expensed as
incurred under FAS 86;
- As a result, the deferred development costs of $2,604,115 that were
written off in the year ended April 30, 1997 under Canadian GAAP
would have been expensed in prior years under United States GAAP.
(e) Loss per share:
For United States GAAP purposes, 1,030,378 shares held in escrow as at
December 31, 1998 (April 30, 1998 and 1997 - 1,030,378) are considered
contingently issuable. Accordingly, these shares have been excluded
from the weighted average number of shares outstanding for the purposes
of calculating loss per shares amounts. To the extent that common
shares held in escrow are releasable based on the achievement of
performance measures and such shares are held by employees of the
Company, compensation expense will be recognized under United States
GAAP at the date the shares became releasable for the difference
between the market value of the shares at that date and the nominal
consideration originally paid.
(f) Summary of United States GAAP adjustments:
The following table sets forth the effect on the loss for the period
and loss per share:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Eight months
ended Years ended April 30,
December 31, ------------------------------------------
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loss determined under Canadian GAAP $ 1,892,283 $ 2,409,390 $ 4,587,628 $ 850,297
Expenses relating to stock-based compensation 44,400 - 19,350 -
Difference in accounting for deferred
development costs and software, including
reversal in 1997 of write-down recorded
under Canadian GAAP for costs that would
have been expensed in a prior year under
United States GAAP - - (2,604,115) 47,857
- ------------------------------------------------------------------------------------------------------------------
Loss determined under United States GAAP $ 1,936,683 $ 2,409,390 $ 2,002,863 $ 898,154
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(a Company in the Development Stage)
Consolidated Notes to Financial Statements, page 17
(expressed in Canadian dollars)
Eight months ended December 31, 1998
Years ended April 30, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
13. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(f) Summary of United States GAAP adjustments (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Eight months
ended Years ended April 30,
December 31, ------------------------------------------
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loss determined under United States GAAP $ 1,936,683 $ 2,409,390 $ 2,002,863 $ 898,154
- ------------------------------------------------------------------------------------------------------------------
Weighted average number of shares
outstanding, United States GAAP 25,878,357 20,400,346 14,675,347 5,860,951
- ------------------------------------------------------------------------------------------------------------------
Loss per share under United States GAAP $ 0.07 $ 0.12 $ 0.14 $ 0.15
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
There would be no impact from the above adjustments on total assets or
shareholders' equity reported under Canadian GAAP at December 31, 1998
and April 30, 1998.
(g) Statement of cash flows:
The settlement of debt through issue of $372,362 of common shares in
the year ended April 30, 1997 would be excluded from operating and
financing transactions in a statement of cash flows under United States
GAAP. The value assigned to shares issued in satisfaction of a royalty
claim of $25,000 in the year ended April 30, 1998 would also be
excluded from operating and financing transactions under United States
GAAP. The bank indebtedness would be reflected as a financing item
rather than included with cash under United States GAAP.
As a result, cash flows from operating, financing and investing
activities under United States GAAP would be presented as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Eight months
ended Years ended April 30,
December 31, ------------------------------------------
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from:
Operating activities $ (2,338,862) $ (1,910,207) $ (1,708,200) $ (856,649)
Financing activities 1,050,952 3,415,367 2,371,596 919,610
Investing activities (232,525) (336,802) 4,714 (62,650)
- ------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash $ (1,520,435) $ 1,168,358 $ 668,110 $ 311
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
14. COMPARATIVE FIGURES:
Certain comparative figures have been reclassified to conform to the
financial statement presentation adopted in the current year.
<PAGE>
Exhibit 4.4
Agreement dated October 28, 1999 between the Company
and certain warrant holders of the Company
<PAGE>
AMENDMENT AGREEMENT
Dated for reference October 28, 1999.
BETWEEN:
SIDEWARE SYSTEMS INC.
(formerly Evergreen International Technology Inc.)
(the "Company")
AND:
THOSE WARRANTHOLDERS SET OUT IN SCHEDULE "A" HERETO
(the "Warrantholders")
WHEREAS:
A. The Warrantholders hold 3,075,400 outstanding share purchase
warrants (the "Warrants") issued by the Company on or about November 8, 1996.
B. Under the terms of the Warrants as originally issued, the Warrants
would expire November 8, 1998.
C. The Company requested approval from the Vancouver Stock Exchange
(the "Exchange") to extend the term of the Warrants to April 16, 1999, but
the Exchange approved an extension to November 27, 1998 only.
D. By Amendment Agreement dated November 23, 1998, the Company and the
Warrantholders agreed to extend the term of the warrants to April 16, 1998
subject to the Company either obtaining Exchange approval, or to a change in
the Company's regulatory status such that Exchange approval was not required.
E. The conditions to the extension of the term of the warrants to
April 16, 1999, as set out in the Amendment Agreement dated for reference
November 23, 1998, were not satisfied.
F. By further Amendment Agreement dated for reference April 14, 1999,
the Company and the Warrantholders agreed to further extend the term of the
Warrants to October 31, 1999.
G. The conditions to the extension of the term of the warrants to
October 31, 1999, as set out in the Amendment Agreement dated for reference
April 14, 1999, were not fulfilled.
H. The Company wishes to further extend the term of the Warrants to
April 30, 2000.
NOW THEREFORE the Company and the Warrantholders agree as follows.
<PAGE>
2
CONDITIONAL FURTHER EXTENSION TO APRIL 30, 2000
1. Subject to the conditions set out in section 2, the Warrants are
hereby further amended to extend the term of the Warrants to 4:00 p.m. on
April 30, 2000. The exercise price for the period from October 31, 1999 up
to April 30, 1999 shall be $0.77.
CONDITIONS OF FURTHER EXTENSION
2. The further extension provided in section 1 is subject to the
condition that the Company shall have obtained such regulatory approvals as
it is required to obtain. Without limiting the generality of the foregoing,
the further extension provided in section 1 is subject to conditions that:
(a) the Company obtain approval from the Exchange (or, though appeal, from the
British Columbia Securities Commission) to the further extension; or
(b) the regulatory status of the Company change, so that the Company is not
subject to any regulatory requirement to obtain Exchange approval to the
further extension.
No Underlying Warrant may be exercised until such time as the conditions set out
in this section have been satisfied.
MANNER OF EXECUTION
3. This Agreement may be executed in counterpart of by facsimile, and
such counterpart and facsimile documents shall be taken and read together to
form a single binding agreement.
SIDEWARE SYSTEMS INC.
per:
"signed"
- ---------------------------
Authorized Signatory
"signed" "signed"
- --------------------------- ---------------------------
Alder Enterprises Ltd. Donald Anderson - RRSP
"signed" "signed"
- --------------------------- ---------------------------
Clive Forth - RRSP Golden Capital Securities Ltd.
"signed" "signed"
- --------------------------- ---------------------------
Paul Hildebrand Stephen K. Howell
<PAGE>
3
"signed"
- --------------------------- ---------------------------
Owen Jones Stan Jackson - RRSP
"signed"
- --------------------------- ---------------------------
Gordon Kemp Peter Kozicki
- --------------------------- ---------------------------
Ken Kozlowski David Mackenzie
- --------------------------- ---------------------------
Dave Mew Sherman Quon
"signed"
- --------------------------- ---------------------------
Valerie Rooks Grant Sutherland
- --------------------------- ---------------------------
Richard M. Thompson Lily Wong
"signed"
- --------------------------- ---------------------------
Jori Woodman
<PAGE>
SCHEDULE "A"
<TABLE>
<CAPTION>
Warrantholder No. of Warrants Outstanding
------------- ---------------------------
<S> <C>
Alder Enterprises Ltd. 220,000
Donald Anderson - RRSP 268,000
Baldwin & Brown Development Company Inc. 110,000
Baldwin Realty Ltd. 110,000
Merle Barney 22,000
Melvin E. Beaumont 440,000
TimChan - RRSP 13,200
Peter Fisher 11,600
Clive Forth - RRSP 55,000
Golden Capital Securities Ltd. 60,000
Paul Hildebrand 110,000
Stephen K. Howell 8,800
Owen Jones 440,000
Stan Jackson - RRSP 88,000
Gordon Kemp 154,000
Peter Kozicki 44,000
Ken Kozlowski 11,000
David Mackenzie 154,000
Dave Mew 10,400
Sherman Quon 6,000
Valerie Rooks 275,000
Grant Sutherland 372,000
Richard M. Thompson 22,000
Lily Wong 44,000
Jori Woodman 26,400
</TABLE>
<PAGE>
Exhibit 5.1
Legal Opinion of Dale W. Wilcox, A Law Corporation
<PAGE>
DALE W. WILCOX,
A LAW CORPORATION
SUITE 1910 - 777 HORNBY STREET TELEPHONE: (604) 687-1374
VANCOUVER, B.C. FACSIMILE: (604) 687-2731
DALE W. WILCOX
PAUL HILDEBRAND
DAVID M. SAITO
November 4, 1999
BY HAND
Sideware Systems Inc.
930 West 1st Street, Suite 102
North Vancouver, B.C.
V7P 3N4
ATTENTION: GRANT SUTHERLAND, CHAIRMAN
Dear Sirs:
RE: REGISTRATION STATEMENT ON FORM F-1
We act as general counsel to Sideware Systems Inc. (the "Company"). In
particular, we have rendered legal services to the Company relating to the
issuance of 2,746,833 units in September 1999 at a price of US$1.64 per unit.
Each unit consists of one common share without par value (the "Shares") in the
capital of the Company and one share purchase warrant (the "Warrants"). Each
Warrant entitles the holder to acquire one additional share (the "Warrant
Shares") at any time up to September 14, 2001 at a price of US$1.64 per share
in the first year and US$1.89 per share in the second year.
We have also participated in the preparation of a Registration Statement to
register the Shares and Warrant Shares under the Securities Exchange Act of
1933.
We have examined such documents and records of the Company as we have deemed
necessary for the purpose of this opinion. In doing so, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, and the conformity of all documents submitted to us as copies
to the originals.
In our opinion:
1. The Shares constitute duly authorised, validly issued, fully paid, and
non-assessable common shares without par value in the capital of the
Company.
2. The Warrants have been duly and validly authorised, executed and
delivered on behalf of the Company.
3. The Warrant Shares have been validly authorised and allotted.
<PAGE>
-2-
4. Upon issuance of the Warrant Shares in accordance with the terms of the
Warrants and receipt by the Company of the consideration required for
the Warrant Shares in accordance with the terms of the Warrants, the
Warrant Shares will constitute duly authorised, validly issued, fully
paid, and non-assessable common shares without par value in the capital
of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under section 7 of
the Securities Act of 1933.
We are solicitors qualified to carry on the practice of law in British Columbia
only and we express no opinion as to any laws, or other matters governed by
any laws, other than the laws of British Columbia and federal laws of Canada
applicable therein.
This opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in these sources of law or subsequent legal or factual developments which
might affecting any matters or opinions set forth in this letter.
We are opining only as to the 0matters expressly stated in this letter, and no
opinion should be inferred as to any other matters.
Yours truly,
DALE W. WILCOX, A LAW CORPORATION
"Paul Hildebrand"
Per:
Paul Hildebrand
<PAGE>
Exhibit 10.2
Software Development and License Agreement dated September 20, 1999
between the Company and BrainTech, Inc.
<PAGE>
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
THIS AGREEMENT is dated as of the 20th day of September, 1999.
BETWEEN:-
BRAINTECH, INC., a company subsisting under the laws of
Nevada and having its head office in British Columbia at
Suite 102, 930 West 1st Street, Vancouver, B.C. V7P 3N4
("BrainTech")
AND:
SIDEWARE SYSTEMS INC., a company duly incorporated under the
laws of the Province of British Columbia having its head
office at Suite 102, 930 West 1st Street, Vancouver, B.C.
V7P 3N4
("SSI")
WHEREAS:-
A. BrainTech has proposed to develop the Software.
B. Sideware is the owner and developer of Dr. Bean, which facilitates
customer care and customer relations management for companies operating
e-business internet web sites.
C. One potential application of the Software is as a component of Dr.
Bean.
D. The parties wish to provide for the development and licensing of the
Software on the terms and conditions set out herein.
NOW THEREFORE WITNESSETH that in consideration of the premises and of
the mutual covenants and agreements set forth herein, the parties hereto
covenant and agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
DEFINITIONS
1.01 In this Agreement, including the recitals hereto, the following words
and phrases shall have the following meanings:-
(a) "Available Date" means the date on which a version of Dr. Bean
incorporating the Software becomes generally available for sale to the
public;
(b) "Dr. Bean" includes:
(i) the software application currently being marketed by
Sideware under the name "Dr. Bean";
(ii) any modifications or enhancements to the software described
in (i); and
(iii) any other software applications which may be developed or
marketed by Sideware which include functions similar to those
performed by the software described in (i);
(c) "Intellectual Property Rights" includes copyrights, patents, trade
marks, service marks, design rights (whether registered or unregistered),
moral rights, semiconductor topography rights, trade secrets and all
other similar proprietary rights;
(d) "Sideware" includes SSI, Sideware Corp., Sideware International S.R.L.,
and any other affiliates or subsidiaries thereof;
(e) "Software Developer" means any company whose business includes the
development and marketing of software applications;
(f) "Systems Integrator" means any company which is not a Software Developer,
and whose business includes the creation of customised computer systems
using software applications developed by other persons;
(g) "Know How" includes all technical information, procedures, programs,
codes, trade secrets, methods, concepts, ideas, practices, algorithms,
techniques, information, and specifications relating to the Software;
(h) "Software" means the Wizmaster computer program to be developed generally
in accordance with the Specifications; and
2
<PAGE>
(i) "Specifications" means the specifications for the Software set out
Schedule in "A".
CAPTIONS AND SECTION NUMBERS
1.02 The headings and section references in this Agreement are for
convenience of reference only and do not form a part of this Agreement and
are not intended to interpret, define or limit the scope, extent or intent of
this Agreement or any provision thereof.
EXTENDED MEANINGS
1.03 The words "hereof", "herein", "hereunder" and similar expressions used
in any clause, paragraph or section of this Agreement shall relate to the
whole of this Agreement and not to that clause, paragraph or section only,
unless otherwise expressly provided.
NUMBER AND GENDER
1.04 Whenever the singular or masculine or neuter is used in this
Agreement, the same shall be construed to mean the plural or feminine or body
corporate where the context of this Agreement or the parties hereto so
require.
SECTION REFERENCES AND SCHEDULES
1.05 Any reference to a particular "article", "section", "subsection" or
other subdivision is to the particular article, section or other subdivision
of this Agreement and any reference to a schedule by letter shall mean the
appropriate schedule attached to this Agreement and by such reference the
appropriate schedule is incorporated into and made part of this Agreement.
GOVERNING LAW
1.06 This Agreement and all matters arising hereunder shall be governed by,
construed and enforced in accordance with the laws of the Province of British
Columbia, Canada.
SEVERABILITY OF CLAUSES
1.07 In the event that any provision of this Agreement or any part thereof
is invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
CURRENCY
1.08 All sums of money to be paid or calculated pursuant to this Agreement
shall be paid or calculated in currency of the United States of America
unless otherwise expressly stated.
3
<PAGE>
SCHEDULES
1.09 The following are the schedules attached to and incorporated in this
Agreement by reference and deemed to be part hereof:-
Schedule "A" - Specifications
Schedule "B" - Hourly charge out rates
ARTICLE 2
DEVELOPMENT OF SOFTWARE
DEVELOPMENT OF THE SOFTWARE
2.01 Following the execution and delivery of this Agreement, BrainTech
shall use diligent and continuous efforts to cause the Software to be
developed generally in accordance with the Specifications. SSI acknowledges
that some or all of the development work may be carried out through BrainWare
Systems Inc., as a sub-contractor to BrainTech.
SSI TO PAY DEVELOPMENT COSTS
2.02 SSI will pay for the development of the Software in accordance with
the following procedure.
(a) At the end of each month, BrainTech shall be entitled to submit an
invoice to SSI in an amount equal to:
(i) the costs incurred by BrainTech during the month in the
development of the Software; plus
(ii) a 10% allowance for profit.
(b) In calculating the costs incurred in the development of the Software,
BrainTech shall be entitled to charge for work done by personnel in the
categories described in Schedule "B" at the charge out rates set out in
Schedule "B".
(c) For work done by personnel not included in the categories set out in
Schedule "B", BrainTech shall include in its invoices such time charges
as it considers reasonable. SSI shall be entitled to dispute the
reasonableness of any such charges by giving notice to BrainTech within
30 days of receiving the invoice. If the parties are unable to resolve
their disagreement within 30 days of SSI giving
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such notice, then any dispute shall be resolved by arbitration pursuant
to section 7.07.
(d) BrainTech shall be entitled to include in its invoices other out of
pocket expenses incurred in the development of the Software, plus a 10%
allowance for profit.
(e) SSI shall pay all invoices within 30 days of receipt. If SSI disputes
the amount of any invoice, it shall be entitled either to:
(i) pay such amount as may be in dispute into a lawyer's trust
account pending resolution of the dispute; or
(ii) pay such amount as may be in dispute to BrainTech, subject
to the right of SSI to recover the amount in dispute subsequently,
if the dispute is resolved in SSI's favour.
AUDIT RIGHTS
2.03 SSI shall at any time have the right on reasonable notice to BrainTech
to audit the books and records of BrainTech in respect of the amounts charged
to SSI pursuant to this Agreement for any period. The costs of the audit
shall be borne by BrainTech if the results of such audit disclose that
BrainTech overcharged SSI by 10% or more in respect of the period under
audit. Any dispute arising out of such audit shall be resolved by
arbitration in accordance with section 7.07.
MONTHLY REPORTS
2.04 At the end of each month, BrainTech shall give SSI a report on the
development of Software, which report shall include:
(a) a description of the development work completed to date;
(b) an estimated date for completion of the development; and
(c) an estimated cost for completion of the development.
TERMINATION OF DEVELOMENT
2.05 SSI shall be entitled at any time prior to delivery of the Software to
give notice to BrainTech terminating its involvement in development of the
Software. If SSI gives such notice:
(a) SSI's payment obligations pursuant to section 2.02 shall terminate;
(b) BrainTech's development obligations pursuant to section 2.01 shall
terminate;
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(c) Sideware shall not be entitled to any license rights under Article 3; and
(d) If BrainTech subsequently sells or licenses the Software to any other
person, BrainTech shall repay to SSI the amounts paid by SSI pursuant to
section 2.02, except that BrainTech's liability pursuant to this
subsection shall be limited to the greater of:
(i) the total of the amounts paid by SSI pursuant to section 2.02; and
(ii) the total sales and license revenue received by BrainTech
from such third party sales or licenses.
TESTING AND DE-BUGGING OF SOFTWARE
2.06 BrainTech shall notify SSI when development of the Software has
reached the stage where integration of the Software with Dr. Bean, and
testing and de-bugging thereof, is feasible. The parties thereafter will
co-operate to complete integration of the Software with Dr. Bean as soon as
reasonably practicable.
DELIVERY OF SOFTWARE
2.07 Upon completion of the integration of the Software with Dr. Bean, and
provided that SSI shall have paid to BrainTech all amounts owing pursuant to
section 2.02, BrainTech shall deliver to Sideware:
(a) the source code for the Software; and
(b) such other technical data and information relating to the Software
as Sideware may require.
Use of such source code and technical data by Sideware shall be subject to
Article 3.
EXPLOITATION OF SOFTWARE BY SIDEWARE
2.08 Following delivery of the Software to Sideware, Sideware shall use
reasonable commercial efforts to achieve the Availability Date as soon as
reasonably practicable.
SUPPORT FOR SOFTWARE
2.09 Following delivery of the Software BrainTech shall, upon request from
Sideware, give such assistance to Sideware as BrainTech is reasonably able to
give in respect of:
(a) further development or enhancement of the Software by Sideware; and
(b) correcting any defects or errors in the Software.
Sideware will pay BrainTech for the reasonable personnel charges in rendering
such assistance on the same basis as set out in section 2.02.
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ARTICLE 3
GRANT OF LICENSE
GRANT OF LICENSE
3.01 Upon completion of the integration of the Software with Dr. Bean, and
provided that SSI shall have paid to BrainTech all amounts owing pursuant to
section 2.02, Sideware shall have and hold a perpetual, irrevocable,
world-wide, fully pre-paid license to use the Software on the terms and
conditions set out herein.
PERMITTED USE AND SUB-LICENSEING
3.02 Sideware may:
(a) use the Software as a component of its Dr. Bean application;
(b) sub-license directly and indirectly the Software to licensees and
purchasers of Dr. Bean for use as part of Dr. Bean;
(c) use the Software and the Know How to develop further enhancements
and modifications of the Software and Dr. Bean; and
(d) use the Software and the Know How for any purposes incidental to
(a) to (d), above.
MODIFICATIONS AND ENHANCEMENTS DEVELOPED BY SIDEWARE
3.03 Any modifications or enhancements to the Software developed by Sideware
will belong to Sideware.
MODIFICATIONS AND ENHANCEMENTS DEVELOPED BY BRAINTECH
3.04 Any modifications or enhancements to the Software developed by
BrainTech will belong to BrainTech. Sideware shall be entitled to acquire
license rights in respect of such modifications or enhancements in accordance
with the following procedure.
(a) Forthwith upon completing any material modification or enhancement to
the Software, BrainTech shall give notice to SSI thereof. Such notice
shall describe in reasonable detail the functions performed or enhanced
by the modifications or enhancements, and shall state the cost incurred
by BrainTech in developing the modifications or enhancements, calculated
as nearly as practicable in accordance with section 2.02.
(b) Sideware shall have 30 days following receipt of any notice delivered
pursuant to (a) to consider whether it wishes to purchase license rights
in the modification or enhancement. During such 30 day period, BrainTech
shall give Sideware such technical and other information as Sideware may
reasonably request concerning the modification or enhancement.
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(c) At any time during the 30 day period described in (a), SSI may give
notice to BrainTech that Sideware wishes to acquire license rights in the
modification or enhancement. Concurrently with giving such notice, SSI
must pay the cost stated by BrainTech in the notice given pursuant to
(a) plus a 10% allowance for profit.
(d) Upon giving notice pursuant to (c), Sideware shall acquire license rights
in the modification or enhancement on the same terms and conditions as
set out in sections 3.01 to 3.03.
RESTRICTION ON LICENSING BY BRAINTECH
3.05 For a period of one year following the Availability Date, BrainTech
shall not license the Software to any Software Developer other than Sideware.
For greater clarity, this section shall not prevent BrainTech from licensing
the Software to any Systems Integrator. The restrictions set out in this
section shall also apply to any modification or enhancement to which Sideware
acquires license rights pursuant to section 3.04, except that in such case
the one year period specified in this section shall commence, in respect of
such modification or enhancement, on the date Sideware gives notice pursuant
to subsection 3.04(c).
OWNERSHIP OF SOFTWARE AND KNOW HOW
3.06 Except as expressly set out herein, no provision of this Agreement
shall or shall be construed to assign, transfer, or otherwise convey to
Sideware any ownership right of any sort in the Software or the Know How.
ARTICLE 4
PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
ACKNOWLEDGEMENTS OF BRAINTECH
4.01 BrainTech acknowledges that Dr. Bean is the property of Sideware
solely and exclusively, and that:
(a) Dr. Bean and the know how related thereto constitute valuable trade
secrets of Sideware;
(b) all Intellectual Property Rights relating to Dr. Bean (except for those
rights Sideware has licensed from third parties) are the property of
Sideware; and
(c) all technical data relating to Dr. Bean is confidential information
belonging to Sideware and, to the extent that such information is
disclosed to BrainTech, it is disclosed to BrainTech in confidence.
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PROTECTION OF CONFIDENTIALITY
4.02 BrainTech shall adopt internal operating procedures and shall take all
other reasonable steps to protect and ensure the confidentiality of
Sideware's confidential information relating to Dr. Bean. Without limiting
the generality of the foregoing, the steps taken by BrainTech shall include
compliance with sections 4.03 to 4.05 of this Agreement.
PROHIBITION ON USE AND DISCLOSURE
4.03 Except as expressly authorized by this Agreement, or except as
expressly authorized in writing in advance by Sideware, BrainTech shall not:-
(a) disclose, provide, or make available any information relating to Dr. Bean
to any person, except to employees of BrainTech for whom access to the
information is necessary to enable BrainTech to perform its obligations
or exercise its rights under this Agreement;
(b) copy, disassemble, decompile, translate or convert into human readable
form, or reverse engineer, all or any part of Dr. Bean;
(c) use Dr. Bean or any information relating to Dr. Bean for any purpose
other than to facilitate development of the Software pursuant to this
Agreement; or
(d) remove any proprietary, copyright or trade secret legend from any copy of
Dr. Bean or from any copy of any technical written material relating to
Dr. Bean.
QUALIFICATION TO SECTION 4.03
4.04 Section 4.03 shall not prevent the disclosure of information which (i)
is or becomes part of the public domain through no act or omission of
BrainTech, (ii) BrainTech receives from a third party acting without any
obligation or restriction of confidentiality in favor of Sideware, (iii)
Sideware releases from confidential treatment by written consent, or (iv)
BrainTech is required by any applicable law or court order to disclose.
CONFIDENTIALITY AGREEMENTS
4.05 Prior to permitting any employee of BrainTech (or any other person, if
access by such other person is authorised by this Agreement) to have access
to Dr. Bean or any technical information relating thereto, BrainTech shall
cause such employee or other person to enter into a confidentiality agreement
pursuant to which the employee (or other person) covenants to protect the
confidentiality of Dr. Bean.
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PROTECTION OF CONFIDENTIALITY OF BRAINTECH
4.06 Except as expressly provided in this Agreement, SSI shall keep (and
shall cause the other entities included within Sideware to keep) confidential
all confidential information, trade secrets, or know-how of BrainTech which
is in its possession or hereafter becomes known to Sideware as a result of
this Agreement (the "BrainTech Confidential Information"). Prior to
permitting any employee of SSI (or any other person, if access by such other
person is authorised by this Agreement) to have access to the BrainTech
Confidential Information, SSI shall cause such employee or other person to
enter into a confidentiality agreement pursuant to which the employee (or
other person) covenants to protect the confidentiality of the BrainTech
Confidential Information.
QUALIFICATION TO SECTION 4.06
4.07 Section 4.06 shall only apply to such information relating to the
affairs of BrainTech that BrainTech expressly designates as confidential, or
which is by its nature patently confidential. In addition, section 4.06
shall not apply to any information in respect of which Sideware acquires any
license or right, pursuant to this Agreement, to use or exploit for its own
benefit or advantage, or prevent disclosure of any information which (i) is
or becomes part of the public domain through no act or omission of Sideware,
(ii) Sideware receives from a third party acting without any obligation or
restriction of confidentiality in favor of BrainTech, (iii) BrainTech
releases from confidential treatment by written consent, or (iv) Sideware is
required by any applicable law or court order to disclose.
INFRINGEMENT CLAIMS BY THIRD PARTIES
4.08 Subject to the limitations set out in this section, BrainTech shall at
BrainTech's expense conduct the defence of any action brought by any third
party against Sideware alleging that use by Sideware of the Software or the
Know How constitutes violation of any Intellectual Property Right of such
third party. BrainTech's obligations under this section shall:
(a) only apply if the infringing conduct alleged by the third party arises
from use of the Software or the Know How for a use authorised by this
Agreement, or conduct necessarily incidental thereto;
(b) only apply if Sideware gives BrainTech prompt notice of the claim by the
third party;
(c) not apply to any claim based on use of any modification or enhancement
developed by Sideware; and
(d) not apply to any claim based on the combination or connection of the
Software by Sideware to any other product, device, program, or system
(other than Dr. Bean) which BrainTech did not supply to Sideware.
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ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS
4.09 Each party acknowledges that damages will not be an adequate remedy
for any infringement or threatened infringement of the Intellectual Property
Rights of the other party. Each party agrees that:
(a) in any proceeding in respect of any infringement or threatened
infringement of the Intellectual Property Rights of the other party, the
party seeking to enforce its Intellectual Property Rights shall be
entitled to interim, interlocutory, and permanent injunctive relief
without regard to the balance of convenience or the adequacy of damages;
(b) each party shall submit to and attorn to, and hereby submits to and
attorns to, the jurisdiction of the Supreme Court of British Columbia in
respect of any such proceeding;
(c) any order or decision of the Supreme Court of British Columbia shall be
enforceable against and binding upon the parties in respect of activities
in any jurisdiction; and
(d) notwithstanding subsections (b) and (c), no party shall be required to
commence proceedings to enforce its Intellectual Property Rights in the
Supreme Court of British Columbia, but shall be entitled to commence such
proceedings in another jurisdiction if such party is of the view that
proceedings in such other jurisdiction might reasonably result in more
effective or valuable relief being granted.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BRAINTECH
5.01 BrainTech represents and warrants to Sideware, with the intent that
Sideware will rely thereon in entering into this Agreement and in concluding
the transactions contemplated hereby, that:
(a) BrainTech is duly incorporated and organized under the laws of the State
of Nevada and has the power, authority and capacity to enter into this
Agreement and carry out its terms;
(b) BrainTech has the corporate power and authority to own its property and
to carry on the business now being conducted by it;
(c) this Agreement will constitute legal, valid and binding obligations of
BrainTech enforceable in accordance with its terms; and
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(d) the entering into of this Agreement and the performance by BrainTech of
its obligations thereunder do not and will not result in the violation of
any of the terms and provisions of any agreement to which BrainTech is a
party or by which it or any of its properties or assets are bound.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SIDEWARE
6.01 SSI represents and warrants to BrainTech, with the intent that
BrainTech will rely thereon in entering into this Agreement and in concluding
the transactions contemplated hereby, that:
(a) SSI is duly constituted and organised under laws of British Columbia and
has the power, authority and capacity to enter into this Agreement and
carry out its terms;
(b) SSI has the corporate power and authority to own its property and to
carry on the business now being conducted by it;
(c) this Agreement will constitute legal, valid and binding obligations of
SSI enforceable in accordance with its terms; and
(d) the entering into of this Agreement and the performance by SSI of its
obligations thereunder do not and will not result in the violation of any
of the terms and provisions of any agreement to which SSI is a party or
by which it or any of its properties or assets are bound.
NO WARRANTY OF QUALITY
6.02 SSI acknowledges that the Software represents unique and novel
technology. No warranty, covenant, or representation, express or implied, is
given by BrainTech as to the quality or performance characteristics of the
Software, the suitability or fitness of the Software for any use, or the
absence of defects in the Software.
ARTICLE 7
GENERAL PROVISIONS
NOTICES
7.01 All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
by hand or telecopied:
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To SSI:
SIDEWARE SYSTEMS INC.
1910 - 777 Hornby St.
Vancouver, B.C.
V6Z 1S4
Fax: (604) 687-2731
To BrainTech:
BRAINTECH, INC.
#102, 903 West 1st Street
North Vancouver, B.C.
V7P 3N4
Fax: (604) 980-7121
or to such other address as may be given in writing by the parties in
accordance with this section, and shall be deemed to have been received, if
delivered by hand, on the date of delivery, if telecopied to the telecopier
numbers set out above, on the business day next following the date of
transmission.
TIME OF ESSENCE
7.02 Time is hereby expressly made of the essence of this Agreement with
respect to the performance by the parties of their respective obligations
under this Agreement.
BINDING EFFECT
7.03 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
personal representatives, successors and assigns.
ENTIRE AGREEMENT
7.04 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
expectations, understandings, communications, representations and agreements
whether verbal or written between the parties with respect to the subject
matter hereof.
FURTHER ASSURANCES
7.05 Each of the parties hereby covenants and agrees to execute such
further and other documents and instruments and do such further and other
things as may be necessary or desirable to implement and carry out the intent
of this Agreement.
AMENDMENTS
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7.06 No amendment to this Agreement shall be valid unless it is evidenced
by a written agreement executed by all of the parties hereto.
ARBITRATION
7.07 All disputes arising under this Agreement shall be resolved through
arbitration by a single arbitrator in accordance with the COMMERCIAL
ARBITRATION ACT of British Columbia, except that nothing in this section
shall prevent a party from commencing proceedings before another court or
tribunal to protect any Intellectual Property Right.
GOOD FAITH
7.08 All parties to this Agreement shall exercise their respective rights,
and perform their respective obligations, in good faith and in a commercially
reasonable manner.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on
the day and year first above written.
SIDEWARE SYSTEMS INC.
Per:
"signed"
---------------------------------
Authorised Signatory
BRAINTECH, INC.
Per:
"signed"
---------------------------------
Authorised Signatory
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Exhibit 10.3
Software Development License between the Company and
Sideware International SRL effective August 27, 1999
<PAGE>
SOFTWARE DEVELOPMENT LICENSE
DATED for reference the 27th day of August, 1999.
BETWEEN:
SIDEWARE SYSTEMS INC., a company with an office at #102 -
930 West 1st Street, North Vancouver, B.C., Canada V7P 3N4
OF THE FIRST PART;
(herein called "Sideware")
AND:
SIDEWARE INTERNATIONAL SRL, with its head office and place
of business at 2nd Street, Holetown, St. James, Barbados,
West Indies
OF THE SECOND PART;
(herein called "Developer")
RECITALS
A. Sideware has developed and is the owner of the Dr. Bean Version 2.0
Software described in Schedule "A".
B. Sideware has agreed to grant the Developer, subject to the terms of this
agreement, a license to use such Software to develop Derivative Products
and to market, distribute and sell such Derivative Products.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein the parties record their agreement as follows:
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1.0 DEFINITIONS
1.1 DEFINED TERMS - In this agreement:
(a) "Authorized Employee" means an employee or a contractor of Developer
who requires access to the Software and Source Code solely for the
purpose of developing the Derivative Products;
(b) "Derivative Products" means the products developed by the Developer
using the Software in which all or part of the Software may be
incorporated;
(c) "Developer" means Sideware International SRL;
(d) "End User" means a third party who purchases a copy of the Derivative
Products from the Developer or the Developer's distributor for its own
internal use pursuant to the Sub-license Agreement referred to in
section 3;
(e) "Default" has the meaning provided in section 8;
(f) "Sideware" means Sideware Systems Inc.
(g) "Software" means the machine readable object code for the computer
programs listed in Schedule "A";
(h) "Source Code" means the human readable or source code version of the
Software developed by Sideware.
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1.2 CONSTRUCTION - In this agreement, except as otherwise expressly provided:
(a) the headings and captions will be considered as provided for
convenience only and not as forming a part of this agreement and will
not be used to interpret, define, or limit the scope, extent or intent
of this agreement or any of its provisions;
(b) all dollar amounts and payments referred to in this agreement are in
United States of America currency unless specifically indicated
otherwise;
(c) a reference to "approval", "authorization", "consent", "designation"
or "notice" means written approval, written authorization, written
consent, written designation or written notice unless specifically
indicated otherwise; and
(d) a reference in this agreement to a particular section is a reference
to such numbered section of this agreement.
2.0 GRANT OF LICENSE
2.1 GRANT OF LICENSE - Subject to the terms and conditions of this agreement,
Sideware grants to Developer a non-exclusive fully-paid license to use the
Software for the purpose of developing Derivative Products and marketing,
distributing and selling the Derivative Products to End Users located
anywhere in the world outside of Canada.
2.2 DELIVERY OF SOFTWARE AND UTILIZATION - Upon signing of this agreement
Sideware will deliver to Developer the Software and the Source Code.
Except as expressly permitted by this agreement, at no time, whether during
or after the term of this agreement, shall Developer utilize the Software
and Source Code except in accordance with section 2.1. Without limiting
the foregoing, Developer shall refrain from taking any action such as
reverse assembly or reverse compilation, to derive a source code equivalent
of the Software programs.
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2.3 USE OF SOFTWARE MATERIALS - Developer may copy the Software and the Source
Code materials that are provided by Sideware pursuant to section 2.2 solely
for the following purposes:
(a) to understand the contents of the Software materials;
(b) for backup purposes; and
(c) for archive purposes.
In making any copies of the Software, Developer shall preserve and
reproduce all copyright, trademark or proprietary legends on any copy or
copies of any Software materials or any portion thereof.
2.4 NON-DISCLOSURE - Developer shall not make available, provide or otherwise
allow or permit the provision, directly or indirectly, of the Source Code
for the Software or any copy thereof, in any form, representation or
medium, including but not limited to, electronic or optical storage
thereof, to any third party.
2.5 AUTHORIZED EMPLOYEES - Prior to any Authorized Employee of Developer having
access to the Software and Source Code provided by Sideware, Developer
shall inform such Authorized Employee of its obligations under this
agreement with respect to the Source Code and Software, place the name of
such Authorized Employee on the Authorized Employee list and provide such
list of Authorized Employees to Sideware. The procedures in this section
shall be undertaken for every Authorized Employee, prior to such newly
Authorized Employee having access to the Software.
2.6 Developer agrees that only those Authorized Employees who have signed an
agreement agreeing to transfer and confer onto the Developer all
proprietary information and copyrights they may generate in performance of
their duties and agreeing to maintain the
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Source Code confidential shall have access to the Software and Source
Code. Developer shall provide copies of such agreements to Sideware.
3.0 DERIVATIVE PRODUCTS
3.1 RIGHT TO SUB-LICENSE - Subject to the terms and conditions of this
agreement, Developer or its distributors may sell copies of the Derivative
Products to End Users only if the End Users enter into a non-exclusive,
non-transferable sub-license agreement to use the Derivative Products.
Developer agrees to use the sub-license agreement provided by Sideware from
time to time, including any amendments or modifications thereof (the
"Sub-license Agreement").
3.2 APPOINTMENT OF DISTRIBUTORS - Subject to the terms and conditions of this
agreement, Developer may enter into reseller agreements with resellers of
software for the purpose of distributing, marketing and selling the
Derivative Products, provided such resellers agree to perform Developer's
obligations in this agreement that relate to the distribution, marketing,
sale, installation, integration and support of the Derivative Products.
Developer agrees to use the reseller agreement provided by Sideware from
time to time, including any amendments or modifications thereof (the
"Reseller Agreement").
3.3 RIGHT TO COPY - Except as otherwise provided in this agreement, Developer
is authorized to copy all or portions of the Software for distribution to
End Users within the Derivative Products and to copy, modify and/or
incorporate into the documentation for the Derivative Products, portions of
the printed documentation provided by Sideware in connection with the
Software. Developer shall preserve and reproduce Sideware's copyright,
trademark and proprietary rights notices on any such permitted copies.
3.4 DEMONSTRATION COPIES - Developer and the Developer's resellers may use
copies of Derivative Products for demonstration purposes for which no
royalty fees shall be due to Sideware.
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3.5 DISTRIBUTION AND SALES - Developer will use its best efforts to distribute
and sell the Derivative Products. From time to time as requested by
Sideware, Developer will meet with Sideware for review and consultation
regarding Developer's marketing plans and activities. For the purposes of
such review, Developer will make available to Sideware such information
concerning Developer's marketing plans and activities as Sideware may
reasonably request.
3.6 MARKETING STANDARDS - Developer agrees to conduct its marketing and sales
of Derivative Products in a manner that reflects favourably on the
Derivative Products and on the reputation and good will of Sideware and its
affiliates.
4.0 ROYALTY FEE
4.1 ROYALTY FEE - For each copy of a Derivative Product sold by Developer
pursuant to a Sub-license Agreement or Reseller Agreement, Developer shall
pay Sideware the royalty fee set forth in Schedule "B" hereto according to
the payment terms therein. Developer shall maintain an accurate list of
End Users, which shall consist of, for each End User an identification
number assigned by Developer, the Derivative Products licensed, and the
location of their use. Under no circumstances shall Sideware have access
to Developer's End User list. Developer shall also maintain records of
Derivative Product inventory held by resellers. Within thirty (30) days of
the end of each calendar quarter, Developer shall complete and submit to
Sideware the report detailing the number of copies of Derivative Products
distributed directly to End Users and the number distributed to resellers
during the previous calendar quarter, amount billed customers less
discounts, returns, and reportable sales (in the form attached hereto as
Schedule "C") and remit to Sideware all royalty fees due.
4.2 AUDIT RIGHTS - Sideware shall have the right to direct an independent audit
firm of international standing to conduct, during normal business hours, an
audit of the appropriate records of Developer with respect to the sale and
distribution of the Derivative Products and verify statements made by
Developer to Sideware with respect to
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royalty fees due. Such audit shall be at Sideware's expense unless the
adjustment to royalty fees due is greater than 5% of fees due for the
period audited, in which case Developer shall pay for all expenses
associated with the audit and all adjustments and royalty fees due.
5.0 INSTALLATION AND INTEGRATION
5.1 Developer shall be responsible for providing installation and integration
of all Derivative Products the Developer sells directly to End Users. The
Developer shall require that its distributors provide installation and
integration services for the Derivative Products they sell to End Users.
6.0 SUPPORT AND MAINTENANCE
6.1 SUPPORT - Developer will either directly, or indirectly through its
distributors, provide telephone and internet support systems to fulfill the
maintenance obligations under the Sub-license Agreement.
7.0 COPYING AND TITLE
7.1 PRINTED MATERIALS - Developer may copy in whole or in part any Software
documentation, training materials, or user guides which are provided by
Sideware in printed form. Such copies shall be governed by the terms and
conditions of this agreement.
