As filed with the Securities and Exchange Commission on November 1, 1999
Registration No.333-90031
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
FORM SB-1
Originally filed November 1, 1999
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NORTHSTAR ELECTRONICS, INC.
( Name of Small Business Issuer in its Charter)
#33-0803434
(I.R.S. Employer Identification Number)
Suite 1455-409 Granville Street
Vancouver, B.C.
V6C 1T2 CANADA
(604) 685-0364
(Address, including zip code and telephone number, including area
code and registrant's principal executive office and principal
place of business)
Dr. Wilson E. Russell
Suite 1455-409 Granville Street
Vancouver, BC
V6C 1T2
604) 685-0364
(Address, including zip code and telephone number, including area
code, of agent for service) Copies to:
Mr.Jeffrey A. Nichols
Attorney-at-Law
388 Market St.
Suite 500
San Francisco, CA 94111
Phone: 415/433-1178
Fax: 415/433-1182
Approximate date of proposed sale to the public: As soon as
practicable following effectiveness of the Registration Statement
CALCULATION OF REGISTRATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Title of each Class of Dollar Amount Maximum Dollar Amount Offering Amount of
Securities to be Registered To be Registered to be Registered Price per share registration fee
per share
- -------------------------------------------------------------------------------------------------------------
<C>
Common Stock $1,000,000 $800,000 $1.00US $287*
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a) may determine.
Disclosure Alternative Used: Alternative 1__ Alternative 2_X_
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined
if this prospectus is truthful and complete. Any representation to the
contrary is a criminal offence.
<PAGE>
NORTHSTAR ELECTRONICS, INC.
MAILING ADDRESS:
Suite 1455-409 Granville Street
Vancouver, BC
V6C 1T2
(604) 685-0364
As filed with the United States Securities and Exchange Commission
on November 1, 1999
Description of Securities Offered: 800,000 shares of common stock at a
price of $1.00US per share.
THE UNITED STATES SECURITIES COMMISSION DOES NOT PASS UPON
THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED
OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY
OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SELLING LITERATURE.
THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION
WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT
DETERMINATION THAT THE SECURITIES OFFERED HEREUNDER ARE EXEMPT FROM
REGISTRATION.
Significant Parties:
Dr. Wilson Russell, President
4742 Collingwood St.
Vancouver BC, Canada V6S 2B4
Mr. Frank Power
998 Riverside Drive
Port Coquitlam BC, Canada V3B 7Y4
Mr. Lee Meyers
9629 Alene Drive
Tujunga, California 91042
Distribution Spread:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Price to Public Underwriting discount Proceeds to issuer or
and commissions other persons
Per Unit $1.00US N/A $1.00US
Total 800,000 N/A $800,000
</TABLE>
Name of Underwriter: N/A
Any materials required by laws of the state(s) in which securities
will be offered: None
Identify material risks involved with the offering:
"See Risk Disclosure"
Approximate date of proposed sale to the public: As soon as
practicable following effectiveness of the
Registration Statement
PROSPECTUS SUMMARY
This is a brief summary of the information in this prospectus.
We encourage you to read the entire prospectus before you decide
whether and how the Issuer:
Northstar Electronics, Inc., a Delaware corporation. ("Northstar")
is the parent of Northstar Technical Inc. (NTI)
Subsidiary Business:
Northstar Technical, Inc. (NTI) Northstar is a high technology
developer and electronics manufacturer, with corporate offices in
British Columbia, Canada and research and development and
productions operations in Newfoundland, Canada.
Securities Offered: Up to 1,000,000 800,000 shares of common stock.
Offering Price: $1.00US per share
Applicable Regulation: Regulation S of the United States
Securities Act of 1933
Residency Limitation: Non-US residents No limitations
Offering shares purchased to date: 200,000 common shares
Use of Proceeds:
Production (Marine Electronics) $150,000
Production (Contract Manufacturing) $200,000
Marketing (Marine Electronics) $100,000
Business Development (Contract Manufacturing) $100,000
Operating Capital $250,000
Total $800,000
Total common shares issued and outstanding: $7,604,481
Total common shares after sale of offering: $8,404,481
Closing Date: April 30, 2000
Northstar Electronics, Inc., based in Vancouver, BC, was organized
under the laws of the State of Delaware on May 11, 1998. At that time,
the corporation was titled Scientific Technologies, Inc. See Exhibits
for documentation supporting the name change. The company was originally
incorporated for the purpose of high technology development and
manufacturing of underwater communications systems and contract
manufacturing. The Company acquired all of the issued and outstanding
common shares in Northstar Technical Inc., in January of 1999. Northstar
is a high technology development and manufacturing company with two main
business activities (as above) Northstar's objectives are to become
a leader in marine electronics and a major regional contract
manufacturer. As a result of the acquisition, Northstar became a
subsidiary of the company. Northstar has developed a core technology for
underwater communications which has applications in the fishery, offshore
oil and gas, defence, marine transportation, oceanographic and
environmental industries. The first application is the NETMIND system
for the world's commercial fishing industry. NETMIND monitors the
performance of a trawl and is both a conservation tool and an efficiency
tool. It consists of a group of electronic sensors that transmit
measurements from the net through the water to a receiver on the ship.
The information is displayed on a computer screen and the captain
can see what activities are occurring in the net. He then knows
how to adjust the height and width of the net opening, how much
fish are in the opening and when the net is full and ready to be
pulled in. Fishermen call NETMIND, their 'eyes beneath the sea.'
The Offering
- ---------------
Securities Offered: Up to 1,000,000 shares of common stock.
Regulation S: The shares are being offered pursuant to
Regulation S of the United States Securities act of 1933 to
persons who are not US persons. Use of Proceeds: The proceeds
to the company from the sale of the shares will be approximately
$1,000,000 assuming all shares are sold. $200,000 has already
been received from the sale of 200,000 shares under Regulation S.
Securities Issued: As of the date of this document there are
7,604,481 shares of Common Stock issued and outstanding. Upon
the completion of the offering there will be 8,604,481 shares
of Common Stock issued and outstanding if the offered shares are
fully sold. As stated above 200,000 shares have been issued under
Regulation S, pursuant to this offering.
RISK FACTORS
An investment in common stock involves many substantial risk
factors, including those associated generally with a new
venture and a high technology undertaking which does not have
a developed marketing structure into a tested market. Although
management itself feels that there is a substantial demand for
its product at the proposed price, the assumption has yet to be
tested in full operation. The Company itself has a limited
operating history.
Risk Factors Related to the Company's Business
Status of Venture: The Company, formed in 1998, has had no
significant operations or business assets, and is in its early
development stage. In January 1999, it purchased all shares of
Northstar Technical Inc. (Northstar) as described below.
No-Operating History: The company Northstar has been in actual
operation under its current management for a relatively short time.
It faces all of the risks inherent in of a new business and those
risks specifically inherent in the development and operation of a
new business, including, but not limited to, uncertainty as the
ability to develop a market for a new product in a new area. The
Company Northstar is not expected to generate any specific revenues
until it completes a further offering of its securities. The
purchase of the securities offered hereby must be regarded as the
placing of funds at risk in a new or "start-up" venture with all
of the unforeseen costs, expenses, problems and difficulties to
which such ventures are subject.
Management Risks Inherent in High-Technology Businesses:
New ventures, particularly those involved in high technology,
have substantial inherent risks. These risks are in three general
areas: human, technical and mechanical. Notwithstanding any
pre-production planning, any new products can incur any unexpected
problems in full-scale production, all of which cannot always be
foreseen or accurately predicted. Designs can be unworkable, for
unpredicted reasons. Quality control and component sourcing
failures are to be expected from time to time. Any operation,
including the one described here, is substantially dependent upon
the capabilities and performance of both management and sales
personnel. Mistakes in judgement or performance can be costly and,
in instances, disabling. Therefore, management skill, experience,
character and reliability are of premium importance.
Production Risks In High Technology Ventures
The NETMIND sytem production high-technology product line requires
Northstar the Company to deal with suppliers and subcontractors
supplying highly-specialized parts, operating highly sophisticated
and narrow tolerance equipment and performing highly-technical
calculations and tasks. Components must be custom designed and
manufactured, which is not only complicated and expensive, but
can require a number of months to accomplish. Slight mistakes in
either the design or manufacturing can result in unsatisfactory
parts which may not be correctable. Since this operation uses the
talents of various professions, mistakes from very slight oversights
or miscommunications can occur, resulting not only in costly delays
and lost orders, but in disagreements regarding liability and, in any
event, extended delays in production.
Nature of Market Appeal:
Although management believes that the NETMIND sysem the product
will have sustained market demand over an extended period into the
future, it is possible that current indications of commercial
demand are limited to current market conditions only. It is
possible that demand may be directed to similar or other competing
products because of technical developments or preferences or simply
because of overwhelming commercial promotion within a short period
of time, thereby limiting the commercial viability of the product
either prior to or shortly after the Company Northstar reaches an
initial level of economic profitability. Unexpected negative
publicity, even if not relating directly to Northstar the Company
or the NETMIND system its own products and even if unwarranted, can
devastate a market. Such unusual fortuities can never be predicted.
RISK FACTORS RELATING TO MARKET PROTECTION
Market Competition: The fishing trawl monitoring business is dominated
by a number of larger competitors who are well established in the
marketplace, have experienced and talented management, are well
financed and have recognized trade names related to their product
lines. Although the company believes Northstar's NETMINSD system
product line has certain distinctive characteristics which allow it
to penetrate the existing market and acquire a significant market
share in its special niche to be profitable, there is no assurance
that existing companies will not aggressively compete by introducing
new products substantially similar to the Company's Northstar's and
at a price below that at which Northstar the Company can compete.
Should this occur, Northstar the Company may not be able to survive
for a sufficient time to reach profitability viability.
Inherently Limited Nature of Northstar's Market Protection:
The Company We knows of several products directly competing
with our Northstar's NETMIND system technology. It is
conceivable that new or similar products are now being or
will be produced and distributed by one or more other companies,
entities, As some security from competition within the market
place, Northstar the Company is we are relying on the protection
which itwe hopes to realize under the United States and foreign
patent laws. It is even conceivable that certain patent copyright
claims superior to the Company's Northstar's unfiled are either
pending or planned, either within the U.S. or other foreign
countries, which could significantly impact Northstar's the
Company's rights to the use of all, or important aspects, of
the NETMIND technology. It is further conceptually possible that
similar devices could be designed which, although not identical
and therefore not infringing on the company's proprietary right,
could function adequately to be distributed into the same market.
Moreover, it is even possible that an unpatented or uncopyrighted
but prior existing device or design may exist which simply has
never been made public and therefore not known to Mmanagement or
the industry in general. Such a device could be introduced into
the market without infringing upon Northstar's the Company's current
rights. If any such competing non-infringing devices are produced
and distributed, Northstar's the Company's profit potential could
be seriously limited.
Patent Protection is Not Self-Enforcing:
The Company Northstar plans to file copyright claims within the
United States and countries where major markets exist. However,
even apart from a superior right to Northstar's the Company's
claim to exclusive design and concept rights, if one or more
competitors should yet produce and distribute a product apparently
with the protection of one or more of those claims, the cost of
enforcing Northstar the Company's claim could fall on the Company
Northstar itself. The costs can be substantial and ultimately could
be beyond the its financial resources of the Company. Even if it is
not, the legal costs required in protecting that claim could
seriously debilitate its' the Company's other operations. Thus,
even though the patent may be valid, investors should be aware
that it is not self-enforcing.
Cautions on Copyright Protection:
If any of those copyright claims are challenged in a future lawsuit
by one or more competitors, it is possible, though not probable,
that a court could find one or more of those claims invalid, or at
least too broad. The courts, and not the granting agencies are
generally the final arbiters on such maters. If challenged, the
court, through its own interpretation of the laws and facts may
either determine the patent to be completely invalid or the claim
to be considerably narrower than defined in the patent documents
issued by the patent offices.
Dependence Upon Key Personnel:
At least in the near term, the Company Northstar is dependent upon
its executive officers and certain key employees and consultants,
the loss of any one of whom could have a material adverse effect
on Northstar the Company. The CompanyNorthstar has not obtained
key man life insurance on the lives of its key personnel except
for a policy of CDN $250,000 on Wilson Russell payable to Northstar
Technical Inc. At the present time, the Company Northstar has not
entered into consulting and employment agreements with each of its
key employees. Alternatively, the primary means of maintaining their
relationship with the Company's Northstar's pursuit is their equity
interest. The continued success of the Company Northstar will also
be dependent upon its ability to attract and retain highly qualified
personnel in the sales area. There can be no assurance that the
company will be able to recruit and attain such personnel.
RISKS RELATED TO THE MANAGEMENT STRUCTURE OF THE COMPANY
Limitation on Liability of Management:
Management will have no liability to the Company for any
mistakes or error of judgement or for any act or omission
believed to be within the scope of authority conferred by the
Company's articles unless such acts or omissions were performed
or omitted fraudulently or in bad faith, constituted gross
negligence or were a violation of a director's or officer's
fiduciary obligations to the Company. The Company had agreed to
indemnify the officers and directors against all loss or damage
even if caused by an officer's or director's simple negligence
unless such loss or damage was caused by that officer's or
director's fraud, bad faith, gross negligence or breach of
fiduciary obligation.
RISKS INHERENT IN BUSINESS
No Assurance of Profitability of Operation:
Notwithstanding the business plan and projections made by
Northstar the Company, there can be no assurance that Northstar
the Company will be able to operate the commercial operation
successfully and in fact, may ultimately fail. Even if the
commercial operation itself is successful, there is no assurance
that any specific level of profitability will be achieved by
Management.
Application of Revenues:
Although earnings sufficient to allow the possible payment of
stock dividends in the future may develop, there is no assurance
that earnings sufficient enough to pay such dividends will ever
be achieved. Even if achieved, there is no assurance that such
funds will not be applied by Mmanagement to other purposes. For
instance, Mmanagement could apply those funds to payment of other
debt which either now exists or may be incurred in the future,
capital expansion or improvements, the creation of reserves, the
payment of compensation or any other of a variety of business
purposes. The decision of what portion of earnings is to be
distributed in payment of dividends and what portion is to be
retained for any of those other purposes is inherently within
the discretion of Mmanagement.
Dilutionary Possibilities:
A board of directors has the inherent right under applicable law,
for whatever value the Board seems adequate, to the limit of
shares authorized by the Articles, to issue additional shares,
and all common stock shareholders, regardless of when the stock
is issued, thereafter generally rank equally in all aspects of
that class of stock, regardless of when issued. A majority of
shareholders can vote to amend the Articles of Incorporation to
authorize the issuance of additional preferred shares. The board
of directors likewise has the inherent right, limited only by
applicable law, provisions of the articles of incorporation and
existing resolutions, to expand the number of shares in a series,
create new series and to establish preferences and all other terms
and conditions in regard to such newly created series. Those terms
and conditions may include preferences on an equal or prior rank to
existing series and to all common stock. Those shares may be issued
on such terms and for such consideration as the Board then deems
reasonable and such stock then shall rank equally in all aspects
of the series and on the preferences and conditions so provided,
regardless of when issued. Any of those actions can not only dilute
the Common Shareholders but the relative position of the holders of
any series of any preferred class. Current shareholders have no
rights to prohibit such issuance nor inherent 'pre-emptive' rights to
purchase any such stock when offered.
RISKS RELATED TO THE NATURE OF THE OFFERING
Arbitrary Offering Price:
The offering price of the common stock was arbitrarily
determined by Management and is not based on any specific
recognized criteria of value or other practices. Quite
specifically, it should be recognized that it is impossible
to determine at what price, if anything those shares would sell.
Dilution of Proceeds from common stock:
The common stock offered hereunder is being sold at US$1.00 per
share. Subscribers under this offering will suffer an immediate
dilution of their rights and contribution, as compared to the
current shareholders of the Company. While Management feels that
the value of its technology and of the business plan discussed
herein justifies the subscription price, there is no assurance
that this venture will succeed, thereby confirming that projection
of disproportionate value.
GENERAL CAUTION
For all of the aforesaid reasons, and others set forth therein,
the very nature of the company, its management structure and the
securities being offered here, each involve a notable risk. Any
person considering an investment in the securities offered hereby
should be aware of these and other risk factors. No person should
invest in these securities if that person anticipates an immediate
return on his/her investment. These securities should only be
purchased by persons who can afford to absorb a total loss of their
investment and, at the very least, they have no need for immediate
return on that investment.
RISK DISCLOSURE
General caution
Northstar's business involves a number of risks
and uncertainties, as described below that could cause actual
results to differ materially from results projected in any
forward-looking statement in this report. Northstar's securities
are speculative and investment in these securities involves a
high degree of risk and the possibility that the investor will
suffer the loss of the entire amount invested. The very nature
of Northstar, its management structure and the securities being
offered here, each involve a notable risk. Any person considering
an investment in the securities offered hereby should be aware of
these and other risk factors. These securities should only be
purchased by persons who can afford to absorb a total loss of their
investment and, at the very least, have no immediate need for a
return on that investment.
Possible performance and financial problems due to limited operating
history; history of losses; increased expenses
Northstar has only a limited operating history upon
which an evaluation of its business and prospects can be based.
Prior to 1996, the company was a research and development company
with no revenues. We incurred a net loss in the nine months ended
September 30, 1999. The company has not had any significant revenue
in recent years. It has never been profitable and in the future,
we can not guarantee profitablility on a quarterly or annual basis.
In addition, Northstar plans to increase its operating expenses to
expand its sales manufacturing and marketing operations, fund of
research and development, and expand its business development activities.
In view of the rapidly evolving nature of our business and markets and
limited operating history, we believe that period-to-period comparisons
of financial results are not necessarily meaningful and should not be
relied upon as an indication of future performance. We have been
manufacturing the NETMIND system only since August 1996. There has
been an inconsistency of sales orders from month to month, and
consequently, we have little experience in continually producing
a large number of systems. If sales were to unexpectedly increase,
the company may not be able to adjust its operations fast enough and
delivery delays could occur. This could result in customer
dissatisfaction and loss of business.
Our contract manufacturing operation is relatively new.
Although our staff has received training from Lockheed-Martin in
how to assemble and test their submarine control consoles, we have
not yet built any in-house. The current contract we have with
Lockheed-Martin calls for us to assemble, test, and deliver eleven
consoles by August 2000. There may be unforeseen problems with
sourcing parts from suppliers or having parts delivered to our
plant when needed. This could result in delays. This could
cause Northstar to spend extra time and money to fix the problems;
putting a strain on company finances. There may also be problems
with the quality and workmanship of the consoles produced; which
could delay payment from Lockheed-Martin.
Possible problems due to inability to raise funds
Revenue from Northstar's operations is not sufficient to
finance the costs of manufacturing and marketing our NETMIND system
and additionally the costs of the contract manufacturing and business
development in the future. Accordingly, we must raise additional
funding. The company expects to be able to meet its financial
obligations for approximately the next six months. There is no
assurance that, after such period, it will be able to secure financing
or that such financing will be obtained on terms favorable to the
company. Failure to obtain adequate financing could result in
significant delays in development of new products and a substantial
curtailment of operations. Northstar has accumulated losses since
it began operation in 1994 and may require additional working capital
to complete its business development activities and generate revenues
adequate to cover operating and future development expenses.
Possible financial problems due to the unpredictability of
future revenues
As a result of Northstar's limited operating
history and the changing nature of the market in which it
competes, the company is unable to forecast revenues with
precision. Northstar's current and future expense levels are
based largely on its estimates of future revenue. Sales and
operating results generally depend on the volume of, timing of
and ability to fill orders received, and these are difficult to
forecast. We may be unable to adjust spending to quickly
compensate for any unexpected revenue shortfall. Accordingly,
any significant shortfall in revenue in relation to Northstar's
planned expenditures would have an immediate adverse affect on
the company's business, financial condition and results of
operations. Further, in response to changes in the competitive
environment, the company may from time to time make certain
pricing, service or marketing decisions that could have a material
adverse effect on the company's business, financial condition,
operating results and cash flows.
Loss of key personnel could have an adverse effect on business and
finance Northstar's performance and future operating results are
substantially dependent on its senior management and key personnel.
We intend to hire additional technical and business development
personnel in the next year. Competition for such personnel is
intense, and there can be no assurance that the company can retain
its key technical, sales and managerial employees or that it will
be able to attract or retain highly qualified technical and
managerial personnel in the future. The loss of the services
of any of our senior management or other key employees or the
inability to attract and retain the necessary technical, sales
and managerial personnel could have a material adverse effect
upon business, financial condition, operating results and cash
flows. The degree of the adverse effect would depend on the
person's position. For example, if the production manager were
to leave the company, there could be a decrease in the number of
NETMIND systems produced until the position could be filled.
This could take three months or longer. The loss of the president
could slow down new business development and hurt Northstar's
ability to raise money. If the senior electronics engineer left,
the development of enhancements to the NETMIND system could be
delayed six months or more. Northstar does not currently maintain
"key man" insurance for any senior management or other key employees
other than a $167,000 policy on the president.
Liability for information published could lead to claims
against Northstar
Northstar may be subjected to claims for
defamation, negligence, copyright or trademark infringement
and various other claims relating to the nature and content
of materials it publishes on its Internet Web sites and in
advertising literature. Any adverse outcome of any claims
could have an adverse material effect on the company's business
and financial conditions.
Security breaches could cause lost revenues
Northstar's computer servers may be vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions.
The company may need to expend significant additional capital and
other resources to protect against a security breach or to alleviate
problems caused by any breaches. There can be no assurance that
Northstar can prevent or remedy all breaches. If any of occur,
the company could face disruptions to its computerized inventory
ordering system leading to slowdowns in manufacturing operations.
This could result in lost revenues and have a material adverse
effect on Northstar's business, financial conditions, operating
results and cash flows.
Reliance on suppliers could lead to production interruptions
Northstar's operations depend to a significant degree on a
number of suppliers, including electronic and mechanical
parts suppliers. The company has no effective control over
these third parties and no long-term contractual relationships
with any them. From time to time, we could experience delays in
supplying parts to NETMIND and contract manufacturing operations.
Continuous or prolonged interruptions would have a material adverse
effect on the company's business, financial condition and results
of operations.
Competition could result in the loss of NETMIND market share
Northstar's current and potential NETMIND competitors, such as
Furuno and Scanmar, have substantially longer operating histories,
larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources. In addition,
competitors may be acquired by, receive investments from or enter
into other commercial relationships with larger, well-established
and well-financed companies. Competitors may be able to respond
more quickly to changes in customer preferences, devote greater
resources to marketing and promotional campaigns, develop more
advanced net monitoring systems, adopt more aggressive pricing
or inventory availability policies and devote substantially more
resources to systems development. It is possible that new
competitors or alliances among competitors may emerge and rapidly
acquire market share. Increased competition may result in loss
of current and future market share. Northstar may not be able to
compete successfully against current or future competitors or
competitors alliances, and competitive pressures we face may
materially adversely affect our business, financial condition,
operating results and cash flows.
Failure to adapt to business practices of other countries could
mean loss of potential NETMIND sales
Northstar plans to sell the NETMIND system in many
different countries. There are enormous variations in language,
culture, religion, custom and business practices involved. Even
where people speak a common language (such as Spanish), there
are great variations from region to region and nation to nation.
To be successful, the company will need to adapt its offerings
and method of operations to market locations. Business practices
that succeed in one nation or region may be inappropriate in
others. To be successful, we must adapt business practices to
each market we service and the company's ability to do so is
uncertain. Failure to adapt could result in the loss of potential
sales and could have a material adverse effect on the company's
business, financial conditions and results of operations.
Intellectual property rights may result in production delays;
expensive litigation
It is possible that the scope, validity, and/or enforceability of
Northstar's NETMIND intellectual property rights could be challenged
by competitors or other parties. The results of such challenges
before administrative bodies or courts depend on many factors that
cannot be accurately assessed at this time. Unfavorable decisions
by such administrative bodies or courts could have a negative
impact on our intellectual property rights. Any such challenges,
whether with or without merit, could be time consuming, result in
costly litigation and diversion of resources, cause NETMIND
production delays or require the company to enter into royalty
or licensing agreements. Such royalty or licensing agreements,
if required, may not be available on terms acceptable to Northstar,
or at all. In the event of a successful claim of infringement
against Northstar and failure or inability to license the infringed
or similar technology, our business, operating results, and financial
condition could be materially adversely affected.
Failure of systems and services relating to the Year 2000
Because many computer applications have been written using two
digits rather than four to define the applicable year, some date
sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This year 2000 problem could
result in systems failures or miscalculations causing disruptions
of operations. Northstar has obtained confirmation from its
third-party vendors that they have resolved their year 2000 issues,
and we has completed a year 2000 compliance testing program.
The systems and services provided by these vendors may fail to
be year 2000 compliant despite their representations to the contrary.
Failure of these systems or services to be year 2000 compliant could
result in a systemic failure beyond our control and prevent delivery
of NETMIND products to customers and prevent us from delivery of
systems to our contract manufacturing customers. See Exhibit 10.2
for our Year 2000 Compliance Statement (Y2K) Contingency Plan and
Disaster Recovery Plan.
Financial losses, damaged reputation due to a director or officer's
negligence
The directors and officers of Northstar have no liability to the
company for any mistakes, errors of judgment or acts of omission
unless they were committed fraudulently or in bad faith, committed
gross negligence or were a violation of a director or officer's
fiduciary duty. Northstar could suffer financial losses or have
our reputation damaged as a result of any director or officer's
negligence.
There may be no dividends paid on common shares
Northstar may not become profitable for five years or longer.
If it does not, or only achieves low profits, there would be no
dividends paid on common shares. Even in the event of
profitability, Northstar may use the funds for business
activities. These may include payment of debt, capital
expansion or improvements, the creation of cash reserves,
payment of compensation, new product development, NETMIND
marketing and contract manufacturing business development.
The offering price may not accurately reflect the value of the
company:
We arbitrarily set the offering price at $1.00 per common share.
We believe that the value of Northstar's technology and the
prospects for it, as well as the value of its contract manufacturing
operation justify the offering price. However, this figure was not
based on specific recognized criteria or value or other practice,
and in time may be shown to be unrealistically high. An investor
should be aware that the value of the investment may be substantially
lower in the future.
Northstar's share value could decrease on issuance of new shares
Northstar's board of directors, at its discretion, may issue
additional common or preferred shares, up to the maximum allowed
according to articles of incorporation. As well, a majority of
shareholders could amend the articles to increase the maximum number
of shares. Typically, shares could be issued to raise funds for
Northstar's business or to acquire another company or acquire the
rights to a particular technology.
Also, Northstar's board may elect to increase the number of
shares in a series, create a new series, and establish preferences
and other terms and conditions to any newly created series. These
terms and conditions may include preferences on an equal or prior
rank to existing series and to all common shares.
Any new issuance of common shares would mean a reduction of existing
shareholdings as a percentage of the total. Depending on the value
received, if any, by Northstar, the net tangible book value of the
existing shares could decrease.
Also, new investors may suffer an immediate dilution of the value of
their common shares based on the net tangible book value of the
company. For this offering, the net tangible book value, as of
September 30, 1999 was $0.05per share. Assuming all 800,000 shares
are sold, the pro forma net tangible book value would be
approximately $419,983 or $0.05 per share. This represents an
immediate dilution of approximately $0.95 per share to new investors.
"See dilution section for reference table"
The downturn in the fishing industry could reduce NETMIND sales
potential
The NETMIND system is sold into only one industry, fishing, and is
fully dependent on the overall strength and weaknesses in it. NETMIND
was designed to be a conservation tool in that, by increasing
efficiencies and lowering operating costs for the fishermen, they
could catch fewer fish and still make profits. In principle, this would
fit many government regulatory policies which have reduced fishing quotas.
However, in some areas of the world, the quotas are too small for
fishermen to justify purchasing net monitoring systems like NETMIND.
Also, prices the fishermen receive for their catches can fluctuate
greatly. For example, in the summer of 1999 in the Northwest
Atlantic, prices for shrimp varied from about $0.25 per pound to
$0.50 per pound depending on size and quality. Many fishermen who
are potential NETMIND customers may not buy if their revenues are low.
Consequently, the nature of the fishing industry itself could result
in fewer NETMIND sales than anticipated. In some areas of the world
where moratoriums may be placed on certain species, the sales
potential for NETMIND may disappear. The loss of revenues would
have a material adverse effect on Northstar's business, financial
condition, operating results and cash flows.
A downturn in the defence industry could reduce or eliminate
Northstar's contract manufacturing revenue potential
Our contract manufacturing business currently is dependent upon the
defence industry. In the 1990's, since the end of the Cold War,
defence spending cuts have occurred in most NATO countries, which
represent our target market. Some large contractors have merged and
almost all defense contractors have tried to diversify into contract
or civilian markets.
Although Northstar is optimistic about our future prospects, especially
in the United States and Canada, we may find there will be cutbacks in
the areas he company is pursuing. This could reduce the potential
revenues for our contract manufacturing operations and, in fact, it
is possible that Northstar would not secure any future contracts.
This would mean that the company would have incurred business
development expenses without any appreciable return. The consequences
would have a materially adverse effect on the company's business,
financial condition, operating results and cash flows.
Northstar's dependency on one product could lead to business failure
The company's auditors have deemed Northstar a going concern.
However, Northstar currently has only one product, that is, NETMIND.
Although it expects to develop other products in the future for
industries such as offshore petroleum, it is highly dependent upon
NETMIND for sales of revenues. If, for whatever reason, the company
does not have sufficient sales revenues at some time in the future,
it may not have financial resources to maintain the NETMIND business
and the company could conceivably fail. This would result in the
loss of most and possibly all of any investment made.
Current claim against Northstar could result in financial difficulties
Northstar is a defendant in a lawsuit commenced by the company's
former master distributor , First Watch Marine, Inc. First Watch
alleges that NTI has interfered with their ability to sell products
and claims relief of approximately $1.3 million, plus damages. NTI
has filed a counterclaim of $100,000 owing by First Watch to NTI,
plus damages. Although Northstar considers its case is strong, there
is a possibility that it could lose. Even a long, drawn-out court
proceeding would cost Northstar considerable money and valuable
management time, regardless of the outcome and could have an adverse
material effect on our business and financial condition.
Receipt of minimal funds from the offering could restrict Northstar's
future business
If minimal funds are raised from the current offering, the company
likely will not be able to carry out the planned growth-oriented
activities, such as increasing NETMIND marketing, NETMIND production
capacity, and contract manufacturing business development. Inability
to do these activities would heavily restrict growth and, in fact, the
company may see little or no growth for the next two years or longer.
<PAGE>
PLAN OF DISTRIBUTION
Principal Underwriters: None
Discounts and Commissions Paid to Dealers: None
Plan of Distribution for Securities Offered through Brokers
or Dealers: None
Securities to be Offered for the Account of Security Holders:
Arrangements for Return of Funds to Subscribers: None
Material Delays in the Payment of Proceeds of the Offering: None
DILUTION
The net tangible book value of the company, as of September 30,
1999 October 15, 1999was $380,017 or approximately ($0.05) per
share. Giving effect to the sale by Northstar of shares at the
O offering price, the pro forma net tangible book value of
Northstar the Company would be approximately $419,983 or
approximately ($0.05) per Sshare, which would represent an
immediate increase in net tangible book value of approximately
$0.10 per Sshare to present shareholders and an immediate
dilution of approximately $0.95 per share, or approximately 95%
to new investors.
_______________________________________________________________________
ASSUMING MAXIMUM SHARES SOLD
Offering Price (before deduction of operating expenses) $1.00 per share
Net tangible book value before offering ($0.05) per share
Net tangible book value after offering $0.95 per share
Dilution to new investors $0.95 per share
Dilution as a percentage 95%
_________________________________________________________________
Insert brief description of table included, and comparative data
section. (As outlined in draft)
USE OF PROCEEDS
It is estimated that the Company will use the maximum funds of
$800,000 in the manner set forth below:
We intend to use the funds raised to increase our key business
activities. The application of funds to each area is shown below:
Production (Marine Electronics) $150,000
Production (Contract Manufacturing) $200,000
Marketing (Marine Electronics) $100,000
Business Development (Contract Manufacturing) $100,000
Operating Capital $250,000
$800,000
Production (Marine Electronics) refers to the manufacture of our
NETMIND system. We intend to increase production from approximately
four systems per month to 8-10 per month, by adding additional
electronic equipment, increasing the size of the electronics section
of the plant by about 1500 square feet, and hiring three new full-time
production personnel.l.
Production (Contract Manufacturing) refers to our manufacture
of other companies' systems, under contract to them. We intend
to establish a separate production operation for this. The space
required is about 2,000 square feet to accommodate component
inventory, manufacturing, administration, storage of finished
goods and shipping. Equipment will be purchased for electronic
and mechanical assembly and for testing of both incoming
components and finished goods. We intend to hire up to five
new contract employees in the year 2000/2001.
Marketing (Marine Electronics) refers to the NETMIND marketing.
We intend to increase activities in 2000/2001, primarily in
Western North America, the Gulf of Mexico and the US Eastern
Seabord, which we hope will lead to increased sales. Additionally,
we want to open the market in overseas countries such as Australia,
Chile, Thailand, Korea and China. We will exhibit at trade shows,
advertise in trade magazines, find new dealers, and provide guidance
and support to these dealers.
Business Development (Contract Manufacturing) refers to the
activities designed to gain new contracts. The main focus in
2000/2001 will be large prime and defense communications
contractors in the United States and Canada. We intnend to hire
two people each with 15-20 years experience in these indusctries
to identify opportunities for Northstar. Their work will likely
involve meetings with prime contractors, exhibiting at defense and
communications trade shows, preparation of qualifications documents
and preparation of bids.
Operating capital is composed of...
There is no guarantee that we will raise the full amount
of the offering proceeds. If only 25%, 50%, or 75% were
raised, the proceeds would be allocated as follows:
USE OF PROCEEDS
We estimate that Northstar will use the maximum funds of
$800,000 as follows :
Production (Marine Electronics) $150,000
Production (Contract Manufacturing) $200,000
Marketing (Marine Electronics) $100,000
Business Development (Contract Manufacturing) $100,000
Operating Capital $250,000
Total $800,000
Production (Marine Electronics) refers to the manufacture of our
NETMIND system. The company plans to increase production from
approximately four systems per month to 8-10 per month, by adding
additional electronic equipment, increasing the size of the plant's
electronics section by about 1500 square feet, and hiring three new
full-time production workers.
Production (Contract Manufacturing) refers to our manufacture
of other companies' systems, under contract . The company
intends to establish a separate production operation for this.
The space required is about 2,000 square feet to accommodate
component inventory, manufacturing, administration, storage of
finished goods and shipping. Equipment will be purchased for
electronic and mechanical assembly and for testing of both
incoming components and finished goods. Northstar plans to
hire up to five new contract employees in 2000/2001.
Marketing (Marine Electronics) refers to the NETMIND marketing.
Northstar intends to increase activities in 2000/2001, primarily
in Western North America, the Gulf of Mexico and the US Eastern
Seabord, which it's hoped will lead to increased sales.
Additionally, Northstar wants to start marketing in overseas
countries such as Australia, Chile, Thailand, Korea and China.
It will exhibit at trade shows, advertise in trade magazines,
find new dealers, and provide guidance and support to these dealers.
Business Development (Contract Manufacturing) refers to the
activities designed to gain new contracts. The main focus in
2000/2001 will be large prime and defense communications
contractors in the United States and Canada. The company
intends to hire two people, each with 15-20 years experience
in these industries, to identify opportunities. They will meet
with prime contractors exhibit at defense and communications
trade shows, and prepare qualifications documents and bids.
We cannot guarantee that Northstar will raise the full amount
of the offering proceeds. If only 25%, 50%, or 75% were raised,
the proceeds would be allocated as follows:
AMOUNT RAISED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
25% 50% 75%
Production(Marine Electronics) $100,000 $150,000 $150,000
Production (Contract Manufacturing) $50,000 $100,000 $200,000
Marketing (Marine Electronics) $50,000 $100,000 $100,000
Business Development (Contract Man.) -------- $50,000 $100,000
Operating Capital -------- -------- $50,000
Total $200,000 $400,000 $550,000
</TABLE>
If only minimal proceeds, that is 25% raised, or less the
company will likely require the additional funds in mid-2000 in
order to achieve the expected growth. Northstar estimates that
approximately one year after the successful completion of the
offering, that is, in early to mid 2001, it will likely require
additional funds for accelerated growth. With $5 million of
additional capital in the next 12-18 months, Northstar could
possibly achieve annual revenues of up to $14 million in the year
following. We are exploring the ways and means of raising the funds,
and as of yet, we have no plans in place.
If our efforts to obtain financing are unsuccessful, Northstar's
growth, if any, will likely be funded from operating cash flow.
The actual expenditures of the proceeds of the Offering may
differ substantially from the estimated use of proceeds. The
actual expenditures of the proceeds of the Offering will be
according to the expenditures deemed by the Company and its
Board of Directors to be in the best interests of advancing
the business of the Company. The actual expenditures will also
vary from the estimated use of proceeds if less than all of
the Shares are sold.
The Company anticipates that the net proceeds from the Offering
will be sufficient to meet its financial requirements for only
a short period of time. The Company, therefore, will require
substantial additional capital to fund its contemplated business
plan in the near future.
The Company anticipates expenses associated with the Offering,
including legal, accounting, and stock transfer agent expenses,
will be approximately $10,000US. The Company anticipates expenses
associated with the registration of the Shares issued pursuant to
the Offering, including legal and accounting expenses, will be
approximately $30,000US.
NORTHSTAR'S BUSINESS
Northstar's business is currently that of its subsidiary NTI.
General
Northstar Electronics, Inc., is a corporation originally organized
as Scientific Technologies, Inc. under the laws of the State of
Delaware on May 11, 1998. (See Exhibit S) The company acquired all
of the issued and outstanding common shares in NTI in January 1999.
Northstar is a high technology development and manufacturing company
with two main business activities. One is underwater communications
systems, the other is contract manufacturing. Northstar's objectives
are to become a leader in marine electronics and a major regional
contract manufacturer. As a result of the acquisition, Northstar
Technical became a subsidiary of the Ccompany.