7.2 SOFTWARE COPIES - Sideware retains ownership of the original and any copies
of the Software, in whole or in part and however modified, which are made
by Developer, except that Developer shall have and hold ownership of that
part of the Derivative Products developed by the Developer and Sideware has
and shall have no rights in that part of the Derivative Products. Except
as expressly stated in this agreement, Developer shall make no copies of
any other materials supplied to Developer pursuant to this agreement.
<PAGE>
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8.0 TERM AND TERMINATION
8.1 TERM - The term of this agreement and the license of the Software granted
by Sideware hereunder shall commence on the date first set forth above and
shall continue for a period of five (5) years unless terminated as provided
in this section 8 or elsewhere in this agreement.
8.2 TERMINATION BY DEVELOPER - Developer may terminate this agreement and the
license granted herein on sixty (60) days notice to Sideware.
8.3 SURVIVAL - The following sections herein shall survive any termination of
the agreement, sections 2.4, 4.0, 9.1, 9.2, 9.4, 11.0, 12.0, and 13.0.
8.4 TERMINATION UPON DEFAULT - Either party may at its option terminate this
agreement upon the default by the other party in observance or compliance
with any provision of this agreement (a "Default") and if such Default has
not been corrected within the cure period set forth in section 8.8 below,
except for any Default by Developer in regards to obligations in relation
to the Source Code, in which case this agreement shall at Sideware's option
terminate immediately.
8.5 BANKRUPTCY OR INSOLVENCY - In addition to the provisions of section 8.4, it
shall constitute a Default if Developer or Sideware ceases to do business,
becomes or is declared insolvent or bankrupt, is the subject of any
proceedings related to its liquidation or insolvency which is not dismissed
within thirty (30) days or makes an assignment for the benefit of its
creditors.
8.6 LICENSE TERMINATE - Upon termination of this agreement the license granted
by Sideware to Developer hereunder shall terminate, and Developer
immediately shall discontinue using the Software. Upon termination each
party shall return and make no further use of property, materials and other
items (and all copies thereof) belonging to the other party.
<PAGE>
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8.7 CONVERSION OF SUB-LICENSES - Upon termination of this agreement all
Sub-license Agreements of the Derivative Products granted by Developer or
its distributors shall convert automatically into licenses running directly
from Sideware or Sideware's affiliates, and Sideware or its affiliates
shall provide support to End Users provided, however, that Sideware shall
not be required to perform any of Developer's other obligations under any
Sub-license Agreement as a result of such conversion.
8.8 OPPORTUNITY TO CURE - Upon the occurrence of any Default (except a Default
regarding the Source Code), the non-defaulting party may terminate its
further obligations under the agreement only by giving written notice of
termination specifying the specific nature of the Default. Such party
shall continue to perform its obligations pursuant to this agreement for a
period of sixty (60) days following delivery of such notice to the other
party to enable that party to cure the Default. Failure to cure the
Default within such sixty (60) day period shall result in termination
without further notice by the non-defaulting party unless such party
extends the cure period by written notice.
9.0 INTELLECTUAL PROPERTY RIGHTS
9.1 OWNERSHIP SOFTWARE - Developer acknowledges that all title and intellectual
property rights, copyright, moral rights, and patent rights in and to the
Software (including but not limited to any images, photographs, animation,
video, audio, music, text and "applets" incorporated into the Software) are
owned by Sideware or licensed to Sideware by third parties. Nothing in
this agreement shall constitute a grant, transfer, or assignment to the
Developer of any of the foregoing rights.
9.2 Developer warrants that neither it nor any of its employees will knowingly
convert to their own use or to the use of any other party any industrial
secrets or trade secrets owned by Sideware or any third party in relation
to the Software.
<PAGE>
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9.3 Developer shall not disclose, and shall keep confidential, all information
provided by Sideware or relating to the Software and marked confidential or
proprietary. This provision shall not apply to information which (i) is or
becomes part of the public domain through no act or omission of Developer,
(ii) Developer receives from a third party acting without any obligation or
restriction of confidentiality in favour of Sideware, (iii) Sideware
releases from confidential treatment by written consent, or (iv) Developer
is required by any applicable law or court order to disclose.
9.4 Developer acknowledges that Sideware would be irreparably harmed if the
Developer breaches its obligations under sections 9.1, 9.2, and 9.3, and
would be entitled to injunctive and other equitable relief if such a breach
were to occur. Developer will use its best efforts not to effect or permit
the removal or alteration of any trade names or marks, warning labels,
serial numbers or other similar markings affixed to the Software.
10.0 INFRINGEMENT INDEMNIFICATION
10.1 Sideware will indemnify, defend and hold Developer harmless from any and
all damages, liabilities, costs and expenses, including reasonable
attorney's fees, (excluding any consequential incidental and punitive
damages) arising from any judgment made against Developer, to the extent
that such judgment is based on a finding that the Software furnished by
Sideware under this agreement infringes any patent, copyright, or trade
secret. Sideware shall defend any such suit alleging such infringement
which is brought against Developer or any of its customers, and shall pay
all reasonable legal costs incurred and satisfy all judgments and decrees
against Developer, provided Developer notifies Sideware within ten (10)
business days of the date any such claim becomes known to Developer and
Developer provides such assistance and co-operation to Sideware as is
reasonably requested at Sideware's expense.
10.2 In the event Developer is enjoined from use of the Software furnished by
Sideware under this agreement due to a proceeding based upon infringement
of any patent, copyright, or trade secret, Sideware shall either (i)
promptly render the Software non-infringing and
<PAGE>
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capable of providing services as intended, or (ii) procure for Developer
the right to continue using the Software.
10.3 Notwithstanding any other term of this agreement, Sideware shall have no
liability to Developer with respect to any claim of infringement which is
based on the combination or utilization of Software with equipment, data,
or computer programs not supplied by Sideware or the use of Software in a
manner for which such Software were not designed, or arising from any
alteration or modification of Software.
10.4 The provisions of sections 10.1 to 10.2 constitute the entire liability of
Sideware with respect to infringement of patents, copyrights and trade
secrets by Software furnished by Sideware pursuant to this agreement. For
greater certainty, Sideware shall not be liable to Developer for
consequential, incidental and punitive damages, loss or profits or damage
to business or business relations resulting from the Software infringing
any patents, copyrights and trade secrets.
11.0 WARRANTY
11.1 Sideware warrants that the Software will perform free of material
reproducible defects or errors for a period of ninety (90) days from the
date of first installation of the Server Component of the Software.
Sideware makes no separate warranty to Developer with respect to the
Software. Developer acknowledges that End Users and resellers who purchase
Derivative Products from Developer will not be entitled to the warranty
protection from Sideware. Developer agrees to provide to End Users
warranties with respect to the Derivative Products on terms substantially
the same as the warranties in the Sub-license Agreement.
11.2 THE WARRANTIES AND COVENANTS SET FORTH ABOVE ARE COMPLETE AND ARE IN LIEU
OF ALL OTHER WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESS OR IMPLIED
BY STATUTE, USAGE, CUSTOM OF THE TRADE OR OTHERWISE. NOTWITHSTANDING ANY
OTHER OR
<PAGE>
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PRIOR STATEMENT, WRITTEN OR ORAL, SIDEWARE MAKES NO OTHER WARRANTIES
REGARDING THE SOFTWARE. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, SIDEWARE EXPRESSLY DISCLAIMS WARRANTIES OR REPRESENTATIONS OF
WORKMANSHIP, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, LACK OF
NEGLIGENCE, DURABILITY, ACCURACY OR COMPLETENESS OF RESPONSES, LACK OF
VIRUSES, THAT SOFTWARE WILL MEET ANY OF A CUSTOMER'S NEEDS, OR THAT
SOFTWARE WILL OPERATE ERROR FREE.
12.0 DAMAGES AND LIABILITY
12.1 TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES AGREE THAT
IN NO EVENT SHALL SIDEWARE BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT,
OR CONSEQUENTIAL DAMAGES WHATSOEVER (INCLUDING, BUT NOT LIMITED TO, DAMAGES
FOR LOSS OF PROFITS OR CONFIDENTIAL OR OTHER INFORMATION, FOR BUSINESS
INTERRUPTION, FOR PERSONAL INJURY, FOR LOSS OF PRIVACY, FOR FAILURE TO MEET
ANY DUTY INCLUDING OF GOOD FAITH OR OF REASONABLE CARE, FOR NEGLIGENCE, AND
FOR ANY OTHER PECUNIARY OR OTHER LOSS WHATSOEVER) ARISING OUT OF OR IN ANY
WAY RELATED TO THE USE OF OR INABILITY TO USE SOFTWARE PROVIDED PURSUANT TO
THIS AGREEMENT, EVEN IN THE EVENT OF THE FAULT, TORT (INCLUDING
NEGLIGENCE), STRICT LIABILITY, BREACH OF CONTRACT, OR BREACH OF WARRANTY OF
SIDEWARE, AND EVEN IF SIDEWARE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. IN NO EVENT WILL SIDEWARE'S TOTAL LIABILITY, IN DAMAGES OR
OTHERWISE, EXCEED THE AMOUNTS ACTUALLY RECEIVED BY SIDEWARE FOR FURNISHING
THE SOFTWARE. NO ACTION REGARDLESS OF FORM, ARISING OUT OF OR IN ANY WAY
CONNECTED WITH SOFTWARE FURNISHED BY SIDEWARE MAY BE BROUGHT BY DEVELOPER
MORE THAN
<PAGE>
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2 YEARS AFTER THE CAUSE OF ACTION HAS ACCRUED OR SUCH SHORTER
STATUTORY PERIOD AS MAY BE APPLICABLE.
13.0 USE OF SIDEWARE NAME
13.1 During the terms of this agreement, Developer is authorized to use the
product names, trade marks, logos and designations used by Sideware for
Software in connection with Developer's distribution of Derivative Products
in accordance with Sideware policies. Any such use of the trade marks,
logos, and designations is subject to the review and approval of Sideware.
Upon expiration or termination of this agreement, Developer will cease all
display, advertising and use of all Sideware names, trademarks, logos and
designations. Developer will not alter, erase or overprint any notice
provided by Sideware and will not affix any Sideware names, trade mark,
logo or designation to any non-Sideware software.
14.0 FORCE MAJEURE
14.1 Neither Sideware nor Developer shall be deemed to be in default of any
provision of this agreement for any failure in performance resulting from
acts or events beyond its reasonable control, including acts of nature,
acts of civil or military authority, civil disturbance, strikes, fires, or
other catastrophes.
15.0 GENERAL
15.1 This agreement shall be governed by the laws of British Columbia, Canada.
15.2 Any consent by a party to, or waiver of, a breach of this agreement by the
other party, whether express or implied, shall not constitute a consent to,
or waiver of, any different or subsequent breach.
<PAGE>
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15.3 This agreement is personal to Developer. Neither this agreement nor any
rights hereunder may be assigned or transferred by Developer without
Sideware's prior written consent.
15.4 This agreement together with the schedules hereto is the exclusive
statement of the entire agreement between Sideware and Developer, and
supersedes all prior oral or written representations or agreements between
the parties, as to the subject matter hereof. Any modification of this
agreement must be in writing and signed by both parties. No course of
dealing between the parties or usage of trade shall be deemed to effect any
such amendment or modification.
15.5 If any provision of this agreement is held invalid, illegal, or
unenforceable by a court of competent jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and shall remain in full force and effect.
15.6 All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered by hand
or telecopied to the addresses or fax numbers (as the case may be) stated
on the first page of this agreement, or to such other addresses or fax
numbers as may be given in writing by the parties in accordance with this
section. Any such notice, request, demand or other communication shall be
deemed to have been received, if delivered by hand, on the date of
delivery, and if telecopied, on the business day next following the date of
transmission.
IN WITNESS WHEREOF, the parties hereto have executed this agreement on the
dates set out below:
SIDEWARE SYSTEMS INC. SIDEWARE INTERNATIONAL SRL
"signed" "signed"
- ---------------------------- --------------------------------
Signature Signature
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- ---------------------------- --------------------------------
Name Name
- ---------------------------- --------------------------------
Date Date
<PAGE>
LIST OF SCHEDULES
to Software Development License
dated August 27, 1999
between
SIDEWARE SYSTEMS INC.
and
SIDEWARE INTERNATIONAL SRL
Schedule "A" Description of Software
Schedule "B" Royalty and Payment Terms
Schedule "C" Quarterly Royalty Report
<PAGE>
SCHEDULE "A"
DESCRIPTION OF THE SOFTWARE
The Dr. Bean Software Version 2.0 consists of: (a) instructions or statements
in machine-readable object code, including the Server Component, the CSR
Interface Component, the Server Administration Component, and the CSR
Administration Component; (b) all user manuals, handbooks, and other written
materials relating to (a) above.
<PAGE>
SCHEDULE "B"
ROYALTY AND PAYMENT TERMS
1. ROYALTY RATE
The parties contemplate that the first Derivative Product will be Dr. Bean
Version 3.0. The Royalty fee for all sales of Dr. Bean Version 3.0 by
Developer is TEN PERCENT (10%) (the "Royalty Rate") of the Net Gross
Revenues earned by Developer.
2. PAYMENT TERMS
2.1 The Royalty fee payable to Sideware shall be calculated on a quarterly
calendar basis (the "Royalty Period") and shall be paid no later than
thirty (30) days after the end of each Royalty Period.
2.2 Net Gross Revenues for each Derivative Product means the Developer's
gross sales (the gross invoice amount billed by the Developer) in
respect of the Derivative Product less taxes, shipping charges,
quantity trade discounts shown on the invoice and further, less any
actual returns.
2.3 The obligation to pay the Royalty fee shall accrue upon the sale of
each copy of the Derivative Product by Developer directly to End Users
and to Developer's resellers regardless of the time of collection by
the Developer.
2.4 The Developer's obligations for the payment of the Royalty fee shall
survive the expiration or termination of this agreement and will
continue for so long as the Developer continues to sell copies of the
Derivative Products.
<PAGE>
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3. ROYALTY ADJUSTMENT
3.1 The parties have agreed to establish the Royalty Rate for the
Derivative Products at what they believe would be agreed between
unrelated parties dealing at arm's length in the same circumstances.
3.2 If the Minister of National Revenue or his authorized representatives
or any similar authority should assess or reassess either or both of
the parties on the basis that a Royalty Rate should be different than
that established by the parties, then the Royalty Rate shall be deemed
to be determined as follows:
(a) such amount as may be agreed upon by the parties and all of the
relevant government tax authorities; or
(b) in the absence of any agreement pursuant to paragraph (a) above,
such amount as may be determined by a court having jurisdiction
in the matter (after all appeal rights have been exhausted or all
times for appeal have expired without appeals having been filed)
to be the Royalty Rate.
3.3 If at any time after the commencement of this agreement, either of the
parties undertakes a transfer pricing study with respect to the
Royalty for a Derivative Product and the results of the study indicate
that the Royalty should be adjusted to comply with the arm's length
requirement for "transactions" between related parties (the "Proposed
Adjustments"), the other party may agree to make the Proposed
Adjustments or reject the Proposed Adjustments stating its reasons for
rejecting the Proposed Adjustments. After considering the other
party's reasons for rejecting the Proposed Adjustments, if any, the
first party may propose Amended Proposed Adjustments or obtain the
opinion of an independent third
<PAGE>
-3-
party expert on the matter. The other party shall:
(a) accept the Amended Proposed Adjustments; or
(b) reach some other agreement on the adjustments to the Royalty
within forty-five (45) days of receiving the Amended Proposed
Adjustments; or
(c) accept the opinion of the third party independent expert.
3.4 Either party may request on reasonable notice a review and
re-negotiation of the Royalty Rate for a Derivative Product. Upon
such a request being made, the parties agree to conduct such a review
and re-negotiation.
3.5 Where the Royalty Rate is adjusted pursuant to sections 3.2, 3.3 or
3.4, the parties will make whatever payments or refunds are required
to fully implement the terms of the adjustment from the date it is
effective.
3.6 Each of the parties shall bear their own costs with respect to any
actions taken by a party under this section 3.
<PAGE>
SCHEDULE "C"
QUARTERLY ROYALTY REPORT
For the quarter commencing ____________________, _______,
and ending _____________________
1. Derivative Product licensed, sold and distributed
2. Net Gross Revenue
3. Royalty Fee
<PAGE>
Exhibit 10.4
Research and Development Cost Sharing Agreement between the Company
and Sideware International SRL, effective August 27, 1999
<PAGE>
ECRM PRODUCTS
RESEARCH AND DEVELOPMENT
COST SHARING AGREEMENT
This Research and Development Cost Sharing Agreement (the "Agreement") is
dated for reference the 27th day of August 1999.
BETWEEN:
SIDEWARE INTERNATIONAL SRL, a society subsisting under the laws of
Barbados and having an office at 2nd Street, Holetown, St. James,
Barbados
(hereinafter "International")
OF THE FIRST PART;
AND:
SIDEWARE SYSTEMS INC., a company subsisting under the laws of
British Columbia, Canada, and having its head office at #102-930
West 1st Street, North Vancouver, B.C., V7P 3N4
(hereinafter "Canco")
OF THE SECOND PART;
WHEREAS:
A. International was formed on August 27, 1999, for the purpose of
developing, distributing and selling computer software products in world-wide
markets;
B. Canco has been engaged in the business of developing, distributing and
selling software products predominantly in the Canadian market;
<PAGE>
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C. International and Canco will each engage in the business of designing,
developing, distributing and selling software products that facilitate
electronic commerce over the internet through electronic customer relations
management (the "ECRM Products");
D. Effective from September 1, 1999, International and Canco have agreed
to pool their respective resources for the purpose of conducting research and
development with respect to the design and development of ECRM Products and
to share the risks and costs of such research and development activity and
the intangible property as may be developed therefrom on the terms of this
Agreement;
E. International and Canco have agreed to share ownership and rights to,
as well as to exploit the proprietary technology developed on the terms
contained in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, International and Canco record their agreement as follows:
SECTION 1
INTERPRETATION
1.01 DEFINITIONS - In this Agreement:
"Confidential Information" shall mean any information disclosed by one party
to the other pursuant to this Agreement which is in written, graphic, machine
readable or other tangible form and is marked "Confidential", "Proprietary",
or in some other manner to indicate its confidential nature, or is otherwise
known to be confidential information of the disclosing party. Confidential
Information may also include oral information disclosed by one party to the
other pursuant to this Agreement, provided that such formation is designated
as confidential at the time of disclosure and is reduced to writing by the
disclosing party within a reasonable time (not to exceed thirty (30) days)
after its oral disclosure, and such writing is marked in a manner to indicate
its confidential nature and delivered
<PAGE>
-3-
to the receiving party. All Developed Technology shall be considered
Confidential Information of each party.
"Developed Technology" shall mean any Technology arising out of or
constituting the results of the Research Program conducted by the parties.
"Developed Technology Documentation" shall have the meaning provided in
Section 7.01 of this Agreement and shall include all written materials or
other media pertaining to a Developed Technology and all information,
concepts, data, and techniques included therein.
"R&D Costs" of a party shall mean and include all costs incurred by a party
in connection with and properly allocable to the Research Program, including
all direct and indirect costs and expenses incurred by a party for the
conduct by it of the Research Program as well the cost of any Technology or
other intangible property purchased, licensed or otherwise acquired from
third parties as part of the Research Program.
"Research Program" shall mean that term described in Section 3 of this
Agreement.
"Share of R&D Costs" of a party shall mean the portion of the R&D Costs
allocated to the party under this Agreement.
"Technology" shall mean any and all technologies, procedures, processes,
designs, inventions, discoveries, know-how and works of authorship, including
without limitation documentation, and all (i) issued patents, utility models
and the like, and applications therefore pending before any relevant
authority world-wide, including any additions, continuations,
continuations-in-part, divisions, reissues or extensions based thereon, (ii)
copyrights and other rights in works of authorship; (iii) mass work rights,
(iv) trade secrets, and (v) Confidential Information and any other
intellectual property rights constituting, embodied in or pertaining thereto.
<PAGE>
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SECTION 2
JOINT RESEARCH AND DEVELOPMENT
2.01 The parties hereto agree to combine their research and development
efforts and to share the costs, risks and rights relating to the development
of the ECRM Products, related and successor technology (whether or not
foreseen at the time hereof), and such other items as the parties may agree
to from time to time, including both basic or experimental research and
product-specific research (whether relating to new product development or the
improvement, adaptation or modification of existing products, as well as the
development of prototypes) which the parties may agree to make part of the
joint ECRM Products research and development program. The parties hereto
intend that the arrangements contemplated by this Agreement constitute a
"qualified cost contribution arrangement" pursuant to subsection 247(1) of
the INCOME TAX ACT, Canada.
SECTION 3
DEVELOPMENT ACTIVITIES AND SCHEDULES
3.01 At the beginning of each year, or at such other times agreed to by the
parties, unless this Agreement shall have terminated in accordance with the
provisions of this Agreement, the parties shall:
(a) agree upon the ECRM Products research and development activities
to be undertaken during the year; and
(b) prepare a development schedule for the activities to be undertaken
including an allocation of the development responsibilities of
each party, including, without limitation, the location where the
development activities will occur.
The research and development activities and schedule described in this
Section 3.01 (the "Research Program") shall be considered a part of this
Agreement. The parties hereto may amend or modify the Research Program at any
time during the year as they shall agree.
<PAGE>
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SECTION 4
COST ALLOCATION
4.01 ALLOCATION OF OWNERSHIP - The parties have agreed that they shall
jointly own and hold the Developed Technology. The party's respective
ownership rights in the Developed Technology are set out in Sections 6.01 and
6.02 herein.
4.02 ALLOCATION OF R&D COSTS - The parties intend that the proportion of
R&D Costs borne by each party shall be based upon the reasonably anticipated
benefits to be derived by each party as a result of commercial exploitation
of the Developed Technology. The parties believe that reasonably anticipated
benefits to be derived from commercial exploitation of the Developed
Technology may be best measured by the sales revenue reasonably expected to
be derived from the licensing and sale of copies of the Developed Technology
by the parties in accordance with their respective ownership rights set out
in Sections 6.01 and 6.02 of this Agreement.
4.03 ANTICIPATED BENEFITS - As of the date of this Agreement, the parties
believe that Canco's reasonably anticipated benefits from the Developed
Technology shall be one tenth (1/10th) of the total of both parties'
reasonably anticipated benefits relating to the Developed Technology, and the
parties believe that International's reasonably anticipated benefits from the
Developed Technology shall be nine tenths (9/10ths) of the total of both
parties' reasonably anticipated benefits relating to the Developed
Technology. The parties will annually review their projections of the
anticipated benefits from the Developed Technology and their respective
shares of such anticipated benefits, and if warranted, adjust the agreement
with respect to each party's share of such anticipated benefits for the
purposes of this Agreement. Such adjustments shall only apply to allocation
of R&D Costs incurred after the date of such adjustments.
4.04 SHARE OF R&D COSTS - To implement the foregoing Sections 4.01 to 4.03,
Canco's Share of R&D Costs incurred each year in conduct of the Research
Program shall be equal to ten percent (10%) of such R&D Costs until adjusted
pursuant to the terms of this Agreement. International's
<PAGE>
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Share of R&D Costs incurred each year in conduct of the Research Program
shall be equal to ninety percent (90%) of such R&D Costs, until adjusted
pursuant to the terms of this Agreement.
4.05 DOCUMENTATION - Each party hereto shall maintain documentation regarding:
(a) the methodology and data used to establish projections of the
anticipated benefits from commercial exploitation of Developed
Technology;
(b) the total amount of R&D costs incurred pursuant to this Agreement;
(c) the R&D costs borne by each party hereto:
(d) the accounting method used to determine the costs and projections
of anticipated benefits of the Developed Technology (including the
method used to translate foreign currencies), and, to the extent
such accounting method materially differs from United States
generally accepted accounting principles, an explanation of such
material differences; and
(e) any prior research relating to the Developed Technology.
The parties shall exchange their respective documentation as it
becomes available.
4.06 ACCOUNTING METHODS - The parties hereto agree to use a consistent
method of accounting to measure R & D Costs, and agree to translate foreign
currencies on a consistent basis.
<PAGE>
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SECTION 5
STATEMENT OF R&D ACTIVITIES
PAYMENT OF SHARE OF R&D COSTS
5.01 STATEMENTS OF R&D ACTIVITIES - Each party shall on a monthly basis
report to the other party with respect to the progress made on the
development responsibilities allocated to that party pursuant to the Research
Program described in Section 3.01. Such report shall also include any
suggested amendments to the Research Program.
5.02 INTERNATIONAL SHARE OF R&D COSTS - While this Agreement remains in
effect, Canco shall provide to International a statement of R&D Costs
incurred by Canco each month by the end of the following month. Such
statement shall also invoice International's share of the R&D Costs to be
reimbursed to Canco, and generally be in the form attached hereto as Schedule
"A".
5.03 CANCO SHARE OF R&D COSTS - While this Agreement remains in effect,
International shall provide to Canco a statement of R&D Costs incurred by
International each month by the end of the following month. Such statement
shall also invoice Canco's share of the R&D Costs to be reimbursed to
International, and generally be in the form attached hereto as Schedule "A".
5.04 PAYMENTS OF REIMBURSEMENTS - Within one month of exchanging the
statements of R&D Costs for a particular month pursuant to Sections 5.02 and
5.03, the party owing the greater of the two amounts invoiced in the
statements (the "Payor") shall pay to the other party the amount invoiced to
the Payor less the amount that the Payor invoiced to the other party.
<PAGE>
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SECTION 6
DEVELOPED TECHNOLOGY
6.01 OWNERSHIP AND FILINGS
(a) Canco and International agree that legal title to the Developed
Technology should be held by one party in order to most
effectively protect the Developed Technology by making it easier
to prosecute claims against infringers and to make filings for
patent applications, and copyright and mass work registrations,
and agree that Canco should hold legal title to the Developed
Technology, subject to the rights held by International as
described in Section 6.02 below. Legal title to Developed
Technology which is conceived or developed by employees of either
party or of both parties shall be held and remain in Canco,
subject to the rights to be held and retained by International
pursuant to Section 6.02 below.
(b) Canco shall have the right of first election to file patent
applications and copyright and mass work registrations (the
"Filings"). Canco will make its election at the earliest
practicable time and will notify International in writing of its
decision to file any such Filings. In addition, Canco will
consult with International regarding the content of such Filings
and will send International a copy of any such Filings and all
correspondence with the applicable governmental offices. The
party that prepares and files any Filings will bear the expenses
of preparing, filing and prosecuting that application and of
paying any taxes, annuities or maintenance fees on the pending
application and on any patent, copyright or mass work right issued
thereon. The non-filing party agrees at no charge to furnish all
documents and other assistance reasonably requested for the
purpose of the filing and prosecution of such Filings. All
Filings will be filed in the name of Canco, and all patents on
inventions and mass work rights issued in relation to the
Developed Technology will be held in the name of Canco.
<PAGE>
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6.02 INTERNATIONAL'S RIGHTS IN DEVELOPED TECHNOLOGY - Subject to the terms
and conditions of this Agreement, Canco and International agree that
International shall have and hold a non-exclusive, transferable, perpetual,
irrevocable, royalty-free right and license, with right to grant and
authorize sublicenses, on and in respect of any Developed Technology, to
practice, use and modify the Developed Technology in order to develop, use,
make, have made, sell and otherwise distribute, directly or indirectly, the
Developed Technology world-wide outside of Canada.
6.03 INFRINGEMENT - If either party becomes aware of any actual or
potential infringement or misappropriation of any Developed Technology, then
such party shall promptly notify the other party in writing of such
infringement ("Infringement Notice").
(a) International shall have the sole right to prosecute infringements
of any Developed Technology or infringement or misappropriation of
any trade secret contained in Developed Technology throughout the
world other than in Canada, and Canco shall have the sole right to
prosecute infringements of any Developed Technology or
infringement or misappropriation of any trade secret contained in
Developed Technology in Canada.
(b) If the party having the sole right to prosecute an infringement
does not take reasonable actions to such end before the end of
ninety (90) days from the issuance of an Infringement Notice or
notifies the other party that it does not intend to prosecute such
infringement, then (i) the other party shall have the sole right
for sixty (60) days at its expense to prosecute such infringement
and (ii) the party which did not prosecute such infringement
during such ninety (90) day period shall take all actions
reasonably requested by the other party in such prosecution,
subject to indemnification by the prosecuting party of the other
party. If the other party does not take reasonable actions to
prosecute such infringement to such end before the end of such
sixty (60) day period or notifies the party having the initial
right to prosecute that it does not intend to prosecute such
infringement, then Section 6.03(b) shall become applicable again.
<PAGE>
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The parties shall consult with each other concerning prosecution
of infringement or misappropriation of know-how not protected by
Developed Technology and the allocation of costs or awards
relating to such prosecution.
6.04 THIRD PARTY LICENSES - Any Technology used to create Developed
Technology licensable or sublicensable by Canco or International because of
an agreement with a third party and as to which Canco or International is
required to make payment to a third party, and under which Canco or
International is free to grant full licenses or sublicenses to the other
party under the terms of this Agreement, shall be licensed to the other party
to the extent and subject to the terms of the agreement with such third party.
SECTION 7
DELIVERY OF DEVELOPED TECHNOLOGY
7.01 DEVELOPED TECHNOLOGY DOCUMENTATION - All documentation whether in
paper form or other media, relating to Developed Technology (the "Developed
Technology Documentation") shall be in the English language and shall be in
accordance with United States standards, measurements and practices. The
costs of any translation of the Developed Technology and adaptation of it for
a particular country shall be borne by the party desiring such translation.
7.02 DISCLOSURE OF DEVELOPED TECHNOLOGY - Subject to the provisions of this
Section 7, each party shall exercise reasonably diligent efforts to disclose
and deliver to the other party the Developed Technology and the Developed
Technology Documentation, to the extent not otherwise in such receiving
party's possession, as promptly as is practicable during the term of this
Agreement. A delivering party shall exercise reasonably diligent efforts to
ensure the accuracy of all Developed Technology provided but does not warrant
that all such Developed Technology will be accurate in all respects.
7.03 DELIVERY RESTRICTION - No Developed Technology Documentation shall be
delivered within the State of California unless such delivery is by means of
remote telecommunications or unless the
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parties hereto are satisfied that such transfer will not incur a sales or use
tax liability. Any attempted delivery contrary to the terms hereof shall be
void and of no effect. If the delivery is made by remote telecommunications,
the parties shall keep a detailed contemporaneous log documenting each
transmission by date, time, place, and the individuals responsible for such
transmission.
7.04 CONFIDENTIALITY - Notwithstanding any failure to so mark it, all
information included or embodied in the Developed Technology Documentation
shall be deemed Confidential Information.
SECTION 8
BEARING OF RISKS,
NO ASSURANCE OF SUCCESS
8.01 Each party conducting research and development shall be solely
responsible to use commercially reasonable efforts to design and develop the
products, devices and processes contemplated by the Research Program. No
party makes a warranty or guarantee that such product or process design or
development efforts will be successful or accomplished in a timely manner or
that the Developed Technology will be commercially viable. No party hereto
shall be liable to the other party hereto for failure to create Developed
Technology in accordance with this Agreement. Notwithstanding anything to
the contrary herein, each party shall bear its Share of R&D Costs regardless
of whether any Developed Technology is in fact produced and regardless of
whether the parties realize any income from any Developed Technology.
SECTION 9
CONFIDENTIAL INFORMATION
9.01 NONDISCLOSURE OF CONFIDENTIAL INFORMATION - Each party shall treat as
confidential all Confidential Information of the other party, shall not use
such Confidential Information except as set forth herein, and shall not
disclose such Confidential Information to any third party except as may be
reasonably required pursuant to this Agreement, and subject to
confidentiality obligations at
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least as protective as those set forth herein. Without limiting the
foregoing, each of the parties shall use at least the same degree of care
which it uses to prevent the disclosure of its own confidential information
of like importance to prevent the disclosure of Confidential Information
disclosed to it by the other party under this Agreement.
9.02 LIMITATION OF LIABILITY - Notwithstanding the above, neither party shall
have liability to the other with regard to any Confidential Information of the
other which:
(a) was in the public domain at the time it was disclosed or becomes
in the public domain through no fault of the receiver;
(b) was known to the receiver, without restriction, at the time of
disclosure as shown by the files of the receiver in existence at
the time of disclosure;
(c) is disclosed with the prior written approval of the discloser;
(d) was independently developed by the receiver without any use of the
Confidential Information and by employees or other agents of (or
independent contractors hired by) the receiver who have not been
exposed to the Confidential Information;
(e) becomes known to the receiver, without restriction, from a source
other than the discloser without breach of this Agreement by the
receiver and otherwise not in violation of the discloser's rights;
(f) is released by the other party from confidential treatment by
written consent; or
(g) is disclosed pursuant to the order or requirement of a court,
administrative agency, or other governmental body, provided,
however, that the receiver shall provide
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prompt notice thereof to enable the discloser to seek a protective
order or otherwise prevent such disclosure.
9.03 NONDISCLOSURE AGREEMENTS - Each party shall exert its best efforts,
including, but not limited to, the execution of proprietary non-disclosure
agreements with employees and consultants, and legal action, to enforce
compliance with the provisions of this Section 9 by its directors, officers,
employees, and any third party having access to the other party's
Confidential Information.
9.04 REMEDIES - Unauthorized use by either party of Confidential
Information provided to it by the other party hereunder will diminish the
value to the other party of such information. Therefore, if either party
breaches any of its obligations with respect to confidentiality and
unauthorized use of Confidential Information hereunder, the other party shall
be entitled to equitable relief to protect its interest therein, including
but not limited to injunctive relief, as well as monetary damages.
SECTION 10
TERM
10.01 TERM - The term of this Agreement shall be one (1) year commencing
August 27, 1999, and shall automatically be renewed for additional one-year
terms thereafter unless either party gives thirty (30) days written notice to
the other prior to the end of the term of its intent to terminate this
Agreement or unless terminated earlier under the provisions of this Section
10.
10.02 TERMINATION FOR CONVENIENCE - This Agreement may be cancelled by
either party for any reason or no reason by giving the other party written
notice sixty (60) days in advance.
10.03 TERMINATION ON DEFAULT - Subject to the terms set forth in this
Section 10.03 if either party defaults in the performance of its material
obligations hereunder, the other party shall have the option, upon written
notice to the defaulting party, to terminate this Agreement. If within
thirty (30) days after the notice of termination, the defaulting party shall
not have remedied the default, the parties shall consult in good faith for an
additional thirty (30) days to develop a plan to remedy
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such default and if such default is not corrected after such thirty (30) days
period, then this Agreement shall terminate.
10.04 TERMINATION IN THE EVENT OF BANKRUPTCY - This Agreement may be
terminated by either party on notice, (i) upon the institution by the other
party of insolvency, receivership or bankruptcy proceedings or any other
proceedings for the settlement of the debts, (ii) upon the institution of
such proceedings against the other party, which are not dismissed or
otherwise resolved in such party's favour within sixty (60) days thereafter,
(iii) upon the other party's making a general assignment for the benefit of
creditors, or (iv) upon the other party's dissolution or ceasing to do
business in the normal course.
10.05 SURVIVAL - Notwithstanding the expiration or termination of this
Agreement, it is acknowledged and agreed that those rights and obligations
which by their nature are intended to survive such expiration or earlier
termination shall survive, including without limiting the foregoing, the
provisions of Sections 6, 7 and 9. Upon any termination of this Agreement,
no party shall relinquish any of its rights to Developed Technology acquired
hereunder as it exists on such termination date but shall have no ownership,
rights, or license to Technology subsequently created or developed by the
other party.
SECTION 11
GENERAL
11.01 EXISTING CANCO TECHNOLOGY - The parties hereto acknowledge that Canco
and International have entered into a License Agreement of even date herewith
granting certain rights from Canco to International relating to existing
Canco Technology.
11.02 ASSIGNMENT - No party may assign its rights or obligations under this
Agreement without the prior written consent of the other party, and any
purported assignment without such consent shall have no force or effect.
Subject to the foregoing, this Agreement shall bind and inure to the benefit
of the respective parties hereto and their successors and assigns.
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11.03 WAIVER - Any waiver by any party of any default by the other hereunder
shall not be deemed to be a continuing waiver of such default or a waiver of
any other default or of any of the terms and conditions of this Agreement.
11.04 AMENDMENTS - The terms and conditions of this Agreement may not be
superseded, modified, or amended except in writing stating that it is such a
modification and signed by an authorized representative of each party hereto.
11.05 GOVERNING LAW; FORUM SELECTION - This Agreement shall be governed by
the laws of British Columbia, without reference to conflict of laws
principles. All disputes arising out of this Agreement shall be subject to
the exclusive jurisdiction and venue of British Columbia courts and the
parties consent to the personal and exclusive jurisdiction and venue of these
courts.
11.06 ATTORNEYS' FEES - The prevailing party in any legal action brought by
one party against the other shall be entitled, in addition to any other
rights and remedies it may have, to reimbursement for its expenses incurred
thereby, including court costs and reasonable attorneys' fees.
11.07 NOTICES - Any notice which any party desires or is obligated to give
to the other shall be given in writing or by facsimile or telex and sent to
the appropriate address set forth above, attention: President, or to such
other address as the party to receive the notice may have last designated in
writing. Except as otherwise expressly provided herein, notice shall be
deemed to have been received on the earlier of the date when actually
received or ten (10) days after being deposited in the mail, postage prepaid,
registered or certified mail, or within one (1) day if by facsimile or telex.
11.08 INDEPENDENT CONTRACTORS - This Agreement does not create a principal
or agent, employer or employee, partnership, joint venture, or any other
relationship except that of independent contractors between the parties.
Nothing contained herein shall be construed to create or imply a joint
venture, principal and agent, employer or employee, partnership, or any other
relationship
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except that of independent contractors between the parties, and neither party
shall have any right, power or authority to create any obligation, express or
implied, on behalf of the other in connection with the performance hereunder.
11.09 HEADINGS; COUNTERPARTS - Headings to Sections of this Agreement are to
facilitate reference only, do not form a part of this Agreement, and shall
not in any way affect the interpretation hereof. This Agreement may be
executed in two (2) counterparts or duplicate originals, all of which shall
be regarded as one and the same instrument, and which shall be the official
and governing version in the interpretation of this Agreement.
11.10 PARTIAL INVALIDITY - If any provision in this Agreement shall be found
or be held to be invalid or unenforceable in any jurisdiction in which this
Agreement is being performed, then the meaning of said provision shall be
construed, to the extent feasible, so as to render the provision enforceable,
and if no feasible interpretation would save such provision, it shall be
severed from the remainder of this Agreement which shall remain in full force
and effect. In such event, the parties shall negotiate, in good faith, a
substitute, valid and enforceable provision which most nearly effects the
parties' intent in entering into this Agreement.
11.11 FORCE MAJEURE - Nonperformance of either party shall be excused to the
extent that performance is rendered impossible by strike, fire, flood,
governmental acts or orders or restrictions, failure of suppliers, or any
other reason where failure to perform is beyond the reasonable control of and
is not caused by the negligence of the nonperformance party.
IN WITNESS WHEREOF, the parties have recorded their agreement on the _____
day of November, 1999, intending it to be effective from August 27, 1999.
SIDEWARE INTERNATIONAL SRL SIDEWARE SYSTEMS INC.
By: "signed" By: "signed"
--------------------------------- ---------------------------------
<PAGE>
Exhibit 10.5
Distribution and Sales Agreement between the Company
and Sideware Corp. effective January 1, 1999
<PAGE>
DISTRIBUTION AND SALES AGREEMENT
DATED for reference the 1st day of January, 1999.
BETWEEN:
SIDEWARE SYSTEMS INC., a company incorporated
pursuant to the laws of the Province of British
Columbia, Canada and having an office at #102 - 930
West 1st Street, North Vancouver, British Columbia
V7P 3N4
("Sideware")
OF THE FIRST PART;
AND:
SIDEWARE CORP., a company incorporated pursuant to
the laws of the State of Washington, U.S.A., and
having an office at #200-208 Elden Street, Herndon,
Virginia 20170, U.S.A.
(the "Distributor")
OF THE SECOND PART;
WHEREAS:
A. Sideware has developed computer software described in Schedule "A" hereto
which provides real-time communication support and services to internet
users and which is better known as "Dr. Bean" Version 2.0 (the
"Software");
B. Sideware has appointed the Distributor, and the Distributor has agreed,
to market and distribute the Software in the 50 United States, the
District of Columbia, and Puerto Rico (the "Authorized Area") on the
terms and conditions contained herein.
IN CONSIDERATION of the mutual promises and covenants contained herein,
the parties record their agreement as follows:
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1.0 GRANT OF DISTRIBUTION RIGHTS
1.1 Subject to the terms of this Agreement, Sideware hereby grants to the
Distributor a non-exclusive right to market, sell and distribute the
Software in the Authorized Area to end users, value-added resellers,
distributors and original equipment manufacturers ("OEMS") for the Term
of this Agreement, as defined herein.
1.2 Notwithstanding paragraph 1.1, the Distributor shall have the right to
sell and distribute the Software outside the Authorized Area provided
that Sideware has consented in writing to each such sale.