Corporate Facilities: The company Northstar maintains its
principal corporate offices at #1455-409 Granville Street,
Vancouver, British Columbia, Canada V6C 1T2.
NTI Corporate Information: NTI is a corporation incorporated
under the laws of Newfoundland, Canada on July 5, 1989 and
extra-provincially registered in British Columbia on April 1,
1997. The registered and records offices of NTI are located at
10 Fort William Place, P.O. Box 5939, St. John's, Newfoundland,
A1C 5X4 (Telephone:(709) 722-8735, Facsimile: (709) 722-1763).
NTI's head office is located at Suite 1455, 409 Granville Street,
Vancouver, British Columbia, Canada, V6C 1T2 (Telephone:
(604) 685-0364, Facsimile: (604) 689-8337).
NTI-General Development and History: NTI was founded in 1989 by
Dr. Wilson Russell as a technology development and manufacturing
company. It effectively became an operating company in 1994.
NTI acquired the initial technology for the NETMIND system from
the receiver of National Petroleum and Marine Consultants Limited
and Altair Marine Systems Limited for the sum of $1.00. two
The companies had spent an aggregate $1,183,000 on the partial
development of the technology.
NTI has since spent over $1,850,000US to complete
the development and commercializeation of the NETMIND system
and establish a production operation. The first product was
ready for the market in August 1996. The plant has manufactured
over fifty systems. basic technology was commercialized in
August 1996 when the first industrial system was produced.
The plant has since manufactured over forty complete systems.
The customers of the NETMIND system customers include the National
Oceanics and Atmospheric Administration (NOAA) in the United States,
the United States Department of the Interior and Fishery Products
International (FPI) in Canada. Sales to these organizations, to date,
are as follows: NOAA $187,016US; US Department of the Interior $37,257US;
and FPI $99,539US.
In 1995, NTI signed a Tteaming Aagreement with Loral Librascope
("LORAL") (now Lockheed Martin of Manassas, Virginia ) of Glendale,
California pursuant to which, if Loral were successful in a proposal
to the Canadian Navy, NTI would assemble and test multi-function
work stations (submarine control consoles). In 1997, Lockheed Martin
entered into a contract with NTI pursuant to which NTI assisted
Lockheed Martin with the production of the first prototype console
on their premises. Lockheed-Martin was eventually succesfsful with
its proposal to the Canadian Navy ; NTI signed a $2.0 million contract
with Lockheed Martin, on October 19, 1999. (See Exhibits)
Background Technology: NTI has developed a communications technology
that which can send information from one place in the ocean to another
place. Electronic devices take certain measurements which that are
then transmitted using underwater sound waves to a receiving system
which processes the data and displays it on a computer monitor. The
technology has many potential uses in a variety of industries
including offshore oil and gas, defense, marine transportation,
oceanography, environmental and fishing. a core technology for
underwater communications, which has applications in the fishery,
offshore oil and gas, defence, marine transportation, oceanographic
and environmental industries. The basic engines are underwater
sensors which take measurements and transmit them the information
back to a receiver on board a ship or oil rig. production platform.
Each sensor is equipped with one or more acoustic transducers,
depending on its function. These transducers are used to send
the sound signals. Analog and digital signal processing and
power management functions are performed by the sensor electronics.
The telemetered data are received by a device mounted on the bottom
of the ship for transmission via cable to the deck unit
processor/display, a small cabinet mounted at a convenient
location on the bridge of the ship. The processor portion of
the deck unit decodes the signals and converts them into engineering
units for display on a high resolution color monitor.
The NETMIND System: The first application of NTI's core technology
is the NETMIND system for the world's commercial fishing industry.
NETMIND monitors the performance of a trawl and is both a conservation
tool and an efficiency tool. It consists of a group of electronic
sensors that transmit measurements from the net through the water to
a receiver on the ship. The information is displayed on a computer
screen and the captain can tell what activities are occurring in the
net. He then knows how to adjust the height and width of the net
opening, how much fish are in the opening and when the net is full
and ready to be pulled in. Fishermen call NETMIND, their 'eyes beneath
the sea.'
The NETMIND Mmarket: NETMIND was introduced to the marketplace in 1996
and approximately 50 sales have been made in North America and Europe.
The targeted customers have been strategic in that they are industry
leaders and government agencies. They include the following:
National Oceangraphic and Atmospheric Administration (NOAA)
United States Department of the Interior (U.S. Geological Survey)
Department of Fisheries and Oceans, (Government of Canada)
Fisheries and Marine Institute of Memorial University of
Newfoundland & Labrador (St. John's, Newfoundland, Canada)
Fishery Products International (St. John's, Newfoundland, Canada)
National Sea Products Ltd. (Lunenberg, Nova Scotia, Canada)
Three different agencies of the US Government have purchased
systems and have given very positive feedback. For instance,
Dr. Steve Gutreuter, Research Statistician and Principal Investigator
with the Biological Resources Division of the U.S. Geological Survey,
United States Department of the Interior, states the NETMIND Trawl
Manager System was, "the right choice for our their work and has
performed flawlessly." Secondly, Dr. Arnold Carr of the Massachussets
Division of Fisheries states that, "the NETMIND Netmind Trawl
Manager System has surpassed our highest expectations and has
efficiently and effectively aided our research capabilities."
Finally, Dr. Neil Williamson of the National Oceanographic and
Atmospheric Administration (NOAA), Seattle, Washington, says that,
"the NETMIND Trawl Manager System has proven extremely useful in
providing accurate, real time data for our research." International
customers are interested in NETMIND for its price and technical
advantages. In September 1999, NTI was awarded a contract to supply
the US Government Agency, National Oceanics and Atmospherics
Administration (NOAA) with its NETMIND system. To date NTI has
barely penetrated the potential market which is estimated to be
about 25,000 vessels worldwide. Upon the successful close of this
offering, sales in the first year are estimated to be about 100
NETMIND systems.
Competition: The NETMIND system has two main competitors, Furuno
in Japan and Scanmar in Norway. It is believed that NETMIND has
both price and technical advantages over each. Technically, NETMIND
has longer sensor battery life, longer operating distance, and
better maintenance and repair features. SEE "Risk Factors."
Both the Furuno and Scanmar systems consist of wireless acoustic
sensors used underwater in a similar fashion to the NETMNIND system.
The Furuno C-24 system is a net recorder used for mid-water and
deep-water trawlers. The Scanmar net monitoring system operates
the same way, that is, by illustrating how the trawl fishing net
is behaving while being towed. However, unlike these products,
NETMIND sensors are fully serviceable. The electronic circuitry is
housed contained in stainless steel cylinders within each component
and is easily removed for repair by opening the end cap.
Technically, w We believe, that NETMIND components have longer
battery life (150-200 hours before recharging compared to approximately
50 hours for the competition.) As well, the NETMIND system has proven
to be very effective at distances up to 2000 metres while, we believe,
competitive systems fall short of this feature. We believe, the rugged
design of various NETMIND components has surpassed competitors' designs
in that theirNETMIND's unique components require very little maintenance.
While NTI is continuing to grow, we believe, the company is smaller
in size and resources when compared to its competitors. NTI's staff
numbers fourteen, while we believe Scanmar and Furuno each employ many
times that number. As well, we believe these companies' facilities are
substantially larger than NTI's. We also believe that Scanmar and Furuno
have each achieved worldwide sales of several thousand systems through
well developed dealer networks.
Technology Protection: Since commercializing NETMIND in 1996,
NTI has made many enhancements to the system. These activities
have resulted in an optimum design for which a patent may be
submitted .application is intended . The technology is difficult
to replicate because of its sophistication and, regardless of
patent protection, it is expected it would take several years for
a new player to catch up to the present system. Northstar has
obtained Canadian Trademark rights to the name NETMIND (registration
number TMA515,009 24-Aug-1999). No other intellectual property
related applications have been filed or prepared. In the meantime,
NTI is developing new innovative NETMIND products which should help
ensure a competitive edge.
Future Opportunities for NTI's technology: NTI's second technology
application will likely be for the multi-billion dollar offshore oil
and gas industry. One potential product is for the remote control of
subsea wellheads which transfer petroleum from the field back to the
offshore production platform. This is especially important as the
industry goes into deeper and deeper water to find and produce
petroleum. NTI envisages Further business opportunities are envisaged for
in the defense, marine transportation, oceanagraphic and environmental
industries. The possibilities include towed arrays for seismic
exploration, towed seismic arrays for submarines,docking systems for
large ocean going ships, positioning systems for oil and gas drilling
platforms, acoustic measurements of ocean currents, and diver to diver
communications for the recreational diving industry. NTI would likely
look to strategic alliances with other companies and government agencies
to reduce technological risks and open doors to new markets. At this
time, NTI has not entered into nor is contemplating any specific
strategic alliances.
Historical Financial Information: NTI has spent over $1,850,000US
to complete the development and commercialization of the NETMIND
system. NPMC Ltd., has also spent over $1,740,000US on system development.
NTI has received $458,309US Scientific Research and Experimental
Development refunds from Revenue Canada.
Funding support from the major shareholder and private investors
total approximately CDN $1,565,500 $1,065,000 in the form of share
purchases or loans. The federal Government of Canada has provided
support totaling approximately CDN $ 6 $400,000 in the form of
research grants and interest free loans through the National Research
Council and the Atlantic Canada Opportunities Agency.
Projected Revenues: NTI anticipates sales of approximately
$ 3.4 millionUS in the first year upon completion of the
offering. Depending on the financial, production and management
resources, there is potential for $14 million in revenues in the
second year, with greater potential in the third year. These revenues
could come from increased NETMIND sales and from new contract
manufacturing projects. These projects could include consoles for
new helicopters for the Canadian Navy's patrol frigates and submarine
consoles for international navies.
Management: NTI 's management is comprised of a small team of
individuals experienced I the development, manufacture and sales
of ocean industry technologies.
Dr. Wilson Russell, Chairman and Chief Executive Officer, has 25
years experience in the field and has established himself as an
international consultant in ocean industry, oil and gas, and high
technology. Dr. Russell is also a director of the company. See 'Management'
for detailed information regarding Dr. Russell.
Dr. David Buttle is NTI's Technical Director and one of the
world's leaders in developing and manufacturing ocean
instrumentation for the defense industry. In 1977, Dr. Buttle
founded Marine Acoustics which designed and manufactured sonar
transducers for OEM use and subsea computers for the control of
subsea rock drills. In 1985, Marine Acoustics was recognized as
Marine Acoustics, Ltd. Marine Acoustics Ltd., produced numerous sonar
systems, including exercise mine acoustic telemetry systems, which
are used by the British, United States, Australian, Belgian, Canadian
and Egyptian Navies. Dr. David Buttle supervised the design of the
NETMIND system and advises NTI on production and value engineering.
Mr. Brian Gamberg, P.Eng., Se and implementation of both hardware and
software elements of tracking radar systems, geophysical sounding
systems, and distributed computing systems. Geographical Information
Systems and embedded instrumentation systems. Mr. Gamberg is
responsible for the development of new NETMIND technologies ad other
underwater communications products. Mr. James Hall is an Electronics
Technologist and NTI's Production Manager. Mr. Hall is responsible
for all production activities including inventory control, electronic
and mechanical production, testing, quality control and shipping.
Ms. Philomena Kavanagh has extensive experience in Plant Equipment
and Operations: The manufacturing plant is located in St. John's
Newfoundland. The plant, is approximately 3,000 square feet in area,
and is comprised of an electronics shop, a mechanical engineering
shop, a molding room, a component inventory area, a finished goods
area, research and development offices and administrative offices.
The plant possesses equipment typical of an electronics manufacturing
operation, i.e., oscilloscopes, soldering stations, computers, flume
hood, molding equipment, drill press and specialty testing and assembly
tools. The inventory system is computerized with a rigorous quality
program in place which covers incoming components, assembly testing
and finished goods testing. NTI uses the program TANGO for its computer
aided design (CAD) activities. Lockheed Martin Federal Systems in
Manassas, Virginia has supplied to NTI proprietary hardware and
software for the testing of submarine control consoles. NTI uses
outsourcing as much as possible to keep overhead and staffing levels
low. For example, most of the mechanical assemblies for the NETMIND
system are supplied by a local mechanical shop., which The assemblies
are then incorporated into the molding of the plastic housings which
are produced in-house.
Employees
As of November 30, 1999, the Company Northstar had ten fourteen
full-time employees and three part-time engineering consultants.
None of Northstar's employees is are represented by a labour union,
and the Company Northstar considers its employee relations to be
good. Competition for qualified personnel in Northstar'she Company's
industry is intense, particularly for software development and other
technical staff. The Company Northstar believes that its future
success will depend in part on its continued ability to attract,
hire and retain qualified personnel.
MANAGEMENT'S DISCUSSION PLAN OF OPERATIONS
NTI's wholesale revenues were $168,377 for the nine months ending ending
December 31, 1998 and $321,013 for the nine months ending September 30,
1999. The gross profit for the nine months ending December 31, 1998 was
65% and for the nine months ending September 30, 1999. Expenses totaled
$272,626 for the nine months ended December 31, 1998 and for the nine
months ended September 30, 1999. Dividends of $28,763 were paid on
Northstar's preference shares in 1998. These shares have been fully
redeemed or converted to common shares. Northstar's assets as of
September 30, 1999 totaled $401,553 and its current liabilities
totalled $113,810. Long-term debt of $526,061 consists of government
interest-free loans and a loan of $160,000 payable to Pathfinder
Enterprises Inc., a company controlled by a shareholder of Northstar,
with monthly interest payments only to July 2002, secured by a floating
charge debenture. There are shareholder loans of $141,699 with no fixed
terms of repayment. Northstar has an accumulated deficit of
CDN $1,381,086 as of September 30, 1999. The amount spent on research
and development in the last two fiscal years was $258,196. The amount
of receivables subsequently collected in cash, after Septembe 1999,
was $131,573.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY OWNERS
The following table sets forth, as of September 15, 1999, the
beneficial ownership of the Company Northstar's common stock by
each officer and director of Norhthstar and the Company,by each
person known by the Company Northstar to own beneficially more
than 105% of Northstar's the Company'sCocommon Sstock outstanding
and by the officers and directors of the cCompany as a group. Except
as otherwise indicated, all stocks are owned directly.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Title of Class Name and Address Number of Shares Percentage of Shares before Percentage
of Beneficial Owner of Common Stock Common Stock(1) Offering After Offering(2)
Common Stock Frank Power 990,000 13.37% 990,000 11.78%
998 Riverside Drive
Port Coquitlam, B.C.
Canada V3B 7Y4
Common Stock Wilson Russell 964,883 13.03% 964,883 11.48%
4742 Collingwood St.
Vancouver, B.C.
Canada V6S 2B4
Common Stock Lee Meyer 100,000 1.35% 100,000 1.19%
9629 Alene Drive
Tujunga, CA 91042
Common Stock Ladner Enterprises Ltd(3) 597,900 8.08% 597,900 6.35%
60 Market Square
P.O Box 364
Belize City
Belize, C.A.
Common Stock Adventure Capital Inc. 533,633 7.02% 533,633 7.11%
9 Power Place
St. John's NFLD, Canada
Common Stock Dr. Michel Ghanadian 400,000 5.26% 400,000 4.76%
CH. Didotai 10
1223 Cologny,
Switzerland
Common Stock Monaco Ventures Ltd. (3) 1,000,000 13.51% 1,000,000 11.90%
60 Market Square
P.O Box 364
Belize City
Belize, C.A.
Common Stock London Enterprises Ltd. (3) 700,000 9.45% 700,000 8.33%
60 Market Square
P.O Box 364
Belize City
Belize, C.A.
Common Stock All officers and 2,054,883 24.45% 2,054,883 27.02%
Directors as a
Group (3 persons)
</TABLE>
Number of shares of common stock after the offering: To be inputted
Percentage of commonstock after the offering: TBI
(1) Based on 7,604,481 shares of Common Stock of Northstar the Company
issued and outstanding on October 15, November 30, 1999.
(2) Based on 8,404,481 shares, if all shares in the offering are sold.
(3) The beneficial owners of Ladner Enterprises Ltd., Monaco Ventures,
Adventure Capital, Inc., and London Enterprises Ltd, are:
LADNER, Mr. Sean Ixles, Leslie Lewis Building, Mount Tout,
Grand Anse, St. George's W.I. ADVENTURE, Dr. Carl Wesolowski,
9 Power Place, St. John's Newfoundland, Canada MONACO,
Ms. Brenda McKay, Suite 71, grand Anse, St. George's W.I.
LONDON, Ms. Michele Grey, 269 Morne Rouge Road, Grand Anse,
St. George's, Grenada, W.I.
The following directors and officers of the Company Northstar have
been granted options to purchase shares of the Company's Northstar's
stock as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Optionee Position Options Option Price Per Share
Wilson Russell Director 250,000 $0.50
Frank Power Director 100,000 $0.50
</TABLE>
(2) Record owners and beneficial See "SECURITY OWNERSHIP owners of 5%
or more of any OF MANAGEMENT AND CERTAIN class of our securities:
SECURITY HOLDERS
(2) Record owners of and beneficial owners of 5% or more of any
class of our securities: See Table Above.
(3) Promoters: None, except for officers and directors
(4) Affiliates: None except for officers and director
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers and
directors of the Company Northstar, their present positions with
Northstar the Company, and their biographical information. Each
director will serve until the next annual meeting of shareholders,
and thereafter if re-elected.
Name of Director Age
Dr. Wilson Russell 54
Mr. Frank Power 56
Mr. Lee Meyer 54
Name of Officer Office
Dr. Wilson Russell, President
Mr. Frank Power Vice-President
As a Delaware corporation, the final responsibility for the
management of the affairs of the Company Northstar rests with
the Bboard of Ddirectors. Thehat Bboard currently consists of
three directors. Those directors are elected at the an annual
meeting of the shareholders and serve for an annual term until
they resign or are replaced. Those directors meet or otherwise
consult with one another on a regular basis. To review the affairs
of the company and to adopt or confirm any resolutions which are
necessary to grant contractual and other authority to administrative
officers. The directors may, and probably will, designate an executive
committee to which they will grant limited authority to make certain
ministerial decisions on behalf of the board.
The following sets forth information as to the principal occupation
and business experience for at least the past five years of each of
those directors and officers.
Dr. Wilson Russell: Dr. Russell received a Master's Degree in
Engineering and in Physics from Memorial University of Newfoundland
and a Doctorate in engineering Physics from the University of
Aix-Marseille in France. Dr. Russell's numerous positions include:
geophysicist with Pan-American Petroleum (AMOCO) in Calgary, Alberta
(1968); professor and researcher at Memorial University (1968 to 1977);
Director of Engineering at NORDCO Ltd. (1977 to 1980); and Associate
Director of the Newfoundland Petroleum Directorate. After starting
his own consulting and technology development firm in 1983, Dr. Russell
has also managed the preparation of the a development plan for the
$6 billion Hibernia development which was for submission tted to the
government for approval of the project; invented, developed and
commercialized the Hydroball current profiling system, a unique
phased array ocean current profiling system which won the silver
medal at the Canada Awards for Business Excellence in 1986; and
developed a fibre optic modem for TRW in the United States. Dr. Russell
founded NowTech Instruments Ltd., in partnership with a subsidiary of
Bell Canada and was the first Chairman of the Board of Directors of
Seabright Corporation. Dr. Russell has also acted as a consultant for
the Canadian federal government, the provincial governments of British
Columbia and Newfoundland, the Canadian Consul in Boston, Massachusetts,
Mobil Oil, the Defense Research Establishment Pacific and the French Navy.
Dr. Russell founded NTI orthstar in 1989 and serves as both Chairman
and Chief Executive Officer. He is has also been a the dDirector and
President of Cabot Management Ltd. since 1989. And, until recently,
From 1994-1998, Dr. Russell was a director at the University of Victoria's
Innovation and dDevelopment Corporation. In addition, Dr. Russell has
been a Director with Cinemage Systems Corporation since 1998. Currently,
as of 1999, he is the President of Northstar.
Mr. Frank Power: Mr. Power, a business management consultant, has
managed and administered several public companies for the last 15
years. Since 1894, 1984, Mr. Power has provided services, including
strategic planning, management, administration, design and
construction of major mining projects both nationally and
internationally. He has owned and operated several consulting
companies which have been providing comprehensive services in the
industrial and high-technology fields as well as the mining field.
His expertise also includes re-activating public companies, project
acquisitions, public and private funding, as well as developing and
taking private companies public. He is equally skilled to function in
the public markets of both Canada and the United States. Mr. Power is
President and Owner of Pow Con Management since 1981 and Premier
Enterprises Ltd. Since since 1994. These companies manage,
administrate and finance reporting companies. He served as President
and Director of several Vancouver reporting companies and publicly
listed companies since from 1986 to present. Since 1992, Mr. Power
has served as President of World Organics Inc., listed on the Vancouver
Stock Exchange. From 1996 to 1997, Mr. Power served as President and
Director of Accuimage Diagnostics and he is also the past President of
Security Industries, Inc. These companies are traded on the OTC
Bulletin Board.
Mr. Lee Meyer: Mr. Meyer, since completing his Business Administration
Degree from Arizona State University in 1946, has held positions as
Managing Director of Omni International since 1988; Vice-President
and Director of World Organics, Inc., a reporting company; Secretary
and Treasurer of Tec Industries Corp., a specialty equipment rental
agency from 1980 through 1990; and owner and President of Stretchcoat
from 1973 to 1984, a national manufacturer and marketer of specialty
products. Present positions include President of WOI since 1991, a
producer and marketer of agricultural amendments; Vice-President and
50% owner of Bio-Organics, Inc., an international manufacturer and
marketer of micro-biological products. Mr. Meyer has also represented
major principals selling products nationally.
Dr. David Buttle is NTI's Technical Director and one of the
world's leaders in developing and manufacturing ocean
instrumentation for the defense industry. In 1977, Dr. Buttle
founded Marine Acoustics which designed and manufactured sonar
transducers for OEM use and subsea computers for the control of
subsea rock drills. In 1985, Marine Acoustics was recognized as
Marine Acoustics, Ltd. Marine Acoustics Ltd., produced numerous
sonar systems, including exercise mine acoustic telemetry systems,
which are used by the British, United States, Australian, Belgian,
Canadian and Egyptian Navies. Dr. David Buttle supervised the design
of the NETMIND system and advises NTI on production and value
engineering.
Mr. Brian Gamberg, P.Eng., Senior Electronics Engineer, has over
20 years experience developing marine systems, computer and
communications systems and in project management. He has been
involved in the design, development and implementation of both
hardware and software elements of tracking radar systems, geophysical
sounding systems, and distributed computing systems. Geographical
Information systems and embedded instrumentation systems. Mr. Gamberg
is responsible for the development of new NETMIND technologies and
any other underwater communications products.
Mr. James Hall is an Electronics Technologist and NTI's Production
Manager. Mr. Hall is responsible for all production activities
including inventory control, electronic and mechanical production,
testing, quality control and shipping.
Ms. Philomena Kavanagh has extensive experience in office
management and has worked for companies such as Coopers Lybrand,
A.H. Murray Ltd. and Atlantic Specialties Ltd. Ms. Kavanagh is
responsible for all of NTI's financial and product shipment
administration.
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets out certain information as to the
company's three highest paid officers and directors for the
period from the commencement of Northstar's Scientific's Bbusiness
to June 15 November 15, 1999. No other compensation was paid to any
such officer or director other than the cash compensation set forth
below:
Summary Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Individual(s) Capacities in which Aggregate Remuneration
Remuneration was Received
Dr. Wilson Russell Director and President $16,300
Mr. Frank Power Director and Vice-President $14,000
Mr. Lee Meyer Director N/L
Directors and Officers $30,300
of Northstar as a
Group
</TABLE>
The compensation paid to the President is believed by Northstar
the Company to be below market rates for the services provided
by the directors and officers, having regard to their experience
and qualifications. Northstar The Company anticipates compensation
being increased to market rates upon Northstar he Company achieving
sufficient revenues and/or financing to pay such increased
compensation. In particular, Northstar believes that the going
rate for Dr. Russell, who is full-time with the company, should be
in the range of $100,000-$150,000 per annum. For Mr. Power, who
spends approximately ten hours per month on Northstar business, the
current rate of $2,000 per month is considered reasonable.
INTEREST OF MANAGEMENT AND
OTHERS IN CERTAIN TRANSACTIONS
There are no material contracts entered into by Northstar the
Company within the two years preceding the date hereof which
are still in effect, except as follows:
Acquisition of NTI Northstar: Northstar
the Company acquired NTI Northstar in January 1999, pursuant to
an agreement dated July 31, 1998. Northstar The Company purchased
all of the issued and outstanding shares of NTI Northstar in exchange
for 4,901,481 shares of its the Company's Ccommon Sstock which were
issued from treasury.
Copies of the foregoing contracts and any reports referred to in
this registration statement may be inspected at the head office
of the Company at Suite 1455-409 Granville Street, Vancouver,
British Columbia, Canada V6C 1T2, during normal business hours
while the Offering contemplated hereunder is in progress to and
including the closing date.
Except for the acquisition of NTI, none
of the following persons has any direct or indirect material interest
in any transaction to which Northstar the Company is a party since
the incorporation of Northstar the Company in May, 1998 or in any
proposed transaction: to which Northstar, the Company, is proposed to
be a party:
(A) any director or officer of the party
(B) any proposed nominee for election as a director of Northstar
the company
(C) any person who beneficially owns, directly or indirectly, shares
carrying more than 10% 5% of the voting rights attached to
Northstar the Company's Ccommon Stock; or
(D) any relative or spouse of any of the foregoing persons, or any
relative of such spouse, who has the same house as such person or who
is a director or officer of any parent or subsidiary of Northstar the
Company.
Available Information:
Copies of the foregoing contracts and any reports referred to in
this registration statement may be inspected at the head office
of the Company at Suite 1455-409 Granville Street, Vancouver,
British Columbia, Canada V6C 1T2, during normal business hours
while the O offering contemplated hereunder is in progress to and
including the closing date.
DESCRIPTION OF SECURITIES
General:
The securities being offered are the shares of Northstar, the
Company's, common stock, par value $0.0001 per share. Under Northstar,
the Company's, Articles of Incorporation, the total number of shares
of all classes of stock that Northstar the Company shall have authority
to issue is 100,000,000 shares of common stock par value $0.0001 per
share (the "Common stock") and 20,000,000 shares of preferred stock,
par value $0.0001 per share (the "Preferred Stock"). As of October 15
November 30, 1999, a total of 7,604,801 shares of Ccommon sStock are
issued and outstanding. All issued and outstanding shares of the
common stock are fully paid and non-assessable.
Common Stock:
Holders of common stock have the right to cast one vote for
each share held of record on all matters submitted to a vote of
holders of common stock, including the election of directors.
Holders of a majority of the voting power of the capital stock
issued and outstanding and entitled to vote, represented in person
or by proxy, are necessary to constitute a quorum at any meeting of
the Company Northstar's stockholders, and the vote by the holders of
a majority of such outstanding shares is required to effect certain
fundamental corporate changes such as liquidation, merger or amendment
of the Company Northstar's Aarticles of Iincorporation.
Holders of common stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by the
Board of Directors, from funds legally available therefore. In the
event of the liquidation, dissolution, or winding up of affairs of
Northstar the Company, all assets and funds of the Company Northstar
remaining after the payment of all debts and other liabilities shall
be distributed, pro rata among the holders of the Ccommon Sstock.
Holders of common stock are not entitled to pre-emptive or
subscription or conversion rights, and there are no redemption
or sinking fund provisions applicable tot he Ccommon Sstock. All
outstanding shares of Ccommon Sstock are fully paid and non-assessable.
Transfer Agent:
Signature Stock Transfer of Dallas, Texas is the transfer agent
for the Shares.
14675 Midway Road-Suite 1221
Dallas, TX 75244
Tel: (972) 788-4193
Fax: (972) 788-4194
Share Purchase Warrants:
None.
LITIGATION
Northstar's subsidiary, NTI, is a defendant in a lawsuit
commenced by our former master distributor, First Watch Marine,
Inc. First Watch alleges that Northstar interfered with its
ability to sell products. NTI, for its part, has filed a
counterclaim against First Watch for money which it says First
Watch owes it for NETMIND systems delivered to them. Northstar
feels that it has a strong case and that there is no validity to
the claims against it. The case may take up to two years or
longer to go to trial.
The details are as follows:
1) Name of the court where proceedings are pending: Supreme Court
of Newfoundland, Canada
2) Date proceeding began: First Watch issued statement of claim
against NTI on July 15, 1999.
(First Watch Marine Inc.-Plaintiff and NTI-Defendant) NTI issued
a statement of claim on August 3, 1999 (NTI-Plaintiff and First
Watch Marine Inc.-Defendant)
3) Principal Parties: NTI and First Watch Marine Ltd.
4) Description of facts underlying the proceedings:
First Watch alleges that NTI interfered in its ability to sell
NETMIND systems. NTI alleges that First Watch owes NTI money
for delivery of NETMIND systems by NTI to First Watch.
5) Relief sought:
First Watch-$1.3 million plus damages
NTI-$100,000 plus damages
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As per Risks Related to the Management Structure of the Company,
management will have no liability to the Company for any mistakes
errors of judgement or for any act of omission believed to be within
the scope of authority conferred by the Company's articles unless such
acts or omissions were performed or omitted fraudulently or in bad
faith, constituted gross negligence or were a violation of a director's
or officer's fiduciary obligations to the Company. The Company has
agreed to indemnify the officers and directors against all loss or
damage even if caused by that officer's or director's fraud, bad faith,
gross negligence or breach of fiduciary obligation.
<PAGE>
PROSPECTUS
October 15, 1999
Until January 15, 1999 (90 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.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
As per risks related to the management structure of Northstar,
management will have no liability to for any mistakes,
errors of judgement or for any act of omission believed to
be within the scope of authority conferred by Northstar's
articles unless such acts or omissions were performed or omitted
fraudulently or in bad faith, constituted gross negligence or
were a violation of a director's or officer's fiduciary
obligations to Northstar . Northstar has agreed to indemnify
the officers and directors against all loss or damage even if
caused by that officer's or director's fraud, bad faith, gross
negligence or breach of fiduciary obligation
As per Risks Related to the Management Structure of the Company,
management will have no liability to the Company for any mistakes
errors of judgement or for any act of omission believed to be
within the scope of authority conferred by the Company's articles
unless such acts or omissions were performed or omitted fraudulently
or in bad faith, constituted gross negligence or were a violation
of a director's or officer's fiduciary obligations to the Company.
The Company has agreed to indemnify the officers and directors
against all loss or damage even if caused by that officer's or
director's fraud, bad faith, gross negligence or breach of
fiduciary obligation.
ITEM. 2 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Filing Fee $ 287
Accounting fees 12,000
Legal fees 25,000
Other professional fees 10,500
Blue Sky fees and expenses 2,500
Transfer agent's fees 1,900
Printing, including registration 1,500
statement and prospectus
Miscellaneous costs and expenses 2,000
- -----------
55,687
ITEM 3: UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (`the Act') may be permitted to directors,
officers and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable.
Post-Effective Amendments {Regulation S-B, Item 512-(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:
(a) To include any prospectus required by Section 10 (a) (3) of
the Securities Act;
(b) To reflect in the prospectus any fact or events arising after
the effective date of the Registration Statement (or most of the
recent post-effective amendment thereof) which, individually, or
in the aggregate, represent a fundamental change in the information
set forth in the registration Statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement,
including (but not limited to) addition or deletion of a managing
underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
ITEM 4
UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR
The date title and amount of unregistered securities sold by
Northstar formerly Scientific Technologies, Inc. are as follows:
1) Date: January 26, 1999
Number of shares:4,901,801
Total offering price: N/A. Northstar acquired all of the
common shares of NTI
on the basis of 3 shares of
NTI for 1 share of Northstar.
2) Date: June 25, 1999
Number of shares: 200,000
Total offering price: $1.00
Total proceeds: $200,000
Principal Underwriter: none
Total commissions: $20,000
Net proceeds: $180,000
Name of Purchasers: See Exhibits
Exemption from registration: The exemption that Northstar
relied on was Regulation S of the
United States Securities Act of 1933. All persons were
defined as non-US persons.
FINANCIAL STATEMENTS-This section should comprise the audited and
unaudited financial statements of Northstar Electronics, inc. and
its wholly wned subsidary Northstar Technical, Inc
Index to Financials:
i) Northstar Electronics, Inc. for period of 7 months ending July
31, 1999 Consolidated and unaudited.
ii) Northstar Technical, Inc. audited financials
for period ending December 31,1998 includes
auditors report.
iii) Northstar Technical unaudited financial
statements for period ending July 31, 1999.
iv) Northstar Technical unaudited financial statments
for period ending September 30, 1999.
- -----------------------------------------------------------------------
i) NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED BALANCE SHEET
(Unaudited)
FOR THE 7 MTHS ENDED JULY 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current US$
Bank and term deposit 45,456.60
Receivables 153,358.07
Inventory 83,860.14
Prepaid Expenses 2,549.06
==========
285,223.87
Capital Assets 24,759.53
Deferred development costs Netmind/contract 575,201.06
599,960.59
==========
885,184.46
LIABILITIES
Current
Payables and accruals 73,187.01
Loans payable (Note 2) 13,779.80
==========
86,966.81
Long term debt ( Note 3) 489,738.61
Loans payable to Cabot Management Limited, no set terms of repayment 79,225.70
Loans payable to shareholders, no set terms of payment 79,887.91
==========
648,852.22
SHAREHOLDERS' EQUITY
Share Capital (Note 4) 971,335.44
Earnings (loss) for period (212,030.52)
Deficit (609,939.49)
==========
149,365.43
885,184.46
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED INCOME STATEMENT
(Unaudited)
FOR THE 7 MONTHS ENDED JULY 31, 1999
US$
Revenue
Sales 171,769.89
Interest Income 652.93
==========
172,422.83
Less cost of goods sold 72,812.34
99,610.49
Expenses
Business Development 1,277.16
Business Tax 128.05
Commissions 30,866.67
Depreciation 54,407.64
Dues and fees 3,234.33
Exchange (9,005.94)
Insurance 1,047.37
Interest and Bank 20,553.57
Lab Expenses 84,662.08
Management Fees 36,666.67
Marketing 1,492.81
Misc. 928.18
Office Expenses 27,445.49
Professional Fees 32,553.77
Rent 16,792.09
Salaries/Wages/employee benefits 49,732.57
----------
352,782.53
Less: allocation to Deferred Technology (41,141.52)
==========
311,641.01
Earnings (loss) (212,030.52)
NOTES:
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
NOTES TO INTERNAL INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
JULY 31, 1999
. Accounting treatment
This internal interim consolidated balance sheet has been prepared
by combining the July 31st, 1999 internal non-consolidated balance
sheet of Scientific Technologies Inc. and the internal balance sheet
of NTI. On consolidation all intercompany receivable and payable
balances have been eliminated.
. Short term loans
9% TD Select Line of credit $ 3,400
Short term loan Eastern Meridian per specific terms,
(repaid in full October, 1999) $10,379
=======
$13,779
. Long Term Debt
10% loan payable to Pathfinder Enterprises Inc. in monthly
interest payments only to July 5, 2002 $160,000
ACOA (Federal Government Agency) interest free loan repayable
in sixty monthly and consecutive installments of $2,170. $130,221
ACOA (Federal Government Agency) interest free loan repayable
in twenty-four monthly and consecutive installments of $4,167 $100,000
10% loan payable to Enterprise Newfoundland and Labrador in monthly
interest payments plus principal amount payable on demand. $ 12,841
(cont.)
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
NOTES TO INTERNAL INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
JULY 31, 1999
. Long Term debt (cont.)
ACOA (Federal Government Agency) interest free loan repayable in 36
monthly and consecutive installments of $4,373 beginning when full loan
draw down is received. Secured by postponements on Cabot Management
Limited's loan of $87,224 and a shareholders' loan $12,707
$ 86,676
========
$489,738
. Capital Stock
Authorized
20,000,000 preferred shares at $0.0001 par value
100,000,000 common shares at $0.0001 par value
. Issued and outstanding
7,614,493 common shares 761
Additional paid in capital 970,574
========
$971,335
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
ii) NORTHSTAR TECHNICAL INC. St. John's, Newfoundland
FINANCIAL STATEMENTS
Audited
December 31, 1998
SULLIVAN, LEWIS AND WHITE-Charter Accountants
AUDITORS' REPORT-To the Shareholders of NTI
We have audited the balance sheet of NTI as of December 31, 1998
and the statements of loss and deficit and changes in cash resources
for the nine months then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the company as at December
31, 1998 and the results of its operations and the changes in its cash
resources for the nine months then ended in accordance with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the
company will continue as a going concern. To date the company's
operations are mainly in the development stages and has not established
revenues sufficient to cover its operating costs. It is management's
opinion that the company's main NETMIND division and the new contract
manufacturing division will generate future revenues sufficient to cover
all costs and result in annual net incomes. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
St. John's, Newfoundland /s/ Sullivan, Lewis and White
July 14, 1999 Chartered Accountants
NORTHSTAR TECHNICAL INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, March 31,
ASSETS 1998 1998
Current
Bank $1,238 $3,829
Receivables (Note 2) 148,583 228,052
Work in progress 3,688 7,101
Inventory 52,591 88,356
Prepaid expenses 2,269 4,127
208,369 331,465
Capital assets (Note 3) 25,523 27,733
Deferred development costs (Note 4) 768,311 824,744
Deferred charges (Note 5) 110,287 82,305
$1,112,490 $1,266,247
LIABILITIES
Current
Payables and accruals $212,038 $199,556
Loans payable (Note 6) 158,815 138,790
Long term debt payable within one year (Note 7) 10,716 127,340
381,569 465,686
Long term debt (Note 7) 704,630 588,006
Loans payable to Cabot Management Limited, no set terms
of repayment (Note 8) 138,339 136,530
Loans payable to shareholder, no set terms of repayment 120,370 83,602
1,344,908 1,273,824
========= =========
Contingent liability (Note 9)
SHAREHOLDERS' DEFICIENCY
Share capital (Note 10) 622,453 605,372
Deficit (854,871) (612,949)
(232,418) (7,577)
$1,112,490 $1,266,247
</TABLE>
ON BEHALF OF THE BOARD:
___/s/Dr. Wilson Russell Director
__/s/Mr. Frank Power Director
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 3.