1.3 Sideware shall deliver to the Distributor copies of the Software for sale
and distribution to end users, resellers, distributors and OEMS in
accordance with section 3.0 herein. Sideware shall provide to the
Distributor one (1) copy of the Software for demonstration purposes free
of charge, and the Distributor shall be entitled to make copies thereof
solely for demonstration and backup purposes only.
1.4 SOFTWARE CHANGES - Sideware may make changes to the Software as Sideware
deems necessary or advisable without advance notice to Distributor,
except that Sideware shall give the Distributor at least thirty (30) days
written notice before discontinuing the sale or distribution of the
Software pursuant to this Agreement.
2.0 TERM
2.1 TERM - The Term of this Agreement shall commence January 1, 1999, and
subject to earlier termination in accordance with this Agreement, shall
expire on December 31, 2001. The Term shall automatically be renewed for
one (1) year periods thereafter unless either party gives notice to the
other party, at least sixty (60) days before the end of the then current
year period, of its desire to let the Agreement expire at the end of such
year period (the "Term").
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3.0 PURCHASE ORDERS
3.1 The Distributor shall order copies of the Software from Sideware by
issuance of a written purchase order to Sideware. Each purchase order
shall state components of the Software required in each copy ordered, a
requested shipment date, the method of shipment, and the location to
which each unit of Software should be shipped.
3.2 Sideware will use its best efforts to meet the requested shipment date in
the Distributor's purchase order, but will not be liable to the
Distributor or to any other person if it fails to meet the requested
shipment date. Orders without a requested shipment date will be
processed for shipment according to Sideware's then current shipping
schedule.
3.3 Shipping charges shall be paid by the Distributor and will be shown
separately on Sideware invoices.
4.0 SOFTWARE PRICES
4.1 SIDEWARE PRICE - The price payable by Distributor for each copy of the
Software shall be equal to Sideware's then current list price for the
Software less the Distributor's Discount. Sideware's current list price
schedule and the Distributor's Discount are contained in Schedule "B"
hereto. All prices are quoted F.O.B. Sideware's shipping point,
exclusive of taxes, shipping, and insurance charges, which shall all be
the Distributor's costs.
4.2 CHANGE IN LIST PRICE - The Distributor hereby acknowledges that Sideware
may change the list price for the Software in Schedule "B" by giving
written notice to the Distributor no less than thirty (30) days prior to
the effective date of such changes. Any such written notice given by
Sideware shall set forth the new effective date and shall be attached
hereto as an Amended Schedule "B". Upon Sideware making changes to the
list price for the Software, the Distributor may request a renegotiation
of the Distributor's Discount specified in Schedule "B".
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4.3 If any change in the suggested list price and Distributor's Discount
results in a higher price to the Distributor, Sideware agrees to honour
the previous lower price for purchase orders based on the Distributor's
outstanding quotations to customers executed within ninety (90) days of
the price change. The Distributor will provide a list of outstanding
proposals within ten (10) working days of receiving notice of the change.
4.4 RESALE PRICES - The Distributor is free to determine its own resale
prices for the Software.
4.5 TAXES AND DUTIES - The prices listed in Schedule "B" are exclusive of all
applicable taxes and duties. The Distributor shall pay all taxes and
duties associated with the sale and delivery of the Software, exclusive
of taxes based on Sideware's income. If claiming tax exemption, the
Distributor must provide Sideware with valid tax exemption certificates.
4.6 PAYMENT TERMS - Payment to Sideware for delivered copies of the Software
shall be made no later than thirty (30) days after the invoice date.
4.7 NO WITHHOLDING OR SET-OFF - The Distributor shall not withhold any amount
due and owing pursuant to this Agreement either on the basis that the
Distributor disputes some issue in respect of, or its obligations under,
this Agreement, or as a set-off of obligations which are allegedly owing
to the Distributor by Sideware.
4.8 CURRENCY - All payments due hereunder to Sideware shall be made in United
States currency by wire transfer or cheque drawn on a United States bank,
unless otherwise specified by Sideware.
4.9 OVERDUE ACCOUNTS - Overdue payments for Software will bear interest at
the rate of 1.5% per month.
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5.0 RECORDS
5.1 ACCESS TO RECORDS - During the Term and for one (1) year following the
termination of this Agreement, the Distributor shall keep at its
principal place of business full, accurate and complete records and books
of account relating to the Software, and shall make them available for
examination, inspection and audit at all reasonable times by Sideware or
duly authorized independent accountants designated by Sideware. Sideware
and the accountants shall also be entitled to investigate generally all
the business transactions carried on by the Distributor relating to this
Agreement, to call for all vouchers supporting the account documentation,
including orders received, work sheets, invoices, bank account
documentation, and all other relevant documents, and to make notes and
copies of any information.
6.0 END USER LICENSE AGREEMENTS
6.1 All copies of the Software sold by the Distributor directly to end users
or indirectly to end users through resellers shall be subject to the
software license agreement provided by Sideware to the Distributor from
time to time, including any modifications or amendments thereof (the
"Software License Agreement"). The Distributor shall not install, nor
permit any of its resellers to install, a copy of the Software until the
end user purchasing the Software has executed the Software License
Agreement. The Distributor shall utilize the latest version of the
Software License Agreement when selling the Software directly to end
users or otherwise require the resellers to utilize the latest version.
7.0 SUBDISTRIBUTION AGREEMENTS
7.1 APPOINTMENT OF SUBDISTRIBUTORS - The Distributor may appoint
subdistributors of the Software provided that such subdistributors enter
into the subdistributor agreement provided by Sideware to the Distributor
with respect to the marketing, sale, installation
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and integration of the Software (the "Subdistributor Agreement").
Sideware reserves the right to change the Subdistributor Agreement from
time to time, and the Distributor shall utilize the latest version of
such agreement when appointing subdistributors.
8.0 DISTRIBUTOR'S RESPONSIBILITIES
8.1 INSTALLATION, INTEGRATION AND TRAINING - The Distributor will be
responsible for the installation and integration of all copies of
Software the Distributor sells directly to end users. The Distributor
shall further provide training to its subdistributors regarding the
installation, integration and use of the Software.
8.2 MAINTENANCE AND SUPPORT - The Distributor will be responsible for
operating telephone and Internet support systems to provide maintenance
and support to all end users and resellers of the Software. The
Distributor and Sideware will consult from time to time on the scope and
content of the support systems to be provided by the Distributor.
8.3 Notwithstanding the above, Sideware may make telephone and Internet
support systems available to the Distributor at Sideware's prevailing
standard charges.
8.4 FEES - The Distributor may, at its discretion, determine the fees to be
charged to end users and subdistributors with respect to the
installation, integration, training, maintenance and support services
provided by the Distributor.
8.5 MARKETING - The Distributor will use its best efforts to actively
promote, market and sell the Software in the Authorized Area. From time
to time as requested by Sideware, the Distributor will meet with Sideware
for review and consultation regarding the Distributor's marketing plans
and activities. For purposes of such review, the Distributor will make
available to Sideware such information concerning the Distributor's
marketing plans and activities as Sideware may reasonably request.
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8.6 SALES LITERATURE - The Distributor shall be responsible for developing
and producing its own literature for the promotion and marketing of the
Software, however, Sideware will provide samples of its sales literature
to the Distributor at no charge. The Distributor may purchase Sideware's
sales literature at Sideware's cost.
8.7 The Distributor agrees to conduct its marketing and sales of the Software
in a manner that reflects favourably on the Software and on the
reputation and good will of Sideware.
9.0 INTELLECTUAL PROPERTY RIGHTS
9.1 OWNERSHIP OF SOFTWARE - The Distributor acknowledges that all title and
intellectual property rights, copyright, moral rights, and patent rights
in and to the Software (including but not limited to any images,
photographs, animation, video, audio, music, text and "applets"
incorporated into the Software, and all written materials relating to the
Software) are owned or licensed by Sideware. Nothing in this Agreement
shall constitute a grant, transfer, or assignment to the Distributor of
any of the foregoing rights.
9.2 The Distributor warrants that neither it nor any of its employees will
knowingly convert to their own use or to the use of any other party any
industrial secrets or trade secrets owned or licensed by Sideware in
relation to the Software.
9.3 The Distributor acknowledges that Sideware would be irreparably harmed by
any breach of the Distributor's covenants in this section 9.0 and
accordingly, would be entitled to equitable and injunctive relief. The
Distributor also acknowledges that Sideware has developed and uses
valuable technical and non-technical information and trade secrets in the
Software. The Distributor will use its best efforts not to effect or
permit the removal or alteration of any trade names or marks, warning
labels, serial numbers or other similar markings affixed to the Software.
9.4 The Distributor shall not disclose, and shall keep confidential, all
confidential and proprietary information provided by Sideware or relating
to the Software. This provision
<PAGE>
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shall not apply to information which (i) is or becomes part of the public
domain through no act or omission of the Distributor, (ii) the
Distributor receives from a third party acting without any obligation or
restriction of confidentiality in favour of Sideware, (iii) Sideware
releases from confidential treatment by written consent, or (iv) the
Distributor is required by any applicable law or court order to disclose.
The provisions of this clause shall survive the termination of this
Agreement.
10.0 WARRANTIES
10.1 Sideware's warranties with respect to the Software are limited to the
warranties set out in the Software License Agreement referred to in
section 6.0. Except as expressly set out below, Sideware makes no
separate warranty to the Distributor.
10.2 Sideware warrants to the Distributor that Sideware has all right, title,
ownership interest and/or marketing rights necessary to provide the
Software to the Distributor.
10.3 THE WARRANTIES AND COVENANTS SET FORTH ABOVE ARE COMPLETE AND ARE IN LIEU
OF ALL OTHER WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESS OR
IMPLIED BY STATUTE, USAGE, CUSTOM OF THE TRADE OR OTHERWISE.
NOTWITHSTANDING ANY OTHER OR PRIOR STATEMENT, WRITTEN OR ORAL, SIDEWARE
MAKES NO OTHER WARRANTIES REGARDING THE SOFTWARE. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, SIDEWARE EXPRESSLY DISCLAIMS WARRANTIES OR
REPRESENTATIONS OF WORKMANSHIP, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, LACK OF NEGLIGENCE, DURABILITY, ACCURACY OR COMPLETENESS OR
RESPONSES, LACK OF VIRUSES, THAT THE SOFTWARE WILL MEET ANY OF A
CUSTOMER'S NEEDS, OR THAT THE SOFTWARE WILL OPERATE ERROR FREE.
<PAGE>
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11.0 INFRINGEMENT INDEMNIFICATION
11.1 INDEMNIFICATION FOR THIRD PARTY RIGHTS - Sideware shall indemnify and
hold harmless the Distributor, from any claim that the Software supplied
hereunder infringes a patent, copyright, trade secret, or similar
proprietary right of a third party. If such claim occurs, or in
Sideware's judgment is likely to occur, the Distributor agrees to allow
Sideware, at Sideware's option, to procure the right for the Distributor
to continue using the Software in accordance with the terms hereof or to
replace or modify the Software in a functionally equivalent manner so it
becomes non-infringing. If neither of the foregoing is available on
terms that are reasonable in Sideware's judgment, the Distributor, upon
written request by Sideware, shall return the Software to Sideware and
Sideware shall have no further obligations under this indemnity.
11.2 INDEMNIFICATION BY DISTRIBUTOR - The Distributor shall indemnify and hold
harmless Sideware, its shareholders, officers, directors or agents
against any and all losses which they may suffer or incur in connection
with any claim arising out of, as a result of, or relating in any manner
whatsoever to the Distributor's breach of any covenant, representation or
warranty contained in this Agreement.
11.3 INDEMNIFICATION BY SIDEWARE - Sideware shall indemnify and hold harmless
the Distributor, its shareholders, officers, directors or agents against
any and all losses which the Distributor may suffer or incur in
connection with any claim arising out of, as a result of, or relating in
any manner whatsoever to Sideware's breach of any covenant,
representation or warranty contained in this Agreement.
11.4 The foregoing indemnities shall be contingent upon the following:
(a) the party seeking indemnity shall give prompt written notice to
the other party for any claim, demand, or action for which
indemnity is sought;
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(b) the party seeking indemnity shall fully co-operate in the defence
or settlement of any such claim, demand or action and shall make
no admission without the indemnifying party's consent; and
(c) the party seeking indemnity shall obtain the prior written
agreement of the indemnifying party to any settlement or proposal
of settlement which agreement shall not be unreasonably withheld,
providing such settlement or proposal does not conflict with the
terms of this section.
12.0 DAMAGES AND LIABILITY
12.1 TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES AGREE THAT
IN NO EVENT SHALL SIDEWARE BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
INDIRECT, OR CONSEQUENTIAL DAMAGES WHATSOEVER (INCLUDING, BUT NOT LIMITED
TO, DAMAGES FOR LOSS OF PROFITS OR CONFIDENTIAL OR OTHER INFORMATION, FOR
BUSINESS INTERRUPTION, FOR PERSONAL INJURY, FOR LOSS OF PRIVACY, FOR
FAILURE TO MEET ANY DUTY INCLUDING OF GOOD FAITH OR OF REASONABLE CARE,
FOR NEGLIGENCE, AND FOR ANY OTHER PECUNIARY OR OTHER LOSS WHATSOEVER)
ARISING OUT OF OR IN ANY WAY RELATED TO THE USE OF OR INABILITY TO USE
PRODUCTS DEVELOPED PURSUANT TO THIS AGREEMENT, EVEN IN THE EVENT OF THE
FAULT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, BREACH OF CONTRACT,
OR BREACH OF WARRANTY OF SIDEWARE, AND EVEN IF SIDEWARE HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT WILL SIDEWARE'S TOTAL
LIABILITY, IN DAMAGES OR OTHERWISE, EXCEED THE AMOUNTS ACTUALLY RECEIVED
BY SIDEWARE FOR DEVELOPING THE PRODUCTS. NO ACTION REGARDLESS OF FORM,
ARISING OUT OF OR IN ANY WAY CONNECTED WITH PRODUCTS DEVELOPED BY
SIDEWARE MAY BE BROUGHT BY THE DISTRIBUTOR MORE
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THAN TWO (2) YEARS AFTER THE CAUSE OF AN ACTION HAS ACCRUED OR SUCH
SHORTER STATUTORY PERIOD AS MAY BE APPLICABLE.
13.0 TERMINATION
13.1 TERMINATION UPON NOTICE - Sideware may terminate this Agreement forthwith
upon written notice to the Distributor if:
(a) the Distributor is in breach of, or attempts to breach, any of its
obligations under this Agreement;
(b) the Distributor is in breach of any of its representations and
warranties under this Agreement;
(c) the Distributor has failed to protect the confidentiality and
proprietary rights of Sideware, or has otherwise failed to take
reasonable steps to protect such confidentiality and proprietary
rights as required herein; and/or
(d) the Distributor is unable to pay its debts when due or is
insolvent, is ordered or adjudged to be a bankrupt, is placed in
the hands of a receiver, enters into any scheme or composition
with its creditors, is dissolved, liquidated or wound up, makes an
assignment for the benefit of its creditors or takes the benefit
of any statutory protection for its debts.
13.2 TERMINATION FOR CONVENIENCE - Either of the parties may in its sole
discretion terminate this Agreement at any time without cause on sixty
(60) days written notice to the other party, such termination to become
effective at the conclusion of such sixty (60) day period.
13.3 CONSEQUENCES OF TERMINATION OR EXPIRATION - In the event of the
termination or expiration of this Agreement, the Distributor shall have
no further rights except those expressly
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granted by this section. Upon termination or expiration of this
Agreement, the Distributor shall:
(a) cease all marketing, sale and distribution of the Software;
(b) at Sideware's option and at the Distributor's expense, deliver to
Sideware all of the Software;
(c) refrained from stating or implying that the Distributor is
authorized to market, sell and distribute the Software;
(d) pay all amounts invoiced by Sideware notwithstanding that such
amounts may not yet be due to Sideware; and
(e) at Sideware's request, execute all such documents and do such
further acts and things which are necessary to assign and transfer
the Distributor's rights and obligations in any and all agreements
with end users, resellers, distributors or OEMS relating to the
Software to Sideware.
14.0 GENERAL
14.1 NOTICE - Any notice required or permitted to be given under this
Agreement shall be deemed to have been well and sufficiently given only
if delivered at the address of the other party herein before set forth or
to such other address as the other party may direct in writing.
14.2 MODIFICATION - No amendment to or modification of this Agreement shall be
effective unless set forth in writing and signed by both Sideware and the
Distributor.
<PAGE>
-13-
14.3 FURTHER ASSURANCES - The parties shall execute all such further documents
and do such further acts and things as are necessary or convenient to
carry out the full intent of this Agreement.
14.4 SUCCESSORS AND ASSIGNS - This Agreement shall be binding upon and shall
enure to the benefit of the parties hereto, their successors and
permitted assigns.
14.5 WAIVER - No waiver by either party of any default hereunder shall be
deemed as a waiver of any prior or subsequent default of the same or
other provisions of this Agreement.
14.6 SEVERABILITY - If any provision hereof is held invalid or unenforceable
by a court of competent jurisdiction, such invalidity shall not affect
the validity or operation of any other provision and such invalid
provision shall be deemed to be severed from the Agreement.
14.7 ASSIGNABILITY - The rights and license granted hereunder to the
Distributor may not be assigned by any act of the Distributor or by
operation of law without the consent of Sideware, such consent may be
arbitrarily withheld.
14.8 GOVERNING LAW - This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the
laws of the Province of British Columbia.
<PAGE>
-14-
14.9 ENTIRE AGREEMENT - This Agreement constitutes the entire understanding of
the parties, and revokes and supersedes all prior agreements between the
parties and is intended as a final expression of their agreement.
IN WITNESS WHEREOF the parties hereto have recorded their agreement on
the above terms this _____ day of ____________, 1999, intending the agreement to
be effective from January 1, 1999.
SIDEWARE SYSTEMS INC.
Per:
"signed"
- ------------------------------
SIDEWARE CORP.
Per:
"signed"
- ------------------------------
<PAGE>
Schedule "A"
THE SOFTWARE
The Software is the Dr. Bean Software, version 2.0 which consists of: (a)
instructions or statements in machine-readable object code, including the
Server Component, the CSR Interface Component, the Server Administration
Component, and the CSR Administration Component; and (b) all user manuals,
handbooks, and other written materials relating to (a) above.
<PAGE>
Schedule "B"
SUGGESTED LIST PRICE OF PRODUCTS
AS OF JANUARY 1, 1999
(all amounts in U.S. Dollars)
A.
1. Dr. Bean Software version 2.0 $ 10,000 U.S.
2. Price for each additional CSR Interface Component license:
<TABLE>
<S> <C>
6 to 10 $ 1,000 U.S. per license
11 to 20 $ 850 U.S. per license
21 to 50 $ 700 U.S. per license
51 to 100 $ 550 U.S. per license
101 to 200 $ 400 U.S. per license
Above 200 to be negotiated
</TABLE>
NOTES:
1. Dr. Bean Software version 2.0 includes 1 Server Component, 5 CSR
Interface Components, 1 Server Administration Component, and 1 CSR
Administration Component.
B. DISTRIBUTOR'S DISCOUNT
1. On Dr. Bean Software version 2.0 resold to end users, resellers, and
OEMS, the Distributor's Discount = 50%
<PAGE>
-2-
C. DISCOUNT ADJUSTMENT
1. The parties have established the Distributor's Discount at what they
believe would be agreed between unrelated parties dealing at arm's length
in the same circumstances.
2. If the Minister of National Revenue or his authorized representatives or
any similar authority should assess or reassess either or both of the
parties on the basis that the Discount should be different than that
established by the parties, then the Discount shall be deemed to be
determined as follows:
(a) such amount as may be agreed upon by the parties and all of the
relevant government tax authorities; or
(b) in the absence of any agreement pursuant to paragraph (a) above,
such amount as may be determined by a court having jurisdiction in
the matter (after all appeal rights have been exhausted or all
times for appeal have expired without appeals having been filed)
to be the Discount.
3. If at any time after the commencement of this Agreement, either of the
parties undertakes a transfer pricing study with respect to the Discount
and the results of the study indicate that the Discount should be
adjusted to comply with the arm's length requirement for "transactions"
between related parties (the "Proposed Adjustments"), the other party may
agree to make the Proposed Adjustments or reject the Proposed Adjustments
stating its reasons for rejecting the Proposed Adjustments. After
considering the other party's reasons for rejecting the Proposed
Adjustments, if any, the first party may propose Amended Proposed
Adjustments or obtain the opinion of an independent third party expert on
the matter. The other party shall:
(a) accept the Amended Proposed Adjustments; or
(b) reach some other agreement on the adjustments to the Discount
within forty-five (45) days of receiving the Amended Proposed
Adjustments; or
<PAGE>
-3-
(c) accept the opinion of the third party independent expert.
4. Where the Discount is adjusted pursuant to paragraphs 2 or 3, the parties
will make whatever payments or refunds are required to fully implement
the terms of the adjustment.
5. Each of the parties shall bear their own costs with respect to any
actions taken by a party under this section relating to Discount
adjustment.
<PAGE>
Exhibit 10.8
Agreement between the Company and IBM for participation
in the Enterprise Growth Opportunity program
<PAGE>
AGREEMENT OF PARTICIPATION
The purpose of this Agreement of Participation (this "Agreement") between
Sideware Corp. ("you") is to described the terms and conditions pursuant to
which text regarding certain of your Products may be included in the
announcements that IBM makes with respect to the IBM Enterprise Growth
Offering, as modified from time to time ("EGO").
This Agreement consists of this Agreement of Participation and the following
Attachments and Exhibits:
- - Attachment - Certificate of Originality
- - Attachment A - Product List
The following are related agreements between the parties. Related agreements
require the signatures of the parties.
- - Agreement for Exchange of Confidential Information No.________________
DEFINITIONS
Capitalized terms in this Agreement have the following meanings:
PRODUCTS are your computer programs that are listed on Attachment A to this
Agreement.
SUBSIDIARY is an entity that is owned or controlled directly or indirectly
(by more than 50% of its voting stock, or if not voting stock decision-making
power) by you or IBM.
LICENSE GRANTS
To enable IBM to effectively promote your Products to customers through the EGO,
you grant IBM the non-exclusive right and license to use, copy, translate,
reproduce, display, perform and distribute, in any medium or distribution
technology whatsoever, whether known or unknown, the trademarks and trade names
associated with your Products to customers.
IBM may perform any of its rights, licenses and obligations under this Agreement
through Subsidiaries, subcontractors, and other companies affiliated with IBM,
such as IBM Business Partners. The use of such entities by IBM does not relieve
it of its obligations under this Agreement.
You warrant the accuracy of all statements in the attached completed
Certificate of Originality. You agree to complete a new Certificate of
Originality before adding any New Products to this Agreement.
YOUR RESPONSIBILITIES
<PAGE>
LICENSE AGREEMENT: You will license the Products to customers under the terms
of your end user license agreement (your "License"). IBM is not a party to
your License and does not assume any obligation for violations of it.
DELIVERY: You agree to deliver the Products specified by IBM or an IBM
Business Partner in an order, and will use your best efforts to meet the
requested delivery dates and quantities. You will include a copy of your
License with each Product before you ship it to the customer. It must be
packaged so the customer can review it before use of the Product. You will
notify IBM or the IBM Business Partner within 5 working days of your receipt
of IBM's order if you cannot meet the request, and will include a proposed
delivery schedule that you agree to meet. IBM or the IBM Business Partner can
accept your proposed delivery schedule or cancel the order without liability.
You agree to pay all transportation charges required for the shipment of the
Products to the location IBM or the IBM Business Partner specifies.
NEW PRODUCTS: You represent that the Products that will be included in the
EGO under this agreement are always the most current release or version that
is available to your customer. Your will give IBM at least six months notice
prior to withdrawing any Product (including any version) from marketing or
support.
CUSTOMER DISCOUNT AND BUSINESS PARTNER FEES: The customer discounts that you
will grant to customers with respect to the Products and the fees that you
will pay to IBM Business Partners with respect to the sale of your Products
are listed in Attachment A. You will notify IBM immediately in writing upon
the change of any such discount or fees.
IBM EGO ANNOUNCEMENT
IBM will include your company's name and a description of your participation
as it relates to the EGO in its EGO announcement through whatever
announcement process IBM has in place at the time of the announcement. IBM is
not obligated to publish the names of your individual Products, your
discounts or fees in the EGO announcement.
WARRANTY
You represent and warrant on an ongoing basis that:
(a) you have sufficient rights to the Products (including associated
marks and names) to grant IBM the rights specified in this
Agreement, and to grant customers the rights specified in your End
User License Agreement;
(b) the Products conform to their published specifications and any
written representations made by you to IBM, its Business Partners
or customers;
(c) the Products do not infringe any patent, copyright, trademark or
trade secret or any other intellectual property rights of any
third party, and do not contain any virus or other harmful code;
<PAGE>
(d) at the time of signing this Agreement, you are not aware of any
claims against you regarding Products;
(e) you comply with any and all export laws and/or regulations,
including but not limited to, export laws and/or regulations
regarding (i) the classification of the Products; and (ii)
distribution of encrypted code contained in the Products;
(f) the Products, when used in accordance with their associated
documentation, are capable of correctly processing, providing
and/or receiving date data within and between the twentieth and
twenty-first centuries, provided that all products (for example,
hardware, software and firmware) used with the Products properly
exchange accurate date with the Products; and
(g) where applicable, the Products are euro-ready such that they will
correctly process, send, receive, present, store, and convert
monetary data in the euro denomination, respecting the euro
currency formatting conventions (including the euro symbol).
INDEMNIFICATION
You will defend and indemnify IBM, its customers and its and their end users
and IBM Business Partners, their customers and their end users if a third
party makes a claim against them, whether actual or alleged, based on your
breach of any of the warranties contained in the Section of this Agreement
entitled "Warranty". If an infringement claim of any type appears likely or
is made against IBM or customers, about a Product, you will obtain the
necessary rights for IBM, and customers to continue exercising all rights
granted under this Agreement, or you will modify the Product or its name so
that it is non-infringing, or replace it with a Product that is functionally
equivalent. In addition to any remedies specified in this Agreement, IBM may
pursue any other remedy it may have in law or in equity. You will pay any
settlement amounts you authorize and all costs, damages and attorney's fees
that a court finally awards if IBM promptly provides you notice of the claim,
and allows you to control and cooperates with you in the defense of the claim
and settlement negotiations. IBM may participate in the proceedings at its
option and expense.
LIMITATION OF LIABILITY
Except for claims arising under the Section entitled "Indemnification",
neither party shall be liable to the other for any economic consequential
damages (including lost profits or savings) or incidental damages, even if
advised that they may occur. IBM's liability under this contract is limited
to $100,000.
TERM AND TERMINATION
This Agreement shall be effective when signed by both parties and shall
remain in effect unless terminated as set forth below.
<PAGE>
IBM may terminate this Agreement for convenience on 10 business days prior
written notice to you. You may terminate this Agreement for convenience with
90 days prior written notice to IBM. The effective date of termination will
be specified in such prior written notice.
Any items of this Agreement which by their nature extend beyond the day this
Agreement ends remain in effect until fulfilled, and apply to respective
successors and assignees.
INFORMATION
All information exchanged under this Agreement is non-confidential. If either
party wishes to disclose confidential information, such information shall be
disclosed under an Agreement for the Exchange of Confidential Information.
Neither party shall disclose the terms of this Agreement to any third party
without the other party's prior written consent, except to the extent
necessary to establish each party's rights hereunder, or, as required by
applicable law or regulations. You agree not to issue press releases or other
publicity regarding this Agreement or the relationship under it without IBM's
prior written approval.
GENERAL
Neither party guarantees the success of any marketing effort it engages in
for the Products. Either party may independently develop, acquire, and market
materials, equipment, or programs that may be competitive with (despite any
similarity to) the other party's products or services. Each party is
responsible for its own costs, including all business, travel and living
expenses incurred by the performance of this Agreement.
Either party may enter into a similar agreement with any other party,
including, but not limited to, competitors of the other party.
Neither party has relied on any promises, inducements or representations by
the other, except those expressly state in this Agreement. This Agreement is
not to be construed as a commitment or obligation, express or implied, on the
part of IBM that IBM will market, sell, purchase, or license any Products
under this Agreement.
You may not assign this Agreement without IBM's written consent. Any other
assignment shall be void.
Neither party will bring a legal action against the other more than two years
after the cause of action arose. Each party waives a jury trial in any
dispute. Failure by either part to demand strict performance or to exercise a
right does not prevent either party from doing so later.
The laws of New York govern this Agreement.
This Agreement replaces all prior oral or written communications between the
parties relating to the subject matter hereof. Both parties accept the terms
of this Agreement and identified Attachments and Exhibits by signing below.
Once signed, any reproduction of this Agreement made by reliable means (for
example, photocopy or facsimile) is considered an original, unless
<PAGE>
prohibited by local law. This Agreement may only be modified by a writing
signed by both parties.
AGREED TO: AGREED TO:
International Business Machines Corporation
By: Jim Speros By: "Richard Polanza"
------------------------------ ---------------------------------
Print Name Print Name
Jim Speros Richard Polanza
------------------------------ ---------------------------------
Print Title Print Title
President EGO Program Manager
- ---------------------------------- ---------------------------------
Date September 27, 1999 Date
Address: 208 Elden Street IBM Office address:
Suite 209 404 Wyman Street
Herndon, VA Waltham, MA 02451
20170 United States
USA
AFTER SIGNING, PLEASE RETURN A COPY OF THIS AGREEMENT TO THE LOCAL "IBM
OFFICE ADDRESS" SHOWN ABOVE.
<PAGE>
Please list the Products, Discounts, and Fees that will be included in the EGO
under this Agreement
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- --------------------------------------
PRODUCT NAME DISCOUNT TO END USER FEE TO THE BUSINESS PARTNER
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Dr. Bean Software 40% 15%
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
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- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
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- ---------------------------------------- -------------------------------------- --------------------------------------
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- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
<PAGE>
Exhibit 10.9
Reseller agreement between the Company and Enterprise Soft
<PAGE>
EnterpriseSoft Software Reseller Agreement
Reseller Name: Sideware Systems Inc.
----------------------------------------------------------------
(hereinafter referred to as "Reseller")
Reseller Officer/Representative Name: John Wedel
------------------------------------------
Address: #102 - 930 West 1st Street
----------------------------------------------------------------------
----------------------------------------------------------------------
City: North Vancouver State: BC
------------------------------- ----------------------------------
Zip or Postal Code: V7P 3N4 Country: Canada
------------------ --------------------------------
Phone: (604) 988-0440 Fax: (604) 980-7121
------------------------------ -----------------------------------
Email: [email protected] Web site: www.sideware.com
------------------------------ -------------------------------
- -------------------------------------------------------------------------------
This agreement is made as of the date listed below, by and between
EnterpriseSoft, located at 7573 Waterford Drive, Cupertino, CA 95014, (the
"Company") and the above named Reseller concerning the Company's grant to
Reseller of rights to resell the Company's software products specified in
Appendix A, referred to herein as the "Product(s)."
For the good and valuable consideration received by each party from the
other, including entry into this Agreement and the covenants hereof, the
parties AGREE:
1. GRANT: The Company designates Reseller as a non-exclusive reseller for the
Products listed in Appendix A. Based on this agreement, Reseller is
authorized to resell Product as detailed in Appendix A.
This grant does not give Reseller any right to make and/or sell variations or
derivative works of the Products. Sole ownership of copyrights and other
intellectual and proprietary rights to the Products shall remain in the
Company.
2. BEST EFFORTS: Reseller accepts the grant, in the limited scope provided
herein, and agrees to use its best efforts to communicate the features,
benefits, pricing, and availability of the Products to potential customers in
reseller's ordinary course of business. Reseller agrees not to engage in
activity that reflects poorly on the Company or Product.
3. PRICE:
3.1 Product Pricing: Pricing for Products are listed in Appendix A. Reseller
agrees to not resell Products for below price listed in Appendix A. Reseller
agrees to obtain written authorization
<PAGE>
from Company if it wishes to quote a price that is below the ones listed in
Appendix A. Pricing decisions made at the sole discretion of the Company,
however, the Reseller will be given a 15-day advanced notice of prices and
any price changes.
3.2 Services Pricing:
4. COMMISSION & PAYMENTS:
4.1 Product Pricing: Reseller may either sell Product licenses to its
customers directly or refer them to Company for sale. If the first method is
used, Reseller shall pay the Company, within 30 days of sale, a supplier a
license fee in respect of each copy of the Product sold. The amount payable
to Company will be based on the Schedule of Payments which is attached to
this agreement as Appendix B. If the second method is used, Company shall pay
the Reseller a sales commission based on the schedule of payments as
described in Appendix B.
The payment obligations stated in this Section 3 are exclusive of any
federal, state, municipal or other governmental taxes, duties, excise taxes
or tariffs now or hereafter imposed on the sale of the Products.
4.2 Services Pricing:
5. REGISTERING END-USERS: Reseller agrees to provide Company with contact
details for all users to when the Products are licensed. Contact details will
include user's name, user's company name, email address, phone number, fax
number and mailing address.
Reseller agrees to ensure that each licensed end-user of the Product is
provided with the EnterpriseSoft End-User License Agreement and the end-user
agrees to accept and abide by the agreement.
6. COPYRIGHTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY: Reseller accepts
that the copyrights, trademarks and all other Intellectual Property of the
Company and its products are owned by the Company and agrees to not engage in
any activity that jeopardizes such rights. Reseller may use approved
copyrights or trademarked material provided by the Company in connection with
the advertising of the Products. Nothing herein shall grant reseller any
right, title or interest in the Company's copyrights, trademarks or other
Intellectual Property.
7. WARRANTY & LIABILITY
7.1 PRODUCT WARRANTY: Company warrants to Distributor that the Products
purchased hereunder shall be free from defects in materials and workmanship
and shall conform in all material respect to the Product Documentation for a
period of thirty (30) days from the date of delivery thereof, provided the
Product in question has been stored and used in accordance with ordinary
industry practices and condition. COMPANY DOES NOT WARRANT THAT THE OPERATION
OF THE PRODUCTS WIL BE UNINTERRUPTED OR ERROR FREE.
<PAGE>
7.2 REMEDIES: In the event that Product does not comply with the product
warranty set out in Section 7.1 and such non-conforming Product is returned
to Company within the warranty period by Reseller freight prepaid, Company
will replace such non-conforming Product at not additional charge to
Reseller; the replaced Product will be returned to Reseller, freight prepaid.
7.3 DISCLAIMER OF WARRANTIES: The foregoing express warranties are limited to
Company and are not transferable and are in lieu of any other warranty by
Supplier with respect to Products furnished hereunder. COMPANY GRANTS NO
OTHER WARRANTY, EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
7.4 LIMITATION OF LIABILITY: COMPANY SHALL IN NO EVENT BE LIABLE FOR ANY
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR
RELATING TO THE SALE OR USE OF ITS PRODUCTS, WHETER OR NOT COMPANY HAS
ADVANCE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. IF COMPANY BREACHES ANY
PROVISION OF THIS AGREEMENT, COMPANY'S SOLE AND EXCLUSIVE MAXIMUM LIABILITY,
WHETHER BASED IN CONTRACT, TORT, OR OTHERWISE, SHALL NOT IN ANY EVENT EXCEED
THE AMOUNT PAID BY OR ON BEHALF OF RESELLER TO THE COMPANY FOR THE CURRENT
PAYMENT TERM. The foregoing limitation of liability will not apply to the
payment of costs and damage awards referred to the following section 8,
Indemnification.
7.5 SELECTION: Reseller assumes full responsibility for its selection of the
Product specified herein and any other equipment, programs or services used
with the Product, their use, and results obtained therefrom.
8. INDEMNIFICATION: Company shall indemnify, hold harmless and defend
Reseller against any action brought against Reseller to the extent that such
action is based on a claim that any unmodified Product, when used in
accordance with this Agreement, infringes a United States copyright and
Company shall pay all costs, settlements and damages finally awarded;
provided, that Reseller promptly notifies Company in writing of any claim,
gives Supplier sole control of the defense and settlement thereof and
provides all reasonable assistance in connection therewith. If Product is
finally adjudged to so infringe, or in Company's opinion is likely to become
the subject of such a claim, Supplier shall, at its option, either: (i)
procure for Reseller the right to continue using and reselling the Product
(ii) modify or replace the Product to make it non-infringing, or (iii) refund
the price paid upon return of the Product. Company shall have no liability
regarding any claim arising out of: (w) use of other than a current,
unaltered release of the Product unless the infringing portion is also in the
then current, unaltered release, (x) use of the Product in combination with
non-Company products, date or equipment if the infringement was caused by
such use or combination, (y) any modification or derivation of the products
not specifically authorized in writing by Company or (z) use of third party
products. THE FOREGOING STATES THE ENTIRE LIABILITY OF COMPANY AND THE
EXCLUSIVE REMEDY FOR RESELLER RELATING TO INFRINGEMENT OR CLAIMS OF
INFRINGEMENT OF ANY COPYRIGHT OR OTHER PROPRIETARY RIGHT BY THE PRODUCTS.
<PAGE>
9. CONFIDENTIAL INFORMATION: Reseller and Company acknowledge that in the
course of dealings between the parties, each party will acquire information
about the other party, its business activities and operations, its technical
information and trade secrets, of a highly confidential and proprietary
nature. Each party shall hold such information in strict confidence and shall
not reveal the same except for any information generally available to or
known to the public, known prior to the negotiations leading to this
Agreement, independently developed outside the scope of this Agreement or
lawfully disclosed by or to a third party or tribunal. The confidential
information of each party shall be safeguarded by the other to the same
extent that it safeguards its own confidential methods or date relating to
its own business. All such Confidential Information will be held in
confidence for as long as this agreement is in effect and for a period of 3
years thereafter.
10. EXPIRATION & TERMINATION: This agreement shall be considered to continue
for a period of 1 year or until such time that either party terminates the
agreement for any reason. Upon expiration of this agreement, it shall be
automatically terminated unless renewed. Either party may terminate the
agreement for any reason by giving 30 days notice to the other party. Notice
may be delivered via mail, phone, email or fax to the designated officers for
either party. Termination or expiration of this Agreement shall not relieve
Reseller of its then accrued payment obligation under this Agreement.
Termination or relieve Reseller of any post termination clauses of this
agreement.
11. RELATIONSHIP OF PARTIES: The parties hereto are independent contractors
and neither party is an employee, agent, partner or joint venture of the
other. Neither party shall have the right to bind the other to any agreement
with a third party or to incur any obligation or liability on behalf of the
other party.
12. MISCELLANEOUS.
12.1 SUCCESSORS AND ASSIGNS: The rights and obligations of either party shall
not be transferable without the prior written consent of the other party,
which consent shall not be unreasonably withheld or delayed. All obligations
of the parties herein shall be binding upon their respective successors or
assigns.
12.2 CHOICE OF LAWS: This Agreement shall be governed by, and its terms shall
be construed in accordance with, the laws of the State of California, country
of the United State of America. No choice of law is permitted under this
agreement.
12.3 WAIVER: No waiver or breach of any term or condition of this Agreement
shall operate as a waiver of any other breach of such term or condition, or
of any other term or condition, nor shall any failure to enforce any
provisions hereunder operate as a waiver of such provision or any other
provisions hereunder.
12.4 SEVERABILITY: In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, except in those instances where removal or
elimination of such invalid, illegal, or unenforceable provision or
provisions would result in a failure of consideration under this Agreement,
such invalidity,
<PAGE>
illegality or unenforceability shall not effect any other provision hereof,
and this Agreement shall be construed as if such invalid, illegal or
unenforceable provisions had never been contained herein.
12.5 NOTICES: All notices hereunder shall be in writing and shall be deemed
to have been duly given if delivered personally, one day after delivery to a
nationally recognized overnight delivery service, charges prepaid, three days
after being sent by registered or certified mail, postage prepaid, to the
parties at their respective addresses set forth above and:
If to Reseller, with a copy shall be sent to the officer listed at the top of
this agreement.
If to Company, with a copy to:
Attn: Sandeep G. Jain
Address: 7573 Waterford Drive, Cupertino, CA 95014
Phone:510-742-6700
Facsimile: 510-742-6800
or to such other address as any party shall have specified by notice to the
other in accordance with this Section. Purchase orders, forecasts and other
routine business forms (and any notices not sent in accordance with the
foregoing) shall be effective only upon receipt.
12.6 HEADINGS: Headings used in this Agreement are for the purpose of
reference only and are not to be considered in construction or interpretation
of this Agreement.
12.7 COUNTERPARTS: This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed one and the same instrument.
12.8 TERMS CONFIDENTIAL: Reseller and Company shall hold in confidence the
terms of compensation set forth herein, and neither party hereto shall
disclose such terms to any other person or entity without prior consent of
the other.
12.9 FREEDOM OF ACTION: This Agreement shall not be construed to limit
Reseller right to obtain services or software programs from other sources.
This Agreement shall not be construed to limit Company right to sell licenses
in the Product to clients or potential clients of Company or to establish new
resellers.
This Agreement alone establishes the rights, duties, and obligations of
Reseller and Company with respect to the subject matter hereof. Reseller
shall have no right or interest whatsoever in Product of Company other than
the rights and licenses in the Product granted herein.
12.10 COST AND EXPENSES: Unless otherwise provided in this Agreement or
separate agreement, each party shall beat its own cost and expenses relating
to activities under this Agreement.
12.11 COMPLIANCE WITH LAW: Each party hereto agrees that it shall comply with
all applicable laws and regulations of government bodies or agencies in its
performance of its obligation under this Agreement.
<PAGE>
12.12 FORCE MAJEURE: Neither party shall be liable or deemed to be in default
for any delay or failure in performance under this Agreement or interruption
of service resulting directly or indirectly from acts of God, or any causes
beyond the reasonable control of such party.
12.13 ENTIRE AGREEMENT; AMENDMENT: This Agreement, including Exhibit A and
Exhibit B, contain the entire Agreement between the parties relating to the
subject matter hereof. All prior agreements and all prior negotiations,
representations and communications relating to the same subject matter are
superseded by this Agreement. This Agreement may not be modified other than
by a written document signed by an authorized representative of each party.
IN WITNESS WHEROF, the parties have executed this Agreement, under signature,
by their duly authorized representatives as of the date set forth above.
EnterpriseSoft Reseller: Sideware Systems Inc.
-----------------------------
By: "signed" By: "signed"
--------------------------------- -----------------------------------
Title: Title: CEO, Director
------------------------------ --------------------------------
Date: Date: "August 2, 1999"
------------------------------- ---------------------------------
<PAGE>
Exhibit 10.10
Software license agreement between the Company and ICEsoft AS
<PAGE>
COMMERCIAL SOFTWARE LICENSE
AGREEMENT 4116
ICEsoft AS
Hoyteknologisenteret
N-5008 Bergen
NORWAY
I. INTRODUCTION
This is an Agreement between, ICEsoft AS (Licensor), owner of certain
software products, and Sideware Systems Inc. (Licensee), for the purpose of
specifying the conditions under which Licensee will use the software.
II. DEFINITIONS
"ICE Browser Lite" shall mean the proprietary software program and all
proprietary modules needed to build the software that Licensor sells as ICE
Browser Lite. Unless specifically written differently this means the CURRENT
MAJOR RELEASE of ICE Browser Lite.
The CURRENT MAJOR RELEASE is Version 1.
"Documentation" shall mean a written on-line documentation describing
the use and operation of ICE Browser Lite , together with any related supporting
documentation.
"Licensee" shall mean and include Licensee's divisions, departments,
and wholly owned subsidiaries within Licensee's organization, but shall not
include partially owned subsidiaries, affiliates, or independent third parties.
III. LICENSE GRANT
1. Licensor hereby grants to Licensee, and Licensee hereby accepts,
subject to the terms and conditions set forth in this Agreement, a
non-exclusive and nontransferable commercial License to use ICE Browser Lite
and Documentation as set forth in this Agreement. The term "commercial
License" as used in this Agreement shall mean and include:
a. the right to use the licensed copies of ICE Browser Lite in source or
binary (executable) form with the applications set forth in Exhibit B to this
Agreement;
b. the right to use, copy, market, sell, distribute, and sublicense
copies of ICE Browser Lite in binary form to third party customers of
Licensee PROVIDED this forms part of the software suites set forth in Exhibit
B and developed by Licensee. This right may be restricted or further
specified in Exhibit A where a license fee structure that may depend on
volume can be specified. If such an application is further used by a third
party customer to build new (and different) applications for sale or
redistribution then the use of ICE Browser Lite in such products will require
a new binary license between this third party and Licensor.
<PAGE>
c. the right to use and copy ICE Browser Lite documentation for
Licensee's internal operations;
d. the right to make backup copies of ICE Browser Lite ;
e. the right to modify and enhance ICE Browser Lite as required for use
with the Applications and to interpret and render Licensee's (non-standard)
extensions to the HTML language in order to support the Applications listed
in Exhibit B.
2. In accepting the commercial License granted by Licensor, Licensee
agrees that is SHALL NOT:
a. transfer or allow the transfer of copies of source code;
b. make copies or make use of ICE Browser Lite or Documentation except as
expressly set forth in this Agreement;
c. in the case of the binary code license to attempt to disassemble or
reverse engineer ICE Browser Lite, or facilitate such attempts by third
parties. Therefore in the case of the source code license licensee shall take
all reasonable steps to protect the distributed binary code of ICE Browser
Lite, including obfuscating the code;
d. in the case of the source code license to derive a web browser capable
of interpreting and rendering documents written in a publicly available
standard other than HTML 3.2 except where explicitly specified in Exhibit A.
Any rights not expressly granted to Licensee are retained by Licensor.
IV. ITEMS PROVIDED BY LICENSOR
Upon receipt of this executed commercial License granted by Licensor and
accompanying payment, Licensor shall provide to Licensee the deliverables set
forth in Exhibit A.
V. PAYMENT BY LICENSEE
In consideration for the License granted by Licensor for the sue of ICE
Browser Lite as set forth herein, Licensee agrees to pay a license fee for
EACH Application set forth in Exhibit B. The License fee depends on the form
of ICE Browser Lite delivered (source form or binary form) and the intended
use by Licensee. The License fee is specified in Exhibit A. Licensor also has
the right to mention the Licensee's name as an existing customer when
promoting ICE Browser Lite. The parties can agree not to disclose such
information in Exhibit A.
All License fees payable by Licensee under this Agreement are net
of applicable taxes. Licensee is solely responsible for any taxes or assessed
fees which are or may become due by reason of this Agreement other than
Norwegian VAT or Norwegian taxes based on Licensor's income. Licensor may
from time to time at its sole discretion change the License fees and the
License fee structure to take effect for contracts signed after such a change.
<PAGE>
VI. ENHANCEMENTS AND SUPPORT
This Agreement entitles Licensee to updates of the CURRENT MAJOR RELEASE of
ICE Browser Lite for a period of one half year. Licensee understands and
accepts that such updates are provided at the sole discretion of Licensor and
that they DO NOT INCLUDE new releases of ICE Browser Lite with new
functionality. Use of all such updates and enhancements by Licensee shall be
subject to the terms and conditions of this Agreement.
Licensor may from time to time offer enhancements to or a NEW MAJOR
RELEASE of ICE Browser Lite. Licensee may accept any update or enhancement at
the time it is offered to Licensee by paying the applicable update charge or
fee. Licensor shall have the sole discretion to determine the update fee or
charge. Use of all such updates and enhancements by Licensee shall be subject
to the terms and conditions of this Agreement.
Upon notification of errors in ICE Browser Lite, Licensor shall
respond in a timely manner indicating the estimated time to correct the
problem. Licensor will have the sole discretion to determine if a reported
problem shall be corrected and included in a future update or enhancement. If
the problem will not be corrected Licensor shall inform Licensee about this.
Licensee may agree to purchase support and/or upgrade service from
Licensor. These options and possible other special terms related to support
and maintenance shall be described in Exhibit C.
VII. TERM OF LICENSE
The term of this Agreement shall commence as of the last date this Agreement
is executed by Licensor and Licensee and shall continue for a period of 1
year from that date. Thereafter, the Agreement shall automatically be renewed
for successive 1 year terms with respect to all rights of Licensee under this
Agreement. Licensee has the right of non-renewal, in which case Licensor
shall b given written notice 30 days before a new term that the Agreement
will be terminated. The entry level license fee is a one time paid up fee for
a perpetual license.
VII. TERMINATION OF AGREEMENT
In the event of a material default by either party or such party's agent or
representative, of any material provision of this Agreement, the other party
may terminate this Agreement upon 30 days written notice, except that the
defaulting party shall have 30 days after receipt of notice of termination in
which to remedy such breach. Upon termination of the Agreement, Licensee
shall either destroy all licensed copies of ICE Browser Lite, and all backups
then in its possession, or return them to Licensor. This obligation shall
survive the termination of this Agreement.
IX. COPYRIGHT AND PROPRIETARY INFORMATION
Except as otherwise set forth herein, Licensee acknowledges that ICE Browser
Lite and all supporting documentation constitute valuable property of
Licensor and that all title and ownership rights in ICE Browser Lite and
related materials remain exclusively with Licensor.
<PAGE>
Licensor reserves all rights with respects to ICE Browser Lite and
documentation under all applicable laws for the protection of proprietary
information, including, but not limited to, trade secrets, copyrights,
trademarks and patents. Except as otherwise provided in this Agreement,
Licensee shall not cause or permit unauthorized copying, reproduction or
disclosure of any portion of the program, or any instructions, or other
documentation, or the delivery or distribution of any part thereof to any
third person or entity, for any purpose whatsoever, without the prior written
permission of Licensor. This restriction shall continue to bind Licensee and
its agents and representatives beyond the termination of this Agreement.
X. WARRANTIES
Licensor warrants that it has the right to grant Licensee the rights granted
herein and that Licensee's use of the ICE Browser Lite and Documentation as
set forth herein will not violate any copyright, trademark, trade secret
patent or proprietary, or personal right of any third party.
ICE Browser Lite is year 2000 compliant, Licensor warrants that (i)
the Software supplied to Licensee has been designed for use before, during
and after 2000 A.D. and (ii) during such period the Software will perform
accurate and error-free processing, storage, retrieval, calculation,
sequencing and comparison of all date involving dates and same century and
multi-century formulas without change in performance arising from the advent
of 2000 A.D. This statement is made with the caveat that the underlying
runtime environment in use, including the Java virtual machine, is also year
2000 compliant.
If ICE Browser Lite should fail to work after 1st January 2000 due
to programming errors in the delivered code, this will be corrected free of
charge.
XI. LIMITATION OF WARRANTIES
Licensee understands that the statement '100 percent Pure Java' and the pure
Java logo cannot be applied to this application without a separate
certification process. Customized versions of ICE Browser Lite DERIVED FROM
SOURCE may not use the pure Java logo without a separate certification
process.
Except for the warranties in section X, Licensee accepts ICE Browser
Lite "As Is", "with all faults", and in lieu of all other warranties and
conditions, expressed or implied, including, but not limited to, those for
merchantability and fitness for a particular purpose. Licensor accepts no
responsibility for the operation or performance of the program. The entire
risk of use and consequences of use of the program falls completely on the
Licensee and Licensor shall not be liable in any respect for any claims, loss
or injury alleged to have resulted from use or in reliance on ICE Browser
Lite. In this respect, Licensee shall completely indemnify and defend for any
such claim, loss or injury as provided below. Licensee acknowledges that it
has read the foregoing disclaimers of warranty and limitation of liability
and understands that Licensee assumes the entire risk of use of the program.
Except for the Parties' obligations under Section XII, neither party
shall be liable to the other party for any loss of data, profits or income or
for special, incidental, exemplary, consequential or indirect damages of any
kind, even if the other party has been advised of the possibility of such
damages, arising out of or in connection with the product.
<PAGE>
XII. INDEMNIFICATION
Licensor agrees to indemnify, defend and hold Licensee, its agents and
employees harmless from any and all costs, liabilities and damages (
including reasonable attorney's fees and litigation costs) caused by or
arising out of a claim brought against Licensee, its agents and employees
that ICE Browser Lite AS DELIVERED TO Licensee, infringes or misappropriates
any copyright, trademark, trade secret law or patent right, or other
intellectual property right of any third party, when used by Licensee in
accordance with the terms of this agreement; provided however that Licensee
has given Licensor prompt notice of any such claim and that Licensor is given
information, reasonable assistance and sole authority to defend or settle the
claim. Licensor shall have no liability for any settlement or compromise made
without its consent.
Licensee agrees to indemnify, defend and hold Licensor, its agents
and employees harmless from any and all costs, liabilities and damages
(including reasonable attorney's fees and litigation costs) caused by or
arising out of a claim brought against Licensor, its agents and employees
which arise directly or indirectly from Licensee's use, modification or
operation of ICE Browser Lite within the Application specified in Exhibit B
or from misconduct or misrepresentations made by Licensee relating to
Licensor, ICE Browser Lite or this Agreement; provided however that Licensor
has given Licensee prompt notice of any such claim and that Licensee is given
information, reasonable assistance and sole authority to defend or settle the
claim. Licensee shall have no liability for any settlement or compromise made
without its consent.
XII. GOVERNING LAW
This Agreement shall be subject to the laws of Norway. Licensee accepts that
any dispute related to this Agreement and/or ICE Browser Lite that cannot be
settled between the parties or by neutral arbitration, shall be submitted to
the court in Bergen, Norway.
- --------------------------- -------------------------
ICEsoft AS Sideware Systems Inc.
"signed"
- --------------------------- -------------------------
Authorized Signature Authorized Signature
- --------------------------- -------------------------
Place and Date Place and Date
<PAGE>
Exhibit A, Software deliverables, fees and other conditions
This exhibit shall specify which software components ICEsoft AS shall supply
to Licensee and the License fee for each component. There is one such fee for
each application listed in Exhibit B. The total fee for this Agreement shall
also be stated here. Other conditions agreed between Licensee and Licensor
shall also be stated here.
Entry level ICE Browser Lite binary
License fee is US$1000. Mark with cross here: X
Entry level ICE Browser Lite source
License fee is US$1000. Mark with cross here: X
Entry level ECMAScript Scripter binary
License fee is US$500. Mark with cross here: X
Licensee and Licensor have agreed upon a one time fee of US 0.-
dollars instead of a royalty-based clause. Licensee states that this is a
fair compensation with respect to the current estimates of his business
derived from the use of ICE Browser Lite and Licensor has no reason to
believe otherwise. Licensee will notify Licensor if this situation changes
significantly.
This paragraph defines the update of the original License Agreement
4116 between Licensee and Licensor. Exhibit A and C has been updated. Besides
this, no other changes has taken effect. Licensee has notified Licensor that
it will purchase the productes ECMAScript Sripter. Licensee and Licensor has
agreed that Licensee shall pay USD1000. - extro to upgrade the Total Annual
fee for support and upgrades.
This paragraph defines the second update of the License Agreement
4116. Licensee purchases the source code of ICE Browser Lite for USD4000-. In
addition, Licensee shall pay another USD 1000.- to upgrade the Total Annual
Fee for support and upgrades in Exhibit C. Exhibit A andC has been updated.
Besides this, no other changes have taken effect.
Total License Fee to be paid: US 5500.-dollars
- --------------------------- -------------------------
ICEsoft AS Sideware Systems Inc.
"signed" "signed"
- ------------------------- --------------------------
Authorized Signature Authorized Signature
- --------------------------- -------------------------
Place and Date Place and Date
<PAGE>
Exhibit B, Licensed applications
ICE Browser Lite is licensed for development projects, and subsequent
redistribution (in binary code form only), with the following applications.
The applications must be described to the extent that they can be
differentiated. (Fill in and indicate if source is need for the development
project or not):
Application: Dr. Bea Source License: YES
Dr. Bean is a 100for real-time customer support for e-commerce web
sites. Dr. Bean allows customers visiting a web site to interact with service
representatives using real-time chat and browser push. The ICE browser
component allows customers to receive web pages "pushed" from the reps. The
ICE browser component is part of the customer applet and also the CSR
(customer service representative) application.
Additional details can be provided in the space above.
For development projects with other applications than listed here
separate licensing is required.
<PAGE>
Exhibit C, Maintenance and support
The Licensor and Licensee agrees to amend articles V. and VI. as described
below. This description shall define additional maintenance and support and
the extra fee to be paid for this service as agreed between the parties. This
fee is in addition to the fee specified in Exhibit A.
The support option:
This option will provide Licensee with priority access to Licensor's
technical department via email and/or phone contact. Licensee will receive
priority attention when filing bug reports and similarly for receiving
bug-fixes and/or workarounds. Licensee is entitled to priority attention when
submitting questions about the design and operation of the ICE Browser
software.
Licensee will purchase support from Licensor at an annual cost of US
dollar 1500.-, mark with cross here: X
The upgrades and new releases option:
This option will provide Licensee with updates and new versions including new
Major versions at no additional cost.
Licensee will purchase upgrades from Licensor at an annual cost of US
dollar 1500.-, mark with cross here: X
The Total Annual fee for support and/or upgrades is US dollar 3000.-
ICEsoft AS Sideware Systems Inc.
"signed" "signed"
- --------------------------- -------------------------------
Authorized Signature Authorized Signature
- --------------------------- -------------------------------
Place and Date Place and Date
<PAGE>
Exhibit 10.11
Lease effective as of July 1, 1999 between the Company, Techwest
Management Ltd., BrainTech, Inc. and Pacific Centre Leaseholds Ltd.
<PAGE>
PACIFIC CENTRE
PACIFIC CENTRE TOWER FOUR
OFFICE LEASE
BETWEEN
PACIFIC CENTRE LEASEHOLDS LIMITED
- AND -
TECHWEST MANAGEMENT INC.
(Tenant)
- AND -
SIDEWARE SYSTEMS INC.
AND
BRAINTECH, INC.
(collectively, the Indemnifier)
===============================================================================
Pacific Centre Tower Four - Pacific Centre
777 Dunsmuir Street
Vancouver, British Columbia
===============================================================================
<PAGE>
LEASE
TABLE OF CONTENTS
ARTICLE I - PREMISES - TERM AND USE. . . . . . . . . . . . . . . . . . . . . .1
Section 1.01 Grant and Premises . . . . . . . . . . . . . . . . . . . . .1
Section 1.02 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.03 Construction of Premises . . . . . . . . . . . . . . . . . .1
Section 1.04 Use and Conduct of Business. . . . . . . . . . . . . . . . .1
ARTICLE II - RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 2.01 Covenant to Pay. . . . . . . . . . . . . . . . . . . . . . .1
Section 2.02 Net Rent . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.03 Payment of Operating Costs . . . . . . . . . . . . . . . . .2
Section 2.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . .2
Section 2.05 Payment of Estimated Taxes and Operating Costs . . . . . . .3
Section 2.06 Additional Rent. . . . . . . . . . . . . . . . . . . . . . .3
Section 2.07 Rent Past Due. . . . . . . . . . . . . . . . . . . . . . . .3
Section 2.08 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 2.09 Adjustment of Areas. . . . . . . . . . . . . . . . . . . . .3
Section 2.10 Net Lease. . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 2.11 Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE III - CONTROL OF BUILDING. . . . . . . . . . . . . . . . . . . . . . .4
Section 3.01 Landlord's Services. . . . . . . . . . . . . . . . . . . . .4
Section 3.02 Alterations by Landlord. . . . . . . . . . . . . . . . . . .4
ARTICLE IV - ACCESS AND ENTRY. . . . . . . . . . . . . . . . . . . . . . . . .5
Section 4.01 Entry for Inspection and Work. . . . . . . . . . . . . . . .5
Section 4.02 Right to Show Premises . . . . . . . . . . . . . . . . . . .5
Section 4.03 Entry not Forfeiture . . . . . . . . . . . . . . . . . . . .5
ARTICLE V - MAINTENANCE, REPAIRS AND ALTERATIONS . . . . . . . . . . . . . . .5
Section 5.01 Maintenance By Landlord. . . . . . . . . . . . . . . . . . .5
Section 5.02 Maintenance by Tenant; Compliance with Laws. . . . . . . . .6
Section 5.03 Tenant's Alterations . . . . . . . . . . . . . . . . . . . .6
Section 5.04 Repair Where Tenant at Fault . . . . . . . . . . . . . . . .6
Section 5.05 Removal of Improvements and Fixtures . . . . . . . . . . . .6
Section 5.06 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Section 5.07 Notice by Tenant . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE VI - INSURANCE AND INDEMNITY . . . . . . . . . . . . . . . . . . . . .7
Section 6.01 Tenant's Insurance . . . . . . . . . . . . . . . . . . . . .7
Section 6.02 Increase in Insurance Premiums . . . . . . . . . . . . . . .8
Section 6.03 Cancellation of Insurance. . . . . . . . . . . . . . . . . .8
Section 6.04 Loss or Damage . . . . . . . . . . . . . . . . . . . . . . .9
Section 6.05 Landlord's Insurance . . . . . . . . . . . . . . . . . . . .9
Section 6.06 Indemnification of the Landlord. . . . . . . . . . . . . . .9
ARTICLE VII - DAMAGE AND DESTRUCTION . . . . . . . . . . . . . . . . . . . . .9
Section 7.01 No Abatement or Termination. . . . . . . . . . . . . . . . .9
Section 7.02 Damage to Premises . . . . . . . . . . . . . . . . . . . . .9
Section 7.03 Right of Termination . . . . . . . . . . . . . . . . . . . 10
Section 7.04 Destruction of or Damage to Building . . . . . . . . . . . 10
Section 7.05 Architect's Certificate. . . . . . . . . . . . . . . . . . 11
ARTICLE VIII - ASSIGNMENT, SUBLETTING AND TRANSFERS. . . . . . . . . . . . . 11
Section 8.01 Assignments, Subleases and Transfers . . . . . . . . . . . 11
Section 8.02 Landlord's Rights. . . . . . . . . . . . . . . . . . . . . 11
Section 8.03 Conditions of Transfer . . . . . . . . . . . . . . . . . . 12
Section 8.04 Change of Control. . . . . . . . . . . . . . . . . . . . . 12
Section 8.05 No Advertising . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.06 Assignment By Landlord . . . . . . . . . . . . . . . . . . 13
- i -
<PAGE>
ARTICLE IX - DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.01 Default and Remedies . . . . . . . . . . . . . . . . . . . 13
Section 9.02 Distress . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9.03 Damages and Costs. . . . . . . . . . . . . . . . . . . . . 14
Section 9.04 Allocation of Payments . . . . . . . . . . . . . . . . . . 14
Section 9.05 Survival of Obligations. . . . . . . . . . . . . . . . . . 14
ARTICLE X - STATUS STATEMENT, ATTORNMENT AND SUBORDINATION . . . . . . . . . 14
Section 10.01 Status Statement. . . . . . . . . . . . . . . . . . . . . 14
Section 10.02 Subordination . . . . . . . . . . . . . . . . . . . . . . 14
Section 10.03 Attornment. . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10.04 Execution of Documents. . . . . . . . . . . . . . . . . . 15
ARTICLE XI - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.01 Rules and Regulations . . . . . . . . . . . . . . . . . . 15
Section 11.02 Delay . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.03 Overholding . . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.04 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.05 Registration. . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 11.07 Successors. . . . . . . . . . . . . . . . . . . . . . . . 16
Section 11.08 Joint and Several Liability . . . . . . . . . . . . . . . 16
Section 11.09 Captions and Section Numbers. . . . . . . . . . . . . . . 16
Section 11.10 Extended Meanings . . . . . . . . . . . . . . . . . . . . 16
Section 11.11 Partial Invalidity. . . . . . . . . . . . . . . . . . . . 16
Section 11.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 16
Section 11.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . 16
Section 11.14 Time of the Essence . . . . . . . . . . . . . . . . . . . 16
Section 11.15 Authority . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 11.16 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . 17
Section 11.17 Indemnity Agreement . . . . . . . . . . . . . . . . . . . 17
. . . . . . . . . . . . . . . . . . . . 17
. . . . . . . . . . . . . . . . . . . . 17
Section 11.20 Execution . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.21 PARKING . . . . . . . . . . . . . . . . . . . . . . . . . 17
SCHEDULE "A" - LEGAL DESCRIPTION OF THE LANDS. . . . . . . . . . . . . . . . 19
SCHEDULE "B" - FLOOR PLAN OF THE PREMISES. . . . . . . . . . . . . . . . . . 20
SCHEDULE "C" - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 21
SCHEDULE "D" - RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . 26
SCHEDULE "E" - INDEMNITY AGREEMENT . . . . . . . . . . . . . . . . . . . . . 28
- ii -
<PAGE>
THIS LEASE is dated the 25TH day of JUNE, 1999.
B E T W E E N:
PACIFIC CENTRE LEASEHOLDS LIMITED
(the "Landlord")
- and -
TECHWEST MANAGEMENT INC.
(the "Tenant")
- and -
SIDEWARE SYSTEMS INC. AND BRAINTECH, INC.
(collectively, the "Indemnifier")
ARTICLE I - PREMISES - TERM AND USE
SECTION I.1 GRANT AND PREMISES
In consideration of the performance by the Tenant of its obligations under
this Lease, the Landlord leases the Premises to the Tenant for the Term
DESCRIBED IN SECTION 1.02. The Premises are located on the 16TH floor of the
Building and COMPRISE THE ORIGINAL PREMISES (THE "ORIGINAL PREMISES") WHICH
are shown outlined in red on the floor plan attached as Schedule "B" AND THE
EXTENDED PREMISES (THE "EXTENDED PREMISES") WHICH ARE SHOWN OUTLINED IN RED
ON THE FLOOR PLAN ATTACHED AS SCHEDULE "B1". FOR THE PURPOSES OF THIS LEASE,
REFERENCES TO THE PREMISES WILL MEAN THE ORIGINAL PREMISES ONLY FOR THE
PERIOD COMMENCING JULY 1, 1999 THROUGH AND INCLUDING THE LAST DAY OF
NOVEMBER, 2000 AND WILL MEAN BOTH THE ORIGINAL PREMISES AND THE EXTENDED
PREMISES FOR THE PERIOD COMMENCING DECEMBER 1, 2000 AND ENDING THE LAST DAY
OF JUNE, 2002. The Net Rentable Area of the ORIGINAL Premises is
approximately 3,538 square feet and the Rentable Area of the Original
Premises is approximately 3,909 square feet. THE NET RENTABLE AREA OF THE
EXTENDED PREMISES IS APPROXIMATELY 3,996 SQUARE FEET AND THE RENTABLE AREA OF
THE EXTENDED PREMISES IS APPROXIMATELY 4,416 SQUARE FEET.
SECTION 1.02 TERM
The Term of this Lease WITH RESPECT TO THE ORIGINAL PREMISES is THREE (3)
years from the 1ST day of JULY, 1999, to the LAST day of JUNE, 2002. THE
TERM OF THIS LEASE WITH RESPECT TO THE EXTENDED PREMISES IS ONE (1) YEAR AND
SEVEN (7) MONTHS FROM THE 1ST DAY OF DECEMBER, 2000, TO THE LAST DAY OF JUNE,
2002.
SECTION 1.03 CONSTRUCTION OF PREMISES
The provisions (if any) of the Lease Proposal relating to construction of the
Premises and delay in availability of the Premises for occupancy by the
Tenant shall remain in effect and shall not merge upon the execution of this
Lease. The Tenant shall abide by the provisions of the tenant leasehold
improvement manual supplied by the Landlord for any construction it proposes
to do prior to or upon occupancy of the Premises, and any renovations to the
Premises after it takes occupancy.
SECTION 1.04 USE AND CONDUCT OF BUSINESS
The Premises shall be used only for general office use and for no other
purpose.
The Tenant shall conduct its business in the Premises in a reputable and
first class manner. If the Tenant is a corporation, the Tenant will be
either incorporated or extra-provincially registered in the province of
British Columbia and will remain in good standing during the Term with the
Registrar of Companies for British Columbia with respect to filing annual
reports.
ARTICLE II - RENT
SECTION 2.01 COVENANT TO PAY
(a) Except as may be provided in Section 2.02, the Tenant shall pay Rent from
the Commencement Date without prior demand and without any deduction, abatement,
setoff or compensation. If the
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Commencement Date is not on the first day of a calendar month, or the period
of time from the Commencement Date to the end of the first Fiscal Year during
the Term is less than 12 calendar months, or the period of time from the last
Fiscal Year end during the Term to the end of the Term is less than 12
calendar months, then Rent for such month and such periods shall be pro-rated
on a per diem basis, based upon a period of 365 days.
(b) If an Event of Default occurs, at the request of the Landlord, the
Tenant will deliver to the Landlord a series of monthly post-dated cheques
for the next ensuing twelve month period, for the total of the monthly
payments of Net Rent and any Additional Rent estimated by the Landlord in
advance.
SECTION 2.02 NET RENT
(a) WITH RESPECT TO THE ORIGINAL PREMISES, the Tenant shall pay Net Rent
in the sum of SIXTY-FOUR THOUSAND, FOUR HUNDRED AND NINETY-EIGHT DOLLARS AND
FIFTY CENTS ($64,498.50) per annum payable in equal monthly instalments of
FIVE THOUSAND THREE HUNDRED AND SEVENTY-FOUR DOLLARS AND EIGHTY-EIGHT CENTS
($5,374.88) each in advance, on the first day of each calendar month of the
Term. The Net Rent is based on an annual rate of $16.50 per square foot of
the Rentable Area of the ORIGINAL Premises. As soon as reasonably possible
after completion of construction of the ORIGINAL Premises, the Landlord shall
measure the Net Rentable Area of the ORIGINAL Premises and shall calculate
the Rentable Area of the ORIGINAL Premises and Rent shall be adjusted
accordingly.
(b) WITH RESPECT TO THE EXTENDED PREMISES, THE TENANT SHALL PAY NET RENT
IN THE SUM OF SEVENTY-TWO THOUSAND, EIGHT HUNDRED AND SIXTY-FOUR DOLLARS
($72,864) PER ANNUM PAYABLE IN EQUAL MONTHLY INSTALLMENTS OF SIX THOUSAND AND
SEVENTY-TWO DOLLARS ($6,072) EACH IN ADVANCE, ON THE FIRST DAY OF EACH
CALENDAR MONTH COMMENCING DECEMBER 1, 2000 AND CONTINUING UNTIL THE END OF
THE TERM. THE NET RENT IS BASED ON AN ANNUAL RATE OF $16.50 PER SQUARE FOOT
OF THE RENTABLE AREA OF THE EXTENDED PREMISES.
SECTION 2.03 PAYMENT OF OPERATING COSTS
The Tenant shall pay to the Landlord the Tenant's Proportionate Share of
Operating Costs.
SECTION 2.04 PAYMENT OF TAXES
(a) The Tenant shall pay when due all Business Tax. If the Tenant's
Business Tax is payable by the Landlord to the relevant taxing authority, the
Tenant shall pay the amount thereof to the Landlord or as it directs. If no
separate tax bills for Business Tax are issued with respect to the Tenant or
the Premises, the Landlord may allocate Business Tax charged, assessed or
levied against the Building or the Lands to the Tenant on the basis of the
Tenant's Proportionate Share.
(b) The Landlord shall allocate Taxes between the Total Rentable Area of
the Building and other components of the Development on such basis as the
Landlord, acting equitably, determines from time to time.
(c) The Tenant shall pay to the Landlord its Proportionate Share of the
Taxes allocated to the Total Rentable Area of the Building by the Landlord.
(d) If the Landlord obtains a written statement from the assessment or
taxing authorities indicating that as a result of any construction or
installation of improvements in the Premises, or any act or election of the
Tenant, the Taxes payable by the Tenant under subsection 2.05(b) do not
accurately reflect the Tenant's proper share of Taxes, the Landlord may
require the Tenant to pay such greater or lesser amount as is determined by
the Landlord, acting reasonably.
(e) The Landlord may: contest any Taxes and appeal any assessments with
respect thereto; withdraw any such contest or appeal; and agree with the
taxing authorities on any settlement or compromise with respect to Taxes.
The Tenant will co-operate with the Landlord in respect of any such contest
or appeal and will provide the Landlord with all relevant information,
documents and consents required by the Landlord in connection with any such
contest or appeal. The Tenant will not contest any Taxes or appeal any
assessments related thereto without the Landlord's prior written consent.
(f) The Tenant shall promptly deliver to the Landlord on request, copies
of assessment notices, tax bills and other documents received by the Tenant
relating to Taxes and Business Tax and receipts for payment of Taxes and
Business Tax payable by the Tenant.
(g) The Tenant shall on demand, pay to the Landlord or to the appropriate
taxing authority if required by the Landlord, all goods and services taxes,
sales taxes, value added taxes, business transfer taxes, or any other taxes
imposed on the Landlord with respect to Rent or in respect of the rental of
space
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under this Lease, whether characterized as a goods and services tax, sales
tax, value added tax, business transfer tax or otherwise. The Landlord shall
have the same remedies and rights with respect to the payment or recovery of
such taxes as it has for the payment or recovery of Rent under this Lease.
SECTION 2.05 PAYMENT OF ESTIMATED TAXES AND OPERATING COSTS
(a) The amount of Taxes and Operating Costs may be estimated by the
Landlord for such period as the Landlord determines from time to time, and
the Tenant agrees to pay to the Landlord the amounts so estimated in equal
instalments, in advance, on the first day of each month during such period.
Notwithstanding the foregoing, when bills for all or any portion of the
amounts so estimated are received, the Landlord may bill the Tenant for the
Tenant's Proportionate Share thereof (or the amount determined under Section
2.04(d)) after crediting against such amounts any monthly payments of
estimated Taxes and Operating Costs previously made by the Tenant and the
Tenant shall pay the Landlord the amounts so billed.
(b) Within a reasonable time after the end of the period for which such
estimated payments have been made, the Landlord shall submit to the Tenant a
statement showing the calculation of the Tenant's share of Taxes and
Operating Costs together with a report from the Landlord's auditor as to the
total amount of Operating Costs. If: (i) the amount the Tenant has paid is
less than the amounts due, the Tenant shall pay such deficiency to the
Landlord; or (ii) the amount paid by the Tenant is greater than the amounts
due, the Landlord shall pay such excess to the Tenant.
(c) The obligations contained in this Section shall survive the expiration
or earlier termination of the Term. Failure of the Landlord to render any
statement of Taxes or Operating Costs shall not prejudice the Landlord's
right to render such statement thereafter or with respect to any other
period. The rendering of any such statement shall also not affect the
Landlord's right to subsequently render an amended or corrected statement.
SECTION 2.06 ADDITIONAL RENT
Except as otherwise provided in this Lease, all Additional Rent shall be
payable by the Tenant to the Landlord within 5 business days after demand.
SECTION 2.07 RENT PAST DUE
All Rent past due shall bear interest from the date on which the same became
due until the date of payment at 5% per annum in excess of the prime interest
rate for Canadian Dollar demand loans announced from time to time by any
Canadian chartered bank designated by the Landlord.
SECTION 2.08 UTILITIES
(a) The Tenant shall pay to the Landlord, or as the Landlord directs, all
gas, electricity, water, steam and other utility charges applicable to the
Premises on the basis of the Rentable Area of the Premises. Charges for
utilities shall be payable in advance on the first day of each month at a
basic rate determined by the Landlord's engineers. The Landlord shall be
entitled to allocate to the Premises an additional charge, as determined by
the Landlord's engineer, for any supply of utilities to the Premises in
excess of those covered by such basic charge. If any utility rates or
related taxes or charges are increased or decreased during the Term, such
charges shall be equitably adjusted and the decision of the Landlord, acting
reasonably, shall be final and binding with respect to any such adjustment.
(b) The Landlord shall have the exclusive right to replace bulbs, tubes
and ballasts in the lighting system in the Premises, on either an individual
or a group basis. The Tenant shall pay the cost of such replacement on the
first day of each month or at the option of the Landlord upon demand.
(c) The Tenant shall pay the cost of installing and maintaining any meters
installed at the request of the Landlord or the Tenant to measure the usage
of utilities in the Premises.
SECTION 2.09 ADJUSTMENT OF AREAS
The Landlord may from time to time re-measure the Net Rentable Area of the
Premises or re-calculate the Rentable Area of the Premises and may re-adjust
the Net Rent and/or the Tenant's Proportionate Share of Additional Rent
accordingly. The effective date of any such re-adjustment shall: (a) in the
case of an adjustment to the Rentable Area resulting from a change in the
aggregate Net Rentable Area of all office premises on the floor on which the
Premises are situated, be the date on which such change occurred; and (b)
in the case of a correction to any measurement or calculation error, be the
date as of which such error was introduced in the calculation of Rent. Any
necessary adjusting payment will be made by the party responsible for that
payment forthwith upon the amount of the adjusting payment
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being determined.
SECTION 2.10 NET LEASE
This Lease is a completely net lease to the Landlord, except as expressly
herein set out. The Landlord is not responsible for any expenses or outlays
of any nature arising from or relating to the Premises, or the use or
occupancy thereof, or the contents thereof or the business carried on
therein. The Tenant shall pay all charges, impositions and outlays of every
nature and kind relating to the Premises except as expressly herein set out.
SECTION 2.11 DEPOSIT
The Landlord hereby acknowledges receipt of the Tenant's deposit cheque in a
sum EQUAL TO ONE MONTH'S RENT PLUS GST which will be applied without interest
against the FIRST Rent due under this Lease.
ARTICLE III - CONTROL OF BUILDING
SECTION 3.01 LANDLORD'S SERVICES
(a) The Landlord shall provide climate control to the Premises 24 hours
per day from Monday to Friday inclusive and from 9:00 a.m. to 6:00 p.m. on
Saturdays, Sundays and statutory holidays throughout the Term to maintain a
temperature adequate for normal occupancy, except during the making of
repairs, alterations or improvements, provided that the Landlord shall have
no liability for failure to supply climate control service when stopped as
aforesaid or when prevented from doing so by repairs, or causes beyond the
Landlord's reasonable control. Any rebalancing of the climate control system
in the Premises necessitated by the installation of partitions, equipment or
fixtures by the Tenant or by any use of the Premises not in accordance with
the design standards of such system will be performed by the Landlord or, at
the option of the Landlord, by the Tenant, but in either case at the Tenant's
expense.
(b) Subject to the Rules and Regulations, the Landlord shall provide
elevator service 24 hours per day, 7 days per week for use by the Tenant in
common with others, except when prevented by repairs. The Landlord will
operate at least one passenger elevator for use by tenants at all times
except in the case of fire or other emergencies.
(c) The Landlord will provide cleaning services in the Building consistent
with the standards of a first class office building.
(d) Subject to Section 2.08, the Landlord shall make available to the
Premises electricity for normal lighting and miscellaneous power requirements
and, in normal quantities gas, water, and other public utilities generally
made available to other tenants of the Building by the Landlord.
SECTION 3.02 ALTERATIONS BY LANDLORD
The Landlord may: (a) alter, add to, subtract from, construct improvements
to, rearrange, build additional storeys on and construct additional
facilities adjoining or near the Development; (b) relocate the facilities and
improvements comprising the Building or erected on the Lands, or relocate,
alter or rearrange the Premises, provided that the premises as relocated,
altered, or rearranged shall be in all material aspects comparable to the
Premises as herein defined; (c) do such things on, or in the Lands or
Development as are required to comply with any laws, by-laws, regulations,
orders or directives affecting the Lands or any part of the Development; and
(d) do such other things on or in the Lands or Development as the Landlord,
in the use of good business judgment determines to be advisable; provided
that notwithstanding anything contained in this Section, access to the
Premises shall at all times be available from the elevator lobbies of the
Building.
The Landlord shall not be in breach of its covenant for quiet enjoyment or
liable for any loss, costs or damages, whether direct or indirect, incurred
by the Tenant due to any of the foregoing.
ARTICLE IV - ACCESS AND ENTRY
SECTION 4.01 ENTRY FOR INSPECTION AND WORK
The Landlord shall be entitled at all reasonable times (and at any time in
case of emergency) to enter the Premises to examine them; to make such
repairs, alterations or improvements in the Premises or to the
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Building as the Landlord considers necessary or desirable; to have access to
underfloor ducts and access panels to mechanical shafts; to check, calibrate,
adjust and balance controls and other parts of the heating, air conditioning,
ventilating and climate control systems; and for any other purpose necessary
to enable the Landlord to perform its obligations or exercise its rights
under this Lease or in the administration of the Building or other
improvements on the Lands. The Tenant shall not obstruct any pipes, conduits
or mechanical or electrical equipment so as to prevent reasonable access
thereto. The Landlord shall exercise its rights under this Section, to the
extent possible in the circumstances, in such manner so as to minimize
interference with the Tenant's use and enjoyment of the Premises.
SECTION 4.02 RIGHT TO SHOW PREMISES
The Landlord and its agents shall have the right to enter the Premises at all
reasonable times during Normal Business Hours to show them to prospective
purchasers, or Mortgagees or prospective Mortgagees, and, during the last six
months of the Term (or the last six months of any renewal term if this Lease
is renewed), to prospective tenants.
SECTION 4.03 ENTRY NOT FORFEITURE
No entry into the Premises or anything done hereunder by the Landlord
pursuant to a right granted by this Lease shall constitute a breach of any
covenant for quiet enjoyment, or (except where expressed by the Landlord in
writing) shall constitute a re-entry or forfeiture, or an actual or
constructive eviction. The Tenant shall have no claim for injury, damages or
loss suffered as a result of any such entry or thing, except in the case of
wilful misconduct by the Landlord in the course of such entry, but the
Landlord shall in no event be responsible for the acts or negligence of any
Persons providing cleaning services in the Building.
ARTICLE V - MAINTENANCE, REPAIRS AND ALTERATIONS
SECTION 5.01 MAINTENANCE BY LANDLORD
(a) The Landlord covenants to keep the following in good repair as a
prudent owner: (i) the structure of the Building including exterior walls
and roofs; (ii) the mechanical, electrical and other base building systems;
and (iii) the entrance, lobbies, plazas, stairways, corridors, parking areas
and other facilities from time to time provided for use in common by the
Tenant and other tenants of the Building. If such maintenance or repairs or
alterations are required by law or in the prudent management of the Building
or any other improvements on the Lands due to the business carried on by the
Tenant, then the full cost of such maintenance and repairs plus a sum equal
to 15% of such cost representing the Landlord's overhead, shall be paid by
the Tenant to the Landlord.