STATEMENT OF LOSS AND DEFICIT
NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Year
Ended Ended
December 31, March 31,
1998 1998
Revenue $252,565 $272,631
Direct costs 147,155 140,891
Gross profit 105,410 131,740
Other income 8,231 13,934
113,641 145,674
Expenses
Amortization of capital assets 6,992 15,917
Amortization of deferred development costs 72,224 87,621
Bank charges and interest 15,608 16,196
Contract manufacturing division (Note 11) 72,341 126,008
Heat and light 1,905 10,343
Insurance 1,838 2,027
Interest on loans 43,911 55,963
Management and marketing fees 4,992 16,235
Marketing/Market Research costs 3,606 5,742
Municipal taxes 1,249 2,960
Miscellaneous 5,194 3,855
Office operating 10,240 18,859
Professional fees 17,138 35,296
Rent 32,435 37,685
Repairs and maintenance 2,423 4,693
Telephone 9,590 11,184
Travel 3,739 6,865
Wages and benefits 50,138 66,992
Write off obsolete inventory stock - 14,405
Less: Allocation to deferred development costs - (149,808)
355,563 389,038
Net loss (Note 12) (241,922) (243,364)
Deficit, beginning of period (612,949) (351,303)
(854,871) (594,667)
Dividends paid on preference shares - (42,282)
Discount earned on redemption of Class A preference
shares - 24,000
Deficit, end of period $(854,871) $(612,949)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 4.
STATEMENT OF CHANGES IN CASH RESOURCES
NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Cash provided by (used in)
Operations
Net loss $(241,922) $(243,364)
Amortization 104,667 124,114
Net change in non-cash working capital items 153,012 10,434
15,757 (108,816)
Financing
Proceeds from long term debt - 130,015
Proceeds from issuance of common shares 17,081 595,287
Advances from Cabot Management Limited 1,809 5,694
Advances from shareholder 36,768 70,043
Repayment of long term debt - (30,000)
Discount on redemption of preference shares - 24,000
Redemption of preference shares - (84,000)
Payment of dividends on preference shares - (42,282)
Conversion of Class C preference shares - (287,333)
55,658 381,424
Investments
Increase in deferred charges - net (53,433) (102,881)
Increase in deferred development cost - net (15,791) (152,496)
Purchase of capital assets, net of investment
tax credits (4,782) (11,304)
(74,006) (266,681)
Net change in bank position (2,591) 5,927
Bank position, beginning of period 3,829 (2,098)
Bank position, end of period $1,238 $3,829
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 5.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Significant accounting policies
a. Capital assets
Capital assets are recorded at cost less any government assistance and
are being amortizated over their estimated useful lives using the rates
and methods set out below:
Computer equipment 20% on a declining balance basis
Computer software 30% on a declining balance basis
Office furniture and equipment 20% on a declining balance basis
Leasehold improvements 20% on a straight line basis
b. Deferred development costs
All costs, including share of overhead costs, associated with the
development of the NETMIND System have been capitalized in these financial
statements as deferred development costs. These costs are being amortized
against income on a straight line basis over a period of ten years. If it
becomes evident in a given year that the sales market for this technology
declines , then the remaining costs will be amortized over a shorter period.
The company acquired the initial technology for the NETMIND System from the
receiver of National Petroleum and Marine Consultants Limited and Altair
Marine Systems Limited for the sum of $ 1. Prior to going into receivership,
these two companies had spent approximately $ 1,740,408 on the development of
this technology. To date NTI has spent $ 1,847,795 on this technology,
including overhead costs of $ 621,430, which has been reduced by various
assistance and tax credits totalling $ 879,546 as referred to in Note 4.
c. Deferred charges
Deferred charges consist of initial planning, startup and overhead
costs related to contract manufacturing in association with
Lockheed Martin - Federal Systems Inc. These costs amounted to
$ 156,314 at December 31, 1998, as referred to in Note 5, and are
being amortized on a straight line basis over a five year term.
d. Inventory
The company's inventory is valued at the lower of cost and net
realizable value.
e. Investment tax credits
Investment tax credit refunds arising from the incurrence of
qualifying research and development expenditures have been recorded
in these financial statements as a reduction of the applicable deferred
development costs.
f. Government assistance
The company has been awarded assistance under government programs.
Amounts received or receivable under these programs are recorded
as a reduction in the cost of capital assets or as a reduction of the
applicable deferred development costs.
NORTHSTAR TECHNICAL INC. 5a.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
2. Receivables
============================================================
December 31, March 31,
1998 1998
Trade $20,200 $137,701
Government assistance - 22,486
Investment tax credit refunds 128,383 67,865
$148,583 $228,052
======== ========
</TABLE>
3. Capital assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
==============================
December 31, March 31,
1998 1998
--------------------------------------------
Cost Accumulated Net Book Net Book
Amortization Value Value
Computer equipment $6,654 $3,170 $3,484 $4,099
Computer software 8,892 5,681 3,211 3,945
Furniture and equipment 34,350 16,906 17,444 17,286
Leasehold improvements 15,872 14,488 1,384 2,403
$65,768 $40,245 $25,523 $27,733
======= ======= ======= =======
</TABLE>
4. Deferred development costs
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, March 31,
1998 1998
Wages and benefits $693,362 $608,461
Materials and other costs 173,736 165,160
Subcontractors 359,267 359,267
Overhead 621,430 621,430
1,847,795 1,754,318
Less:
Government assistance 380,133 362,965
Other assistance 61,685 61,685
Investment tax credits 437,728 377,210
968,249 952,458
Less: Amortization 199,938 127,714
$768,311 $824,744
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. Deferred charges - Contract Manufacturing Division
============================================================
December 31, March 31,
1998 1998
Planning and start up costs $28,951 $28,951
Overhead costs (Note 10) 127,363 73,930
156,314 102,881
Less: Amortization of deferred charges 46,027 20,576
$110,287 $82,305
======== ========
6. Loans payable
============================================================
December 31, March 31,
1998 1998
10% loan payable to Enterprise Newfoundland
and Labrador in monthly interest payments
plus principal amount payable on demand $20,473 $22,451
12% loan payable to Eastern Meridian Mining
Corporation including accrued interest, to be
repaid in full by March 1, 1999, secured by the
personal guarantee of Wilson Russell 83,036 75,939
Loan payable to Toronto-Dominion bank,
secured by the personal guarantee of
Wilson Russell. This loan was repaid
in full on September 24, 1998 0 20,000
Loan payable to Brian Gamberg repaid in full
on April 15, 1998 0 20,400
Loan payable to Dr. Carl Wesolowski 55,306 0
7.Long Term Debt $158,815 $138,790
======== ========
============================================================
December 31, March 31,
1998 1998
ACOA 7.5% loan with monthly principal repayments
of $ 3,256 commencing June 1, 2000 $195,331 $195,331
ACOA 10.9 % loan with monthly principal repayments
of $ 1,786 beginning July 1, 1999 150,000 150,000
10% loan payable to Pathfinder Enterprises Inc. in
monthly interest payments only to July 5, 2002,
secured by a floating charge debenture 240,000 240,000
ACOA 6.25% loan repayable in 72 monthly consecutive
instalments of $ 3,280 beginning July 1, 2000 if full
loan draw down is received. Secured by postponements
on Cabot Management Limited's loans of $ 130,836 and
shareholders' loan of $ 19,060 130,015 130,015
715,346 715,346
Less: Long term debt payable within one year 10,716 127,340
$704,630 $588,006
======== ========
8. Loans payable - Cabot Management Limited
Cabot Management Limited, an associated company, has the option to
convert their interest free loans, totalling $ 138,339 at December
31, 1998, to common shares of Scientific Technologies Inc. (See Note 13)
9. Contingent liability
The company is presently involved in a dispute with their distributing
agent, whose contract has now been terminated due to non-payment for
NETMIND systems sold to them. This termination has lead to court action,
the outcome of which is unknown as at the financial statements date.
10. Share capital
============================================================
December 31, March 31,
1998 1998
Authorized
An unlimited number of Class A common shares
with no par value
An unlimited number of Class A preference shares
with no par value
An unlimited number of 10% redeemable, retractable,
cumulative, non-voting, participating Class B preference
shares with no par value
An unlimited number of 10% redeemable, retractable,
cumulative, non-voting, participating Class C preference
shares with no par value
Issued and outstanding 14,704,440 Class A common shares $622,453 $605,372
11. Contract Manufacturing Division
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Amortization of deferred charges (Note 5) $25,451 $20,576
Contract labor 0 25,000
Operating expenses 1,199 63,356
Salaries and benefits 105,667 136,038
Less: Direct costs on contract with Lockheed
Martin - Federal Systems, Inc. 0 (25,133)
Wage subsidy/NRC funding (6,543) (19,899)
125,774 199,938
Less: Allocation to deferred charges (Note 5) (53,433) (73,930)
$72,341 $126,008
======== ========
</TABLE>
12. Income taxes
The company has losses carried forward totalling $ 1,531,226 which have
not been recognized in these financial statements. These losses carried
forward can be applied against otherwise taxable income and if unused will
expire in the following years:
December 31, 1999 - $3,811
December 31, 2001 - $37,523
December 31, 2002 - $94,492
December 31, 2003 - $512,179
December 31, 2004 - $367,846
December 31, 2005 - $515,375
Also the company's book values of deferred development costs and deferred
charges exceeds their income tax values by $ 878,598 as at December 31, 1998.
The net deferred income taxes debit related to both of these items have not
been reflected in these financial statements.
13. Subsequent event
On January 26, 1999 the merger between NTI and Scientific Technologies
Inc. was completed which resulted in Northstar Technical Inc. becoming a
wholly owned subsidiary of Scientific Technologies Inc., a US public
trading company.
On January 15, 1999 and January 26, 1999 the shareholders of Northstar
Technical Inc. exchanged their 14,704,440 common shares for 4,901,480 common
shares in Scientific Technologies Inc. on the basis of three Northstar shares
for every one share of Scientific.
SULLIVAN, LEWIS AND WHITE
- -------------------------------------------------------------------------
<PAGE>
iii) Northstar Technical Inc.
St. John's, Newfoundland
Internal
Unaudited Financial Statements
July 31,1999
Northstar Technical Inc.
Balance Sheet
As at July 31, 1999
Unaudited
<TABLE>
<CAPTION>
<S> <C> <C>
Current Year Ended
Balance Dec. 31, 1998
Assets
Current
Bank 28,275.60 1,237.72
Accounts Receivable 230,037.10 148,582.94
Inventory 125,790.21 56,279.65
----------- ----------
387,926.50 208,368.34
Fixed Assets, Net of Accumulated Depreciation
Computer Equipment St. John's 6,637.49 6,142.51
Accum Deprec. Computer SA (3,274.47) (2,908.51)
Computer Equipment Vancouver 1,808.16 511.38
Computer Software St. John's 9,137.86 8,891.88
Accum Deprec. Software SJ (6,258.10) (5,680.88)
Accum Deprec. Computer SJ (261.38) (261.38)
Furniture and Equipment St. John's 33,575.99 30,590.09
Accum Deprec. Furn St. John's (16,518.87) (14,650.29)
Furniture and Equipment Vancouver 3,759.64 3,759.64
Accum Deprec. Furn & Equip VA (2,462.07) (2,255.64)
Lab Equipment 11,369.97 0.00
Leasehold Improvements SA 15,163.31 14,488.23
Amortization St. John's (15,538.23) (14,488.23)
------------ ------------
Total Fixed Assets 37,139.30 25,522.80
Deferred Technology Costs
Deferred Technology Costs 1,186,275.77 1,124,563.49
Amortization Deferred Tech. (323,474.18) (245,965.21)
------------ ------------
Total Deferred Technology Costs 862,801.59 878,598.28
------------ ------------
Total Assets 1,287,867.39 1,112,489.42
============ ============
Northstar Technical Inc.
Liabilities and Shareholders' Equity
As at July 31, 1999
Unaudited
Liabilities
Current Year Ended
Balance Dec. 31, 98
Current
Payables and Accruals 47,185.18 80,567.36
Trade Payables 49,376.33 128,415.22
Total Current Liabilities 96,561.51 208,982.58
Short Term Loan
Accounts Payable adventure 0.00 55,305.76
A/P Eastern Meridian Mining 15,569.54 83,036.27
Loan Payable (TD 32101169) 5,100.16 0.00
Total 20,669.70 138,342.03
Long Term Liabilities
Adventure Capital 240,000.00 240,000.00
Acoa Provisonally Repayable 325,346.00 325,346.00
Acoa Action Loan 150,000.00 150,000.00
Cabot Management 118,838.55 138.338.55
Accounts Payable Enl 19,261.91 20,473.23
Due to STI 679,024.85 3,055.40
Shareholders Loans Russel 64,831.87 120,369.55
Total Long Term Liabilities 1,597,303.18 997,582.73
Equity
Shareholders Equity
Common W. E. Russel 80.00 80.00
Common Adventure Capital 10,000.00 10,000.00
Common J. Radford 5.00 5.00
Class A Common Shareholders 612,368.31 612,368.31
Total Shareholders' Equity 622,453.31 622,453.31
Retained Earnings (854,871.23) (854,871.23)
Profit (Loss) For period (194,249.08) 0.00
Total (1,287,867.39) (854,871.23)
Total Liabilities and Equity 1,287,867.39 1,112,489.42
Northstar Technical Inc.
Accounts Receivable
As at July 31, 1999
Unaudited
Current Year Ended
Balance Dec. 31, 1998
Accounts Receivable
Accounts Receivable Control 148,665.04 20,051.40
A/R Employee Advances 500.00 0.00
A/R HST 20,206.12 0.00
A/R SR&ED 60,517.54 128,382.54
A/R Other 148.40 149.00
Total Receivable 230,037.10 148,582.94
Northstar Technical Inc.
Consolidated Departments
Statements of Earnings
7 Periods Ended July 31, 1999
Unaudited
Current Current
Month YTD
Revenue:
Sales/Contract/Misc Revenue 220.17 257,654.84
Revenue 220.17 257,654.84
Cost of goods sold
Cost of goods sold 552.37 109,218.51
Total cost of goods sold 552.37 109,218.51
Gross Profit (332.20) 148,436.33
Add Government support
Total Government Support 0.00 0.00
Total (332.20) 148,436.33
Expenses:
Lab Expenses 24,597.02 126,993.12
Business Tax (428.91) 192.08
Depreciation 67,421.07 81,611.46
Interest 4,618.52 30,350.25
Office Expenses 2,277.50 38,327.26
Salaries/wages/Emp/ Benefits 11,284.39 74,598.86
Professional Fees 2,645.00 23,326.24
Rent 3,633.75 25,188.14
Insurance 274.34 1,571.06
Marketing 525.00 2,239.22
Less: Allocation to deffered Technology Cost (61,712.28) (61,712.28)
55,135.40 342,685.41
Earnings (Loss) (55,467.60) (194,249.08)
Earnings (Loss) Before Income Taxes (55,467.60) (194,249.08)
Net Earnings (Loss) For Period (55,467.60) (194,249.08)
</TABLE>
- --------------------------------------------------------------
iv) NORTHSTAR ELECTRONICS INC
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
(Unaudited)
September 30, 1999
C O N T E N T S
Page
Interim Consolidated Balance Sheet 1
Interim Consolidated Income Statement 2
Interim Consolidated Statement of Shareholders Equity 3
Interim Consolidated Statement of Changes in Cash Resources4
Notes to Interim Consolidated Financial Statements 5
NORTHSTAR ELECTRONICS, INC.
INTERIM CONSOLIDATED BALANCE SHEET
(U.S. Dollars)
(Unaudited)
September 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
(Note 4) September 30, December 31,
1999 1998
Current
Cash $13,471 $2,231
Receivables 275,229 99,055
Inventory 83,029 37,519
Prepaid expenses 4,393 1,513
376,122 140,319
Capital Assets 25,431 17,016
$401,553 $157,335
LIABILITIES
Current
Payables and accruals $86,784 $167,541
Loans payable 27,026 116,039
113,810 283,580
Long term debt ( Note 2) 526,061 476,897
Loans payable to Cabot Management Limited 77,959 92,226
Loans payable to shareholder 63,740 80,246
Contigent liabilites (Note 5) -0- -0-
Total Liabilites 781,570 932,949
SHAREHOLDERS' EQUITY
Share Capital (Note 3) 1,003,069 440,069
Deficit (1,383,086) (1,215,684)
(380,017) (775,615)
$401,553 $157,334
</TABLE>
NORTHSTAR ELECTRONICS, INC.
INTERIM CONSOLIDATED INCOME STATEMENT
(U.S. Dollars)
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
(Note 4)
Nine Months Nine Months
Ended Ended
September 30, 1999 December 31, 1998
Sales $321,013 $168,377
Cost of goods sold 112,862 98,103
Gross profit 208,151 70,274
Expenses
Business Development 1,430 -
Business Tax 271 833
Commissions 46,300 -
Depreciation 3,517 4,662
Dues and fees 5,010 -
Exchange 2,400 -
Insurance 1,410 1,226
Interest and bank charges 23,081 39,287
Lab Expenses 15,958 2,482
Marketing 4,592 5,061
Misc. 1,392 -
Office Expenses 69,490 27,573
Professional Fees 62,119 11,425
Rent 21,015 10,898
Salaries/Wages/employee benefits 117,568 75,030
Organizational cost - 38,000
Commitment fees - 10,000
Research and development cost - 10,527
Contract manufacturing cost - 35,622
375,553 272,626
Net loss (167,402) (202,352)
Deficit, beginning of period (1,215,684) (1,013,332)
Deficit, end of period $(1,383,086) $(1,215,684)
Net loss per share $(0.02) $(0.09)
Weighted average number of
common shares outstanding 6,971,244 2,140,000
</TABLE>
NORTHSTAR ELECTRONICS INC.
INTERIM CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(U.S. Dollars)
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Common Shares Additional Total
Number Amount Paid-In Capital Deficit Shareholders
Equity
Balance, 2,140,000 $214 $439,855 $(1,215,684) $(775,615)
December 31, 1998
Common shares
issued for
cash for
$1.00 per share
January 25, 1999 100,000 10 99,990
January 29, 1999 200,000 20 199,980
January 29, 1999 63,000 6 62,994
June 29, 1999 200,000 20 199,980
Common shares
on exchange 4,901,493 490 (490)
(Note 3a)
Balance,
September 30,1999 7,604,493 $760 $1,002,309 $(1,383,086) $(380,017)
</TABLE>
NORTHSTAR ELECTRONICS INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(U.S. Dollars)
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
(Note 4)
Nine Months Ended Nine Months Ended
September 30, 1999 December 31, 1998
Cash provided by (used in)
Operations
Net loss $(167,402) $(202,352)
Depreciation 3,517 4,662
Net change in non-cash working capital items (394,333) 138,352
(558,218) (59,338)
Financing activities
Proceeds from issuance of common shares 563,000 36,487
Proceeds from long term debt 50,355 -
Advances (to) from Cabot Management Limited (14,267) 1,206
Advances (to) from shareholder (16,506) 24,512
Repayment of long term debt (1,191) -
581,391 62,205
Investing activities
Purchase of capital assets (11,933) (3,189)
Increase in cash 11,240 (322)
Cash, beginning of period 2,231 2,553
Cash, end of period $13,471 $2,231
</TABLE>
NORTHSTAR ELECTRONICS INC. 5.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
1. Basis of presentation
These unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles in the United States for interim financial information.