(b) The Landlord shall not be responsible for any damages caused to the
Tenant by reason of failure of any equipment or facilities serving the
Building or delays in the performance of any work for which the Landlord is
responsible under this Lease. The Landlord shall have the right to stop,
interrupt or reduce any services, systems or utilities provided to, or
serving the Building or Premises to perform repairs, alterations or
maintenance or to comply with laws or regulations, or requirements of its
insurers, or for causes beyond the Landlord's reasonable control or as a
result of the Landlord exercising its rights under Section 3.02. The
Landlord shall not be in breach of its covenant for quiet enjoyment or liable
for any loss, costs or damages, whether direct or indirect, incurred by the
Tenant due to any of the foregoing, but the Landlord shall make reasonable
efforts to restore the services, utilities or systems so stopped, interrupted
or reduced.
(c) If the Tenant fails to carry out any maintenance, repairs or work
required to be carried out by it under this Lease to the reasonable
satisfaction of the Landlord, the Landlord may at its option carry out such
maintenance or repairs without any liability for any resulting damage to the
Tenant's property or business. The cost of such work, plus a sum equal to
15% of such cost representing the Landlord's overhead, shall be paid by the
Tenant to the Landlord.
SECTION 5.02 MAINTENANCE BY TENANT; COMPLIANCE WITH LAWS
(a) The Tenant shall at its sole cost repair and maintain the Premises
exclusive of base building mechanical and electrical systems, all to a
standard consistent with a first class office building, with the exception
only of those repairs which are the obligation of the Landlord under this
Lease, subject to Article VII. The Landlord may enter the Premises at all
reasonable times to view their condition and the Tenant shall maintain and
keep the Premises in good and substantial repair according to notice in
writing. At the expiration or earlier termination of the Term, the Tenant
shall surrender the Premises to the Landlord in as good condition and repair
as the Tenant is required to maintain the Premises throughout the Term.
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(b) The Tenant shall, at its own expense, promptly comply with all laws,
by-laws, government orders and with all reasonable requirements or directives
of the Landlord's insurers affecting the Premises or their use, repair or
alteration.
SECTION 5.03 TENANT'S ALTERATIONS
(a) No Alterations shall be made to the Premises without the Landlord's
written approval. The Tenant shall submit to the Landlord details of the
proposed work including drawings and specifications prepared by qualified
architects or engineers conforming to good engineering practice. All such
Alterations shall be performed: (i) at the sole cost of the Tenant; (ii) by
contractors and workmen approved by the Landlord; (iii) in a good and
workmanlike manner; (iv) in accordance with drawings and specifications
approved by the Landlord; (v) in accordance with all applicable legal and
insurance requirements; (vi) subject to the reasonable regulations,
supervision, control and inspection of the Landlord; (vii) subject to such
indemnification against liens and expenses as the Landlord reasonably
requires; and (viii) in accordance with all applicable laws, by-laws and
government orders. The Landlord's reasonable cost incurred with respect to
the Tenant's Alterations including without limitation the cost of approving,
supervising and inspecting all such work shall be paid by the Tenant.
(b) If the Alterations would affect the structure of the Building or any
of the electrical, plumbing, mechanical, heating, ventilating or air
conditioning systems or other base building systems, such work shall at the
option of the Landlord be performed by the Landlord at the Tenant's cost. If
the Landlord performs such work, then on completion of such work, the cost of
the work plus a sum equal to 15% of said cost representing the Landlord's
overhead shall be paid by the Tenant to the Landlord.
(c) If the Tenant installs Leasehold Improvements, or makes Alterations
which depart from the Building standard and which restrict access by the
Landlord to any Building system or to any structural element of the Building
by the Landlord or by any person or corporation authorized by the Landlord,
or which restrict the installation of the leasehold improvements of any other
tenant in the Building, then the Tenant shall at the request of the Landlord
remove any obstruction in a manner acceptable to the Landlord, failing which
the Landlord may remove the same; and the Tenant will pay, or reimburse the
Landlord for, the cost of such removal and for any replacement or restoration
of such Leasehold Improvements or Alterations.
SECTION 5.04 REPAIR WHERE TENANT AT FAULT
Notwithstanding any other provisions of this Lease, if the Building is
damaged or destroyed or requires repair, replacement or alteration as a
result of the act or omission of the Tenant, its employees, agents, invitees,
licensees, contractors or others for whom it is in law responsible, the cost
of the resulting repairs, replacements or alterations plus a sum equal to 15%
of such cost representing the Landlord's overhead, shall be paid by the
Tenant to the Landlord.
SECTION 5.05 REMOVAL OF IMPROVEMENTS AND FIXTURES
All Leasehold Improvements (other than Trade Fixtures) shall immediately upon
their placement, before or during the Term, become the Landlord's property
without compensation to the Tenant. Except as otherwise agreed by the
Landlord in writing, no Leasehold Improvements shall be removed from the
Premises by the Tenant either during or at the expiration or sooner
termination of the Term except that:
(a) the Tenant may, during the Term, in the usual course of its business,
remove its Trade Fixtures, provided that the Tenant is not in default under
this Lease;
(b) the Tenant shall, at the expiration or earlier termination of the
Term, at its sole cost, remove its Trade Fixtures from the Premises, failing
which, at the option of the Landlord, the Trade Fixtures shall become the
property of the Landlord and may be removed from the Premises and sold or
disposed of by the Landlord in such manner as it deems advisable; and
(c) the Tenant shall, at the expiration or earlier termination of the
Term, at its sole cost, leave the premises in a neat and tidy condition.
SECTION 5.06 LIENS
The Tenant shall promptly pay for all materials supplied and work done in
respect of the Premises so as to ensure that no lien is registered against
any portion of the Lands or Building or against the Landlord's or Tenant's
interest therein. If a lien is registered or filed, the Tenant shall
discharge it at its expense forthwith, failing which the Landlord may at its
option discharge the lien by paying the amount claimed to be due into court
or directly to the lien claimant and the amount so paid and all expenses of
the
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Landlord including legal fees (on a solicitor and client basis) shall be paid
by the Tenant to the Landlord. The Tenant will not grant any security
interest in the Leasehold Improvements without the prior written consent of
the Landlord and will promptly cause the discharge of any financing statement
or notice which may be filed in respect of such security interest under any
statute, unless such statement or notice is in favour of the Landlord.
SECTION 5.07 NOTICE BY TENANT
The Tenant shall notify the Landlord of any accident, defect, damage or
deficiency in any part of the Premises or the Building which comes to the
attention of the Tenant, its employees or contractors notwithstanding that
the Landlord may have no obligation in respect thereof.
ARTICLE VI - INSURANCE AND INDEMNITY
SECTION 6.01 TENANT'S INSURANCE
(a) The Tenant shall maintain the following insurance throughout the Term at
its sole cost:
(i) "All Risks" (including flood and earthquake) property insurance
with deductibles not exceeding 3% of the amount insured, naming
the Landlord, the owners of the Lands and Development and the
Mortgagee as insured parties, containing a waiver of any
subrogation rights which the Tenant's insurers may have against
the Landlord and against those for whom the Landlord is in law
responsible, and (except with respect to the Tenant's chattels)
incorporating the Mortgagee's standard mortgage clause. Such
insurance shall insure: (1) property of every kind owned by the
Tenant or for which the Tenant is legally liable located on or in
the Development including, without limitation, Leasehold
Improvements, in an amount equal to not less than 90% of the full
replacement cost thereof, subject to a stated amount co-insurance
clause; and (2) extra expense insurance in such amount as will
reimburse the Tenant for loss attributable to all perils referred
to in this paragraph 6.01(a)(i) or resulting from prevention of
access to the Premises;
(ii) Comprehensive general liability insurance which includes the
following coverages: owners protective; personal injury;
occurrence property damage; and employers and blanket contractual
liability. Such policies shall contain inclusive limits of not
less than $5,000,000, provide for cross liability, and name the
Landlord and the owners of the Lands as insured;
(iii) Tenant's "all risks" legal liability insurance for the replacement
cost value of the Premises including loss of use thereof;
(iv) Automobile liability insurance on a non-owned form including
contractual liability, and on an owner's form covering all
licensed vehicles operated by or on behalf of the Tenant, which
insurance shall have inclusive limits of not less than $1,000,000;
and
(v) Any other form of insurance which the Tenant or the Landlord,
acting reasonably, or the Mortgagee requires from time to time in
form, in amounts and for risks against which a prudent tenant
would insure.
(b) All policies referred to in this Section 6.01 shall:
(i) be taken out with insurers reasonably acceptable to the Landlord;
(ii) be in a form reasonably satisfactory to the Landlord;
(iii) be non-contributing with, and shall apply only as primary and not
as excess to any other insurance available to the Landlord;
(iv) not be invalidated as respects the interests of the Landlord or
the Mortgagee by reason of any breach of or violation of any
warranty, representation, declaration or condition; and
(v) contain an undertaking by the insurers to notify the Landlord by
registered mail not less than 30 days prior to any material
change, cancellation or termination.
Certificates of insurance on the Landlord's standard form or, if required by the
Landlord, certified copies of such insurance policies, shall be delivered to the
Landlord forthwith upon request. If the Tenant fails
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to take out or to keep in force any insurance referred to in this Section
6.01 or should any such insurance not be approved by either the Landlord or
the Mortgagee and should the Tenant not commence to diligently rectify (and
thereafter proceed to diligently rectify) the situation within 48 hours after
written notice by the Landlord to the Tenant (stating, if the Landlord or the
Mortgagee, from time to time, does not approve of such insurance, the reasons
therefor) the Landlord has the right without assuming any obligation in
connection therewith, to effect such insurance at the sole cost of the Tenant
and all outlays by the Landlord shall be paid by the Tenant to the Landlord
without prejudice to any other rights or remedies of the Landlord under this
Lease.
SECTION 6.02 INCREASE IN INSURANCE PREMIUMS
The Tenant shall not keep or use in the Premises any article which may be
prohibited by any fire insurance policy in force from time to time covering
the Premises or the Development. If: (a) the conduct of business in, or
use or manner of use of the Premises; (b) or any acts or omissions of the
Tenant in the Development or any part thereof; cause or result in any
increase in premiums for any insurance carried by the Landlord with respect
to the Development, the Tenant shall pay any such increase in premiums. In
determining whether increased premiums are caused by or result from the use
or occupancy of the Premises, a schedule issued by the organization computing
the insurance rate on the Development showing the various components of such
rate, shall be conclusive evidence of the items and charges which make up
such rate.
SECTION 6.03 CANCELLATION OF INSURANCE
If any insurer under any insurance policy covering any part of the
Development or any occupant thereof cancels or threatens to cancel its
insurance policy or reduces or threatens to reduce coverage under such policy
by reason of the use of the Premises by the Tenant or by any Transferee, or
by anyone permitted by the Tenant to be upon the Premises, the Tenant shall
remedy such condition within 48 hours after notice thereof by the Landlord.
SECTION 6.04 LOSS OR DAMAGE
The Landlord shall not be liable for any death or injury arising from or out
of any occurrence in, upon, at, or relating to the Lands or Development or
damage to property of the Tenant or of others located on the Premises or
elsewhere in the Development, nor shall it be responsible for any loss of or
damage to any property of the Tenant or others from any cause, whether or not
any such death, injury, loss or damage results from the negligence of the
Landlord, its agents, employees, contractors, or others for whom it may, in
law, be responsible. Without limiting the generality of the foregoing, the
Landlord shall not be liable for any injury or damage to Persons or property
resulting from fire, explosion, falling plaster, falling ceiling tile,
falling fixtures, steam, gas, electricity, water, rain, flood, snow or leaks
from any part of the Premises or from the pipes, sprinklers, appliances,
plumbing works, roof, windows or subsurface of any floor or ceiling of the
Development or from the street or any other place or by dampness or by any
other cause whatsoever. The Landlord shall not be liable for any such damage
caused by other tenants or Persons on the Lands or in the Development or by
occupants of adjacent property thereto, or the public, or caused by
construction or by any private, public or quasi-public work. All property of
the Tenant kept or stored on the Premises shall be so kept or stored at the
risk of the Tenant only and the Tenant releases and agrees to indemnify the
Landlord and save it harmless from any claims arising out of any damage to
the same including, without limitation, any subrogation claims by the
Tenant's insurers.
SECTION 6.05 LANDLORD'S INSURANCE
The Landlord shall throughout the Term carry: (a) insurance on the
Development (excluding the foundations and excavations) and the machinery,
boilers and equipment in or servicing the Development and owned by the
Landlord or the owners of the Development (excluding any property which the
Tenant and other tenants are obliged to insure under Section 6.01 or similar
sections of their respective leases) against damage by fire and extended
perils coverage; (b) public liability and property damage insurance with
respect to the Landlord's operations in the Development; and (c) such other
form or forms of insurance as the Landlord or the Mortgagee reasonably
considers advisable. Such insurance shall be in such reasonable amounts and
with such reasonable deductibles as would be carried by a prudent owner of a
reasonably similar building, having regard to size, age and location.
Notwithstanding the Landlord's covenant in this Section and notwithstanding
any contribution by the Tenant to the cost of the Landlord's insurance
premiums, the Tenant acknowledges and agrees that: (i) the Tenant is not
relieved of any liability arising from or contributed to by its negligence or
its wilful act or omissions; (ii) no insurable interest is conferred upon the
Tenant under any insurance policies carried by the Landlord; and (iii) the
Tenant has no right to receive any proceeds of any insurance policies carried
by the Landlord.
SECTION 6.06 INDEMNIFICATION OF THE LANDLORD
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Notwithstanding any other provision of this Lease, the Tenant shall indemnify
the Landlord and save it harmless from all loss (including loss of Net Rent
and Additional Rent) claims, actions, damages, liability and expense in
connection with loss of life, personal injury, damage to property or any
other loss or injury whatsoever arising out of this Lease, or any occurrence
in, upon or at the Premises, or the occupancy or use by the Tenant of the
Premises or any part thereof, or occasioned wholly or in part by any act or
omission of the Tenant or by anyone permitted to be on the Premises by the
Tenant. If the Landlord shall, without fault on its part, be made a party to
any litigation commenced by or against the Tenant, then the Tenant shall
protect, indemnify and hold the Landlord harmless in connection with such
litigation. The Landlord may, at its option, participate in or assume
carriage of any litigation or settlement discussions relating to the
foregoing, or any other matter for which the Tenant is required to indemnify
the Landlord under this Lease. Alternatively, the Landlord may require the
Tenant to assume carriage of and responsibility for all or any part of such
litigation or discussions.
ARTICLE VII - DAMAGE AND DESTRUCTION
SECTION 7.01 NO ABATEMENT OR TERMINATION
If the Premises or Building are damaged or destroyed in whole or in part by
fire or any other occurrence, this Lease shall continue in full force and
effect and there shall be no abatement of Rent except as provided in this
Article VII.
If the Premises are at any time destroyed or damaged as a result of fire or
any other casualty required to be insured against by the Landlord under this
Lease or otherwise insured against by the Landlord and not caused or
contributed to by the Tenant, then the following provisions shall apply:
(a) if the Premises are rendered untenantable only in part, the Landlord
shall diligently repair the Premises to the extent only of its obligations
under Section 5.01 and Net Rent shall abate proportionately to the portion of
the Premises rendered untenantable from the date of destruction or damage
until the Landlord's repairs have been completed;
(b) if the Premises are rendered wholly untenantable, the Landlord shall
diligently repair the Premises to the extent only of its obligations pursuant
to Section 5.01 and Net Rent shall abate entirely from the date of
destruction or damage until the Landlord's repairs have been completed;
(c) if the Premises are not rendered untenantable in whole or in part, the
Landlord shall diligently perform such repairs to the Premises to the extent
only of its obligations under Section 5.01, but in such circumstances Net
Rent shall not terminate or abate;
(d) upon being notified by the Landlord that the Landlord's repairs have
been substantially completed, the Tenant shall diligently perform all repairs
to the Premises which are the Tenant's responsibility under Section 5.02, and
all other work required to fully restore the Premises for use in the Tenant's
business, in every case at the Tenant's cost and without any contribution to
such cost by the Landlord, whether or not the Landlord has at any time made
any contribution to the cost of supply, installation or construction of
Leasehold Improvements in the Premises;
(e) othing in this Section shall require the Landlord to rebuild the
Premises in the condition which existed before any such damage or destruction
so long as the Premises as rebuilt will have reasonably similar facilities to
those in the Premises prior to such damage or destruction, having regard,
however, to the age of the Building at such time; and
(f) nothing in this Section shall require the Landlord to undertake any
repairs having a cost in excess of the insurance proceeds actually received
by the Landlord with respect to such damage or destruction.
SECTION 7.03 RIGHT OF TERMINATION
Notwithstanding Section 7.02, if the damage or destruction which has occurred in
the Premises is such that in the reasonable opinion of the Landlord the Premises
cannot be rebuilt or made fit for the purposes of the Tenant within 90 days of
the happening of the damage or destruction, the Landlord may, at its option,
terminate this Lease on notice to the Tenant given within 30 days after such
damage or destruction. If such notice of termination is given, Rent shall be
apportioned and paid to the date of such damage or destruction and the Tenant
shall immediately deliver vacant possession of the Premises in accordance with
the terms of this Lease.
SECTION 7.04 DESTRUCTION OF OR DAMAGE TO BUILDING
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(a) Notwithstanding anything contained in this Lease and specifically
notwithstanding the provisions of Section 7.03, if
(i) thirty-five percent (35%) or more of the Total Rentable Area of
the Building; or
(ii) a portion of the Building or of the Lands or any other
improvements on the Lands which affect access or services
essential to the Premises;
is damaged or destroyed by any cause whatsoever (irrespective of whether the
Premises are damaged or destroyed) and if, in the opinion of the Landlord
reasonably arrived at, the Total Rentable Area of the Building or the
essential portion described above, as the case may be, so damaged or
destroyed cannot be rebuilt or made fit for the purposes of the respective
tenants of such space within one hundred and eighty (180) days of the
happening of the damage or destruction; then, the Landlord may at its option
(to be exercised by written notice to the Tenant within sixty (60) days
following any such occurrence), elect to terminate this Lease. In the case
of such election, the Term and the tenancy hereby created shall expire upon
the thirtieth (30th) day after such notice is given, without indemnity or
penalty payable by, or any other recourse against the Landlord, and the
Tenant shall, within such thirty (30) day period, vacate the Premises and
surrender them to the Landlord with the Landlord having the right to re-enter
and repossess the Premises discharged of this lease and to expel all Persons
and remove all property therefrom. Net Rent and Additional Rent shall be due
and payable without reduction or abatement subsequent to the destruction or
damage and until the date of termination, unless the Premises shall have been
destroyed or damaged as well, in which event Section 7.03 shall apply.
(b) If the Landlord is entitled to, but does not elect to terminate this
Lease under Section 7.4(a), the Landlord shall, following such damage or
destruction, diligently repair if necessary that part of the Building damaged
or destroyed, but only to the extent of the Landlord's obligations under the
terms of the various leases for premises in the Building and exclusive of any
tenant's responsibilities with respect to such repair. If the Landlord
elects to repair the Building, the Landlord may do so in accordance with
plans and specifications other than those used in the original construction
of the Building.
SECTION 7.05 ARCHITECT'S CERTIFICATE
The certificate of the Architect shall bind the parties as to: (a) the
percentage of the Total Rentable Area of the Building damaged or destroyed;
(b) whether or not the Premises are rendered untenantable and the percentage
of the Premises rendered untenantable; (c) the date upon which either the
Landlord's or Tenant's work of reconstruction or repair is completed or
substantially completed and the date when the Premises are rendered
tenantable; and (d) the state of completion of any work of the Landlord or
the Tenant.
ARTICLE VIII - ASSIGNMENT, SUBLETTING AND TRANSFERS
SECTION 8.01 ASSIGNMENTS, SUBLEASES AND TRANSFERS
The Tenant shall not enter into, consent to, or permit any Transfer without
the prior written consent of the Landlord in each instance, which consent
shall not be unreasonably withheld but shall be subject to the Landlord's
rights under Section 8.02. Notwithstanding any statutory provision to the
contrary, it shall not be considered unreasonable for the Landlord to take
into account the following factors in deciding whether to grant or withhold
its consent: (a) whether such Transfer is in violation or in breach of any
covenants or restrictions made or granted by the Landlord to other tenants or
occupants or prospective tenants or occupants of the Building; (b) whether in
the Landlord's opinion, the financial background, business history and
capability of the proposed Transferee is satisfactory; and (c) if the
Transfer is to an existing tenant of the Landlord. Consent by the Landlord
to any Transfer if granted shall not constitute a waiver of the necessity for
such consent to any subsequent Transfer. This prohibition against Transfer
shall include a prohibition against any Transfer by operation of law and no
Transfer shall take place by reason of the failure of the Landlord to give
notice to the Tenant within 30 days as required by Section 8.02.
Notwithstanding anything to the contrary herein contained, the Tenant may not
assign this Lease while any Rent is in arrears hereunder or while any other
Event of Default exists hereunder. Before making any assignment of this Lease
the Tenant will pay all Rent in arrears and will remedy any Event of Default
which then exists or will cause any Event of Default to cease to exist.
SECTION 8.02 LANDLORD'S RIGHTS
If the Tenant intends to effect a Transfer, the Tenant shall give prior
notice to the Landlord of such intent specifying the identity of the
Transferee, the type of Transfer contemplated, the portion of the Premises
affected thereby, and the financial and other terms of the Transfer, and
shall provide such financial, business or other information relating to the
proposed Transferee and its principals as the Landlord or
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any Mortgagee requires, together with copies of any documents which record
the particulars of the proposed Transfer. The Landlord shall, within 30 days
after having received such notice and all requested information, notify the
Tenant either that:
(a) it consents or does not consent to the Transfer in accordance with the
provisions and qualifications of this Article VIII; or
(b) it elects to cancel this Lease as to the whole or part, as the case
may be, of the Premises affected by the proposed Transfer, in preference to
giving such consent; or
(c) it elects to take over the position of the proposed Transferee with
respect to the Transfer such that the Landlord becomes the assignee or
subtenant, as the case may be, of the Tenant on the financial terms set out
in the notice.
If the Landlord elects to terminate this Lease it shall stipulate in its
notice the termination date of this Lease, which date shall be no less than
30 days nor more than 90 days following the giving of such notice of
termination. If the Landlord elects to terminate this Lease, the Tenant
shall notify the Landlord within 10 days thereafter of the Tenant's intention
either to refrain from such Transfer or to accept termination of this Lease
or the portion thereof in respect of which the Landlord has exercised its
rights. If the Tenant fails to deliver such notice within such 10 days or
notifies the Landlord that it accepts the Landlord's termination, this Lease
will as to the whole or affected part of the Premises, as the case may be, be
terminated on the date of termination stipulated by the Landlord in its
notice of termination. If the Tenant notifies the Landlord within 10 days
that it intends to refrain from such Transfer, then the Landlord's election
to terminate this Lease shall become void.
SECTION 8.03 CONDITIONS OF TRANSFER
(a) Subject to Section 8.03(e), if there is a permitted Transfer, the
Landlord may collect Rent from the Transferee and apply the net amount
collected to the Rent payable under this Lease but no acceptance by the
Landlord of any payments by a Transferee shall be deemed a waiver of the
Tenant's covenants or by acceptance of the Transferee as tenant or a release
from the Tenant from the further performance by the Tenant of its obligations
under this Lease. Any consent by the Landlord shall be subject to the Tenant
and Transferee executing an agreement with the Landlord agreeing:
(i) that the Transferee will be bound by all of the terms of this
Lease and, except in the case of a sublease, that the Transferee
will be so bound as if it had originally executed this Lease as
tenant; and
(ii) to amend the Lease to incorporate such terms, covenants and
conditions as are necessary so that the Lease will be in
accordance with the Landlord's standard form of office lease in
use for the Building at the time of the Transfer, and so as to
incorporate any conditions imposed by the Landlord in its consent
or required by this Section 8.03.
(b) Notwithstanding any Transfer permitted or consented to by the
Landlord, including a Transfer to the Landlord pursuant to Section 8.02(c),
the Tenant making such Transfer shall remain liable under this Lease and
shall not be released from performing any of the terms of this Lease.
(c) The Landlord's consent to any Transfer shall be subject to the
condition that: (i) the net and additional rent payable by the Transferee
shall not be less than the Rent payable by the Tenant under this Lease as at
the effective date of the Transfer, (including any increases provided for in
this Lease); and (ii) if the net and additional rent to be paid by the
Transferee under such Transfer exceeds the Rent payable under this Lease, the
amount of such excess shall be paid by the Tenant to the Landlord. If the
Tenant receives from any Transferee, either directly or indirectly, any
consideration other than rent or additional rent for such Transfer, either in
the form of cash, goods or services (other than the proceeds of any financing
as the result of a Transfer involving a mortgage, charge or similar security
interest in this Lease) the Tenant shall forthwith pay to the Landlord an
amount equivalent to such consideration. The Tenant and the Transferee shall
execute any agreement required by the Landlord to give effect to the
foregoing terms.
(d) Notwithstanding the effective date of any permitted Transfer as
between the Tenant and the Transferee, all Rent for the month in which such
effective date occurs shall be paid in advance by the Tenant so that the
Landlord will not be required to accept partial payments of Rent for such
month from either the Tenant or Transferee.
(e) If a Transfer occurs as a result of the Landlord's election pursuant
to Section 8.2(c), the Landlord will apply the Rent payable by the Landlord,
as Transferee, to the Rent payable under this Lease, but otherwise the Tenant
will not be released from its covenant under this Lease or from the further
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performance of its obligations under this Lease. The Tenant will enter into
an agreement with the Landlord setting out the terms of such Transfer, which
agreement will be prepared by the Landlord or its solicitors and all legal
costs associated with such Transfer shall be paid by the Tenant.
(f) Any document evidencing any Transfer permitted by the Landlord or any
amendment of this Lease pursuant to clause 8.03(a)(ii), or setting out any
terms applicable to such Transfer or the rights and obligations of the Tenant
or Transferee thereunder including a Transfer under Section 8.2(c), shall be
prepared by the Landlord or its solicitors and all associated legal costs
shall be paid by the Tenant.
SECTION 8.04 CHANGE OF CONTROL
If the Tenant is at any time a corporation or partnership, any actual or
proposed Change of Control in such corporation or partnership shall be deemed
to be a Transfer and subject to all of the provisions of this Article VIII.
The Tenant shall make available to the Landlord or its representatives all of
its corporate or partnership records, as the case may be, for inspection at
all reasonable times, in order to ascertain whether any Change of Control has
occurred.
SECTION 8.05 NO ADVERTISING
The Tenant shall not advertise that the whole or any part of the Premises are
available for a Transfer and shall not permit any broker or other Person to
do so unless the text and format of such advertisement and the publications
in which such advertisement is to be placed are approved in writing by the
Landlord. No such advertisement shall contain any reference to the rental
rate of the Premises.
SECTION 8.06 ASSIGNMENT BY LANDLORD
The Landlord shall have the unrestricted right to sell, lease, convey or
otherwise dispose of all or any part of the Building or Lands or this Lease
or any interest of the Landlord in this Lease. To the extent that the
purchaser or assignee from the Landlord assumes the obligations of the
Landlord under this Lease, the Landlord shall thereupon and without further
agreement be released from all liability under this Lease.
ARTICLE IX - DEFAULT
SECTION 9.01 DEFAULT AND REMEDIES
If and whenever an Event of Default occurs, then without prejudice to any
other rights which it has pursuant to this Lease or at law, the Landlord
shall have the following rights and remedies, which are cumulative and not
alternative:
(a) to re-enter the Premises or any part thereof in the name of the whole
and the same to have again, repossess, and enjoy as of the Landlord's former
estate, anything herein contained to the contrary notwithstanding;
(b) to terminate this Lease, with or without notice to the Tenant, whether
or not the Landlord has, with respect to the same or another Event of
Default, previously elected or pursued a right or remedy which is
inconsistent with termination of this Lease;
(c) enter the Premises as agent of the Tenant and to relet the Premises
for whatever term, and on such terms as the Landlord in its discretion may
determine and to receive the Rent therefor and as agent of the Tenant to take
possession of any property of the Tenant on the Premises, to store such
property at the expense and risk of the Tenant or to sell or otherwise
dispose of such property in such manner as the Landlord may see fit without
notice to the Tenant; to make alterations to the Premises to facilitate their
reletting; and to apply the proceeds of any such sale or reletting first, to
the payment of any expenses incurred by the Landlord with respect to any such
reletting or sale; second, to the payment of any indebtedness of the Tenant
to the Landlord other than Rent; and third, to the payment of Rent in
arrears; with the residue to be held by the Landlord and applied in payment
of future Rent as it becomes due and payable. The Tenant shall remain liable
for any deficiency to the Landlord. If any reletting extends for a period
beyond the end of the Term, such reletting shall not constitute a termination
of this Lease, but a reletting as agent of the Tenant up to the end of the
Term and a letting thereafter by the Landlord for its own account. The
Tenant acknowledges and agrees that if the Tenant has abandoned property on
the Premises after notice from the Landlord to remove such property, the
Landlord has no obligation whatsoever to store such property for any period
of time;
(d) to remedy or attempt to remedy any default of the Tenant under this
Lease for the account of the Tenant and to enter upon the Premises for such
purposes. No notice of the Landlord's intention to
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perform such covenants need be given the Tenant unless expressly required by
this Lease. The Landlord shall not be liable to the Tenant for any loss,
injury or damage caused by acts of the Landlord in remedying or attempting to
remedy such default and the Tenant shall pay to the Landlord all expenses
incurred by the Landlord in connection with remedying or attempting to remedy
such default;
(e) to recover from the Tenant all damages, and expenses incurred by the
Landlord as a result of any breach by the Tenant including, if the Landlord
terminates this Lease, any deficiency between those amounts which would have
been payable by the Tenant for the portion of the Term following such
termination and the net amounts actually received by the Landlord during such
period of time with respect to the Premises;
(f) to recover from the Tenant the full amount of the current month's Rent
together with 3 months' instalments of Rent, all of which shall immediately
become due and payable as accelerated rent and may be held and applied by the
Landlord without interest against the last Rent due under this Lease; and
(g) if this Lease has been terminated in accordance with Section 9.01(b),
to recover from the Tenant the unamortized portion of any leasehold
improvement allowance or inducement paid or given by the Landlord under the
terms of this Lease or the Lease Proposal, calculated from the date which is
the later of the date of payment by the Landlord or the Commencement Date, on
the basis of an assumed rate of depreciation on a straight line basis to zero
over the initial Term of this Lease.
SECTION 9.02 DISTRESS
Notwithstanding any provision of this Lease or any provision of applicable
legislation, none of the goods and chattels of the Tenant on the Premises at
any time during the Term shall be exempt from levy by distress for Rent in
arrears, and the Tenant waives any such exemption. If the Landlord makes any
claim against the goods and chattels of the Tenant by way of distress, this
provision may be pleaded as an estoppel against the Tenant in any action
brought to test the right of the Landlord to levy such distress. The Tenant
acknowledges and agrees that the Landlord is entitled to levy by distress any
accelerated rent which becomes due and is payable pursuant to Section 9.01(f)
of this Lease.
SECTION 9.03 DAMAGES AND COSTS
The Tenant shall pay to the Landlord all damages and costs (including,
without limitation, all legal fees on a solicitor and his client basis)
incurred by the Landlord in enforcing or interpreting the terms of this
Lease, or with respect to any matter or thing which is the obligation of the
Tenant under this Lease, or in respect of which the Tenant has agreed to
insure, or to indemnify the Landlord.
SECTION 9.04 ALLOCATION OF PAYMENTS
The Landlord may at its option apply sums received from the Tenant against
any amounts due and payable by the Tenant under this Lease in such manner as
the Landlord sees fit.
SECTION 9.05 SURVIVAL OF OBLIGATIONS
If the Tenant has failed to fulfil its obligations under this Lease with
respect to the payment of Rent, the maintenance, repair and alteration of the
Premises and removal of improvements and fixtures from the Premises during or
at the end of the Term, such obligations and the Landlord's rights in respect
thereto shall remain in full force and effect notwithstanding the expiration,
surrender or sooner termination of the Term.
ARTICLE X - STATUS STATEMENT, ATTORNMENT AND SUBORDINATION
SECTION 10.01 STATUS STATEMENT
Within 10 days after written request by the Landlord, the Tenant shall
deliver in a form supplied by the Landlord a statement or estoppel
certificate to the Landlord as to the status of this Lease, including as to
whether this Lease is unmodified and in full force and effect (or, if there
have been modifications that this Lease is in full force and effect as
modified and identifying the modification agreements); the amount of Net Rent
and Additional Rent then being paid and the dates to which same have been
paid; whether or not there is any existing or alleged default by either party
with respect to which a notice of default has been served and if there is any
such default, specifying the nature and extent thereof; and any other matters
pertaining to this Lease as to which the Landlord shall request such
statement or certificate.
SECTION 10.02 SUBORDINATION
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This Lease and all rights of the Tenant shall be subject and subordinate to any
and all Mortgages and any ground, operating, overriding or underlying leases,
from time to time in existence against the Lands and Building (including without
limitation those referred to in section 11.15 hereof). On request, the Tenant
shall acknowledge in writing the subordination of this Lease and its rights
under this Lease to any and all such Mortgages and leases and to all advances
made under such Mortgages. The form of such subordination shall be as required
by the Landlord or any Mortgagee or the lessee under any such lease.
SECTION 10.03 ATTORNMENT
The Tenant shall promptly, on request, attorn to any Mortgagee, or to the owners
of the Building and Lands, or the lessor under any ground, operating,
overriding, underlying or similar lease of all or substantially all of the
Building made by the Landlord or otherwise affecting the Building and Lands, or
the purchaser on any foreclosure or sale proceedings taken under any Mortgage,
and shall recognize such Mortgagee, owner, lessor or purchaser as the Landlord
under this Lease.
SECTION 10.04 EXECUTION OF DOCUMENTS
The Tenant irrevocably constitutes the Landlord the agent and attorney of the
Tenant for the purpose of executing any agreement, certificate, attornment or
subordination required by this Lease and for registering postponements in favour
of any Mortgagee if the Tenant fails to execute such documents within 10 days
after request by the Landlord.
ARTICLE XI - GENERAL PROVISIONS
SECTION 11.01 RULES AND REGULATIONS
The Tenant shall comply with all Rules and Regulations, and amendments thereto,
adopted by the Landlord from time to time including those set out in Schedule
"D". Such Rules and Regulations may differentiate between different types of
businesses in the Building, and the Landlord shall have no obligation to enforce
any Rule or Regulation or the provisions of any other lease against any other
tenant, and the Landlord shall have no liability to the Tenant with respect
thereto.
SECTION 11.02 DELAY
Except as expressly provided in this Lease, whenever the Landlord or Tenant is
delayed in the fulfilment of any obligation under this Lease (other than the
payment of Rent and surrender of the Premises on termination) by an unavoidable
occurrence which is not the fault of the party delayed in performing such
obligation, then the time for fulfilment of such obligation shall be extended
during the period in which such circumstances operate to delay the fulfilment of
such obligation.
SECTION 11.03 OVERHOLDING
If the Tenant remains in possession of the Premises after the end of the Term
with the consent of the Landlord but without having executed and delivered a new
lease or an agreement extending the Term, there shall be no tacit renewal of
this Lease, and the Tenant shall be deemed to be occupying the Premises as a
Tenant from month to month at a monthly Net Rent payable in advance on the first
day of each month equal to twice the monthly amount of Net Rent payable during
the last month of the Term, and otherwise upon the same terms as are set forth
in this Lease, so far as these are applicable to a monthly tenancy.
SECTION 11.04 WAIVER
If either the Landlord or Tenant excuses or condones any default by the other of
any obligation under this Lease, no waiver of such obligation shall be implied
in respect of any continuing or subsequent default.
SECTION 11.05 REGISTRATION
Neither the Tenant nor anyone claiming under the Tenant shall register this
Lease or any Transfer without the prior written consent of the Landlord. The
Tenant hereby waives any right which the Tenant may have to require the Landlord
to deliver this Lease in registrable form or to provide a plan of the Premises
acceptable to the land title office or other office of public record for
registration or filing purposes.
SECTION 11.06 NOTICES
Any notice, consent or other instrument which may be or is required to be given
under this Lease shall be
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in writing and shall be delivered in person or sent by registered mail
postage prepaid, addressed: (a) if to the Landlord: Pacific Centre North
Limited, Suite 550, The Toronto Dominion Bank Tower, 700 West Georgia Street,
Vancouver, British Columbia, V7Y 1A1 Attention: Vice-President and General
Manager; and (b) if to the Tenant, at the Premises. Any such notice or
other instrument shall be deemed to have been given and received on the day
upon which personal delivery is made or, if mailed, then 48 hours following
the date of mailing. Either party may give notice to the other of any change
of address and after the giving of such notice, the address therein specified
is deemed to be the address of such party for the giving of notices. If
postal service is interrupted or substantially delayed, all notices or other
instruments shall be delivered in person.
SECTION 11.07 SUCCESSORS
The rights and liabilities created by this Lease extend to and bind the
successors and assigns of the Landlord and the heirs, executors, administrators
and permitted successors and assigns of the Tenant. No rights, however, shall
enure to the benefit of any Transferee unless the provisions of Article VIII are
complied with.
SECTION 11.08 JOINT AND SEVERAL LIABILITY
If there is at any time more than one Tenant or more than one Person
constituting the Tenant, their covenants shall be considered to be joint and
several and shall apply to each and every one of them. If the Tenant is or
becomes a partnership, each Person who is a member, or shall become a member, of
such partnership or its successors shall be and continue to be jointly and
severally liable for the performance of all covenants of the Tenant pursuant to
this Lease, whether or not such Person ceases to be a member of such partnership
or its successor.
SECTION 11.09 CAPTIONS AND SECTION NUMBERS
The captions, section numbers, article numbers and table of contents appearing
in this Lease are inserted only as a matter of convenience and in no way affect
the substance of this Lease.
SECTION 11.10 EXTENDED MEANINGS
The words "hereof", "hereto" and "hereunder" and similar expressions used in
this Lease relate to the whole of this Lease and not only to the provisions in
which such expressions appear. This Lease shall be read with all changes in
number and gender as may be appropriate or required by the context. Any
reference to the Tenant includes, where the context allows, the employees,
agents, invitees and licensees of the Tenant and all others over whom the Tenant
might reasonably be expected to exercise control.
SECTION 11.11 PARTIAL INVALIDITY
All of the provisions of this Lease are to be construed as covenants even though
not expressed as such. If any such provision is held or rendered illegal or
unenforceable it shall be considered separate and severable from this Lease and
the remaining provisions of this Lease shall remain in force and bind the
parties as though the illegal or unenforceable provision had never been included
in this Lease.
SECTION 11.12 ENTIRE AGREEMENT
This Lease and the Schedules and riders, if any, attached hereto and the Lease
Proposal, if any, and the Landlord's leasehold improvement manual, set forth the
entire agreement between the Landlord and Tenant concerning the Premises and
there are no agreements or understandings between them other than as are herein
set forth. Subject to Section 11.01, this Lease and its Schedules and riders
may not be modified except by agreement in writing executed by the Landlord and
Tenant. In the event of any inconsistency between the provisions of this Lease
and the provisions of the Lease Proposal, the provisions of this Lease shall
prevail.
SECTION 11.13 GOVERNING LAW
This Lease shall be construed in accordance with and governed by the laws of the
Province of British Columbia.
SECTION 11.14 TIME OF THE ESSENCE
Time is of the essence of this Lease.
SECTION 11.15 AUTHORITY
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The Tenant acknowledges that the Landlord has authority from Toronto Dominion
Realty Limited, 527698 British Columbia Ltd., 527700 British Columbia Ltd. and
The Cadillac Fairview Corporation Limited to enter into this Lease.
SECTION 11.16 QUIET ENJOYMENT
If the Tenant pays Rent, fully observes and performs all of its obligations
under this Lease, and there has been no Event of Default, the Tenant shall be
entitled to peaceful and quiet enjoyment of the Premises for the Term without
interruption or interference by the Landlord or any Person claiming through the
Landlord.
SECTION 11.17 INDEMNITY AGREEMENT
If any Indemnifier is named in this Lease, the Indemnifier agrees to execute and
deliver to the Landlord an Indemnity Agreement in the form attached as Schedule
"E" hereto (with blanks completed) with respect to this lease and any and all
renewals hereof; and the Tenant agrees that failure of the Indemnifier to do so
shall constitute an Event of Default.
SECTION 11.20 EXECUTION
If the Tenant is a corporation, the Tenant confirms and agrees that this Lease
has been executed by its authorized signatories and that if only one signatory
has signed this Lease, the Tenant is authorized by its articles of incorporation
or other constating documents to execute leases by such sole authorized
signatory and if this Lease is not executed under seal by the Tenant, the Tenant
is authorized by its articles of incorporation or other constating documents to
execute leases without a seal.
SECTION 11.21 PARKING
THE LANDLORD AGREES TO PROVIDE TO THE TENANT UP TO TWO (2) UNRESERVED PARKING
STALLS IN THE UNDERGROUND PARKING FACILITY IN THE BUILDING DURING THE TERM UNTIL
NOVEMBER 30, 2000 AND UP TO SIX (6) UNRESERVED PARKING STALLS FROM DECEMBER 1,
2000 FOR THE BALANCE OF THE TERM AT MONTHLY RATES, PLUS GOODS AND SERVICES TAX,
AS ESTABLISHED BY THE LANDLORD FROM TIME TO TIME FOR RANDOM USERS OF PARKING
SPACES WITHIN THE PARKING FACILITY.
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IN WITNESS WHEREOF the Landlord and Tenant have signed this Lease under seal.
PACIFIC CENTRE LEASEHOLDS LIMITED
Per: "signed"
--------------------
Authorized Signatory
Per: --------------------
Authorized Signatory
(Tenant)
TECHWEST MANAGEMENT INC.
Per: "signed"
--------------------
Authorized Signatory
Per: --------------------
Authorized Signatory
(Indemnifier)
SIDEWARE SYSTEMS INC.
Per: "signed"
--------------------
Authorized Signatory
Per: --------------------
Authorized Signatory
(Indemnifier)
BRAINTECH, INC.
Per: "signed"
--------------------
Authorized Signatory
Per: --------------------
Authorized Signatory
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<PAGE>
SCHEDULE "A" - LEGAL DESCRIPTION OF THE LANDS
Those lands and premises lying and being in the City of Vancouver
in the Province of British Columbia more particularly known and described as
Parcel Identifier: 007-857-969
Lot C
Block 32
D.L. 541
Plan 21253
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<PAGE>
SCHEDULE "B" - FLOOR PLAN OF THE PREMISES
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<PAGE>
SCHEDULE "C" - DEFINITIONS
In this Lease and in the Schedules to this Lease:
1. "ADDITIONAL RENT" means all sums of money required to be paid by the
Tenant under this Lease (except Net Rent) whether or not the same are designated
"Additional Rent" or are payable to the Landlord or otherwise.
2. "ALTERATIONS" means all repairs, replacements, improvements or
alterations to the Premises by the Tenant and the placing of a load of more than
50 lbs per square foot in any part of the Premises or the relocation of any such
load.
3. "ARCHITECT" means the architect from time to time named by the Landlord.
4. "BUILDING" means the multi-storey building known municipally as 777
Dunsmuir Street, Vancouver, British Columbia and generally as Pacific Centre
Tower Four from and including the ground floor of such Building to and including
the roof thereof and including all premises rented or intended to be rented
therein, whether for office, retail, cafeteria, banking or other similar
purposes but excluding any Premises below grade which are intended for leasing
for retail or parking purposes; and the areas, buildings systems and facilities
serving the Building or having utility in connection therewith, as determined by
the Landlord, whether or not located directly under the Building, which areas
and facilities may include, without limitation, internal malls, sidewalks and
plazas, exhibit areas, storage and mechanical areas, janitor rooms, mail rooms,
telephone, mechanical and electrical rooms, stairways, escalators, elevators,
truck and receiving areas, driveways, parking facilities, loading docks and
corridors.
5. "BUSINESS TAX" means all taxes (whether imposed on the Landlord or
Tenant) attributable to the personal property, trade fixtures, business, income,
occupancy or sales of the Tenant or any other occupant of the Premises and to
any leasehold improvements installed in the Premises and to the use of the
Building or Lands by the Tenant.
6. "CAPITAL TAX" means the amount , allocated from time to time by the
Landlord to, and relating to the Lands and Building, of any capital tax payable
by the Landlord or the owners of the Lands and Building under the Corporations
Tax Act (British Columbia) as amended or replaced from time to time or any other
legislation, provincial or federal, imposing taxes on account of capital,
calculated as if the Building were the only property of the Landlord or the
owners of the Lands and Building.
7. "CHANGE OF CONTROL" means, in the case of any corporation or partnership,
the transfer or issue by sale, assignment, subscription, transmission on death,
mortgage, charge, security interest, operation of law or otherwise, of any
shares, voting rights or interest which would result in any change in the
effective control of such corporation or partnership unless such change occurs
as a result of trading in the shares of a corporation listed on a recognized
stock exchange in Canada or the United States and then only so long as the
Landlord receives assurances reasonably satisfactory to it that there will be a
continuity of management and of the business practices of such corporation
notwithstanding such Change of Control.
8. "COMMENCEMENT DATE" means the date on which the Term commences under
Section 1.02.
9. "DEVELOPMENT" means the Lands more particularly described in Schedule "A"
attached to this Lease or as such Lands may be altered, expanded or reduced from
time to time, and the improvements, buildings, equipment and facilities erected
thereon or situate from time to time therein. The Development includes those
areas designated or intended by the Landlord to be leased for office, retail,
service and storage purposes, and those areas not so designated or intended, and
all non-leasable areas, parking facilities and the shared common areas and
facilities of the Development. The Development is known generally as "Pacific
Centre".
10. An "EVENT OF DEFAULT" shall occur whenever:
(a) any Rent is in arrears and is not paid within 5 days after written
demand by the Landlord;
(b) the Tenant has breached any of its obligations in this Lease (other than
the payment of Rent) and:
(i) fails to remedy such breach within 15 days (or such shorter period
as may be provided in this Lease); or
(ii) if such breach cannot be reasonably remedied within 15 days or
such shorter period, the Tenant fails to commence to remedy such
breach within such 15 days or shorter period or thereafter fails
to proceed diligently to remedy such breach; in either case after
notice
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<PAGE>
in writing from the Landlord;
(c) the Tenant or any Indemnifier becomes bankrupt or insolvent or takes the
benefit of any statute for bankrupt or insolvent debtors or makes any proposal,
assignment or arrangement with its creditors, or any steps are taken or
proceedings commenced by any Person for the dissolution, winding-up or other
termination of the Tenant's existence or the liquidation of its assets;
(d) a trustee, receiver, receiver/manager or like Person is appointed with
respect to the business or assets of the Tenant or any Indemnifier;
(e) the Tenant makes a sale in bulk of all or a substantial portion of its
assets other than in conjunction with a Transfer approved by the Landlord;
(f) this Lease or any of the Tenant's assets are taken under a writ of
execution;
(g) the Tenant purports to make a Transfer other than in compliance with the
provisions of this Lease;
(h) the Tenant abandons or attempts to abandon the Premises or disposes of
its goods so that there would not after such disposal be sufficient goods of the
Tenant on the Premises subject to distress to satisfy Rent for at least 3
months, or the Premises become vacant and unoccupied for a period of 10
consecutive days or more without the consent of the Landlord;
(i) any insurance policies covering any part of the Building or any occupant
thereof are actually or threatened to be cancelled or adversely changed as a
result of any use or occupancy of the Premises;
(j) if an Event of Default as defined in this paragraph occurs with respect
to any lease or agreement under which the Tenant occupies other premises in the
Building; or
(k) if the Tenant or any Indemnifier is a corporation and at any time during
the Term does not remain in good standing with the Office of the Registrar of
Companies for British Columbia.
11. "FISCAL YEAR" means (i) the period of time commencing on the Commencement
Date and ending on the last day of the next ensuing October; and (ii) thereafter
the period of time commencing on the first day of November and ending on the
last day of the next ensuing October, or (iii) the fiscal period designated by
the Landlord from time to time.
12. "INDEMNIFIER" means the Person, if any, who has executed or agreed to
execute an Indemnity Agreement substantially in the form attached to this Lease
as Schedule "E", or any other indemnity agreement in favour of the Landlord.
13. "LANDLORD" means the party named as landlord on the first page of this
Lease.
14. "LANDS" means the lands situated in the City of Vancouver in the Province
of British Columbia on which the Building is constructed, as more particularly
described in Schedule "A", or as such lands may be expanded or reduced from time
to time.
16. "LEASEHOLD IMPROVEMENTS" mean leasehold improvements in the Premises
determined according to common law, and shall include, without limitation, all
fixtures, improvements, installations, alterations and additions from time to
time made, erected or installed in the Premises by or on behalf of the Tenant or
any previous occupant of the Premises, including signs and lettering,
partitions, doors and hardware however affixed and whether or not movable, all
mechanical, electrical and utility installations and all carpeting and drapes
with the exception only of furniture and equipment not in the nature of
fixtures.
17. "MORTGAGE" means any and all mortgages, charges, debentures, security
agreements, trust deeds, hypothecs or like instruments resulting from financing,
refinancing or collateral financing (including renewals or extensions thereof)
made or arranged by the Landlord of its interest in all or any part of the
Building or Lands.
18. "MORTGAGEE" means the holder of, or secured party under, any Mortgage and
includes any trustee for bondholders.
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<PAGE>
19. "NET RENT" means the annual rent payable by the Tenant under Section
2.02.
20. "NET RENTABLE AREA" means, in the case of premises consisting of part of
a floor, the floor area bounded by the inside surface of the exterior glass, the
office side of the corridor or other permanent partitions and the centre of
partitions that separate the premises from adjoining leasable areas (if any)
without deductions for columns or projections but after making the same
exclusions as are made in computing Rentable Area.
21. "NORMAL BUSINESS HOURS" means the hours from 8:00 a.m. to 6:00 p.m. on
Mondays through Fridays and the hours from 8:00 a.m. to 1:00 p.m. on Saturdays,
unless any such day is a statutory holiday.
22. "OPERATING COSTS" means (without duplication) any amounts paid or payable
whether by the Landlord or by others on behalf of the Landlord for maintenance,
operation, repair, replacement to and administration of the Lands and Building
or allocated by the Landlord to the Lands and Building and for services provided
generally to tenants, calculated as if the Building were 100% occupied by
tenants during the Term, including without limitation:
(a) the cost of insurance which the Landlord is obligated or permitted
to obtain under this Lease and any deductible amount applicable to
any claim made by the Landlord under such insurance;
(b) the cost of security, janitorial, landscaping, window cleaning,
garbage removal and snow removal services;
(c) the cost of heating, ventilating and air-conditioning;
(d) the cost of fuel, steam, water, electricity, telephone and other
utilities used in the maintenance, operation or administration of
the Building, including charges and imposts related to such
utilities to the extent such costs, charges and imposts are not
recovered from other tenants;
(e) salaries, wages and other amounts paid or payable for all
personnel involved in the repair, maintenance, operation, leasing,
on site management, security, supervision or cleaning of the
Building, including fringe benefits, unemployment and worker's
compensation insurance premiums, pension plan contributions and
other employment costs and the cost of engaging contractors for
the repair, maintenance, security, supervision or cleaning of the
Building;
(f) auditing, accounting, legal and other professional and consulting
fees and disbursements;
(g) the costs: (i) of repairing, operating and maintaining the
Building and the equipment serving the Building and of all
replacements and modifications to the Building or such equipment,
including those made by the Landlord in order to comply with laws
or regulations affecting the Building; (ii) incurred by the
Landlord in providing and installing energy conservation equipment
or systems and life safety systems; (iii) incurred by the
Landlord to make alterations, replacements or additions to the
Building intended to reduce operating costs, improve the operation
of the Building or maintain its operation as a first class office
building; and, (iv) incurred to replace machinery or equipment
which by its nature requires periodic replacement; all to the
extent that such costs are fully chargeable in the Fiscal Year in
which they are incurred in accordance with sound accounting
principles;
(h) the cost of the rental of all equipment, supplies, tools,
materials and signs;
(i) all costs incurred by the Landlord in contesting or appealing
Taxes or related assessments including legal, appraisal and other
professional fees, and administration and overhead costs;
(j) Capital Tax;
(k) depreciation or amortization of the costs referred to in paragraph
22(g) above as determined by the Landlord in accordance with sound
accounting principles, if such costs have not been charged fully
in the Fiscal Year in which they are incurred;
(l) interest calculated at 2 percentage points above the average daily
prime bank commercial lending rate charged during such Fiscal Year
by any Canadian chartered bank designated from time to time by the
Landlord upon the undepreciated or unamortized balance of the
costs referred to in paragraph 22(k); and
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<PAGE>
(m) a reasonable fee for the administration and management of the
Building equal to an amount which the Landlord might reasonably
pay to a third party for the administration and management of the
Building as part of the Pacific Centre complex.
Operating Costs shall exclude or have deducted from them as the case may be:
(n) all amounts which otherwise would be included in Operating Costs
which are recovered by the Landlord from tenants (other than under
sections of their leases comparable to section 2.03 of this
Lease);
(o) such of the Operating Costs as are recovered from insurance
proceeds, to the extent such recovery represents reimbursements
for costs previously included in Operating Costs;
(p) interest on debt and capital retirement of debt;
(q) ground rent payable by the Landlord to the owner of the Lands
under any ground lease of the Lands; and
(r) all amounts which otherwise would be included in Operating Costs
which are directly attributable to the operation of the parking
garage forming part of and serving the Building. Costs incurred
in maintaining and operating the Building may be attributed by the
Landlord to the various components of the Building in accordance
with reasonable and current practices and on a basis consistent
with the nature of the particular costs being attributed, and the
costs so attributed may be allocated to the tenants of such
components accordingly.
23. "PERSON" means any person, firm, partnership or corporation, or any group
or combination of persons, firms, partnerships or corporations.
24. "PREMISES" means the premises leased to the Tenant described in Section
1.01 and includes Leasehold Improvements in such premises.
25. "PROPORTIONATE SHARE" means a fraction which has as its numerator the
Rentable Area of the Premises and as its denominator the Total Rentable Area of
the Building.
26. "RENT" means the aggregate of Net Rent and Additional Rent.
27. "RENTABLE AREA" means (a) in the case of premises used or intended to
be used for office purposes and occupying an entire floor, the floor area
bounded by the inside surface of the glass on the exterior walls, including
without limitation, washrooms, telephone, electrical and janitorial closets
and elevator lobbies; (b) in the case of premises used or intended to be used
for office purposes and consisting of part of a floor, the area computed by
multiplying the Net Rentable Area of such premises by a fraction, the
numerator of which is the aggregate floor area of the floor on which the
Premises are located (using the measurement method set out in subparagraph
(a)) and the denominator of which is the aggregate Net Rentable Area of all
office premises on such floor; and (c) in the case of premises used or
intended to be used for retail purposes, the Net Rentable Area thereof. In
calculating Rentable Area, stairs, elevator shafts, flues, stacks, pipe
shafts and vertical ducts with their own enclosing walls, any of which are
used in common, shall be excluded but no deductions or exclusions shall be
made for columns and projections necessary for the Building. The Landlord may
for the purpose of calculating the Net Rent and any Proportionate Share
change the factor referred to in subparagraph (b) from time to time to
reflect the actual ratio of the aggregate floor area of the floor on which
the Premises or part thereof are located (using the measurement method set
out in subparagraph (a)) to the aggregate Net Rentable Area of all office
premises on such floor.
28. "RULES AND REGULATIONS" means the rules and regulations adopted and
promulgated by the Landlord from time to time pursuant to Section 11.01. The
Rules and Regulations existing as at the Commencement Date are those set out in
Schedule "D".
29. "TAXES" means all taxes, levies, charges, local improvement rates and
assessments whatsoever assessed or charged against the Building and the Lands or
any part thereof by any lawful taxing authority and including any amounts
assessed or charged in substitution for or in lieu of any such taxes, but
excluding only such taxes as capital gains taxes, corporate, income, profit or
excess profit taxes to the extent such taxes are not levied in lieu of any of
the foregoing against the Building or Lands or the Landlord in respect thereof.
Taxes shall in every instance be calculated on the basis of the Total Rentable
Area of the Building being assessed as fully leased and operational.
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30. "TENANT" means the party named as tenant on the first page of this Lease.
31. "TERM" means the period set out in Section 1.02.
32. "TOTAL RENTABLE AREA OF THE BUILDING" means the aggregate of the Rentable
Area of each floor in the Building intended for leasing as if each floor is
occupied by one tenant, all as determined by the Architect. The Total Rentable
Area of the Building shall: (a) exclude the main telephone, mechanical,
electrical and other utility rooms and enclosures, public lobbies on the ground
floor, and other public space common to the entire Building; and, (b) be
adjusted by the Architect from time to time to take account of any structural,
functional or other change affecting the same.
33. "TRADE FIXTURES" means trade fixtures as determined at common law, but
for greater certainty, shall not include: (a) heating, ventilating or air
conditioning systems, facilities and equipment in or serving the Premises;
(b) floor coverings affixed to the floor of the Premises; (c) light
fixtures; (d) internal stairways and doors; and, (e) any fixtures,
facilities, equipment or installations installed by or at the expense of the
Landlord pursuant to the Lease Proposal or otherwise.
34. "TRANSFER" means an assignment of this Lease in whole or in part, a
sublease of all or any part of the Premises (whether by the Tenant or by a
subtenant), any transaction whereby the rights of the Tenant under this Lease or
the rights of any subtenant or to the Premises are transferred to another, any
transaction by which any right of use or occupancy of all or any part of the
Premises is conferred upon anyone, any mortgage, charge or encumbrance of this
Lease or the Premises or any part thereof or other arrangement under which
either this Lease or the Premises become security for any indebtedness or other
obligations and includes any transaction or occurrence whatsoever (including,
but not limited to, expropriation, receivership proceedings, seizure by legal
process and transfer by operation of law), which has changed or might change the
identity of the Persons having lawful use or occupancy of any part of the
Premises or which creates a security interest in any part of the Premises,
including without limitation, any of the Leasehold Improvements.
35. "TRANSFEREE" means the Person or Persons to whom a Transfer is or is to
be made.
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SCHEDULE "D" - RULES AND REGULATIONS
1. LIFE SAFETY. (a) The Tenant shall not do or permit anything to be
done in the Premises, or bring or keep anything therein which will in any way
increase the risk of fire or the rate of fire insurance on the Building or on
property kept therein, or obstruct or interfere with the rights of other
tenants or in any way injure or annoy them or the Landlord, or violate or act
at variance with the laws relating to fires or with regulations of the Fire
Department, or with any insurance upon the Lands or Building or in any part
thereof, or violate or act in conflict with any statutes, rules and
ordinances governing health standards or with any other statute or municipal
by-law. (b)No inflammable oils or other inflammable, dangerous or explosive
materials save those approved in writing by the Landlord's insurers shall be
kept or permitted to be kept in the Premises.
2. SECURITY. (a) The Landlord shall permit the Tenant and the Tenant's
employees and all Persons lawfully requiring communication with them to have
the use, during Normal Business Hours in common with others entitled thereto,
of the main entrance and the stairways, corridors, elevators, escalators, or
other mechanical means of access leading to the Building and the Premises.
At times other than during Normal Business Hours the Tenant and the employees
of the Tenant shall have access to the Building and to the Premises only in
accordance with the Rules and Regulations and shall be required to
satisfactorily identify themselves and to register in any book which may at
the Landlord's option be kept by the Landlord for such purpose. If
identification is not satisfactory, the Landlord is entitled to prevent the
Tenant or the Tenant's employees or other Persons lawfully requiring
communication with the Tenant from having access to the Building and to the
Premises. In addition, the Landlord is not required to open the door to the
Premises for the purpose of permitting entry therein to any Person not having
a key to the Premises. (b) The Tenant shall not place or cause to be placed
any additional locks upon any doors of the Premises without the approval of
the Landlord. Two keys shall be supplied to the Tenant for each entrance
door to the Premises and all locks shall be Building standard to permit
access by the Landlord's master key. If additional keys are required, they
must be obtained from the Landlord at the cost of the Tenant. Keys or other
means of access for entrance doors to the Building will not be issued without
the written authority of the Landlord.
3. HOUSEKEEPING. (a) The Tenant shall permit window cleaners to clean the
windows of the Premises during Normal Business Hours. (b) The Tenant shall not
place any debris, garbage, trash or refuse or permit same to be placed or left
in or upon any part of the Lands or Building outside of the Premises, other than
in a location provided by the Landlord specifically for such purposes, and the
Tenant shall not allow any undue accumulation of any debris, garbage, trash or
refuse in or outside of the Premises. If the Tenant uses perishable articles or
generates wet garbage, the Tenant shall provide refrigerated storage facilities
suitable to the Landlord. (c) The Tenant shall not place or maintain any
supplies, or other articles in any vestibule or entry of the Premises, on the
adjacent footwalks or elsewhere on the exterior of the Premises or elsewhere on
the Lands or Building. (d) The sidewalks, entrances, passages, escalators,
elevators and staircases shall not be obstructed or used by the Tenant, its
agents, servants, contractors, invitees or employees for any purpose other than
ingress to and egress from the Premises and the Building. The Landlord reserves
entire control of all parts of the Lands and Building employed for the common
benefit of the tenants and without restricting the generality of the foregoing,
the sidewalks, entrances, corridors and passages not within the Premises,
washrooms, lavatories, air conditioning closets, fan rooms, janitor's closets,
electrical closets and other closets, stairs, escalators, elevator shafts,
flues, stacks, pipe shafts and ducts and shall have the right to place such
signs and appliances therein, as it deems advisable, provided that ingress to
and egress from the Premises is not unduly impaired thereby. (e) The Tenant
shall not cause or permit: any waste or damage to the Premises; any overloading
of the floors or the utility, electrical or mechanical facilities of the
Premises; any nuisance in the Premises; or any use or manner of use causing a
hazard or annoyance to other occupants of the Building or to the Landlord.
4. RECEIVING, SHIPPING, MOVEMENT OF ARTICLES. (a) The Tenant shall not
receive or ship articles of any kind except through facilities and designated
doors and at hours designated by the Landlord and under the supervision of
the Landlord. (b) Hand trucks, carryalls or similar appliances shall only be
used in the Building with the consent of the Landlord and shall be equipped
with rubber tires, slide guards and such other safeguards as the Landlord
requires. (c) The Tenant, its agents, servants, contractors, invitees or
employees, shall not bring in or take out, position, construct, install or
move any safe, business machinery or other heavy machinery or equipment or
anything liable to injure or destroy any part of the Building, including the
Premises, without first obtaining the consent in writing of the Landlord. In
giving such consent, the Landlord shall have the right in its sole
discretion, to prescribe the weight permitted and the position thereof, the
use and design of planks, skids or platforms, and to distribute the weight
thereof. All damage done to the Building, including the Premises, by moving
or using any such heavy equipment or other office equipment or furniture
shall be repaired at the expense of the Tenant. The moving of all heavy
equipment or other office furniture shall occur only by prior arrangement
with the Landlord. The cost of such moving shall be paid by the Tenant.
Safes and other heavy office equipment and machinery shall be moved through
the halls and corridors only in a manner expressly approved by the Landlord.
No freight or bulky matter of any description will be received into any part
of the Building, including the Premises, or carried in the elevators except
during hours approved by the Landlord.
5. PREVENTION OF INJURY TO PREMISES. (a) It shall be the duty of the
Tenant to assist and co-operate
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with the Landlord in preventing injury to the Premises. (b) The Tenant shall
not deface or mark any part of the Building, including the Premises, and
shall not drive nails, spikes, hooks or screws into the walls, floors,
ceilings or woodwork of any part of the Building, including the Premises, or
bore, drill or cut into the walls, floors, ceilings or woodwork of any part
of the Building including the Premises, in any manner or for any reason. (c)
If the Tenant desires telegraphic or telephonic connections, the Landlord,
in its sole discretion, may direct the electricians as to where and how the
wires are to be introduced. No gas pipe or electric wire will be permitted
which has not been ordered or authorized by the Landlord. No outside radio
or television antenna shall be allowed on any part of the Premises without
authorization in writing by the Landlord.
6. WINDOWS. Except for the proper use of approved blinds and drapes, the
Tenant shall not cover, obstruct or affix any object or material to any of the
skylights and windows that reflect or admit light into any part of the Building,
including, without limiting the generality of the foregoing, the application of
solar films.
7. WASHROOMS. (a) The Landlord shall permit the Tenant and the employees of
the Tenant in common with others entitled thereto, to use the washrooms on the
floor of the Building on which the Premises are situated or, in lieu thereof,
those washrooms designated by the Landlord, save and except when the general
water supply may be turned off from the public main or at such other times when
repair and maintenance undertaken by the Landlord shall necessitate the non-use
of the facilities. (b) The water closets and other apparatus shall not be used
for any purposes other than those for which they were intended, and no
sweepings, rubbish, rags, ashes or other substances shall be thrown into them.
Any damage resulting from misuse shall be borne by the Tenant by whom or by
whose agents, servants, invitees, or employees such damage is caused.
8. USE OF PREMISES. (a) No one shall use the Premises for sleeping
apartments or residential purposes, or for the storage of personal effects or
articles other than those required for business purposes. (b) No cooking or
heating of any foods or liquids (other than the heating of water or coffee in
coffee makers or kettles) shall be permitted in the Premises without the written
consent of the Landlord. (c) The Tenant shall not install or permit the
installation or use of any machine dispensing goods for sale in the Premises or
the Building or permit the delivery of any food or beverage to the Premises
without the written approval of the Landlord or in contravention of the Rules
and Regulations. (d) The Tenant shall not permit or allow any odours, vapours,
steam, water, vibrations, noises or other undesirable effects to emanate from
the Premises or any equipment or installation therein which, in the Landlord's
opinion, are objectionable or cause any interference with the safety, comfort or
convenience of the Building to the Landlord or the occupants and tenants thereof
or their agents, servants, invitees or employees.
9. CANVASSING, SOLICITING, PEDDLING. Canvassing, soliciting and peddling in
or about the Lands and Building are prohibited.
10. BICYCLES. No bicycles or other vehicles shall be brought within any part
of the Lands or Building without the consent of the Landlord.
11. ANIMALS AND BIRDS. No animals or birds shall be brought into any part
of the Lands or Building without the consent of the Landlord.
12. SIGNS AND ADVERTISING. The Tenant shall not paint, affix, display or
cause to be painted, affixed or displayed, any sign, picture, advertisement,
notice, lettering or decoration on any part of the outside of the Building or in
the interior of the Premises which is visible from the outside of the Building.
The Landlord will prescribe a uniform pattern and location of identification
signs for tenants, to be placed on the outside of the Premises, and the Tenant
shall not paint, affix, display or cause to be painted, affixed or displayed any
sign, picture, advertisement, notice, lettering or decoration on the outside of
the Premises for exterior view without the written consent of the Landlord. Any
such signs shall remain the property of the Tenant and shall be maintained at
the Tenant's sole cost and expense. At the expiration of the Term or earlier
termination of this Lease, the Tenant shall remove any such sign, picture,
advertisement, notice, lettering or decoration from the Premises at the Tenant's
expense and shall promptly repair all damage caused by any such removal. The
Tenant's obligation to observe and perform this covenant shall survive the
expiration of the Term or earlier termination of the Lease.
13. DIRECTORY BOARD. The Tenant shall be entitled at its expense to have its
name shown upon the directory board of the Building and the Landlord shall
design the style of such identification and shall determine the number of spaces
available on the directory board for each tenant. The directory board shall be
located in an area designated by the Landlord in the main lobby of the Building.
SCHEDULE "E" - INDEMNITY AGREEMENT
THIS INDEMNITY is dated the 25TH day of JUNE, 1999.
B E T W E E N :
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<PAGE>
PACIFIC CENTRE LEASEHOLDS LIMITED
(the "Landlord")
OF THE FIRST PART
- and -
SIDEWARE SYSTEMS INC. AND BRAINTECH, INC.
(collectively, the "Indemnifier")
OF THE SECOND PART
In order to induce the Landlord to enter into the Lease (the "Lease") dated the
25TH day of JUNE, 1999, and made between the Landlord and TECHWEST MANAGEMENT
INC., as Tenant, and for other good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, the Indemnifier hereby makes the
following indemnity and agreement (the "Indemnity") with and in favour of the
Landlord:
1. (a) The Indemnifier hereby agrees with the Landlord that at all times
during the Term of the Lease and any extensions or renewals thereof or
overholding by the Tenant under the Lease, it will (i) make the due and punctual
payment of all Rent, monies, charges and other amounts of any kind whatsoever
payable under the Lease by the Tenant whether to the Landlord or otherwise; (ii)
effect prompt and complete performance and observance of all and singular the
terms, covenants and conditions contained in the Lease on the part of the Tenant
to be kept, observed and performed; and (iii) indemnify and save harmless the
Landlord from any loss, costs or damages arising out of any failure by the
Tenant and the Indemnifier to pay the aforesaid Rent, monies, charges and other
amounts of any kind whatsoever payable under the Lease or resulting from any
failure by the Tenant and the Indemnifier to observe or perform any of the
terms, covenants and conditions contained in the Lease.
(b) The Indemnifier's covenants and obligations set out in paragraph
(a) above will not be affected by any disaffirmance, disclaimer, repudiation,
rejection, termination or unenforceability of the Lease or by any other event or
occurrence which would have the effect at law of terminating any obligations of
the Tenant prior to the termination of the Lease whether pursuant to court
proceedings or otherwise and no surrender of the Lease to which the Landlord has
not provided its written consent (all of which are referred to collectively and
individually in this Indemnity as an "Unexpected Termination"), and the
occurrence of any such Unexpected Termination shall not reduce the period of
time in which the Indemnifier's covenants and obligations hereunder apply, which
period of time includes, for greater certainty, that part of the Term of the
Lease and any extensions or renewals thereof which would have followed had the
Unexpected Termination not occurred.
2. This Indemnity is absolute, unconditional and irrevocable and the
obligations of the Indemnifier and the rights of the Landlord under this
Indemnity shall not be prejudiced, waived, released, discharged, mitigated,
impaired or affected by (a) any extension of time, indulgences or modifications
which the Landlord extends to or makes with the Tenant in respect of the
performance of any of the obligations of the Tenant (or any other obligated
Person) under the Lease; (b) any waiver by or failure of the Landlord to enforce
any of the terms, covenants and conditions contained in the Lease; (c) any
Transfer under Article VIII of the Lease by the Tenant or by any trustee,
receiver, liquidator or any other Person; (d) any consent which the Landlord
gives to any such Transfer; (e) any amendment to the Lease or any waiver by the
Tenant of any of its rights under the Lease; (f) the expiration of the Term; or
(g) any Unexpected Termination (as that term is defined in Section 1(b) above).
The obligations of the Indemnifier are as primary obligor and not as a guarantor
of the Tenant's obligations.
3. The Indemnifier hereby expressly waives notice of the acceptance of this
Indemnity and all notice of non-performance, non-payment or non-observance on
the part of the Tenant of the terms, covenants and conditions in the Lease.
Notwithstanding the foregoing but without prejudicing the foregoing, any notice
which the Landlord desires to give to the Indemnifier shall be sufficiently
given if delivered to the Indemnifier, or, if mailed, by prepaid registered mail
addressed to the Indemnifier at the Premises, or, at the Landlord's option, at
the address, if any, set forth above and every such notice is deemed to have
been given upon the day it was delivered, or if mailed, forty-eight (48) hours
after the date it was mailed. Despite what is stated above, the Indemnifier
acknowledges that if its address is stipulated as a post office box or rural
route number, then notice will be considered to have been sufficiently given to
the Indemnifier if delivered or sent by registered mail to the Premises or,
where notice cannot be given in person upon the Premises, by posting the notice
upon the Premises. The Indemnifier may designate by notice in writing a
substitute address for that set forth above and thereafter notice shall be
directed to such substitute address. If two or more Persons are named as
Indemnifier, such notice given hereunder or under the Lease shall be deemed
sufficiently given to all such Persons if delivered or mailed in the foregoing
manner to any one of such Persons.
4. If an Event of Default has occurred under the Lease or a default under
this Indemnity, the
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<PAGE>
Indemnifier waives any right to require the Landlord to (a) proceed against
the Tenant or pursue any rights or remedies against the Tenant with respect
to the Lease; (b) proceed against or exhaust any security of the Tenant held
by the Landlord; or (c) pursue any other remedy whatsoever in the Landlord's
power. The Landlord has the right to enforce this Indemnity regardless of
the acceptance of additional security from the Tenant and regardless of any
release or discharge of the Tenant by the Landlord or by others or by
operation of any law.
5. Without limiting the generality of the foregoing, the liability of the
Indemnifier under this Indemnity is not and is not deemed to have been waived,
released, discharged, impaired or affected by reason of the release or discharge
of the Tenant in any receivership, bankruptcy, winding-up or other creditors'
proceedings or any Unexpected Termination (as that term is defined in Section
1(b) above) and shall continue with respect to the periods prior thereto and
thereafter, for and with respect to the Term as if an Unexpected Termination or
any receivership, bankruptcy, wind-up or other creditors' proceedings had not
occurred, and in furtherance hereof, the Indemnifier agrees, upon any such
Unexpected Termination or any receivership, bankruptcy, wind-up or other
creditors' proceedings, that the Indemnifier shall, at the option of the
Landlord, exercisable at any time after such Unexpected Termination or any
receivership, bankruptcy, wind-up or other creditors' proceedings, become the
Tenant of the Landlord upon the same terms and conditions as are contained in
the Lease, applied mutatis mutandis. The liability of the Indemnifier shall not
be affected by any failure of the Landlord to exercise this option, nor by any
repossession of the Premises by the Landlord provided, however, that the net
payments received by the Landlord after deducting all costs and expenses of
repossessing and reletting the Premises shall be credited from time to time by
the Landlord against the indebtedness of the Indemnifier hereunder and the
Indemnifier shall pay any balance owing to the Landlord from time to time
immediately upon demand.
6. No action or proceedings brought or instituted under this Indemnity and
no recovery in pursuance thereof shall be a bar or defence to any further action
or proceeding which may be brought under this Indemnity by reason of any further
default or default hereunder or in the performance and observance of the terms,
covenants and conditions contained in the Lease.
7. No modification of this Indemnity shall be effective unless it is in
writing and is executed by both the Indemnifier and two authorized
representatives of the Landlord.
8. The Indemnifier shall, without limiting the generality of the foregoing,
be bound by this Indemnity in the same manner as though the Indemnifier were the
Tenant named in the Lease.
9. If two or more individuals, corporations, partnerships or other business
associations (or any combination of two or more thereof) execute this Indemnity
as Indemnifier, the liability of each such individual, corporation, partnership
or other business association hereunder is joint and several. In like manner,
if the Indemnifier named in this Indemnity is a partnership or other business
association, the members of which are by virtue of statutory or general law,
subject to personal liability, the liability of each such member is joint and
several.
10. All of the terms, covenants and conditions of this Indemnity extend to
and are binding upon the Indemnifier, his, her or its heirs, executors,
administrators, successors and assigns, as the case may be, and enure to the
benefit of and may be enforced by the Landlord, the owner or owners from time to
time (other than the Landlord) of the freehold or leasehold title of the
Building and any Mortgagee.
11. The expressions "Building", "Event of Default", "Landlord", "Tenant",
"Rent", "Term", and "Premises" and other terms or expressions where used in this
Indemnity, respectively, have the same meaning as in the Lease.
12. The use of words in the singular or plural, or with a particular gender,
shall not limit the scope or exclude the application of any provision of this
Indemnity to such person or persons or circumstances as the context otherwise
permits.
13. The undersigned, as Indemnifier, hereby represents and warrants to and
covenants and agrees with the Landlord that:
(a) notwithstanding the foregoing or any performance in whole or in
part by the Indemnifier of the covenants of this Indemnity, the
Indemnifier shall not, except at the option of the Landlord, have
any entitlement to occupy the Premises or otherwise enjoy the
benefits of the Tenant under this Lease;
(b) the Indemnifier has full power and authority to enter into this
Indemnity and to perform the Indemnifier's obligations contained
herein;
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<PAGE>
(c) this Indemnity is valid and binding upon the Indemnifier and
enforceable against the Indemnifier in accordance with its terms;
and
(d) in entering into this Indemnity, the Indemnifier, if a
corporation, is not contravening any provisions of the Company
Act (British Columbia) or the Canada Business Corporations Act
(Canada), as the case may be, as these Acts may be amended from
time to time, or any statute that replaces or supersedes those
Acts.
14. If a part of this Indemnity or the application of it to any Person
hereunder or circumstance is to any extent held or rendered invalid,
unenforceable or illegal, that part:
(a) is independent of the remainder of this Indemnity and is severable
from it, and its invalidity, unenforceability or illegality does
not affect, impair or invalidate the remainder of this Indemnity;
and
(b) continues to be applicable to and enforceable to the fullest
extent permitted by law against any Person hereunder and
circumstance, except those as to which it has been held or
rendered invalid, unenforceable or illegal.
15. The Indemnifier agrees to execute such further assurances in connection
with this Indemnity as the Landlord may reasonably require.
16. This Indemnity shall be construed in accordance with the laws of the
Province in which the Building is located.
17. This Indemnity is the sole agreement between the Landlord and the
Indemnifier relating to the indemnity and there are no other written or verbal
agreements or representations relating thereto.
18. If the Indemnifier is a corporation, the Indemnifier confirms and agrees
that this Indemnity has been executed by its authorized signatories and that if
only one signatory has signed this Indemnity, the Indemnifier is authorized by
its articles of incorporation or other constating documents to execute
indemnities by such sole authorized signatory and if this Indemnity is not
executed under seal by the Indemnifier, the Indemnifier is authorized by its
articles of incorporation or other constating documents to execute indemnities
without a seal.
19. Wherever in this Indemnity reference is made to either the Landlord or
the Tenant, the reference is deemed to apply also to the heirs, executors,
administrators, successors and assigns of the Landlord and the heirs, executors,
administrators, permitted successors, and permitted assigns of the Tenant. Any
assignment by the Landlord of any of its interests in the Lease operates
automatically as an assignment to such assignee of the benefit of this
Indemnity.
IN WITNESS WHEREOF the Landlord and the Indemnifier have signed and sealed this
Indemnity.
SIGNED, SEALED AND DELIVERED in ) PACIFIC CENTRE LEASEHOLDS LIMITED
the presence of: )
)
)
) Per:____________________________________
) Authorized Signatory
)
)
) Per:____________________________________
) Authorized Signatory
)
) (Indemnifier)
)
) SIDEWARE SYSTEMS INC.
)
)
) Per:____________________________________
) Authorized Signatory
)
)
) Per:____________________________________
) Authorized Signatory
)
) (Indemnifier)
) BRAINTECH, INC.
)
)
) Per:____________________________________
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<PAGE>
) Authorized Signatory
)
)
) Per:____________________________________
) Authorized Signatory
)
) I/We have authority to bind the
) corporation.
-32-
<PAGE>
EXHIBIT 10.12
Assignment Agreement effective as of July 1, 1999 between the Company,
Techwest Management Ltd., BrainTech, Inc., and SJM Management Ltd.
<PAGE>
ASSIGNMENT OF LEASE
THIS AGREEMENT is dated for reference June 25, 1999.
BETWEEN:
PACIFIC CENTRE LEASEHOLDS LIMITED
(the "Landlord")
OF THE FIRST PART
AND:
SJM MANAGEMENT LTD.
(the "Tenant")
OF THE SECOND PART
AND:
TECHWEST MANAGEMENT INC.
(the "Assignee")
OF THE THIRD PART
AND:
SIDEWARE SYSTEMS INC. AND BRAINTECH, INC.
(collectively, the "Indemnifier")
OF THE FOURTH PART
WITNESSES THAT WHEREAS:
A. By a lease (the "Original Lease") dated October 10, 1990 made between
Pacific Centre North Limited ("PCNL") and the Tenant, PCNL demised and leased
unto the Tenant certain premises (the "Original Premises") on the 16th Floor of
the Building (as therein defined) comprising 5,496 square feet more or less of
Rentable Area (as therein defined);
B. By an amendment to lease (the "Amendment") dated for reference January
12, 1994, PCNL and the Tenant agreed to adjust the Net Rent payable and to
increase the notice requirement for termination;
C. By a renewal of lease (the "Renewal") dated for reference September
27, 1995, the Tenant and PCNL agreed to renew the Lease for a further term of
five (5) years expiring November 30, 2000 and to reduce the size of the Original
Premises to approximately 4,416 square feet of Rentable Area (the "Premises");
D. The Original Lease, the Amendment and the Renewal are together
referred to herein as the "Lease";
E. By an assignment of lease made as of August 31, 1998, PCNL assigned
all of its estate, right, title and interest in the Lease to the Landlord;
F. Effective July 1, 1999 (the "Effective Date"), the Tenant proposes to
assign its interest under the Lease to the Assignee, and the Landlord has agreed
to give its consent to such assignment on the terms and conditions hereinafter
set forth; and
G. The Indemnifier has agreed to indemnify the obligations of the
Assignee pursuant to this Agreement.
NOW THEREFORE THE LANDLORD, THE TENANT, THE ASSIGNEE AND THE
INDEMNIFIER, in consideration of the Premises, the sum of $1.00 paid by each
party to the others, the mutual covenants and agreements herein contained, and
other good and valuable consideration (the
- 1 -
<PAGE>
receipt and sufficiency of which is hereby acknowledged) and subject to
the terms and conditions herein set out, covenant and agree as follows:
1. INTERPRETATION
All terms defined in the Lease and used herein shall have the
respective meanings ascribed to them in the Lease unless the context otherwise
requires or unless otherwise stated herein. The defined terms in the recitals
to this Agreement shall have such meaning throughout this Agreement, unless
otherwise stated herein.