These financial statements are condensed and do not include all
disclosures required for annual financial statements. The organization
and business of the Company, accounting policies followed by the
Company and other information are contained in the notes to the
Company's audited consolidated financial statements filed as part
of the Company's Registration Statement Form SB-1.
In the opinion of the Company's management, these financial statements
reflect all adjustments necessary to present fairly the Company's
consolidated financial position at September 30, 1999 and the
consolidated results of operations and the consolidated statement
of cash flows for the nine months ended September 30, 1999. The
results of operations for the nine months ended September 30, 1999
are not necessarily indicative of the results to be expected for the
entire fiscal year.
2. Long term debt
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1999 1998
10% loan payable to Pathfinder Enterprises Inc.
in monthly interest payments only to July 5, 2002 $160,000 $160,000
ACOA (Federal Government Agency) interest free
loan repayable in sixty monthly and consecutive
installments of $ 2,170 130,221 130,221
ACOA (Federal Government Agency) interest free
loan repayable in twenty-four monthly and
consecutive installments of $ 4,167 98,809 100,000
ACOA (Federal Government Agency) interest free
loan payable in 36 monthly and consecutive
installments of $ 4,373 beginning when full loan
draw down is received. Secured by postponements
on Cabot Management Limited's loan of $ 87,224
and a shareholders' loan of $ 12,707. 137,031 86,676
$526,061 $476,897
</TABLE>
NORTHSTAR ELECTRONICS INC. 5a.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
3. Capital stock
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1999 1998
Authorized
20,000,000 preferred shares at $ 0.0001 par value
100,000,000 common shares at $ 0.0001 par value
Issued and outstanding
7,604,493 common shares (1998 - 2,140,000) $760 $214
Additional paid in capital 1,002,309 439,855
$1,003,069 $440,069
</TABLE>
a) On January 15, 1999 and January 26, 1999 the shareholders of
Northstar Technical Inc. exchanged their 14,704,479 common shares
for 4,901,493 common shares of Northstar Electronics Inc. on the
basis of three Northstar Technical shares for every one share of
Northstar Electronics Inc. The value of these shares were $ 414,969.
b) Also during January, 1999 the company completed offerings for
363,000 shares of its common stock at $ 1.00 per share. Proceeds
from these offerings were $ 363,000.
c) On June 29, 1999 the company completed an offering for 200,000
shares of its common stock at $ 1.00 per share. Proceeds from this
offering was $ 200,000.
4. Comparative figures
The comparative figures were for the nine months ended December 31,
1998 as the nine months ended September 30, 1998 were not readily
available and there would be no material differences in these comparatives.
5. Contingent liability
The company is a defendant in a lawsuit commenced against
them by their former master distributor. The former distributor
has alleged that the company has interfered with the ability
of the former distributor to selll products. The company has
filed a counterclaim for monies owing by the former distributor
to the company. An adverse outcome to the lawsuit could have
an adverse material impact upon the company and the range of
possible loss could be from $ 0 to $ 1,300,00
TABLE OF CONTENTS
3 PROSPECTUS SUMMARY
4 RISK FACTORS
5 RISK FACTORS RELATING TO MARKET PROTECTION
7 RISKS RELATED TO THE MANAGEMENT STRUCTURE OF THE COMPANY
7 RISKS INHERENT IN BUSINESS
8 RISKS RELATED TO THE NATURE OF THE OFFERING
8 GENERAL CAUTION
9 DILUTION
9 USE OF PROCEEDS
10 BUSINESS
12 MANAGEMENT'S DISCUSSION OF PLAN OF OPERATIONS
14 SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY OWNERS
16 DIRECTOR'S OFFICERS AND SIGNIFICANT EMPLOYEES
17 REMUNERATION OF DIRECTORS AND OFFICERS
18 INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
19 DESCRIPTION OF SECURITIES
20 LITIGATION
20 INDEMNIFICATION OF OFFICERS AND DIRECTORS
Northstar Electronics, Inc.
(800,000 shares of Common Stock)
PROSPECTUS
October____, 1999
Until__________, 1999 (90 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.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
As per Risks Related to the Management Structure of the Company,
management will have no liability to the Company for any mistakes
errors of judgement or for any act of omission believed to be
within the scope of authority conferred by the Company's articles
unless such acts or omissions were performed or omitted fraudulently
or in bad faith, constituted gross negligence or were
a violation of a director's or officer's fiduciary obligations
to the Company. The Company has agreed to indemnify the officers
and directors against all loss or damage even if caused by that
officer's or director's fraud,
ITEM. 2 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
<S> <C>
SEC Filing Fee $ 287
Accounting fees 12,000
Legal fees 25,000
Other professional fees 10,500
Blue Sky fees and expenses 2,500
Transfer agent's fees 1,900
Printing, including registration 1,500
statement and prospectus
Miscellaneous costs and expenses 2,000
-----------
55,817
</TABLE>
ITEM 3. UNDERTAKINGS
Post-Effective Amendments {Regulation S-B, Item 512-(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:
(a) To include any prospectus required by Section 10 (a) (3) of the
Securities Act;
(b) To reflect in the prospectus any fact or events arising after
the effective date of the Registration Statement (or most of the
recent post-effective amendment thereof) which, individually, or
in the aggregate, represent a fundamental change in the information
set forth in the registration Statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement,
including (but not limited to) addition or deletion of a managing
underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act,
each such post-effective amendment shall be deemed to be a new
registration
statement relating to the securities offered therein, and the offering
of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of
the securities being registered which remain unsold at the termination
of the offering.
<PAGE>
ITEM. 4
UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR
The registrant has issued or sold the following securities within one
year
prior to filing this registration statement which were not registered
under
the Securities Act of 1933 (the "Securities Act")
ISSUANCE RESOLUTION-NEW STOCK
CORPORATE RESOLUTION FOR THE ISSUANCE OF NEW SHARES FROM NEW STOCK
SCIENTIFIC TECHNOLOGIES, INC.
(COMPANY NAME, SECURITIES NAME)
COMMON STOCK
(CLASS OF STOCK)
Resolved that Signature Stock Transfer, Inc., a Texas corporation,
sole stock transfer agent for the above class of stock for the above
company to issue the shares described below and increase the outstanding
shares on the books of the company.
Issuance Instructions:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
REGISTERED NUMBER DATE RESTRICTION (IF FREE
NAME & ADDRESS OF SHARES ISSUED TRADING STOCK, IT IS
REQUIRED TO LIST
EXEMPTIONS)
Mr. Michael Ghanadian 200, 000 26/06/99 The shares to be issued will
CH. Diodtai 10 carry a legend restricting
1223 Cologny, Switzerland for resale pursuant to an
available exemption from
registration under the act.
</TABLE>
Increasing the number of shares outstanding by 200,000 shares.
(Please note-This resolution is only used to increase the control
book).
We, the undersigned, qualified officers of the above named company,
do hereby indemnify Signature Stock Transfer, Inc. And their
employees against any and all actions taken by the above company,
and certify that this is a true copy of a resolution, set forth and
adopted on the below date, and that the said resolution has not been
in any way rescinded, annulled or revoked but the same is still in
full force, and effect.
____________________________ _____________________
Wilson E. Russell, President Frank Power, Director
Dated, this the 29th day
of June, 1999.
Name & Mailing Instructions
Courier all above certificates to:
Scientific Technologies, Inc.*
Attention: Wilson Russell
1455-409 Granville Street
Vancouver, B.C. V6C 1T2
*note that the company has undergone a name change since the filing
of this document,
"SEE EXHIBITS"
The securities offered hereby have not been registered under the
Securities Act of 1933 (The "Act"), and are proposed to be issued
in reliance upon an exemption from the registration requirements
of the act provided by Regulation S promulgated under the act.
Upon any sale, such securities may not be reoffered for sale or
resold or otherwise transferred except in accordance with the
provision of Regulation S, pursuant to effective registration under
the act. Hedging transactions involving the securities may not be
conducted unless in compliance with the act.
SUBSCRIPTION AGREEMENT
Scientific Technologies, Inc.* (See Exhibits)
SUBSCRIPTION AGREEMENT made as of this 25 day of June, 1999
between Scientific Technologies, Inc., a Delaware corporation with
an office at 1455-409 Granville Street, Vancouver, British Columbia
V6C 1T2 ("the Company") and the undersigned ("the Subscriber").
WHEREAS:
A. The company desires to issue a maximum of 1,000,000 shares of
common stock of the Company at a price of $1.00 US per share
("the Offering") pursuant to Regulation S of the United States
Securities Act of 1933 ("the Act").
B. The Subscriber desires to acquire the number of shares of the
Offering set forth on the signature page here of ("the Shares") on
the terms and subject to the conditions of this Subscription Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter set forth, the parties hereto do hereby
agree as follows:
1. SUBSCRIPTION FOR SHARES
1.1 Subject to the terms and conditions hereinafter set forth,
the Subscriber hereby subscribes for and agrees to purchase from
the Company such number of Shares as is set forth upon the signature
page hereof at a price equal to $1.00US per share. Upon execution,
the subscription by the Subscriber will be irrevocable.
1.2 The purchase price is payable by the Subscriber contemporaneously
with the execution and delivery of this Subscription Agreement.
1.3. Upon execution by the Company, the Company agrees to sell such
Shares to the Subscriber for said purchase price subject to the
Company's right to sell to the Subscriber such lesser number of Shares
as it may, in its sole discretion, deem necessary or desirable.
1.4 Any acceptance by the Company by the Subscriber is conditional
upon compliance with all securities laws and other applicable laws of
the jurisdiction in which the Subscribers resident. Each Subscriber
will deliver to the Company all other documentation, agreements,
representations and requisite government forms required by the lawyers
for the Company as required to comply with all securities laws and
other applicable laws of the jurisdiction of the subscriber. The
Company will not grant any registration other qualification rights
to any Subscriber, other than the agreement of the Company to register
the shares with the United States Securities and Exchange Commission
("the SEC") as set forth in Section 2 of this Agreement.
2. REGISTRATION STATEMENT
2.1 The company agrees that within a reasonable time of
execution of this Agreement by the Company that the Company
will prepare and file a registration statement with the SEC
pursuant to the Act on a Form SB-1, or other appropriate
registration statement, as required to qualify the resale of
shares in the United States (the `Registration Statement.')
The Company will use its best efforts to ensure effectiveness
of the Registration Statement within a reasonable period of time
following filing of the Registration Statement.
3. REGULATION S AGREEMENTS OF THE SUBSCRIBER
3.1 The Subscriber agrees only to resell the shares only in
accordance with the provisions of Regulation S of the act pursuant
to registration under the Act, or pursuant to an available exemption
from registration pursuant to the Act.
3.2 The Subscriber agrees not to engage in heading transactions
with regards to the shares unless in compliance with the Act.
3.3 The Subscriber acknowledges and agrees that all certificates
representing the Shares will be endorsed with the following legend
in accordance with Regulation S of the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933(THE"ACT"), AND HAVE
BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S PROMULGATED
UNDER THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE
OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT."
3.4 The Subscriber and the Company agree that the Company will refuse
to register any transfer of the Shares not made in accordance with the
provisions of regulation S of the Act, pursuant to registration under
the Act, or pursuant to an available exemption from registration.
4. REPRESENTATIONS AND WARRANTIES BY THE SUBSCRIBER
4.1 The Subscriber represents and warrants the Company and
acknowledges that the company is relying upon the Subscriber's
representations and warranties in agreeing to sell the Shares to
the Subscriber.
(A) The Subscriber is not a "U.S. Person" as defined by
Regulation S of the Act and is not acquiring the Shares for the
account or benefit of a U.S. person.
A U.S. Person is defined by Regulation S of the Act to
be any person who is:
(i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) any estate of which any executor or administrator is
a U.S. person;
(iv) any trust of which any trustee is a U.S. person;
(v) any agency or branch of a foreign entity located in
the United States;
(vi) any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other
fiduciary organized, incorporate, or (if an individual)
resident in the United States; and
(vii) any partnership or corporation if:
1. Organized or incorporated under the laws of any foreign
jurisdiction; and
2. Formed by a U.S. person principally for the purpose of
investing in
securities not registered under the Act, unless it is
organized or incorporated, and owned, by accredited
investors {as defined in Section 230.501(a) of the Act}
who are not natural persons, estates or trusts.
(B) The Subscriber recognizes that the purchase of Shares involves a
high degree of risk in that the Company has only recently
commenced its proposed business and may require substantial funds
in addition to the proceeds of this private placement;
(C) an investment in the Company is highly speculative and only
investors who can afford the loss of their investment should
consider investing in the Company and the Shares;
(D) the Subscriber has been delivered the Company's disclosure
statement and its unaudited financial statements for the period
ending December 31, 1998 and has had full opportunity to review
the disclosure document and financial statements with the
Subscriber's legal and financial advisors prior to execution of
this Subscription Agreement;
(E) the Subscriber has such knowledge and experience in finance,
securities, investments, including investment in non-listed and
non-registered securities, and other business matters so as to
be able to protect its interests in connection with this
transaction.
(F) the Subscriber acknowledges that a limited market for the Shares
presently exists and accordingly the Subscriber may not be able
to liquidate its investment.
(G) the Subscriber hereby acknowledges that this offering of Shares
has not been reviewed by the SEC and the Shares are being issued
by the Company pursuant to an exemption from registration
provided by Regulation S pursuant to the Act.
(H) the Subscriber is acquiring the Shares as principal for the
Subscribers own benefit;
(I) the Subscriber is not aware of any advertisement of the Shares;
(J) Subscriber is acquiring the Shares subscribed to hereunder as an
investment for Subscriber's own account, not as a nominee or agent,
and not with a view towards the resale or distribution of any part
thereof, and Subscriber has no present intention of selling,
granting any participation in, or otherwise distributing the same;
(K) Subscriber does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant
participation to such person, or to any third person, with respect
to any of the shares sold hereby;
(L) Subscriber has full power and authority to enter into this Agreement
which constitutes a valid and legally binding obligation,
enforceable in accordance with its terms;
(M) Subscriber can bear the economic risk of this investment, and was not
organized for the purpose of acquiring the Shares;
(N) The Subscriber has satisfied himself or herself as to the full
observance of the laws of his or her jurisdiction in connection with
any invitation to subscribe for the Shares and/or any use of this
Agreement, including (i) the legal requirements within his/her
jurisdiction for the purchase of the Shares, (ii)any foreign exchange
restrictions applicable to such purchase, (iii)any governmental or
other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to
the purchase, holding, redemption sale, or transfer of the Shares.
5. REPRESENTATIONS BY THE COMPANY
5.1 The Company represents and warrants to the Subscriber that:
(A) The Company is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and has the corporate
power to conduct the business which it conducts and proposes to conduct.
(B) Upon issue, the Shares will be duly and validly issued, fully-paid
and non-assessable common shares in the Capital of the Company.
6. TERMS OF SUBSCRIPTION
6.1 Pending acceptance of this subscription by the Company, all funds
paid hereunder shall be deposited by the Company and immediately available
to the Company for the purposes set forth in the disclosure statement.
In the event subscription is not accepted, the subscription funds, will
constitute a non-interest bearing demand loan of the Subscriber to the
Company.
6.2 The Subscriber hereby authorizes and directs the Company to deliver
the Securities to be issued to such Subscriber pursuant to this
Subscription Agreement to the Subscriber's address indicated herein.
6.3 The Subscriber acknowledges and agrees that the subscription for
the Shares and the Company's acceptance of the subscription is not
subject to any minimum subscription for the Offering.
7. MISCELLANEOUS
7.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail,
return receipt requested, addressed to the Company, at Suite 1455,
409 Granville Street, Vancouver, British Columbia, Canada V6C 1T2,
Attention: Mr. Wilson E. Russell, President and Chief Executive
Officer, and to the Subscriber at his address indicated on the last
page of this Subscription Agreement. Notices shall be deemed to have
been given on the date of mailing, except notices of change of address,
which shall be deemed to have been given when received.
7.2 Notwithstanding the place where this Subscription Agreement may
be executed by any of the parties hereto, the parties expressly agree
that all the terms and provisions hereof shall be construed in
accordance and governed by the laws of the State of Nevada.
7.3 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent
of this Subscription Agreement.
IN WITNESS THEREOF, this Subscription Agreement is executed as of the
day and year first written above.
Name of shares subscribed for: _________________________
Signature of Subscriber: _______________________________
Name of Subscriber:__________________________________
Address of Subscriber:_______________________________
________________________________
Subscriber's Social Security Number: ______________________
ACCEPTED BY:
SCIENTIFIC TECHNOLOGIES, INC.*
Signature of Authorized Signatory:__________________
Name of Authorized Signatory:______________________
Position of Authorized Signatory: ___________________
Date of Acceptance:______________________
<PAGE>
ITEM. 5 INDEX TO EXHIBITS
Copies of the following documents are included as exhibits to this
Registration Statement pursuant to Item Part III of Form 1-A and
Item 6 of Part II.
Exhibit No. Title of Document
3.10 Certificate of Incorporation
3.11 Bylaws
3.12 Amendments-Name Change
3.2 Opinion Regarding Legality on Shares
10.1 Business and Financial
10.2 Sales Contracts
10.31 Lease Agreements
23.1 Accountants consent form
99.1 Disclosure Statement
99.2 Subscription Agreement
99.3 Y2K issues
ITEM.6 DESCRIPTION OF EXHIBITS
Exhibit No. Description of Exhibit
3.10 Northstar Electronics, Inc. Certificate of Incorporation
3.11 Northstar Electronics, Inc. Bylaws
3.12 Northstar Electronics, Inc. Amendments to Articles
of Incorporation-Name Change
3.2 Opinion Regarding Legality on Shares of Northstar
Electronics, Inc.
10.1 Business and Financial
10.11 03.31.98-Audited Financial Statements of Northstar
Technical, Inc.
10.12 12.31.98-Audited Financials of Northstar Technical, Inc.
10.13 07.31.99-Northstar Electronics, Inc. Unaudited Financial
Statements
10.14 09.30.99-Northstar Electronics, Inc. Unaudited Financial
Statements
10.2 10.18.99-Lockheed Martin Sales Contract
10.21 04.06.95-Sales Contracts ACOA Project 600-4031828-1
10.22 05.18.95-NRC Letter of Agreement No. 03978E
10.23 10.23.95-NRC Contribution Agreement No. 04132E
10.24 11.15.95-Teaming Agreement with Loral Librascope
10.25 03.05.96-ACOA Project 600-4024021-1 Agreement
10.26 12.19.96-NRC Contribution Agreement No. 04702E
10.27 11.28.97-NRC Contribution Agreement No. 05100E
10.28 04.10.97-ACOA Business Development Program
10.29 09.24.99-NOAA Sales Contract
10.31 Lease Agreement Nothstar Technical Inc.,
and Par Holdings, Ltd.