2. AMENDMENTS TO LEASE
The Lease is hereby amended, with effect as of the Effective Date, by
deleting Section 1.04.
3. ASSIGNMENT OF THE LEASE
The Tenant hereby assigns to the Assignee as of the Effective Date all
of the right, title, benefit and interest of the Tenant in and to the Premises,
together with the unexpired residue of the Term, as extended pursuant to this
Agreement, and the Lease (as hereby amended) and all of the benefit and
advantage to be derived therefrom, to hold the same onto the Assignee henceforth
for and during the residue of the Term, as hereby extended, subject to the
payment of the rent and performance of the covenants of the Tenant under the
Lease.
4. WARRANTIES AND COVENANTS OF THE TENANT IN FAVOUR OF THE ASSIGNEE
The Tenant hereby represents and warrants to, and covenants and agrees
with, the Assignee that:
(a) notwithstanding any act of the Tenant, the Lease is good, valid and
subsisting, the rents thereby reserved have been duly paid, the
covenants and conditions therein have been duly observed and performed
by the Tenant as of the date hereof, and the Tenant now has good
right, full power and absolute authority to assign the Premises and
the Lease in the manner aforesaid according to the true intent and
meaning hereof;
(b) subject to the payment of rent and the performance of the covenants
and conditions contained in the Lease, the Assignee may enter into and
hold and enjoy the Premises for the residue of the Term, for its own
use and benefit without any interruption by the Tenant or any person
claiming under it, free from all charges and encumbrances whatsoever,
and the Tenant shall at all times hereafter, at the request and cost
of the Assignee, execute such further assurances of the Premises as
the Assignee shall reasonably require;
(c) it has not previously assigned, transferred, charged, encumbered,
sublet or parted with possession of the Premises; and,
(d) it has not exercised any renewal options under the Lease.
5. COVENANTS OF THE ASSIGNEE IN FAVOUR OF THE TENANT
The Assignee hereby covenants and agrees with the Tenant that the
Assignee shall during the residue of the Term:
(a) pay the Rent reserved by the Lease;
(b) perform and observe the obligations, covenants and conditions therein
contained on the part of the tenant therein named to be observed and
performed; and,
(c) indemnify and save the Tenant harmless therefrom and from all actions,
suits, costs, losses, charges, damages and expenses for or in respect
thereof, as if the Assignee were the tenant named in the Lease.
6. COVENANTS OF THE ASSIGNEE IN FAVOUR OF THE LANDLORD
The Assignee hereby covenants and agrees with the Landlord:
- 2 -
<PAGE>
(a) to pay the Rent and Additional Rent and to observe and perform all of
the covenants, agreements and conditions of the Tenant reserved and
contained in the Lease in the same manner as if the Assignee were the
tenant named in the Lease; and
(b) not to assign or sublet or part with possession of the Premises or any
part thereof or the Lease without the prior written consent of the
Landlord pursuant to the Lease.
7. COVENANTS OF THE INDEMNIFIER IN FAVOUR OF THE LANDLORD
Each of the corporations which are identified as the Indemnifier in
this Agreement agree to execute and deliver to the Landlord an indemnity
agreement in the form attached as Schedule "A" hereto (with blanks completed)
and the Tenant agrees that the failure of the Indemnifier to do so shall
constitute a Event of Default pursuant to the Lease.
8. CONSENT OF THE LANDLORD TO THE ASSIGNMENT
The Landlord hereby consents to this Assignment on the following
conditions:
(a) neither the consent of the Landlord, nor the payment of any money, nor
the performance by the Assignee of its obligations under the Lease
shall waive or modify in any respect the rights of the Landlord under
the Lease other than to relieve the Tenant from the observance or
performance of the conditions and covenants in the Lease to be
observed or performed by the Tenant; and
(b) the consent of the Landlord shall not be deemed to be a consent to or
a waiver of the requirement set forth in the Lease for the consent of
the Landlord to any subsequent assignment of the Lease or the Term or
to any subletting or other parting with possession of the Premises or
any part thereof.
9. RELEASE OF TENANT
The Landlord hereby expressly confirms and agrees that the Tenant is
released from any further obligations arising under the Lease as of the
Effective Date, except for any claims or liabilities which exist or arise prior
to the Effective Date.
10. DEMISE
For greater certainty, and in consideration of the rents, covenants
and agreements contained in the Lease as hereby amended on the part of Tenant to
be paid, observed and performed, the Landlord does hereby demise and lease unto
the Assignee, as from the Effective Date, the Premises for and during the Term
of the Lease, and the Assignee hereby covenants and agrees to pay the rents, and
observe and perform the covenants and agreements in the Lease as hereby amended
on its part to be paid, observed and performed.
11. LEASE RATIFIED AND CONFIRMED
Except as hereby expressly amended the Lease is hereby ratified and
confirmed by the Landlord, the Tenant, the Assignee and the Indemnifier to the
effect and with the intent that the Lease and this Agreement shall be read and
construed as one document.
12. EXECUTION
The Tenant, the Assignee and the Indemnifier confirm and agree that
this Agreement has been executed by their authorized signatories and if only one
signatory has signed this Agreement, each of the Tenant, the Assignee and the
Indemnifier is authorized by its articles or incorporation or other constating
documents to execute leases by such sole authorized signatory and if this
Agreement is not executed under seal, the Tenant, the Assignee and the
Indemnifier are authorized by their articles of incorporation or other
constating documents to execute leases without a seal.
13. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the
parties and their respective heirs, personal representatives, successors and
permitted assigns.
14. CAPTIONS
The captions appearing in this Agreement have been inserted as a
matter of convenience
- 3 -
<PAGE>
and for reference only and in no way define, limit or enlarge the scope or
meaning of this Agreement or any provision hereof.
IN WITNESS WHEREOF the Landlord, the Tenant, the Assignee and the
Indemnifier have executed this Agreement as of date first above written.
THE CORPORATE SEAL OF PACIFIC CENTRE )
LEASEHOLDS LIMITED was hereunto affixed )
in the presence of: )
)
)
"signed" )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
THE COMMON SEAL OF SJM MANAGEMENT LTD. )
was hereunto affixed in the presence of: )
)
"signed" )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
)
THE COMMON SEAL OF TECHWEST MANAGEMENT )
INC. was hereunto affixed in the presence )
of: )
)
"signed" )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
)
THE COMMON SEAL OF SIDEWARE SYSTEMS INC. )
was hereunto affixed in the presence of: )
)
"signed" )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
)
)
- 4 -
<PAGE>
THE COMMON SEAL OF BRAINTECH, INC. was )
hereunto affixed in the presence of: )
)
"signed )
- ------------------------------------ )
Title: )
Authorized Signatory ) C/S
)
)
- ------------------------------------ )
Title: )
Authorized Signatory )
)
)
SCHEDULE A
INDEMNITY AGREEMENT
THIS INDEMNITY is dated the 25TH day of JUNE, 1999.
B E T W E E N :
PACIFIC CENTRE LEASEHOLDS LIMITED
(the "Landlord")
OF THE FIRST PART
- and -
SIDEWARE SYSTEMS INC. AND BRAINTECH, INC.
(collectively, the "Indemnifier")
OF THE SECOND PART
In order to induce the Landlord to consent to an assignment of the Lease (the
"Lease") dated the 10TH day of OCTOBER, 1996, and made between the Landlord and
SJM Management Ltd. which was assigned to Techwest Management Inc. (the
"Tenant") effective July 1, 1999 (the "Effective Date") and for other good and
valuable consideration, the receipt and sufficiency whereof is hereby
acknowledged, the Indemnifier hereby makes the following indemnity and agreement
(the "Indemnity") with and in favour of the Landlord:
A. 1. The Indemnifier hereby agrees with the Landlord that at all times
during the Term of the Lease and any extensions or renewals thereof or
overholding by the Tenant under the Lease, it will (i) make the due and punctual
payment of all Rent, monies, charges and other amounts of any kind whatsoever
payable under the Lease by the Tenant whether to the Landlord or otherwise; (ii)
effect prompt and complete performance and observance of all and singular the
terms, covenants and conditions contained in the Lease on the part of the Tenant
to be kept, observed and performed; and (iii) indemnify and save harmless the
Landlord from any loss, costs or damages arising out of any failure by the
Tenant and the Indemnifier to pay the aforesaid Rent, monies, charges and other
amounts of any kind whatsoever payable under the Lease or resulting from any
failure by the Tenant and the Indemnifier to observe or perform any of the
terms, covenants and conditions contained in the Lease.
2. The Indemnifier's covenants and obligations set out in paragraph (a)
above will not be affected by any disaffirmance, disclaimer, repudiation,
rejection, termination or unenforceability of the Lease or by any other event or
occurrence which would have the effect at law of terminating any obligations of
the Tenant prior to the termination of the Lease whether pursuant to court
proceedings or otherwise and no surrender of the Lease to which the Landlord has
not provided its written consent (all of which are referred to collectively and
individually in this Indemnity as an "Unexpected Termination"), and the
occurrence of any such Unexpected Termination shall not reduce the period of
time in which the Indemnifier's covenants and obligations hereunder apply, which
period of time includes, for greater certainty, that part of the Term of the
Lease and any extensions or renewals thereof which would have followed had the
Unexpected Termination not occurred.
B. This Indemnity is absolute, unconditional and irrevocable and the
obligations of the Indemnifier and the rights of the Landlord under this
Indemnity shall not be prejudiced, waived, released, discharged, mitigated,
impaired or affected by 1. any extension of time, indulgences or modifications
which the Landlord extends to or makes with the Tenant in respect of the
performance of any of the obligations of the Tenant (or any other obligated
Person) under the Lease; 2. any waiver by or failure of the Landlord to enforce
any of the terms, covenants and conditions contained in the Lease; 3. any
Transfer under Article VIII of the Lease by the Tenant or by any trustee,
receiver, liquidator or any other Person; 4. any consent which the Landlord
gives to any such Transfer; 5. any amendment to the Lease or any waiver by the
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<PAGE>
Tenant of any of its rights under the Lease; 6. the expiration of the Term; or
(g) any Unexpected Termination (as that term is defined in Section 1(b) above).
The obligations of the Indemnifier are as primary obligor and not as a guarantor
of the Tenant's obligations.
C. The Indemnifier hereby expressly waives notice of the acceptance of this
Indemnity and all notice of non-performance, non-payment or non-observance on
the part of the Tenant of the terms, covenants and conditions in the Lease.
Notwithstanding the foregoing but without prejudicing the foregoing, any notice
which the Landlord desires to give to the Indemnifier shall be sufficiently
given if delivered to the Indemnifier, or, if mailed, by prepaid registered mail
addressed to the Indemnifier at the Premises, or, at the Landlord's option, at
the address, if any, set forth above and every such notice is deemed to have
been given upon the day it was delivered, or if mailed, forty-eight (48) hours
after the date it was mailed. Despite what is stated above, the Indemnifier
acknowledges that if its address is stipulated as a post office box or rural
route number, then notice will be considered to have been sufficiently given to
the Indemnifier if delivered or sent by registered mail to the Premises or,
where notice cannot be given in person upon the Premises, by posting the notice
upon the Premises. The Indemnifier may designate by notice in writing a
substitute address for that set forth above and thereafter notice shall be
directed to such substitute address. If two or more Persons are named as
Indemnifier, such notice given hereunder or under the Lease shall be deemed
sufficiently given to all such Persons if delivered or mailed in the foregoing
manner to any one of such Persons.
D. If an Event of Default has occurred under the Lease or a default under this
Indemnity, the Indemnifier waives any right to require the Landlord to (a)
proceed against the Tenant or pursue any rights or remedies against the Tenant
with respect to the Lease; (b) proceed against or exhaust any security of the
Tenant held by the Landlord; or (c) pursue any other remedy whatsoever in the
Landlord's power. The Landlord has the right to enforce this Indemnity
regardless of the acceptance of additional security from the Tenant and
regardless of any release or discharge of the Tenant by the Landlord or by
others or by operation of any law.
E. Without limiting the generality of the foregoing, the liability of the
Indemnifier under this Indemnity is not and is not deemed to have been waived,
released, discharged, impaired or affected by reason of the release or discharge
of the Tenant in any receivership, bankruptcy, winding-up or other creditors'
proceedings or any Unexpected Termination (as that term is defined in Section
1(b) above) and shall continue with respect to the periods prior thereto and
thereafter, for and with respect to the Term as if an Unexpected Termination or
any receivership, bankruptcy, wind-up or other creditors' proceedings had not
occurred, and in furtherance hereof, the Indemnifier agrees, upon any such
Unexpected Termination or any receivership, bankruptcy, wind-up or other
creditors' proceedings, that the Indemnifier shall, at the option of the
Landlord, exercisable at any time after such Unexpected Termination or any
receivership, bankruptcy, wind-up or other creditors' proceedings, become the
Tenant of the Landlord upon the same terms and conditions as are contained in
the Lease, applied mutatis mutandis. The liability of the Indemnifier shall not
be affected by any failure of the Landlord to exercise this option, nor by any
repossession of the Premises by the Landlord provided, however, that the net
payments received by the Landlord after deducting all costs and expenses of
repossessing and reletting the Premises shall be credited from time to time by
the Landlord against the indebtedness of the Indemnifier hereunder and the
Indemnifier shall pay any balance owing to the Landlord from time to time
immediately upon demand.
F. No action or proceedings brought or instituted under this Indemnity and no
recovery in pursuance thereof shall be a bar or defence to any further action or
proceeding which may be brought under this Indemnity by reason of any further
default or default hereunder or in the performance and observance of the terms,
covenants and conditions contained in the Lease.
G. No modification of this Indemnity shall be effective unless it is in
writing and is executed by both the Indemnifier and two authorized
representatives of the Landlord.
H. The Indemnifier shall, without limiting the generality of the foregoing, be
bound by this Indemnity in the same manner as though the Indemnifier were the
Tenant named in the Lease.
I. If two or more individuals, corporations, partnerships or other business
associations (or any combination of two or more thereof) execute this Indemnity
as Indemnifier, the liability of each such individual, corporation, partnership
or other business association hereunder is joint and several. In like manner,
if the Indemnifier named in this Indemnity is a partnership or other business
association, the members of which are by virtue of statutory or general law,
subject to personal liability, the liability of each such member is joint and
several.
J. All of the terms, covenants and conditions of this Indemnity extend to and
are binding upon the Indemnifier, his, her or its heirs, executors,
administrators, successors and assigns, as the case may be, and enure to the
benefit of and may be enforced by the Landlord, the owner or owners from time to
time
- 6 -
<PAGE>
(other than the Landlord) of the freehold or leasehold title of the
Building and any Mortgagee.
K. The expressions "Building", "Event of Default", "Landlord", "Tenant",
"Rent", "Term", and "Premises" and other terms or expressions where used in this
Indemnity, respectively, have the same meaning as in the Lease.
L. The use of words in the singular or plural, or with a particular gender,
shall not limit the scope or exclude the application of any provision of this
Indemnity to such person or persons or circumstances as the context otherwise
permits.
M. The undersigned, as Indemnifier, hereby represents and warrants to and
covenants and agrees with the Landlord that:
7 notwithstanding the foregoing or any performance in whole or in part
by the Indemnifier of the covenants of this Indemnity, the Indemnifier
shall not, except at the option of the Landlord, have any entitlement
to occupy the Premises or otherwise enjoy the benefits of the Tenant
under this Lease;
8 the Indemnifier has full power and authority to enter into this
Indemnity and to perform the Indemnifier's obligations contained
herein;
9 this Indemnity is valid and binding upon the Indemnifier and
enforceable against the Indemnifier in accordance with its terms; and
10 in entering into this Indemnity, the Indemnifier, if a corporation, is
not contravening any provisions of the Company Act (British Columbia)
or the Canada Business Corporations Act (Canada), as the case may be,
as these Acts may be amended from time to time, or any statute that
replaces or supersedes those Acts.
N. If a part of this Indemnity or the application of it to any Person
hereunder or circumstance is to any extent held or rendered invalid,
unenforceable or illegal, that part:
11 is independent of the remainder of this Indemnity and is severable
from it, and its invalidity, unenforceability or illegality does not
affect, impair or invalidate the remainder of this Indemnity; and
12 continues to be applicable to and enforceable to the fullest extent
permitted by law against any Person hereunder and circumstance, except
those as to which it has been held or rendered invalid, unenforceable
or illegal.
O. The Indemnifier agrees to execute such further assurances in connection
with this Indemnity as the Landlord may reasonably require.
P. This Indemnity shall be construed in accordance with the laws of the
Province in which the Building is located.
Q. This Indemnity is the sole agreement between the Landlord and the
Indemnifier relating to the indemnity and there are no other written or verbal
agreements or representations relating thereto.
R. If the Indemnifier is a corporation, the Indemnifier confirms and agrees
that this Indemnity has been executed by its authorized signatories and that if
only one signatory has signed this Indemnity, the Indemnifier is authorized by
its articles of incorporation or other constating documents to execute
indemnities by such sole authorized signatory and if this Indemnity is not
executed under seal by the Indemnifier, the Indemnifier is authorized by its
articles of incorporation or other constating documents to execute indemnities
without a seal.
S. Wherever in this Indemnity reference is made to either the Landlord or the
Tenant, the reference is deemed to apply also to the heirs, executors,
administrators, successors and assigns of the Landlord and the heirs, executors,
administrators, permitted successors, and permitted assigns of the Tenant. Any
assignment by the Landlord of any of its interests in the Lease operates
automatically as an assignment to such assignee of the benefit of this
Indemnity.
IN WITNESS WHEREOF the Landlord and the Indemnifier have signed and sealed this
Indemnity.
- 7 -
<PAGE>
SIGNED, SEALED AND DELIVERED in
the presence of: ) PACIFIC CENTRE LEASEHOLDS LIMITED
)
)
) Per: ---------------------------
) Authorized Signatory
)
)
) Per: ---------------------------
) Authorized Signatory
)
) (Indemnifier)
) SIDEWARE SYSTEMS INC.
)
)
) Per: ---------------------------
) Authorized Signatory
)
)
) Per: ---------------------------
) Authorized Signatory
)
)
) (Indemnifier)
) BRAINTECH, INC.
Per: ---------------------------
Authorized Signatory
Per: ---------------------------
Authorized Signatory
) I/We have authority to bind the
) corporation.
- 8 -
<PAGE>
Exhibit 10.13
Cost Sharing and Allocation Agreement dated October 29, 1999
between the Company and BrainTech, Inc.
<PAGE>
COST SHARING AND ALLOCATION AGREEMENT
BETWEEN:
BRAINTECH, INC., a company duly incorporated under the laws
of the State of Nevada, having an office at 1600 - 777
Dunsmuir Street, Vancouver, B.C. V7Y 1K2
("BNTI")
AND:
SIDEWARE SYSTEMS INC., a company duly incorporated under the
laws of the Province of British Columbia, having an office
at 1910 - 777 Hornby Street, Vancouver, B.C. V7Z 1S4
("SYD")
WHEREAS:
A. BNTI and SYD share certain office premises located at 930 West 1st
Street, North Vancouver, British Columbia (the "Shared Premises").
B. BNTI and SYD also share the services of certain personnel (the "Shared
Personnel") presently including, inter alia, the Receptionist, Marketing
Coordinator, Controller, Assistant Accountant, Trade Show Coordinator,
President, and Chairman of BNTI and SYD.
C. BNTI and SYD also share certain equipment (the "Shared Equipment") which
are incidental to the operation of the Shared Premises and the employment of
the Shared Personnel, presently including, inter alia, a telephone system for
voice and internet communication.
D. Pursuant to a Memorandum of Agreement dated October 18, 1996, BNTI and
SYD agreed to share certain costs relating to the Shared Premises, the Shared
Personnel, and the Shared Equipment on a 50 - 50 basis.
E. Subsequent to the Memorandum of Agreement, the business of SYD has
expanded more rapidly than the business of BNTI.
F. As a result of the expansion of the SYD business, SYD now makes greater
use of the Shared Premises, the Shared Personnel, and the Shared Equipment
than BNTI.
G. Following an analysis of their respective accounting records, BNTI and
SYD have concluded that from and after January 1, 1999, the relative use of
the Shared Premises, the Shared Personnel, and the Shared Equipment has been
approximately 80% by SYD and 20% by BNTI.
H. In the circumstances set out herein, SYD and BNTI have agreed that it
would be fair and equitable to re-allocate the costs relating to the Shared
Premises, the Shared Personnel, and the Shared Equipment on an 80 - 20 basis
as between SYD and BNTI, effective January 1, 1999.
NOW THEREFORE the parties hereto, intending to be legally bound, agree as
follows.
1. Effective January 1, 1999, responsibility for costs relating to the
Shared Premises, the Shared Personnel, and the Shared Equipment, shall be
allocated 80% to SYD and 20% to BNTI.
2. As soon as practicable following execution of this Agreement, the
parties shall use their best efforts to make any adjustments required to
their inter-corporate accounts to give effect to this Agreement.
<PAGE>
3. The parties acknowledge and agree that changes in circumstances may
render the cost allocations set out in this Agreement inequitable. In such
event, the parties will negotiate in good faith to adjust the cost
allocations set out in this Agreement on a fair and equitable basis.
4. The parties acknowledge and agree that it is not practical to ensure
that all payments in respect of the costs covered by this Agreement will be
made in specified proportions in the first instance. BNTI and SYD agree that
they shall, from time to time, account to each other for their respective
shares of the costs covered by this Agreement to ensure that the intent of
this Agreement is carried out.
5. BNTI and SYD will deal with each other in good faith with respect to all
matters covered by this Agreement.
Dated: October 29, 1999.
SIDEWARE SYSTEMS INC.
Per:
"signed"
- -------------------------------------------
Authorized Signatory
BRAINTECH, INC.
Per:
"signed"
- -------------------------------------------
Authorized Signatory
2
<PAGE>
Exhibit 10.14
Agreement between the Company and Advanced Contact Solution Inc.
<PAGE>
THIS AGREEMENT is dated effective as of Monday, September 20, 1999.
BETWEEN:
SIDEWARE SYSTEMS INC.
Suite 102 - 930 West 1st Street, North Vancouver, British Columbia,
Canada, V7P 3N4
("Sideware")
AND:
ADVANCED CONTACT SOLUTIONS, INC.
2050 West 190th Street, Suite 210, Torrance, California, USA, 90504
("ACS")
WHEREAS:
A. Sideware is the developer of, and owner of all rights associated with,
the computer software application known as Dr. Bean;
B. Dr. Bean is a customer service software application that enables
businesses operating Internet websites to provide online customer service;
C. ACS is a provider of outsourced customer relationship management
services and solutions, including online customer service over the Internet;
D. Sideware, both directly and through its network of Sideware VAR'S,
intends to offer outsourced customer service utilizing Dr. Bean to its Dr.
Bean customers;
E. Sideware and ACS wish to enter into an agreement whereby ACS will
provide outsourced customer service utilizing Dr. Bean to Sideware customers,
on a non-exclusive sub-contractor basis, in accordance with the terms and
conditions set out below;
NOW THEREFORE, Sideware and ACS, intending to be legally bound, hereby agree
as follows:
1. DEFINITIONS
1.1 In this Agreement:
<PAGE>
- 2 -
a) "Account Maintenance Services" means services of the nature
specified in section 1.04 of Schedule ""A";
b) "ACS Services" means the outsourced customer services provided by
ACS to Sideware Clients pursuant to this Agreement;
c) "Commencement Date" means the date on which ACS first begins to
provide ACS Services to a Sideware Client pursuant to this Agreement;
d) "Contact" means the respective individuals appointed pursuant to
Article 7 by each party as their points of initial interface;
e) "Copy" means a reproduction of computer programs and other
information onto any medium, whether electronically or otherwise;
f) "Customer Service Contract" means a contract between Sideware and
a Sideware Client pursuant to which ACS Services are provided to the
Sideware Client;
g) "Derivatives" has the meaning set out in section 6.04;
h) "Dr. Bean" means the customer service software program developed
and owned by Sideware, including documentation relating to the program
and all updates and new releases of the program;
i) "Intellectual Property Rights" includes copyrights, patents,
trade marks, service marks, design rights (whether registered or
unregistered), moral rights, semiconductor topography rights, trade
secrets and all other similar proprietary rights;
j) "Minimum Monthly Payment" means the amount designated as a
minimum monthly payment pursuant to any Customer Service Agreement;
k) "Sideware Clients" means business organizations which have
licensed Dr. Bean from Sideware and have also entered into Client
Service Contracts with Sideware, and "Sideware Client" means any one of
them; and
l) "VARs" means Sideware's value-added resellers of Dr. Bean and
participants in the Sideware Partner Program, and "VAR" means any one of
them.
2. PROVISION OF ACS SERVICES
ACS TO PROVIDE ACS SERVICES
<PAGE>
- 3 -
2.01 Subject to the terms and conditions of this Agreement, ACS will
provide outsourced ACS Services to Sideware Clients.
SPECIFICATIONS FOR ACS SERVICES
2.02 Each Sideware Client will enter into a Customer Service Contract,
which will follow the form of Schedule "A" as closely as practicable.
SERVICE CHANGES REQUESTED BY SIDEWARE CLIENTS
2.03 If any Sideware Client shall request a change in the services which it
receives pursuant to its Customer Service Contract, Sideware and ACS will use
their best efforts to agree on mutually acceptable changes, in accordance
with any applicable procedures set out in the Customer Service Contract
between Sideware and the Sideware Client. Sideware will not agree to any
changes without the consent of ACS.
SERVICE CHANGES REQUESTED BY SIDEWARE AND ACS
2.04 If at any time it ceases to be reasonably practicable for ACS to
provide the ACS Services specified in the Customer Service Contract of any
Sideware Client, Sideware will, upon written request from ACS, propose
changes in accordance with any applicable procedures set out in the Customer
Service Contract. Sideware and ACS will use their best efforts to agree on
changes which are mutually agreeable, and which are also agreeable to the
Sideware Client. If all parties are not able, within 30 days of the request
of ACS, to agree on mutually acceptable changes:
(a) if so requested by ACS, or if Sideware considers it advisable to do so,
Sideware shall invoke such procedures as may be available to it under
the Customer Service Contract to terminate the Customer Service Contract;
and
(b) until the Customer Service Contract is terminated, ACS shall continue
to provide services as close as is practicable to those specified in
the Customer Service Contract.
SERVICE QUALITY CRITERIA
2.05 In providing ACS Services to Sideware Clients, ACS shall ensure that:
(a) all outsourcing customer service representatives used by ACS will be
university level representatives, fluent in the English language;
(b) all outsourcing customer service representatives providing services to
Sideware Clients will conduct themselves in a manner which promotes the
goodwill of Sideware and the Sideware Clients; and
<PAGE>
- 4 -
(c) the ACS Services provided in respect of any Customer Service Contract
meet the quality criteria set out in such Customer Service Contract.
SOFTWARE AND TRAINING
2.06 Sideware will provide ACS, free of charge, with sufficient copies of
Dr. Bean to enable it to provide the required service to Sideware
Clients. In addition, Sideware shall:
(a) provide ACS with no-charge technical support for Dr. Bean;
(b) be responsible for providing Sideware Clients with technical support
for Dr. Bean; and
(c) provide to ACS employees such training sessions relating to Dr. Bean
as ACS may reasonably require.
With respect to item (c), Sideware will bear the cost of any training
facilities and equipment, and of conducting any training sessions. ACS will
bear the cost of transportation and living accommodations for its employees.
Training will be provided at the location, on the date or dates, and for the
number of ACS employees, as Sideware in its discretion specifies after
consultation with ACS, which consultation will not be binding on Sideware.
SERVICE REPORTS
2.07 ACS will provide Sideware with such information as Sideware may
reasonably require to provide service reports required under Customer Service
Contracts.
SOFTWARE LICENSE
2.08 Subject to the terms and conditions set out in this Agreement,
Sideware hereby grants to ACS a license to use Dr. Bean solely for the
purpose of providing ACS Services to Sideware Clients pursuant to this
Agreement. No other rights are granted to ACS in respect of Dr. Bean by this
Agreement.
3. CONTRACTING PROCEDURES
Pre-Contractual Procedures
3.01 Sideware will not enter into any Customer Service Contract with a
Sideware Client until Sideware and ACS have completed the following
procedures:
(a) Sideware and ACS will agree on an hourly rate charge to be included in
the contract for ACS Services.
<PAGE>
- 5 -
(b) Sideware and ACS will agree upon an estimated number of service hours
which, when applied to the hourly rate for ACS Services, will form the
basis for a Minimum Monthly Payment to be paid by the Sideware Client in
advance.
(c) Sideware and ACS will agree upon a description of the work required to
perform the Account Maintenance Services for the Sideware Client, and on:
(i) the amount to be charged, or the basis for charging, for the
Account Maintenance Services; and
(ii) which party will perform, and be entitled to receive payment for,
the Account Maintenance Services.
Sideware and ACS acknowledge that in the case of Customer Service
Contracts negotiated by a Sideware VAR, some or all of the Account
Maintenance Services may be performed by, and some or all of the payment
therefor received by, the Sideware VAR.
(d) Sideware and ACS will agree on the ACS Services to be provided to the
Sideware Client, to be included in Schedules "A", "B", and "C" in the
Customer Service Contract. Without limiting the generality of the
foregoing, Sideware and ACS shall both be satisfied that ACS can
practicably perform the ACS Services, and that provision of such ACS
Services will be economical at the prices set out in the Customer
Service Contract.
(e) Sideware will perform reasonable credit checks on the Sideware Client,
and shall provide to ACS such information as Sideware is reasonably
able to provide concerning the creditworthiness of the Sideware Client.
(f) If the contract is to be negotiated by a Sideware VAR, the parties shall
agree on the functions to be performed by the Sideware VAR and, except
where determined elsewhere in this Agreement, the remuneration for the
Sideware VAR.
BEST EFFORTS
3.02 The parties will use their best efforts to agree on all matters
requiring the parties' agreement to permit Sideware to complete Customer
Service Contracts with Sideware Clients, including without limitation the
matters set out in section 3.01. The parties agree that owing to the
requirements of individual Sideware Clients, Sideware may be required to
negotiate changes to the standard form of Customer Service Contract annexed
as Schedule "A" hereto. The parties will use their best efforts to agree on
commercially reasonable changes, when required. Without limiting the
generality of the foregoing, in the event that a Sideware Client is unwilling
to pay time-based charges for the ACS Services, the parties will use their
best efforts to agree on an alternate method for charging the client, and
upon consequential changes to the provisions of Article 4.
<PAGE>
- 6 -
APPROVAL OF FORM OF CONTRACT
3.03 Sideware will not enter into any Customer Service Contract with a
Sideware Client until ACS has approved the form of contract. If the matters
set out in section 3.01 have been resolved, ACS shall:
(a) respond as expeditiously as possible to any request from Sideware to
consent to a form of Customer Service Contract; and
(b) not withhold its approval unreasonably.
4. SERVICE PRICING
HOURLY SERVICE CHARGE
4.01 Subject to any adjustment made as provided for in this Agreement, the
fees payable to ACS for providing ACS Services will be based on the hourly
rate set out in Schedule "B" to this Agreement. The parties acknowledge that
this figure has been negotiated in the expectation that corresponding list
price charged by Sideware to the Sideware Clients will be the estimated list
price set out in Schedule "B". Fees payable to ACS will be calculated and
payable in accordance with the provisions of this Article 4.
DEFINITION OF SALES CHANNEL MARGIN
4.02 The Sales Channel Margin shall be equal to the difference between the
hourly charge payable by Sideware Clients to Sideware for ACS Services and
the hourly charge payable to ACS (as set out in section 4.01, or as otherwise
determined or adjusted pursuant to this Agreement).
DIVISION OF SALES CHANNEL MARGIN
4.03 The Sales Channel Margin shall be divided as follows:
(a) In cases where the contract between Sideware and the Sideware Client
is negotiated without a Sideware VAR:
To ACS - 29%
To Sideware - 71%
(b) In cases where the contract between Sideware and the Sideware Client is
negotiated by a Sideware VAR, the following division shall prevail
initially:
To ACS - 29%
To Sideware - 57%
<PAGE>
- 7 -
To Sideware VAR - 14%
The division set out above shall continue for so long as the Sideware
VAR who negotiated the contract continues to provide Account
Maintenance Services to the Sideware Client, or to act as a liaison
with the Sideware Client. Thereafter, the division set out in
subsection (a) shall apply.
The parties acknowledge that the division set out above in this
subsection (b) may be subject to renegotiation with specific Sideware
VAR's.
PAYMENT PROCEDURES
4.04 Payment of the amounts payable to ACS pursuant to this Agreement will
be made on the following basis:
(a) As soon as practicable following the receipt of a Monthly Minimum
Payment from a Sideware Client, Sideware shall remit to ACS its
portion of the Minimum Monthly Payment, which shall be equal (unless
otherwise agreed in respect of a specific Sideware Client) to the
hourly charge payable to ACS in respect of ACS Services provided to
such Sideware Client multiplied by the number of hours which formed
the basis for the Minimum Monthly Payment. If a Sideware Client makes
only a portion of its required Minimum Monthly Payment, the parties
shall divide such payment pro rata in accordance with their respective
entitlements.
(b) As soon as practicable following the end of each month ACS will provide
to Sideware a full statement of the ACS Services provided during the
month to each Sideware Client, such statement to contain sufficient
information to enable Sideware to invoice the Sideware Clients. ACS
will use its best efforts to provide such information within 5 days
following the end of each month.
(c) As soon as practicable following receipt of the information described in
(b), Sideware will invoice the Sideware Clients. Sideware will use its
best efforts to invoice the Sideware Clients within 5 days following
receipt of the information described in (b).
(d) As soon as practicable following receipt of payment from Sideware
Clients, Sideware will pay to ACS the amounts owing to ACS for the ACS
Services for which Sideware has received payment. Any interest received
by Sideware on overdue accounts will be shared between Sideware, ACS,
and any applicable VAR in the proportions set out in section 4.03.
(e) Sideware will use commercially reasonable efforts to collect unpaid
invoices, and may in its discretion acting reasonably agree to reduce
the amount owing in order to effect settlement of the claim. Sideware,
ACS, and any applicable VAR will share the settlement proceeds in
accordance with their respective entitlements.
<PAGE>
- 8 -
PRICE REVIEW PROCEDURE
4.05 The parties acknowledge that the business to be established and
operated pursuant to this Agreement is novel, and that as a result, the
parties do not have adequate operating experience on which to base accurate
cost or pricing calculations. The pricing provisions set out in this
Agreement for ACS Services will be in effect for a period of 180 days from
the Commencement Date. 150 days following the Commencement Date, the parties
shall begin good faith negotiations to adjust the pricing provisions for ACS
Services, with a view to establishing new pricing to take effect 180 days
from the Commencement Date. The new pricing will be implemented as follows:
(a) Subject to subsection (b), the new pricing will apply to all new
Customer Service Contracts completed subsequent to the effective date
for the new pricing.
(b) New pricing established pursuant to this section will not apply to ACS
Services being provided in respect of Customer Service Contracts already
in place prior to the establishment of the new pricing, until such time
as Sideware is able to implement a price adjustment in respect of such
Customer Service Contracts.
(c) As soon as practicable Sideware will implement price adjustments in
accordance with the applicable procedures set out in its existing
Customer Service Contracts, to make the pricing under those Customer
Service Contracts consistent with the new pricing established pursuant
to this section.
5. RELATIONSHIP OF THE PARTIES
NO PARTNERSHIP OR JOINT VENTURE
5.01 The relationship between Sideware and ACS is that of
contractor/subcontractor. This Agreement is not intended by the parties to
constitute or create a joint venture or partnership of any kind. Neither
party shall have the authority to bind the other except to the extent, if
any, expressly authorized in this Agreement. Neither party shall make any
statement or representation to the effect that its relationship with the
other party is anything other than as set out in this section.
DISCLAIMER OF EMPLOYMENT
5.02 Neither Sideware's nor ACS's officers, employees or agents shall be
deemed officers, direct or indirect employees, or agents of the other.
CONTROL OF ACS
5.03 Subject to section 2.05, ACS shall have exclusive discretion in the
selection, engagement and discharge of its personnel and the direction and
control thereof. The determination of the wages, salaries and compensation
of the personnel, workers and employees of ACS shall be within ACS's full
control.
<PAGE>
- 9 -
CONTACT WITH SIDEWARE CLIENTS
5.04 Sideware (or in the case of a Customer Service Contract negotiated by
a Sideware VAR, the Sideware VAR)shall be the prime interface with Sideware
Clients both before and after their entry into Customer Service Contracts.
Notwithstanding the foregoing, it is recognised that ACS employees will
likely have day-to-day contact with Sideware Clients' employees in providing
ACS Services. It is also recognized that ACS may be the recipient of
inquiries from Sideware Clients relating to the subject-matter of this
Agreement which go beyond the day-to-day interface concerning ACS Services.
Therefore, any such "high level" communications invited by a Sideware Client
directly with ACS concerning any matter relating to this Agreement, the
Customer Service Contract or Dr. Bean will not constitute a breach of this
Agreement, provided that Sideware is notified of such contact by ACS prior to
the communication where possible (and allowed to direct or assume such
communication at Sideware's option) or, where not possible, subsequently in a
timely manner.
6. NON-DISCLOSURE , NON-COMPETITION, AND PROPRIETARY INFORMATION
CONFIDENTIAL INFORMATION
6.01 During the term of this Agreement, the parties may exchange
proprietary and/or confidential information, including but not limited to,
each party's performance, sales, financial, contractual, and technical data,
and product plans, designs, costs, prices and names, finances, marketing
plans, business opportunities, customers, personnel, research, development or
know-how, and the parties acknowledge that such will be considered
confidential ("Confidential Information") provided that information disclosed
by the disclosing party ("Discloser") will be considered Confidential
Information by the receiving party ("Recipient") only if such information is
conspicuously designated as "Confidential": (i) in writing, if communicated
in writing; or (ii) confirmed in writing within thirty days of disclosure if
disclosed orally, and provided further that Confidential Information shall
not include information that: (i) is now or subsequently becomes generally
available to the public through no fault or breach on the part of Recipient;
(ii) Recipient can demonstrate to have had rightfully in its possession prior
to disclosure to Recipient by Discloser; (iii) is independently developed by
Recipient without the use of any Confidential Information; or (iv) Recipient
rightfully obtains from a third party who has the right to transfer or
disclose it. Notwithstanding the foregoing limitations, all technical
information relating to Dr. Bean will constitute Confidential Information,
except to the extent that such technical information is generally available
to the public through no fault or breach on the part of ACS.
PROHIBITION AGAINST DISCLOSURE OR UNAUTHORISED USE
6.02 Recipient agrees to use reasonable care, but in no event no less than
the same degree of care that it uses to protect its own confidential and
proprietary information of similar importance, to prevent the unauthorised
use, disclosure, publication or dissemination of Confidential Information.
<PAGE>
- 10 -
Recipient agrees to accept Discloser's Confidential Information for the sole
purpose of carrying out its obligations under this Agreement. Recipient
further agrees that:
(a) Recipient will not to use Confidential Information otherwise for its own
or any third party's benefit without the prior written approval of an
authorised representative of Discloser in each instance; and
(b) except in connection with carrying out its obligations under this
Agreement, neither Recipient nor any of its directors, officers,
employees, subcontractors, consultants or other associates will carry on
any business activities utilizing Discloser's Confidential Information;
For the purposes of this section, the entry by ACS or any of its directors,
officers, employees, subcontractors, consultants or other associates into an
agreement with an Sideware Client to provide the Sideware Client with
outsourced customer service will constitute an unauthorized utilization of
Sideware Confidential Information by ACS unless such agreement is expressly
authorized in writing by Sideware, notwithstanding the fact that the Sideware
Client's Customer Service Contract may have expired or been terminated.
COMPULSORY DISCLOSURE EXCEPTED
6.03 Section 6.02 notwithstanding, Recipient may disclose Confidential
Information if required by any judicial or governmental request, requirement
or order; provided that Recipient will take reasonable steps to give
Discloser sufficient prior notice in order to contest such request,
requirement or order by notifying Discloser of such request.
DERIVATIVES BELONG TO DISCLOSER
6.04 All Confidential Information, and any Derivatives thereof, whether
created by Discloser or Recipient, remains the property of Discloser and no
license or other rights to Confidential Information is granted or implied
hereby other than as expressly set out in this Agreement. For purposes of
this Agreement, "Derivatives" means:
(a) for copyrightable or copyrighted material, any translation, abridgement,
revision or other form in which an existing work may be recast,
transformed or adapted;
(b) for patentable or patented material, any improvement thereon; and
(c) for material which is protected by trade secret, any new material
derived from such existing trade secret material, including new
material which may be protected by copyright, patent and/or trade
secret.
<PAGE>
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INFORMATION RELATING TO INTERNAL PROCEDURES
6.05 Discloser acknowledges that information and documentation created by
Recipient in the course of carrying out this Agreement which relate to
Recipient's internal processes and procedures in general shall be owned by
Recipient and may be used by Recipient and its affiliated companies to
facilitate delivery of similar services to other customers.