10.32 Lease Agreement Nothstar Electronics Inc.,
and Morguard Corporate Offices
23.1 Sullivan Lewis and White- Accountants' consent
99.1 Disclosure Statement
99.2 Subscription Agreement
99.21 Agreement for sale of shares
99.3 Y2K compliant statement for Northstar Electronics, Inc
and it subsidary Northstar Technical, Inc.
<PAGE>
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 SB-1 and authorized
this registration statement to be signed on its behalf by the
undersigned, in the City of Vancouver, British Columbia, Canada,
on October__22__, 1999.
By: /s/ Dr. Wilson Russell
/s/ Wilson Russell, Phd
- -----------------------------------
Dr. Wilson Russell, President
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in
the capacities and on the dates stated.
By: /s/ Dr. Wilson Russell
/s/Wilson Russell, Phd
- -----------------------------------
Dr. Wilson Russell, President
Date: 10/22/99
/s/ Frank Power
-------------------------------
Frank Power, Director
Date filed: October_22___, 1999
SEC File No. __________
Certificate of Incorporation
of
NORTHSTAR ELECTRONICS, INC.
FIRST. The name of this corporation shall be:
NORTHSTAR ELECTRONICS, INC.* (See below)
SECOND. Its registered office in the State of Delaware is to be locate at
1013 Centre Road, in the City of Wilmington, County of New Castle, 19805,
and its registered agent at such address is CORPORATE AGENTS, INC.
THIRD. The purpose or purposes of this corporation shall be:
To engage in any lawful act or activity for which corporations may be
organised under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
One Hundred Twenty Million (1,200,000) shares of which
One Hundred Million(100,000,000) with a par value of
One Tenth of One Mil (.0001) each,
amounting to Ten Thousand Dollars ($10,000.00) are
Common Stock and Twenty Million (20,000,000) shares
with a par value of One Tenth of One Mil. (.0001) each,
amounting to Two Thousand Dollars ($2,000.00) are Preferred Stock.
FIFTH. The name and mailing address of the incorporator is as follows:
Corporate Agents, Inc.
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt,
amend or repeal the by-laws.
IN WITNESS THEREOF, The undersigned, being the incorporator
herein before named, has executed, signed and acknowledged this
certificate of incorporation this eleventh day of May, A.D. 1998.
*Note that the original certification document lists the
corporation As Scientific Technologies, Inc. Documentation supporting
the legal name change is included in Exhibit__3.12__
<PAGE>
BYLAWS
OF
Northstar Electronics, Inc.
(a Delaware Corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates
representing stock in the corporation shall e signed by, or in
the name of, the corporation by the Chairman or Vice-Chairman of
the Board of Directors, if any, or by the President or a
Vice-President and by the Treasurer or an Assistant-Treasurer
or the Secretary or an Assistant Secretary of the corporation.
Any or all of the signatures on nay such certificate may be a
facsimile. In case any officer, transfer agent, or registrar who
has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent,
or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than
one class of stock or more than one series of any class of stock,
and whenever the corporation shall issue any shares of its
stock as partly paid stock, the certificates representing
shares of any such class or series or of any such partly paid
stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or
registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate
representing such shares.
The corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate therefore
issued by it, alleged to have been lost, stolen, or destroyed
certificate, or his legal representative, to give the corporation
a bond sufficient to indemnify the corporation against any claim
that may be made against on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of any such new
certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions
imposed by the General Corporation Law, the Board of Directors
of the corporation may provide, by resolution or resolutions
that some or all of any or all classes or series of the stock
of the corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any
uncertificated shares, the corporation shall send to the
registered owner thereof any written notice prescribed by the
General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but
shall not be required to , issue fractions of a share. If the
corporation does not issue fractions of a share, it shall (1)
arrange for the disposition of fractional interests by those
entitled thereto, (2) pay in cash the fair value of fractions
as a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in
registered form (either represented by a certificate or
uncertificated) or bearer form (represented by a certificate)
which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share.
A certificate for a fractional share or an uncertificated fractional
share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights,
to receive dividends thereon, and to participate in any of the assets
of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the
conditions that the shares for which scrip or warrants are
exchangeable may be sold by the corporation and the proceeds
therefore distributed to the holders of scrips or warrants, or
subject to any other conditions which the Board of Directors may
impose.
4. STOCK TRANSFERS. Upon compliance with provisions
restricting the transfer or registration of transfer of shares
of stock, if any, transfers or registration of transfers of shares
of stock of the corporation shall be made only on the stock ledger
of the corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed
and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and, in the case of shares represented
by certificates, on surrender of the certificate or certificates for
such shares of stock properly endorsed and the payment of all taxes
due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the
corporation may determine the stockholders entitled to notice
of or to a vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which
record date shall not be more than sixty or less than ten days before
the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to
notice of or to a vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled
to notice of or to a vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board
of Directors may fix a date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which date shall not be more than ten days
after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed
by the Board of Directors, the record date for determining the
stockholders entitled to consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is required
by the General Corporation Law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or an
officer or agent of the corporation having custody of the book in
which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record
date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by the General Corporation Law, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on
the day on which the Board of Directors adopts the resolution taking such
prior action. In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled
to exercise any right in respect of any change, conversion or exchange
of stock, or for the purpose of any lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted, and which record
date shall not be more than sixty days prior to such action. If no
record date is fixed, the record date for determining stockholders for
any such purpose shall be at the close of the business on the day on
which the Board of Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein respect of the
right to notice of a meeting of stockholders or a waiver thereof or
to participate or vote thereat or to consent or dissent in writing
in lieu of a meeting, as the case may be, the term `share' or `shares'
or `shares of stock' or `stockholder' or `stockholders' refers to an
outstanding share or shares of stock and to a holder or holders of
record of outstanding shares of stock when the corporation is
authorized to issue only one class of shares of stock, and said
reference is also intended to include any outstanding share or shares
of any class which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series
or shares of stock or upon which or upon whom the certification of
incorporation confers such rights where there are two or more classes
or series of shares of stock or upon which or upon whom the General
Corporation Law confers such rights notwithstanding that the
certificate of incorporation may provide for more than one class or
series of shares of stock, one of which are limited or denied such
rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number
of shares of stock of any class or series which is otherwise denied
voting rights under the provisions of the certificate of incorporation,
except as any provision of law may
otherwise require.
<PAGE>
7. STOCKHOLDER MEETINGS.
TIME. The annual meeting shall be held on the date at the
time fixed, from time to time, by the directors, provided, that
the first annual meeting shall be held on a date within thirteen
months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the
directors.
PLACE. Annual meetings and special meetings shall be held
at such place, within or without the State of Delaware, as the
directors may, from time to time fix. Whenever the directors shall
fail to fix such place, the meeting shall be held at the registered
office of the corporation in
the State of Delaware.
CALL. Annual meetings and special meetings may be called
by the directors or by any officer instructed by the director to
call the meeting.
NOTICE OR WAIVER OF NOTICE. Written notice of all meetings
shall be given, stating the place, date, and hour of the meeting
and stating the place within the city or other municipality or
community at which the list of stockholders of the corporation
may be examined. The notice of an annual meeting shall state that
the meeting is called for the election of directors and for the
transaction of other business which may properly come before the
meeting, and shall (if any other action which could be taken at a
special meeting is to be taken at such annual meeting) state the
purpose or purposes for which the meeting is called. The notice of
any meeting shall also include, or be accompanied by, any additional
statements, information, or documents prescribed by the General
Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given,
personally or by mail, not less than ten days nor more than sixty
days before the date of the meeting, unless the lapse of the prescribed
period of time shall have been waived, and directed to each stockholder
at his record address or at such other address which he may have
furnished by request in writing to the Secretary of the corporation.
Notice by mail shall be deemed to be given when deposited with postage
thereon prepaid in the United States mail. If a meeting is adjourned
to another time, not more than thirty days hence, and/or to another
place, and if an announcement of the adjourned time and/or place is
made at the meeting, it shall not be necessary to give notice of the
adjourned meeting unless the directors, after adjournment, fix a new
record date for the adjourned meeting. Notice need not be given to
any stockholder who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of a stockholder
at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of stockholders need be
specified in any written waiver of notice.
STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the
stockholders, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period at least ten days prior to the
meeting, either at a place within the city or other municipality or
community where the meeting is to be held, which place shall be
specified in the notice of this meeting, or if not so specified,
at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who
is present. The stock ledger shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger, the
list required by this section or the books of the corporation, or
to vote at any meeting of stockholders.
CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of
seniority and if present and acting - The Chairman of the Board,
if any, the Vice-Chairman of the Board, if any, the President,
a Vice-President, or, if none of the foregoing is in office and
present and acting, by a chairman to be chosen by the stockholders.
The secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as the Secretary of every meeting, but if
neither the Secretary, nor an Assistant Secretary is present the
Chairman of the meeting shall appoint a Secretary of the meeting.
PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of
any meeting, voting, participating at a meeting, or expressing consent
or dissent without a meeting. Every proxy must be signed by the
stockholder or by his attorney-in-fact. No proxy shall be voted or
acted upon after three years form its date unless such proxy provides
for a longer period. A duly executed proxy shall be irrevocable and,
if, and only as long as, it is coupled with an interest sufficient in
law to support an irrevocable power. A proxy may be made irrevocable
regardless of whether the interest with which it was coupled is an
interest in the stock itself or an interest in the corporation
generally.
INSPECTORS. The directors, in advance of any meeting, may,
but need not, appoint one or more inspectors of election to act at
the meeting or any adjournment thereof. If an inspector or
inspectors are not appointed, the person presiding at the meeting
may, but need not, appoint one or more inspectors. In case any
person who may be appointed as an inspector fails to appear or act,
the vacancy may be filled by appointment made by directors in advance
of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties
of inspectors at such meeting with strict impartiality and according
to the best of his ability. The inspectors, if any, shall determine
the number of shares of stock outstanding and the voting power of each,
the shares of stock represented at the meeting, the existence of a
quorum, the validity and effects of proxies, and shall receive votes,
ballots, or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count, and tabulate
all votes, ballots or consents, determine the result, and do such
acts that are proper to conduct the election or vote with fairness
to all stockholders. On request of the person presiding at the
meeting, the inspector or inspectors, if any, shall make a report
in writing of any challenge, question, or matter determined by him
or them and execute a certificate of any fact found by him or them.
Except as otherwise required by subsection (e) of Section 231 of
the General Corporation Law, the provisions of that section shall
not apply to the corporation.
QUORUM. The holders of a majority of the outstanding shares of
stock shall constitute a quorum at a meeting of stockholders of the
transaction of any business. The stockholders present may adjourn
the meeting despite the absence of a quorum.
VOTING. Each share of stock shall entitle the holder thereof to one
vote. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Any other action shall
be authorized by a majority of the votes cast except where the General
Corporation Law prescribes a different percentage of votes and/or a
different exercise of voting power, and except as may be otherwise
prescribed by provisions of the certificate of incorporation and
these Bylaws. In the election of directors, and for any other action,
voting need not be by ballot.
<PAGE>
STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
General Corporation Law to be taken at any annual or special
meeting of stockholders, or any action which may be taken at any
annual or special meeting of stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number
of votes that would be necessary to authorize to take such action
at a meeting at which all shares entitled to vote thereon were
presented and voted. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in
writing. Action taken pursuant to this paragraph shall be subject
to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the
Board of Directors of the Corporation. The Board of Directors
shall have the authority to fix the compensation of the members
thereof. The use of the phrase "whole board" herein refers to
the total number of directors which the corporation would have
if there were no vacancies.
QUALIFICATIONS AND NUMBER. A director need not be a stockholder,
a citizen of the United States, or a resident of the State of
Delaware. The initial Board of Directors shall consist of _3___
persons. Thereafter the number of directors constituting the
whole board shall be at least one. Subject to the foregoing
limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or of
the directors, or, if the number is not fixed, the number shall be,
__7__. The number of directors may be increased or decreased by
action of the stockholders or of the directors.
ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation,
shall be elected by the incorporator or incorporators and shall hold
office until the first annual meeting of stockholders and until their
successors are elected and qualified and until or until their earlier
resignation or removal. Any director may resign at any time upon written
notice to the corporation. Thereafter, directors who are elected at an
annual meeting of stockholders, and directors who are elected in the
interim to fill vacancies and newly created directorships , shall hold
office until the next annual meeting of stockholders and until their
successors are elected and qualified or until their earlier resignation
or removal. Except as the General Corporation Law may otherwise require,
in the interim between annual meetings of stockholders or of special
meetings of stockholders called for the election of directors and/or
for the removal of one or more directors and for the filling of any
vacancy in that connection, newly created directorships and any
vacancies in the Board of Directors, including unfilled vacancies
resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors
then in office, although less than a quorum, or by the sole remaining
director.
MEETINGS.
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held
as soon after its election as the directors may conveniently assemble.
PLACE. Meetings shall be held at such place within or without the
State of Delaware as shall be fixed by the Board.
CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or
at the Direction of the Chairman of the Board, if any, the Vice-Chairman
of the Board, if any, of the President, or of a majority of directors
in the office.
NOTICE OR ACTUAL OR CONSTRUCTION OF WAIVER. No notice shall be
required for regular meetings for which the time and place have been
fixed. Written, oral, or any other mode of notice of the time and
place shall be given for special meetings in sufficient time for the
convenient assembly of directors thereat. Notice need not be given to
any director or any member of a committee of directors who submits a
written waiver of notice signed by him before or after the time stated
therein. Attendance of any such person at a meeting shall constitute
waiver of notice of such meeting, except when he attends a meeting for
the express purpose of objecting, at the beginning of a meeting, to the
transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transact at, nor the purpose of,
any regular or special meeting of the directors need to be specified
in any written waiver of notice.
QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the
whole Board. A majority of the directors present, whether or not a
quorum is present, may adjourn a meeting to another time and place.
Except as herein otherwise provided by the General Corporation Law, the
vote of the majority of directors present at a meeting at which a quorum
is present shall be the act of the Board. The quorum and voting provisions
therein stated shall not be construed as conflicting with any provisions
of the General Corporation Law and these Bylaws which govern a meeting
of directors held to fill vacancies and newly created directorships in
the Board or action of disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or
any such committee, as the case may be, by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and
if present or acting, shall preside at all meetings. Otherwise,
the Vice-Chairman of the Board, if any and if present and acting,
or the President, if present and acting, or any other director of
the Board, shall preside.
REMOVAL OF DIRECTORS. Except as may otherwise be provided by
the General Corporation Law, any director or entire Board of Directors
may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or
disqualification of any member of any such committee or committees,
the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors
to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution
of the Board, shall have and may exercise the powers of authority of
the Board of Directors in the management of the business and affairs
of the corporation with the exception of any authority the delegation
of which is prohibited by Section 141 of the General Corporation Law,
and may authorize the seal of the corporation to be affixed to all
papers which may require it.
WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
<PAGE>
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President,
a Secretary, a Treasurer, and, if deemed necessary, expedient or
desirable by the Board of Directors, a Chairman of the Board, or
Vice-Chairman of the Board, an Executive Vice-President, one or more
other Vice-Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers with such titles as the
resolutions of the Board of Directors choosing them shall designate.
Except as may be otherwise provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or
Vice-Chairman of the Board, if any, need be a director. Any number
of offices may be held by the same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him,
each officer shall be chosen for a term which shall continue
until the meeting of the Board of Directors following the next
annual meeting of stockholders and until his successor shall have
been chosen and qualified.
All officers of the corporation shall have such authority and
perform such duties in the management and operation of the corporation
as shall be prescribed in the resolutions of the Board of Directors
designating and choosing such officers and prescribing their authority
and duties, and shall have such additional authority and duties as are
incident to their office except to the extent that such resolutions
may be inconsistent therewith. The Secretary or an Assistant Secretary
of the corporation shall record all of the proceeds of all the meetings
and actions in writing of stockholders, directors, and committees of
directors, and shall exercise such additional duties as the Board shall
assign to him. Any officer may be removed, with or without cause, by
the Board of Directors. Any vacancy, in any office, may be filled by
the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
<PAGE>
ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and
the provisions of the General Corporation Law, the power to amend,
alter, repeal these Bylaws and to adopt new Bylaws may be exercised
by the Board of Directors or by the stockholders.
I hereby certify that the foregoing is full, true and a correct
copy of the Bylaws of _Scientific Technologies__, a Delaware corporation
as in effect on the date hereof.
Dated: May 11, 1998
Insert signature.
STATE OF DELAWARE CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
Scientific Technologies, Inc. a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Director of Scientific
Technologies, Inc. resolution were dully adopted setting forth a
proposed amendment of the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and calling
a meeting of the stockholders of said corporation for consideration
thereof. The resolution setting forth the proposed amendment is as
follows: RESOLVED, that the Certificate of Incorporation of this
corporation be amended by changing the Article thereof numbered "1"
so that, as amended, said Article shall be and read as follows:
THE NAME OF THIS CORPORATION IS `NORTHSTAR ELECTRONICS, INC.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said corporation
was dully called and held upon notice in accordance with Section 222
of the General Corporation Law of the State of Delaware at which
meeting the necessary number of shares a required by statue were
voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the
State of Delaware.FOURTH: That the capital of said corporation shall
not be reduced under or by reason of said amendment.
IN WITNESS WHEREOF, Said Corporation has caused this certificate to
be signed by Wilson Russell, an Authorized Officer, This 19 day of
August, 1999.
BY: /s/ Wilson Russell
NAME: Wilson Russell
Title: President/Directors
Witnessed By: /s/Frank Power
Name: Frank Power
Title: Director.
State of Delaware: time stamp
Secretary of State
Division of Corporations
Filed 09:00AM 08/26/1999
#991360794-2480085
November 3, 1999
Northstar Electronics, Inc.
Suite 1455 - 409 Granville Street
Vancouver, B.C. V6C 1T2
Re: Registration Statement on Form SB-1
Dear Sirs:
You have requested that I provide an opinion of counsel with respect
to the issuance of certain common shares of Northstar Electronics, Inc.
(the "Company") for inclusion in your filing with the Securities and
Exchange commission("SEC") of the Registration Statement Form SB-1
("SB-1"). More specifically, you have asked that I provide an opinion
as to whether the shares registered in the SB-1 are, or will be deemed
validly issued, fully paid and non-assessable.
I have been retained as outside counsel by the Company only to render
the above noted opinion and have not provided the Company with other
services in connection with the preparation and filing of the SB-1.
In preparing my opinion, I have reviewed the SB-1 document filed with
the SEC, the Articles of Incorporation and By-Laws of the Company,
applicable Minutes of the Board of Directors of the Company, and
various other documents incident to the issuance of said shares.
Based on the foregoing, and assuming the accuracy and completeness of
all information supplied by the Company, and having regard for the
legal considerations which I deem relevant, I am of the opinion that
(1) the Company is a corporation duly organized and validly existing
under the laws of the state of Delaware; (2) the Company has taken all
requisite corporate action and all action required by laws of the state
of Delaware with respect to the authoriaztion, issuance, and sale of the
Company's common stock to be registered by its Registration Statement
Form SB-1; (3) the 200,000 shares issued in January, 1999, under an
exemption to registration under Reg-S, and intended to be registered
in the current SB-1 filing, have been validly authorized and issued,
and are fully paid and non-assessable; and (4) the 800,000 shares to be
offered under the SB-1 registration at an offering price of $1.00 per
share, when issued and distributed pursuant to the offering statement,
will be validly authorized and issued, and fully paid and non-assessable
shares of the common stock of the Company.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 3.2 to the Registration Statement on
Form SB-1 and to any referance to my services in the prospectus.