LIMITED WARRANTY
6.06 Discloser warrants that it has the right to disclose the Confidential
Information to Recipient. Otherwise, all information is provided "AS IS" and
without any warranty, express, implied or otherwise, regarding its accuracy
or performance. Recipient will return all tangible Confidential Information,
including but not limited to all computer programs, documentation, notes,
plans, drawings, and Copies thereof, to Discloser immediately upon
Discloser's written request.
COMPETITION PERMITTED
6.07 Subject to section 6.09, sections 6.01 to 6.06 shall not be construed
to prevent either party from:
(a) entering into agreements with a similar purpose or similar terms to this
Agreement with third parties;
(b) engaging in any activities with respect to competitive products or
services;
(c) independently developing any materials, products or services which are
similar to those of either party irrespective of their similarity to any
materials, products or services delivered under this Agreement; or
(d) using data processing techniques, ideas, and other know-how gained
during the performance of this Agreement in the furtherance of its
business, to the extent that this does not result in the unauthorised
disclosure or use of Confidential Information or unauthorised use of
any Intellectual Property Right of the other party.
TERM
6.08 Recipient's duty to protect Discloser's Confidential Information as
set out in sections 6.01 - 6.07 expires ten years from the date of disclosure
of Confidential Information or ten years from the date of termination of this
Agreement (including any renewal of this Agreement), whichever is later. For
greater certainty, however, the ten year term set out in this section shall
not apply to the obligation of ACS to protect proprietary technical
information relating to Dr. Bean as set out below, which obligations shall be
perpetual.
<PAGE>
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PROPRIETARY RIGHTS IN DR. BEAN
6.09 ACS acknowledges that Sideware is the sole owner of all copyright,
patent rights, moral rights, and other Intellectual Property Rights in Dr.
Bean. ACS agrees that:
(a) ACS will not utilize Dr. Bean for any purpose other than providing ACS
Services for Sideware Clients pursuant to this Agreement;
(b) ACS may not reverse engineer, decompile, or disassemble Dr. Bean, except
and only to the extent that such activity is expressly permitted by
applicable law notwithstanding this limitation;
(c) unless express authorization is obtained from Sideware through a
separate agreement, ACS may not re-sell, rent, lease, or lend Dr. Bean;
(d) unless express authorization is obtained from Sideware through a
separate agreement, ACS may not assign, transfer, or sub-license any
license granted pursuant to this Agreement;
(e) ACS does not by this Agreement acquire any form of ownership interest or
Intellectual Property Right in Dr. Bean, other than the license rights
expressly granted pursuant to this Agreement;
(f) ACS will hold in strict confidence, and will not disclose to any third
party, any technical information provided to ACS by Sideware or any
agent of Sideware relating to Dr. Bean; and
(g) all rights in respect of Dr. Bean which are not expressly granted to ACS
pursuant to this Agreement are reserved to Sideware.
TRADEMARKS
6.10 Except where expressly stated, this Agreement does not grant to either
ACS or Sideware any rights in connection with any trademarks or trade names
of the other.
INJUNCTIVE RELIEF
6.11 Each party acknowledges that a violation of this Article 6 may cause
irreparable harm to the other party for which no adequate remedy in damages
exists, and each party therefore agrees that, in addition to any other
remedies available, a party will be entitled to seek equitable remedies,
including without limitation injunctive relief, to enforce the nondisclosure
and non-competition obligations set forth in this Article 6. Without
limiting the generality of the foregoing, each party agrees that a party
seeking to enforce the obligations set out in this Article 6 shall be
entitled to obtain interim, interlocutory, and permanent injunctive relief
without having
<PAGE>
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to prove irreparable harm, without regard to the balance of convenience, and
without having to post a bond.
7. REVIEW MEETINGS AND DISPUTE RESOLUTION
APPOINTMENT OF CONTACTS
7.01 Sideware and ACS shall each appoint a person (the "Contact") of
suitable experience to be its single interface and point of initial contact
for the duration of the Agreement.
PARTIES TO MEET
7.02 The parties, including the Contacts, will meet regularly at mutually
agreed times and locations to discuss issues arising in connection with
performance of this Agreement by Sideware and ACS.
CONTACTS TO MEET
7.03 In the event there is an issue which cannot be resolved at these
review meetings, either party may request that their Contacts meet separately
to resolve the issue.
DISPUTE RESOLUTION
7.04 As the final step in the dispute resolution process and prior to
either party giving notice of termination for cause as described in section
8.02, Sideware and ACS will each designate another corporate executive who
will meet to attempt to resolve the issue.
8. TERM AND TERMINATION
TERM
8.01 This Agreement shall commence on the date set out at the beginning of
this Agreement and continue for a term of one year. At the end of the
initial term, this Agreement will be automatically renewed for additional one
year terms unless either party gives 60 days written notice of cancellation
prior to the end of the initial term or the end of any additional one year
term.
TERMINATION FOR BREACH
8.02 Except for non-payment by Sideware, either party may terminate this
Agreement by written notice for material breach provided:
<PAGE>
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(a) the dispute resolution process set out in Article 7 has been completed
and has failed to resolve the issue;
(b) the terminating party thereafter gave 30 days written notice to the
other party requiring the other party to rectify its material breach;
and
(c) the other party failed to rectify its material breach within 30 days of
receiving the notice specified in subsection (b).
In the event of non-payment by Sideware, ACS may give 30 days written notice
after payment was due and terminate immediately if payment is not made by the
end of the 30 day notice period. For purposes of this section a bona fide
disagreement between Sideware and ACS as to any amount owing by Sideware to
ACS shall not constitute non-payment by Sideware.
EXCEPTION
8.03 For purposes of section 8.02 ACS shall not be in material breach if
its failure to perform hereunder is due to problems caused by Dr. Bean,
Sideware or Sideware Client's data, by applications or other software owned
or licensed by Sideware or Sideware Clients, by hardware failures for
hardware not maintained by ACS or other causes beyond ACS's control.
TERMINATION FOR INSOLVENCY
8.04 If either party is adjudged bankrupt by a court of competent
jurisdiction, commences proceedings for a dissolution or winding up of its
affairs, seeks the protection of any debtors' relief legislation or has a
receiver or receiver-manager of its assets appointed, such event shall be
deemed to be a breach of this Agreement, the other party may terminate this
Agreement immediately by written notice to the party in breach.
CONSEQUENCES OF TERMINATION
8.05 Forthwith upon termination of this Agreement:
(a) Sideware shall cease entering into any new Customer Service Contracts;
(b) Sideware shall use diligent efforts to procure an alternate source for
the services being rendered by ACS in respect of the Customer Service
Contracts then in force;
(c) ACS will cooperate with Sideware to ensure as orderly a transition as
possible from ACS to any alternate service provider arranged by Sideware
in respect of those Customer Service Contracts then in force (such
cooperation to include, without limitation, facilitating relocation of
Sideware-owned equipment and software from an ACS site to a new Sideware
or vendor location); and
<PAGE>
- 15 -
(d) until Sideware is able to procure an alternate source for the services
being provided by ACS, ACS will continue to provide ACS Services in
respect of those Customer Service Contracts then in force.
CONDITIONS PRECEDENT
8.06 In the event that this Agreement is terminated by ACS for non-payment by
Sideware, the obligations of ACS as set out in subsections 8.05(c), and (d)
shall be conditional upon:
(a) Sideware's prior payment of all amounts then due and owing to ACS as of
the date of termination of this Agreement; and
(b) Sideware providing reasonable security for payment for any ACS Services
to be provided subsequent to termination of this Agreement pursuant to
subsection 8.05(d).
For purposes of this section a bona fide disagreement between Sideware and
ACS as to any amount owing by Sideware to ACS shall not constitute
non-payment by Sideware.
RETURN OF DR. BEAN
8.07 Upon the termination or expiry of this Agreement and completion of any
ACS Services to be provided pursuant to section 8.05(d), ACS shall:
(a) cease using Dr. Bean; and
(b) forthwith certify to Sideware that ACS has destroyed or has returned
all Copies of Dr. Bean to Sideware.
The requirement of subsection (b) applies to Copies in all forms, partial and
complete, in all types of media and computer memory, and whether or not
modified or merged into other materials.
9. INDEMNIFICATION AND LIMITATION OF DAMAGES
INDEMNIFICATION BY SIDEWARE
9.01 Sideware shall defend, indemnify, and hold harmless ACS from and
against any claims by a Sideware Client relating to (i) defects or errors in
the performance of Dr. Bean, other than as a result of changes or
modifications made to Dr. Bean by anyone other than Sideware, or (ii) a
breach by Sideware of the Client's Customer Service Contract.
<PAGE>
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INDEMNIFICATION BY ACS
9.02 ACS shall defend, indemnify, and hold harmless Sideware from and
against any claims by third parties relating to (i) the ACS Services provided
or to be provided by ACS, its agents, or its employees; or (ii) any
statements, actions, or services of ACS not expressly authorized by this
Agreement.
CONDITIONS PRECEDENT TO INDEMNIFICATION
9.03 The foregoing indemnities are conditional on (i) prompt written notice
by the party seeking indemnification; (ii) cooperation in the defense of the
claim, demand, or action; and (iii) the obtaining of prior written approval
by the indemnifying party of any settlement or offer of settlement.
NO RECOVERY FOR CONSEQUENTIAL DAMAGES
9.04 EXCEPT FOR:
(A) THE EXPRESS RIGHTS OF INDEMNIFICATION SET OUT IN SECTIONS 9.01 AND 9.02;
OR
(B) ANY LIABILITY FOR BREACH OF ANY PROVISION OF ARTICLE 6 OR SECTION 8.07;
(TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW) IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, INDIRECT, OR
CONSEQUENTIAL DAMAGES WHATSOEVER (INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR
LOSS OF PROFITS, FOR BUSINESS INTERRUPTION, FOR PERSONAL INJURY, FOR LOSS OF
PRIVACY, FOR FAILURE TO MEET ANY DUTY INCLUDING OF GOOD FAITH OR OF
REASONABLE CARE, FOR NEGLIGENCE, AND FOR ANY OTHER PECUNIARY OR OTHER LOSS
WHATSOEVER) ARISING OUT OF OR IN ANY WAY RELATED TO THE PERFORMANCE OF THIS
AGREEMENT, OR ACTS OR OMISSIONS IN RELATION THERETO, EVEN IN THE EVENT OF
FAULT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, BREACH OF CONTRACT, OR
BREACH OF WARRANTY, AND EVEN IF THE SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
LIMITATION ON DAMAGES RECOVERABLE BY SIDEWARE
9.05 In addition to the limitations set out in section 9.04, in the event
of ACS's failure to comply with section 2.05 in providing services in respect
of any Customer Service Contract, the damages payable by ACS in respect of
such breach shall be limited to the greater of:
<PAGE>
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(a) the damages payable by Sideware to any third party resulting from such
breach; or
(b) the total amount paid by Sideware to ACS for ACS Services rendered in
connection with such Customer Service Contract.
10. NOTICES
NOTICES TO BE IN WRITING
10.01 No notice, approval, acceptance, waiver, consent or other
communication pursuant to this Agreement shall be valid unless made in
writing.
MANNER OF GIVING NOTICE
10.02 All notices, requests, demands and other communications hereunder
shall be in writing, shall be delivered by hand or sent by telecopy, and
shall be deemed to have been duly given if delivered by hand or telecopied:
If to Sideware:
Attn: Mac Allan
Sideware Systems Inc.
Suite 102 - 930 West 1st Street
North Vancouver, British Columbia
Canada V7P 3N4
Fax No: 604-980-7121
If to ACS:
Attn: Ken Bone
Advanced Contact Solutions, Inc.
2050 West 190th Street, Suite 210
Torrance, California
USA 90504
Fax No: 310-212-0522
and shall be deemed to have been received, if delivered by hand, on the date
of delivery, or if telecopied and if the sender has machine confirmation that
the fax was transmitted to the correct fax number, on the business day of the
transmission if the transmission occurs before or during the recipient's
normal business hours, or on the business day next following the date of
transmission, if the transmission occurs after the recipient's normal
business hours.
<PAGE>
- 18 -
CHANGE OF ADDRESS
10.03 Either party may change the address or designated representative to
which notices from the other party must be sent by providing the other party
with written notice of such change before the new address is to become
effective.
11. MISCELLANEOUS
JURISDICTION OF BRITISH COLUMBIA COURTS
11.01 Except as set out herein, Sideware and ACS affirm that it is the
intention of the parties that all civil or criminal actions, all suits or
special proceedings concerning the relationships of the parties, the
interpretation of and/or validity of this Agreement, or any suit or
proceedings to determine any right, privilege or remedy under this Agreement,
or any suit or proceeding to determine any other civil or criminal cause of
action between the parties hereto shall be commenced, prosecuted, and tried
exclusively in the courts of competent jurisdiction in the Province of
British Columbia, Canada, and both parties hereby attorn to such
jurisdiction. Notwithstanding the foregoing, this section shall not prevent
any party from commencing legal proceedings in another jurisdiction for the
purpose of protecting such party's Confidential Information or Intellectual
Property Rights, if proceedings in such other jurisdiction will provide more
effective protection for such rights.
NON-WAIVER
11.02 Either party's lack of enforcement of any provision in this Agreement
in the event of a breach by the other shall not be construed to be a waiver
of any such provision and the non-breaching party may elect to enforce any
such provision in the event of any repeated or continuing breach by the other.
ENTIRE AGREEMENT
11.03 This Agreement together with the Schedules hereto is the exclusive
statement of the entire agreement between Sideware and ACS, and supersedes
all prior oral or written representations or agreements between the parties,
as to the subject matter hereof. Any modifications of this Agreement must be
in writing and signed by both parties.
ILLEGALITY
11.04 If any provision of this Agreement is held invalid, illegal, or
unenforceable by a court of competent jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
NO ASSIGNMENT
<PAGE>
- 19 -
11.05 This Agreement may not be assigned by either party without the prior
written consent of the other party, which consent may be unreasonably
withheld.
COUNTERPART EXECUTION
11.06 This Agreement may be executed simultaneously in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
HEADINGS
11.07 The headings of this Agreement have been included for the convenience
of the parties and are not part of the Agreement, nor are the headings to be
used to alter or interpret the terms hereof.
SURVIVAL OF PROVISIONS
11.08 The provisions of Articles 6 and 10 survive termination of this
Agreement.
ENFORCEABILITY
11.09 If any restriction as to capacity, responsibility, activity, period
or geographic area imposed on a Party by this Agreement is finally determined
by a court of competent jurisdiction to be unenforceable (the "Unenforceable
Restriction"), and so often as the same shall occur, such Party agrees that
upon written notice from the other specifying for inclusion in this Agreement
of fewer capacities or responsibilities, or any activity of lesser scope or
of a lesser time or geographic area than now contained herein (the "Lesser
Restriction"), that this Agreement shall be deemed to be amended by the
substitution of the Lesser Restriction for the Unenforceable Restriction,
with retroactive effect to the date of this Agreement.
SCHEDULES
11.10 The following Schedules are attached to and incorporated into this
Agreement:
Schedule "A" - Customer Service Contract
Schedule "B" - Fee Schedule
GOVERNING LAW
11.11 This Agreement and all matters arising hereunder shall be governed by,
construed and enforced in accordance with the laws of the Province of British
Columbia, Canada.
CURRENCY
11.12 All sums of money to be paid or calculated pursuant to this Agreement
shall be paid or calculated in currency of the United States of America
unless otherwise expressly stated.
<PAGE>
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SIDEWARE SYSTEMS INC. ADVANCED CONTACT SOLUTIONS, INC.
By: "signed" By: "signed"
------------------------ ------------------------
Name: Owen Jones Name: Kenneth W. Bone
----------------------- -----------------------
Title: CEO Title: President
----------------------- -----------------------
<PAGE>
Exhibit 10.15
Contract Agreement No. SDW001 between the Company
and Science Applications International Corp.
<PAGE>
CONTRACT AGREEMENT
No. SDW001
Between
SIDEWARE SYSTEMS, INC.
Suite 102, 930 West 1st Street
North Vancouver, British Columbia
Canada V7P 3N4
and
208 Elden Street, Suite 200
Herndon, Virginia 20170
and
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
c/o Technology Applications Group
1710 Goodridge Drive, M/S: 2-4-6
McLean, VA 22102
This Agreement consists of:
- - Terms and Conditions
- - Appendix A - Statement of Work
- - Appendix B - Price Schedule
ACCEPTANCE:
SIDEWARE SYSTEMS, INC. SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION
"signed"
- ------------------------
Signature Signature
Grant Sutherland Robert W. Larrick, Jr.
- --------------------------
Name Name
Chairman Contracts Manager
- ----------------
Title Title
Date Date
<PAGE>
INTRODUCTION
This Contract Agreement, effective 25 October 1999, is made between SIDEWARE
SYSTEMS, INC. (hereinafter known as "Sideware") and Science Applications
International Corporation (hereinafter known as "SAIC") with principal
offices located at 1710 Goodridge Drive, McLean, Virginia. The work will be
performed on a Time and Material (T&M) Basis in accordance with Schedules A,
the (Specific Terms and Conditions), Appendix A (Statement of Work), and
Appendix B (Price Information).
SCHEDULE A
SPECIFIC TERMS AND CONDITIONS
1. Type of Contract
This is a Time-and-Material type contract whereby SAIC will invoice Sideware
at specified rates (Appendix B) for the individuals performing work pursuant
to this contract. Expenses such as clerical/administrative labor, computer
services, communications, postage and express mail, and normal reproduction
are included in the labor rates. All other direct costs (ODC's), materials,
and travel not stated above as included in the labor rate, will be invoiced
on an actual incurred basis with a twelve percent (12%) handling charge.
2. Period of Performance
The terms and billing rates identified herein are based upon a performance
period estimated at this time to be approximately twelve (12) months with an
anticipated start date of . In order to begin the work
identified in Appendix A, SAIC will require the execution of this contract
document.
3. Services
Services will be performed on a "time and materials" basis as described in
Paragraph 1. SAIC may, at its option, continue efforts until written
notification terminating this Agreement is provided by either party to the
other pursuant to Section 11 "Termination". SAIC shall be reimbursed for all
Services performed and costs incurred prior to the effective date of
termination in accordance with Section 11.
4. Invoice and Payment Terms
The amount to be paid to SAIC for labor shall be computed by multiplying the
applicable hourly billing rate set forth in Exhibit B by the number of direct
hours performed. Fractional parts of an hour shall be payable on a prorated
basis. The labor hour billing rates set forth in Exhibit B shall be
effective through December 31, 2000, at which time such rates shall be
subject to renegotiations.
Upon prior approval from the Sideware, SAIC may purchase materials for
exclusive use in performing the Services. Sideware shall reimburse SAIC for
all such materials purchased. These expenses shall be subject to the
administrative charges provided in Appendix B.
SAIC shall provide an invoice to Sideware every four weeks or as set forth in
Exhibit B for Services performed and expenses incurred by SAIC pursuant to
this Agreement.
The invoices shall be sent to:
Sideware Systems, Inc.
Suite 102, 930 West 1st Street
North Vancouver, BC
Canada V7P 3N4
<PAGE>
Attn: John Wedel
Invoiced amounts are immediately due and payable by either electronic funds
transfer (EFT) or by mail to the following location(s):
If Sideware has EFT capabilities, use the following address:
Bank of America, San Francisco
Account Number: 14520-00006
Bank Routing Number: 121000358
Telegraphic Abbreviation: BNKAMER
Reference: Project and Invoice Numbers
All costs associated with the wire transfer of funds shall be borne by
Sideware
If Sideware does not have EFT capabilities, use the following address:
Science Applications International Corporation
Drawer CS 198347
Atlanta, GA 30384-8347
Reference: Project Number(s) and Invoice Numbers(s)
If Sideware fails to pay the total of such invoiced fees and costs within
thirty (30) days of such invoice, interest compounded at the rate of one
percent (1%) per month shall be charged on all amounts unpaid and
outstanding. If Sideware fails to make any payment to SAIC as and when
required hereunder, SAIC shall have the right, in addition to its other
rights and remedies, to cease further performance of the Services hereunder.
5. Administrative Points of Contact
The name and address of SAIC authorized representatives for purposes of
negotiation and contract administration are as follows:
Negotiation for SAIC:
Primary: Robert W. Larrick, Jr.
Contracts Manager
1710 Goodridge Drive, M/S 2-4-6
McLean, VA 22102 USA
(703) 676-8163 - Telephone
(703) 676-8434 - Facsimile
Alternate: Christine A. Aaron
Group Contracts Manager
1710 Goodridge Drive, M/S 2-4-6
McLean, VA 22102 USA
(703) 676-4548 - Telephone
(703) 676-8434 - Facsimile
Negotiation for Sideware Systems, Inc.
<PAGE>
Sideware Systems, Inc.
Suite 102, 930 West 1st Street
North Vancouver, BC
Canada V7P 3N4
Attn: John Wedel
(604) 988-0440 - Telephone
(604) 980-7121 - Facsimile
6. Resources to be Provided by Sideware
Sideware shall provide, maintain and make available to SAIC, at Sideware's
expense and in a timely manner, the following resources, and such other
additional resources, as SAIC may from time to time reasonably request in
connection with SAIC's performance of the Services:
Qualified Sideware personnel or representatives who will be designated by
Sideware to consult with SAIC on a regular basis in connection with the
Services, as well as documentation or other information necessary to perform
the Services.
Access to Sideware's premises and appropriate workspace for SAIC personnel at
Sideware's premises as necessary for performance of those portions of the
Services to be performed at Sideware's premises.
7. Confidentiality
Information which is exchanged under or in connection with this contract may
include proprietary information of the disclosing party. "Proprietary
Information," for purposes of this contract, shall be any information,
regardless of the media on which it appears or resides and whether in written
or electronic form, that is clearly marked with the legend "Proprietary
Information of Sideware Systems, Inc. " The legend can appear on the
document, diskette, or screen display as the case may be. The receiving
party shall not disclose any information so marked to others nor use it for
any purpose other than the performance of this contract. The parties agree
that the transfer of Proprietary Information from the disclosing party does
not provide any ownership or license rights in such information to the
receiving party. Immediately upon request, the receiving party must return
to the disclosing party and Proprietary Information transferred. It is
expressly understood by the parties that all information, data, data
libraries, in-house code, and any other information resident on the computers
(and their associated peripherals, network, and media) is the Proprietary
Information of Sideware.
In the event proprietary information is orally disclosed, the substance of
the oral disclosure should be reduced to writing or electronic form and
clearly marked with the above legend within ten (10) days following
disclosure. The receiving party shall handle and protect the disclosing
party's Proprietary Information using the same care that is used for handling
and protection of its own Proprietary Information.
Proprietary information shall not include, and this paragraph shall not apply
to, information which:
a. was in the receiving party's possession or was known to the receiving
party prior to the execution of this contract;
b. is or becomes public knowledge without fault of the receiving party;
c. is acquired by the receiving party from a third party with good legal
title thereto and without binder or secrecy;
d. is independently developed by the receiving party;
<PAGE>
e. is used or disclosed with the prior written approval of the disclosing
party;
f. is disclosed pursuant to the requirement or request of the United States
Government or other governmental agencies.
The obligations stated under this article shall survive the expiration of
termination of this contract and extension thereof for a period of three (3)
years.
Each party agrees not to make more copies than necessary for internal use of
the proprietary information. All tangible forms and copies of the
proprietary information, such as written documentation, delivered by either
party to the other pursuant to this agreement shall be and remain the
property of the issuing party, and all such tangible information shall be
properly returned to said party or destroyed upon its written request. Any
work papers, memoranda, or other writings prepared by the receiving party
incorporating any or all of the information shall also be subject to the
provisions of this contract.
8. Work for Hire
This contract is a work-for-hire contract. All work product, draft and final
deliverables (as identified within the Statement of Work), all
work-in-process (including logs, draft reports, and records), and all
products of the contract shall become at their creation, and at all times
thereafter shall remain, the property of Sideware, and shall be designated
as the proprietary information of Sideware pursuant to Section 7 herein.
Sideware recognizes that the performance of SAIC hereunder will require the
skills of SAIC. Therefore, regardless of ownership of any work, SAIC shall
retain the non-exclusive, perpetual, royalty-free, paid-up license with the
right to sublicense to use the algorithms, know-how, ideas, techniques, and
concepts used or developed by it in the course of performance of this
contract.
9. Taxes
Sideware shall be solely responsible for the collection and payment of any
and all sales, use, value added, excise, import, privilege or other similar
taxes or payments in lieu thereof, including interest and penalties thereon,
imposed by any authority, government or governmental agency arising out of or
in connection with the performance of the Services by SAIC (other than those
levied on SAIC's income), and Sideware shall make such withholdings and
payments, and timely file any return or information required by treaty, law,
rule or regulation.
10. Personnel
Personnel will at all times be considered employees or agents of the party
providing such personnel and will not for any purpose be considered employees
or agents of the other party. Each party shall assume full responsibility
for the actions or inactions of the personnel it provides, and shall be
solely responsible for the supervision, direction, control, salaries,
workers' compensation coverage, disability and other insurance, benefits, and
all other obligations required by law relating to its personnel.
<PAGE>
11. Termination
Either party may terminate this Agreement for any reason at any time upon
providing written notification to the other party. Termination under this
paragraph will not affect payment obligations incurred under this Agreement
for Services performed prior to the effective date of termination, and for
any costs incurred, including without limitation commitments to purchase
products or services from third parties which were entered into by SAIC in
the course of performance hereunder prior to the effective date of
termination. Such reimbursable costs may include, but are not limited to,
cancellation fees, minimum consulting fees, and non-refundable charges or
fees for third party products or services.
12. Effect of Termination
Upon termination of this Agreement, each party shall promptly return to the
other any and all personal property of the other held by such party;
provided, that if, and so long as, any fees required to be paid by Sideware
to SAIC have not been paid, then SAIC shall not be required to return to
Sideware any personal property of Sideware held by SAIC, and SAIC shall have
a lien on such property, to the extent of the amounts unpaid by Sideware.
13. Warranties
SAIC warrants that the Services provided under this Agreement shall be
performed with that degree of skill and judgment normally exercised by
recognized professional firms performing services of the same or
substantially similar nature. The exclusive remedy for any breach of the
foregoing warranty shall be that SAIC, at its own expense, and in response to
written notice of a warranty claim by Sideware within 60 days after
performance of the Services at issue, shall, at its own option, either (1)
re-perform the Services to conform to this standard; or (2) refund to
Sideware amounts paid for non-conforming Services.
SAIC SPECIFICALLY DISCLAIMS ANY OTHER EXPRESS OR IMPLIED STANDARDS,
GUARRANTEES, OR WARRANTIES, IUNCLUDING ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR ANY WARRANTIES THAT MAY ALLEGED TO ARISE
AS A RESULT OF CUSTOM OR USAGE. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT SAIC DISCLAIMS ANY WARRANTY, RESPONSIBILITY, OR
LIABILITY FOR THE "YEAR 2000" COMPLIANCE OR FUNCTIONALITY OF THE SIDEWARE'S
HARDWARE, SOFTWARE, FIRMWARE, OR COMPUTER SYSTEMS.
Sideware represents and warrants to SAIC that it has the right to use,
disclose and disseminate the information, specifications and data that it has
provided or will provide to SAIC in order for SAIC to perform the Services
and to create the deliverables, if any, identified in Exhibit A. Sideware
further represents and warrants that possession and use of that information,
specifications and data by SAIC under the terms and conditions of this
Agreement will not constitute an infringement upon any patent, copyright,
trade secret, or other intellectual property right of any third party.
14. Limitation of Liability
Sideware agrees that SAIC's total liability to Sideware and all liabilities
arising out of or related to the work contemplated by this contract, from any
cause or causes, and regardless of the legal theory, including breach of
contract, warranty, negligence, strict liability, or statutory liability,
shall not, in the aggregate, exceed the amounts paid to SAIC hereunder.
<PAGE>
In no event shall either SAIC or Sideware be liable to the other for any
special, indirect, incidental, consequential, or economic (including, but not
limited to lost profits and lost business opportunity) damages, regardless of
the legal theory under which such damages are sought, and even if the parties
have been advised of the possibility of such damages.
Any claim by Sideware against SAIC related to this contract must be made in
writing and presented to SAIC within six (6) months after the date on which
SAIC completes performance of all services specified in this contract,
including such services performed pursuant to Sections 15 and 16.
15. Year 2000 Warranty I
SAIC warrants that the services performed under this Contract shall be
performed with that degree of skill and judgement normally exercised by
recognized professional firms performing services of a similar nature.
Sideware's exclusive remedy for breach of this warranty is to have SAIC
re-perform any services whose non-compliance with this warranty is made known
by Sideware to SAIC in writing within sixty (60) days after Sideware's
acceptance of the non-compliant services.
Except as provided in (a) above, SAIC disclaims any warranty, responsibility,
or liability for the Year 2000 compliance or functionality of Sideware's
hardware, software, firmware, or computer systems, and disclaims any warranty
that any services provided will achieve Year 2000 compliance or functionality
with Sideware's systems. The provisions of this Year 2000 Warranty shall
take precedence over any inconsistent provisions elsewhere in this Contract
including its exhibits and attachments.
16. Year 2000 Warranty II
SAIC warrants that each hardware, software, and firmware product
delivered under this contract and listed below shall be able to accurately
process dates and date-related data (including, but not limited to,
calculating, comparing, and sequencing) from, into, and between the twentieth
and twenty-first centuries, and the years 1999 and 2000 and leap year
calculations, to the extent that other information technology, used in
combination with the information technology being acquired, properly
exchanges date/time data with it. If the contract requires that specific
listed products must perform as a system in accordance with the foregoing
warranty, then that warranty shall apply to those listed products as a system.
Warranted Items:
NONE
seq level0 \h \r0 seq level1 \h \r0 seq level2 \h \r0 seq level3 \h \r0 seq
level4 \h \r0 seq level5 \h \r0 seq level6 \h \r0 seq level7 \h \r0 (b)
SAIC shall repair or replace, at its option, any Warranted Item whose
non-compliance is discovered and made known to SAIC in writing by Sideware
within sixty (60) days after acceptance. Nothing in this warranty shall be
construed to limit any rights or remedies Sideware may otherwise have under
this Contract with respect to defects other than Year 2000 performance.
(c) As to any item of hardware, software, or firmware (if any)
delivered by SAIC but not warranted above, SAIC shall, to the extent
permitted by the manufacturer or licensor, pass through or assign to Sideware
the manufacturer's or licensor's warranties, if any, given to SAIC, regarding
Year 2000 compliance. SAIC itself provides no warranty, express or implied,
regarding the Year 2000 performance of any third-party items unless
specifically listed as a Warranted Item.
<PAGE>
17. Limitation of Dissemination of SAIC Commercial Work Product
SAIC and Sideware expressly exclude any and all third parties from the
benefits of this Agreement. In the event that Sideware furnishes any SAIC
work product to a person who is not a party to this Agreement, Sideware
agrees to defend, indemnify, and hold harmless SAIC from and against all
claims, damages, losses, costs and expenses (including reasonable attorney's
fees) of actions brought by third parties, and arising out of or relating to
such third party's use or distribution of, or reliance upon, SAIC's work
product.
18. Changed and Additional Work
Sideware may, at any time, during the term of the contract, order a change to
the work being performed under this contract that is within the general scope
of this contract. In the event SAIC determines that the change order will
affect the performance, delivery or price of the contract, SAIC will submit,
within ten (10) calendar days of receipt of the change order, a proposal
identifying the consequences of the change order, and the price thereof, on
the contract terms and conditions. Following the acceptance of SAIC's
proposal, the parties will modify the contract in writing prior to the SAIC
beginning work on the change order. The cost of the change order will be
included in the total estimated price identified in Appendix B.
In the event Sideware requests additional work under this contract, the above
procedures will be used prior to the commencement of performance on the
additional work. However, at its sole option, SAIC is not obligated to
submit a proposal for, or perform, any additional work. Any costs for
additional work are not included in the total estimated price in Appendix B
and the total estimated price will be increased by the amount of the
additional work.
This contract can only be modified by an instrument in writing signed by
authorized representatives of Sideware and SAIC.
19. Non-Waiver of Rights
The failure of either party to insist upon performance of any provision of
this Agreement, or to exercise any right, remedy or option provided herein,
shall neither be construed as a waiver of the right to assert any of the same
or to rely on any such terms or conditions at any time thereafter, nor in any
way affect the validity of this Agreement.
20. Severability
If any covenant, condition, term, or provision contained in this Agreement is
held or finally determined to be invalid, illegal, or unenforceable in any
respect, in whole or in part, such covenant, condition, term, or provision
shall be severed from this Agreement, and the remaining covenants,
conditions, terms and provisions contained herein shall continue in force and
effect, and shall in no way be affected, prejudiced or disturbed thereby.
21. Conflicting Provisions
<PAGE>
This Agreement and all of the exhibits, schedules, and documents attached
hereto are intended to be read and construed in harmony with each other, but
in the event any provision in any attachment conflicts with any provision of
this Agreement, then this Agreement shall be deemed to control, and such
conflicting provision shall be deemed removed and replaced with the governing
provision herein.
22. Assignment
Neither party may sell, assign, transfer, or otherwise convey any of its
rights or delegate any of its duties under this Agreement without the prior
written consent of the other party, which consent may not be unreasonably
withheld. Notwithstanding the foregoing, SAIC may without violation of this
paragraph engage the services of independent contractors to assist in the
performance of its duties hereunder.
23. Governing Law
This Agreement shall be governed by and construed under the laws of the
Commonwealth of Virginia without regard to those laws relating to conflict of
laws.
24. Interpretation
The captions and headings used in this Agreement are solely for the
convenience of the parties, and the text of the Agreement shall govern in the
event of any conflict or ambiguity. Each party has read and agreed to the
specific language of this Agreement; therefore no conflict, ambiguity, or
doubtful interpretation shall be construed against the drafter.
25. Disputes
Sideware and SAIC agree to first enter into negotiations to resolve any
controversy, claim or dispute ("dispute") arising under or relating to this
Agreement. The parties agree to negotiate in good faith to reach a mutually
agreeable resolution of such dispute within a reasonable period of time. If
good faith negotiations are unsuccessful, Sideware and SAIC agree to resolve
the dispute by binding and final arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitration shall take place in the County of Fairfax, State of
Virginia. The arbitrator(s) shall be bound to follow the provisions of this
Agreement in resolving the dispute, and may not award punitive damages. The
decision of the arbitrator(s) shall be final and binding on the parties, and
any award of the arbitrator(s) may be entered or enforced in any court of
competent jurisdiction.
26. Force Majeure
Neither party shall be liable for any failure of or delay in performance of
its obligations under this Agreement to the extent such failure or delay is
due to circumstances beyond its reasonable control, including, without
limitation, acts of God, acts of a public enemy, fires, floods, wars, civil
disturbances, sabotage, accidents, insurrections, blockades, embargoes,
storms, explosions, labor disputes (whether or not the employees' demands are
reasonable and within the party's power to satisfy), acts of any governmental
body, failure or delay of third parties or governmental bodies from whom a
party is obtaining or must obtain approvals, authorizations, licenses,
franchises or permits, or inability to obtain labor, materials, equipment, or
transportation (collectively referred to herein as "Force Majeure"). Each
party shall use its reasonable efforts to minimize the duration and
consequences of any failure of or delay in performance resulting from a Force
Majeure event.
27. Multiple Copies or Counterparts of Agreement
<PAGE>
The original and one or more copies of this Agreement may be executed by one
or more of the parties hereto. In such event, all of such executed copies
shall have the same force and effect as the executed original.
28. Notices
All notices or other written communication required or permitted to be given
under any provision of this Agreement shall be deemed to have been given by
the notifying party if mailed by certified mail, return receipt requested, to
the receiving party addressed to its or his mailing address set forth in the
first paragraph of this Agreement, or such other address as the parties may
designate in writing to the other parties. Additionally, notices sent by any
other means (i.e., facsimile, overnight delivery, courier, etc.) may be
acceptable subject to written confirmation of both the transmission and
receipt of the notice.
29. Relationship of Parties
SAIC is an independent contractor in all respects with regard to this
Agreement.
Nothing contained in this Agreement shall: (1) authorize or empower either
party to act as partner or agent of the other party in any manner; (2)
authorize, or empower or deem one party to assume or create any obligation or
responsibility whatsoever, express or implied, on behalf of or in the name of
any other party; or (3) authorize, empower or deem a party to bind any other
party in any manner or make any representation, warranty, covenant,
agreement, or commitment on behalf of any other party.
30. Third Party Beneficiaries
This Agreement does not create, and shall not be construed as creating, any
rights or interests enforceable by any person not a party to this Agreement.
31. Waiver or Modification
This Agreement may be modified, or part or parts hereof waived, only by an
instrument in writing specifically referencing this Agreement and signed by
an authorized representative of the party against whom enforcement of the
purported modification or waiver is sought.
32. Entire Agreement
This Agreement, including Exhibits A and B, which are hereby incorporated by
reference, constitutes the entire agreement and understanding between the
parties and supersedes and replaces any and all prior or contemporaneous
proposals, agreements, understandings, commitments or representations of any
kind, whether written or oral, relating to the subject matter hereof or the
Services to be performed hereunder.
<PAGE>
APPENDIX A
STATEMENT OF WORK
SAIC and Sideware will work together to create a computer telephony
integration solution for Sideware's software product, Dr. Bean. This will
improve and enhance Dr. Bean to respond to the requirements of the evolving
marketplace. SAIC will provide telephony engineering expertise and project
management support.
Sideware requires that the software product, Dr. Bean, have the capability to
route calls to a telephone sitting next to a specific Sideware Service
Representative (CSR). Dr. Bean will have the capability to handle telephony
and computer requests simultaneously. The accounting information for the
routed call must be integrated into the current Dr. Bean accounting system.
SAIC will handle all Project Management and telephony requirements. Sideware
will provide all JAVA expertise. SAIC and Sideware will work jointly on this
project.
<PAGE>
Exhibit 21.1
List of Subsidiaries
<PAGE>
Exhibit 21.1 - List of Subsidiaries
Sideware Corp. (wholly owned)
3032650 Nova Scotia Corp. (wholly owned)
Sideware International SRL (wholly owned)
9050 Investments Ltd. (wholly owned)
Evergreen International Technology Inc. (wholly owned)
9123 Investments Ltd. (wholly owned)
Carr Corp. (one third owned)
<PAGE>
Exhibit 23.1
Consent of KPMG
<PAGE>
[LETTERHEAD]
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
The Board of Directors
Sideware Systems Inc.
We consent to the use of our report dated April 15, 1999, except as to note 12
which is as of April 30, 1999, with respect to the consolidated balance sheets
of Sideware Systems Inc. as of December 31, 1998 and April 30, 1998 and the
related consolidated statements of operations and deficit and changes in
financial position for the eight months ended December 31, 1998 and the years
ended April 30, 1998, 1997 and 1996 included in the registration statement on
Form F-1, of Sideware Systems Inc. and to the reference to our firm under the
heading "Experts" in the prospectus. Our report includes additional comments for
U.S. readers on Canada-U.S. reporting differences with respect to conditions
that cause substantial doubt as to Sideware Systems Inc.'s ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
November 4, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,269,596
<SECURITIES> 0
<RECEIVABLES> 57,740
<ALLOWANCES> 0
<INVENTORY> 31,857
<CURRENT-ASSETS> 3,937,143
<PP&E> 2,037,014
<DEPRECIATION> 1,071,035
<TOTAL-ASSETS> 4,928,929
<CURRENT-LIABILITIES> 362,028
<BONDS> 0
0
0
<COMMON> 19,015,084
<OTHER-SE> (14,448,183)
<TOTAL-LIABILITY-AND-EQUITY> 4,928,929
<SALES> 134,369
<TOTAL-REVENUES> 137,000
<CGS> 124,306
<TOTAL-COSTS> 124,306
<OTHER-EXPENSES> 2,213,378
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,200,684)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,200,684)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,200,684)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE EIGHT MONTH PERIOD ENDED DECEMBER 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 317,344
<SECURITIES> 0
<RECEIVABLES> 35,181
<ALLOWANCES> 0
<INVENTORY> 44,105
<CURRENT-ASSETS> 1,070,353
<PP&E> 1,582,858
<DEPRECIATION> 936,329
<TOTAL-ASSETS> 1,725,095
<CURRENT-LIABILITIES> 278,738
<BONDS> 0
0
0
<COMMON> 12,716,774
<OTHER-SE> (11,270,417)
<TOTAL-LIABILITY-AND-EQUITY> 1,725,095
<SALES> 158,533
<TOTAL-REVENUES> 200,267
<CGS> 140,418
<TOTAL-COSTS> 140,418
<OTHER-EXPENSES> 1,952,132
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,892,283)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,892,283)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,892,283)
<EPS-BASIC> (0.07)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED APRIL 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1999
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<SECURITIES> 0
<RECEIVABLES> 51,340
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,024,460
<PP&E> 1,350,333
<DEPRECIATION> 798,937
<TOTAL-ASSETS> 2,584,069
<CURRENT-LIABILITIES> 221,511
<BONDS> 0
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<COMMON> 11,516,774
<OTHER-SE> (9,155,216)
<TOTAL-LIABILITY-AND-EQUITY> 2,584,069
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<TOTAL-REVENUES> 200,267
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