Yours truly,
/s/ Jeffrey A. Nichols
Jeffrey A. Nichols
388 Market St.
Suite 500
San Francisco, CA 94111
Phone: 415/433-1178
Fax: 415/433-1182
MANAGEMENT'S DISCUSSION OF FINANCIAL STATEMENTS
Northstar's wholesale revenues were US $168,736 for nine months ending
December 31, 1998 and US $171,770 for seven months ending July 31, 1999.
The gross profit was 48% for the nine months ended December 31, 1998 and
58% for the seven months ending July 31, 1999. Northstar's assets as of
July 31,1999 totaled US $885,184. Long-term debt of US $489,739 consists
of government interest-free loans and a loan of US $160,000 payable to
Pathfinder Enterprises, Inc., a company controlled by a shareholder of
Northstar, with monthly interest payments only to July 2002, secured by
a floating charge debenture. There are shareholder loans of US $159,113
with no fixed terms of repayment. Northstar has an accumulated deficit
of US $609,939 as of July 31,1999.
<PAGE>
Index to Financials
i) Northstar Electronics, Inc. for period of 7 months ending July
31, 1999 Consolidated and unaudited.
ii) Northstar Technical, Inc. audited financials
for period ending December 31,1998 includes
auditors report.
iii) Northstar Technical unaudited financial
statements for period ending July 31, 1999.
iv) Northstar Technical unaudited financial statments
for period ending September 30, 1999.
- ------------------------------------------------------------------------
i) NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED BALANCE SHEET
(Unaudited)
FOR THE 7 MTHS ENDED JULY 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current US$
Bank and term deposit 45,456.60
Receivables 153,358.07
Inventory 83,860.14
Prepaid Expenses 2,549.06
==========
285,223.87
Capital Assets 24,759.53
Deferred development costs Netmind/contract 575,201.06
599,960.59
==========
885,184.46
LIABILITIES
Current
Payables and accruals 73,187.01
Loans payable (Note 2) 13,779.80
==========
86,966.81
Long term debt ( Note 3) 489,738.61
Loans payable to Cabot Management Limited, no set terms of repayment 79,225.70
Loans payable to shareholders, no set terms of payment 79,887.91
==========
648,852.22
SHAREHOLDERS' EQUITY
Share Capital (Note 4) 971,335.44
Earnings (loss) for period (212,030.52)
Deficit (609,939.49)
==========
149,365.43
885,184.46
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
INTERNAL CONSOLIDATED INCOME STATEMENT
(Unaudited)
FOR THE 7 MONTHS ENDED JULY 31, 1999
US$
Revenue
Sales 171,769.89
Interest Income 652.93
==========
172,422.83
Less cost of goods sold 72,812.34
99,610.49
Expenses
Business Development 1,277.16
Business Tax 128.05
Commissions 30,866.67
Depreciation 54,407.64
Dues and fees 3,234.33
Exchange (9,005.94)
Insurance 1,047.37
Interest and Bank 20,553.57
Lab Expenses 84,662.08
Management Fees 36,666.67
Marketing 1,492.81
Misc. 928.18
Office Expenses 27,445.49
Professional Fees 32,553.77
Rent 16,792.09
Salaries/Wages/employee benefits 49,732.57
----------
352,782.53
Less: allocation to Deferred Technology (41,141.52)
==========
311,641.01
Earnings (loss) (212,030.52)
NOTES:
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
NOTES TO INTERNAL INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
JULY 31, 1999
. Accounting treatment
This internal interim consolidated balance sheet has been prepared
by combining the July 31st, 1999 internal non-consolidated balance
sheet of Scientific Technologies Inc. and the internal balance sheet
of NTI. On consolidation all intercompany receivable and payable
balances have been eliminated.
. Short term loans
9% TD Select Line of credit $ 3,400
Short term loan Eastern Meridian per specific terms,
(repaid in full October, 1999) $10,379
=======
$13,779
. Long Term Debt
10% loan payable to Pathfinder Enterprises Inc. in monthly
interest payments only to July 5, 2002 $160,000
ACOA (Federal Government Agency) interest free loan repayable
in sixty monthly and consecutive installments of $2,170. $130,221
ACOA (Federal Government Agency) interest free loan repayable
in twenty-four monthly and consecutive installments of $4,167 $100,000
10% loan payable to Enterprise Newfoundland and Labrador in monthly
interest payments plus principal amount payable on demand. $ 12,841
(cont.)
NORTHSTAR ELECTRONICS, INC.
(FORMALLY SCIENTIFIC TECHNOLOGIES, INC.)
NOTES TO INTERNAL INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
JULY 31, 1999
. Long Term debt (cont.)
ACOA (Federal Government Agency) interest free loan repayable in 36
monthly and consecutive installments of $4,373 beginning when full loan
draw down is received. Secured by postponements on Cabot Management
Limited's loan of $87,224 and a shareholders' loan $12,707
$ 86,676
========
$489,738
. Capital Stock
Authorized
20,000,000 preferred shares at $0.0001 par value
100,000,000 common shares at $0.0001 par value
. Issued and outstanding
7,614,493 common shares 761
Additional paid in capital 970,574
========
$971,335
</TABLE>
- -------------------------------------------------------------------------
<PAGE>
ii) NORTHSTAR TECHNICAL INC. St. John's, Newfoundland
FINANCIAL STATEMENTS
Audited
December 31, 1998
SULLIVAN, LEWIS AND WHITE-Charter Accountants
AUDITORS' REPORT-To the Shareholders of NTI
We have audited the balance sheet of NTI as of December 31, 1998
and the statements of loss and deficit and changes in cash resources
for the nine months then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the company as at December
31, 1998 and the results of its operations and the changes in its cash
resources for the nine months then ended in accordance with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the
company will continue as a going concern. To date the company's
operations are mainly in the development stages and has not established
revenues sufficient to cover its operating costs. It is management's
opinion that the company's main NETMIND division and the new contract
manufacturing division will generate future revenues sufficient to cover
all costs and result in annual net incomes. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
St. John's, Newfoundland /s/ Sullivan, Lewis and White
July 14, 1999 Chartered Accountants
NORTHSTAR TECHNICAL INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, March 31,
ASSETS 1998 1998
Current
Bank $1,238 $3,829
Receivables (Note 2) 148,583 228,052
Work in progress 3,688 7,101
Inventory 52,591 88,356
Prepaid expenses 2,269 4,127
208,369 331,465
Capital assets (Note 3) 25,523 27,733
Deferred development costs (Note 4) 768,311 824,744
Deferred charges (Note 5) 110,287 82,305
$1,112,490 $1,266,247
LIABILITIES
Current
Payables and accruals $212,038 $199,556
Loans payable (Note 6) 158,815 138,790
Long term debt payable within one year (Note 7) 10,716 127,340
381,569 465,686
Long term debt (Note 7) 704,630 588,006
Loans payable to Cabot Management Limited, no set terms
of repayment (Note 8) 138,339 136,530
Loans payable to shareholder, no set terms of repayment 120,370 83,602
1,344,908 1,273,824
========= =========
Contingent liability (Note 9)
SHAREHOLDERS' DEFICIENCY
Share capital (Note 10) 622,453 605,372
Deficit (854,871) (612,949)
(232,418) (7,577)
$1,112,490 $1,266,247
</TABLE>
ON BEHALF OF THE BOARD:
___/s/Dr. Wilson Russell Director
__/s/Mr. Frank Power Director
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 3.
STATEMENT OF LOSS AND DEFICIT
NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Year
Ended Ended
December 31, March 31,
1998 1998
Revenue $252,565 $272,631
Direct costs 147,155 140,891
Gross profit 105,410 131,740
Other income 8,231 13,934
113,641 145,674
Expenses
Amortization of capital assets 6,992 15,917
Amortization of deferred development costs 72,224 87,621
Bank charges and interest 15,608 16,196
Contract manufacturing division (Note 11) 72,341 126,008
Heat and light 1,905 10,343
Insurance 1,838 2,027
Interest on loans 43,911 55,963
Management and marketing fees 4,992 16,235
Marketing/Market Research costs 3,606 5,742
Municipal taxes 1,249 2,960
Miscellaneous 5,194 3,855
Office operating 10,240 18,859
Professional fees 17,138 35,296
Rent 32,435 37,685
Repairs and maintenance 2,423 4,693
Telephone 9,590 11,184
Travel 3,739 6,865
Wages and benefits 50,138 66,992
Write off obsolete inventory stock - 14,405
Less: Allocation to deferred development costs - (149,808)
355,563 389,038
Net loss (Note 12) (241,922) (243,364)
Deficit, beginning of period (612,949) (351,303)
(854,871) (594,667)
Dividends paid on preference shares - (42,282)
Discount earned on redemption of Class A preference
shares - 24,000
Deficit, end of period $(854,871) $(612,949)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 4.
STATEMENT OF CHANGES IN CASH RESOURCES
NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Cash provided by (used in)
Operations
Net loss $(241,922) $(243,364)
Amortization 104,667 124,114
Net change in non-cash working capital items 153,012 10,434
15,757 (108,816)
Financing
Proceeds from long term debt - 130,015
Proceeds from issuance of common shares 17,081 595,287
Advances from Cabot Management Limited 1,809 5,694
Advances from shareholder 36,768 70,043
Repayment of long term debt - (30,000)
Discount on redemption of preference shares - 24,000
Redemption of preference shares - (84,000)
Payment of dividends on preference shares - (42,282)
Conversion of Class C preference shares - (287,333)
55,658 381,424
Investments
Increase in deferred charges - net (53,433) (102,881)
Increase in deferred development cost - net (15,791) (152,496)
Purchase of capital assets, net of investment
tax credits (4,782) (11,304)
(74,006) (266,681)
Net change in bank position (2,591) 5,927
Bank position, beginning of period 3,829 (2,098)
Bank position, end of period $1,238 $3,829
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
SULLIVAN, LEWIS AND WHITE
NORTHSTAR TECHNICAL INC. 5.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Significant accounting policies
a. Capital assets
Capital assets are recorded at cost less any government assistance and
are being amortizated over their estimated useful lives using the rates
and methods set out below:
Computer equipment 20% on a declining balance basis
Computer software 30% on a declining balance basis
Office furniture and equipment 20% on a declining balance basis
Leasehold improvements 20% on a straight line basis
b. Deferred development costs
All costs, including share of overhead costs, associated with the
development of the NETMIND System have been capitalized in these financial
statements as deferred development costs. These costs are being amortized
against income on a straight line basis over a period of ten years. If it
becomes evident in a given year that the sales market for this technology
declines , then the remaining costs will be amortized over a shorter period.
The company acquired the initial technology for the NETMIND System from the
receiver of National Petroleum and Marine Consultants Limited and Altair
Marine Systems Limited for the sum of $ 1. Prior to going into receivership,
these two companies had spent approximately $ 1,740,408 on the development of
this technology. To date NTI has spent $ 1,847,795 on this technology,
including overhead costs of $ 621,430, which has been reduced by various
assistance and tax credits totalling $ 879,546 as referred to in Note 4.
c. Deferred charges
Deferred charges consist of initial planning, startup and overhead
costs related to contract manufacturing in association with
Lockheed Martin - Federal Systems Inc. These costs amounted to
$ 156,314 at December 31, 1998, as referred to in Note 5, and are
being amortized on a straight line basis over a five year term.
d. Inventory
The company's inventory is valued at the lower of cost and net
realizable value.
e. Investment tax credits
Investment tax credit refunds arising from the incurrence of
qualifying research and development expenditures have been recorded
in these financial statements as a reduction of the applicable deferred
development costs.
f. Government assistance
The company has been awarded assistance under government programs.
Amounts received or receivable under these programs are recorded
as a reduction in the cost of capital assets or as a reduction of the
applicable deferred development costs.
NORTHSTAR TECHNICAL INC. 5a.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
2. Receivables
============================================================
December 31, March 31,
1998 1998
Trade $20,200 $137,701
Government assistance - 22,486
Investment tax credit refunds 128,383 67,865
$148,583 $228,052
======== ========
</TABLE>
3. Capital assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
==============================
December 31, March 31,
1998 1998
--------------------------------------------
Cost Accumulated Net Book Net Book
Amortization Value Value
Computer equipment $6,654 $3,170 $3,484 $4,099
Computer software 8,892 5,681 3,211 3,945
Furniture and equipment 34,350 16,906 17,444 17,286
Leasehold improvements 15,872 14,488 1,384 2,403
$65,768 $40,245 $25,523 $27,733
======= ======= ======= =======
</TABLE>
4. Deferred development costs
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, March 31,
1998 1998
Wages and benefits $693,362 $608,461
Materials and other costs 173,736 165,160
Subcontractors 359,267 359,267
Overhead 621,430 621,430
1,847,795 1,754,318
Less:
Government assistance 380,133 362,965
Other assistance 61,685 61,685
Investment tax credits 437,728 377,210
968,249 952,458
Less: Amortization 199,938 127,714
$768,311 $824,744
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
5. Deferred charges - Contract Manufacturing Division
============================================================
December 31, March 31,
1998 1998
Planning and start up costs $28,951 $28,951
Overhead costs (Note 10) 127,363 73,930
156,314 102,881
Less: Amortization of deferred charges 46,027 20,576
$110,287 $82,305
======== ========
6. Loans payable
============================================================
December 31, March 31,
1998 1998
10% loan payable to Enterprise Newfoundland
and Labrador in monthly interest payments
plus principal amount payable on demand $20,473 $22,451
12% loan payable to Eastern Meridian Mining
Corporation including accrued interest, to be
repaid in full by March 1, 1999, secured by the
personal guarantee of Wilson Russell 83,036 75,939
Loan payable to Toronto-Dominion bank,
secured by the personal guarantee of
Wilson Russell. This loan was repaid
in full on September 24, 1998 0 20,000
Loan payable to Brian Gamberg repaid in full
on April 15, 1998 0 20,400
Loan payable to Dr. Carl Wesolowski 55,306 0
7.Long Term Debt $158,815 $138,790
======== ========
============================================================
December 31, March 31,
1998 1998
ACOA 7.5% loan with monthly principal repayments
of $ 3,256 commencing June 1, 2000 $195,331 $195,331
ACOA 10.9 % loan with monthly principal repayments
of $ 1,786 beginning July 1, 1999 150,000 150,000
10% loan payable to Pathfinder Enterprises Inc. in
monthly interest payments only to July 5, 2002,
secured by a floating charge debenture 240,000 240,000
ACOA 6.25% loan repayable in 72 monthly consecutive
instalments of $ 3,280 beginning July 1, 2000 if full
loan draw down is received. Secured by postponements
on Cabot Management Limited's loans of $ 130,836 and
shareholders' loan of $ 19,060 130,015 130,015
715,346 715,346
Less: Long term debt payable within one year 10,716 127,340
$704,630 $588,006
======== ========
8. Loans payable - Cabot Management Limited
Cabot Management Limited, an associated company, has the option to
convert their interest free loans, totalling $ 138,339 at December
31, 1998, to common shares of Scientific Technologies Inc. (See Note 13)
9. Contingent liability
The company is presently involved in a dispute with their distributing
agent, whose contract has now been terminated due to non-payment for
NETMIND systems sold to them. This termination has lead to court action,
the outcome of which is unknown as at the financial statements date.
10. Share capital
============================================================
December 31, March 31,
1998 1998
Authorized
An unlimited number of Class A common shares
with no par value
An unlimited number of Class A preference shares
with no par value
An unlimited number of 10% redeemable, retractable,
cumulative, non-voting, participating Class B preference
shares with no par value
An unlimited number of 10% redeemable, retractable,
cumulative, non-voting, participating Class C preference
shares with no par value
Issued and outstanding 14,704,440 Class A common shares $622,453 $605,372
11. Contract Manufacturing Division
Nine Months Year
Ended Ended
December 31, December 31,
1998 1998
Amortization of deferred charges (Note 5) $25,451 $20,576
Contract labor 0 25,000
Operating expenses 1,199 63,356
Salaries and benefits 105,667 136,038
Less: Direct costs on contract with Lockheed
Martin - Federal Systems, Inc. 0 (25,133)
Wage subsidy/NRC funding (6,543) (19,899)
125,774 199,938
Less: Allocation to deferred charges (Note 5) (53,433) (73,930)
$72,341 $126,008
======== ========
</TABLE>
12. Income taxes
The company has losses carried forward totalling $ 1,531,226 which have
not been recognized in these financial statements. These losses carried
forward can be applied against otherwise taxable income and if unused will
expire in the following years:
December 31, 1999 - $3,811
December 31, 2001 - $37,523
December 31, 2002 - $94,492
December 31, 2003 - $512,179
December 31, 2004 - $367,846
December 31, 2005 - $515,375
Also the company's book values of deferred development costs and deferred
charges exceeds their income tax values by $ 878,598 as at December 31, 1998.
The net deferred income taxes debit related to both of these items have not
been reflected in these financial statements.
13. Subsequent event
On January 26, 1999 the merger between NTI and Scientific Technologies
Inc. was completed which resulted in Northstar Technical Inc. becoming a
wholly owned subsidiary of Scientific Technologies Inc., a US public
trading company.
On January 15, 1999 and January 26, 1999 the shareholders of Northstar
Technical Inc. exchanged their 14,704,440 common shares for 4,901,480 common
shares in Scientific Technologies Inc. on the basis of three Northstar shares
for every one share of Scientific.
SULLIVAN, LEWIS AND WHITE
- -------------------------------------------------------------------------
<PAGE>
iii) Northstar Technical Inc.
St. John's, Newfoundland
Internal
Unaudited Financial Statements
July 31,1999
Northstar Technical Inc.
Balance Sheet
As at July 31, 1999
Unaudited
<TABLE>
<CAPTION>
<S> <C> <C>
Current Year Ended
Balance Dec. 31, 1998
Assets
Current
Bank 28,275.60 1,237.72
Accounts Receivable 230,037.10 148,582.94
Inventory 125,790.21 56,279.65
----------- ----------
387,926.50 208,368.34
Fixed Assets, Net of Accumulated Depreciation
Computer Equipment St. John's 6,637.49 6,142.51
Accum Deprec. Computer SA (3,274.47) (2,908.51)
Computer Equipment Vancouver 1,808.16 511.38
Computer Software St. John's 9,137.86 8,891.88
Accum Deprec. Software SJ (6,258.10) (5,680.88)
Accum Deprec. Computer SJ (261.38) (261.38)
Furniture and Equipment St. John's 33,575.99 30,590.09
Accum Deprec. Furn St. John's (16,518.87) (14,650.29)
Furniture and Equipment Vancouver 3,759.64 3,759.64
Accum Deprec. Furn & Equip VA (2,462.07) (2,255.64)
Lab Equipment 11,369.97 0.00
Leasehold Improvements SA 15,163.31 14,488.23
Amortization St. John's (15,538.23) (14,488.23)
------------ ------------
Total Fixed Assets 37,139.30 25,522.80
Deferred Technology Costs
Deferred Technology Costs 1,186,275.77 1,124,563.49
Amortization Deferred Tech. (323,474.18) (245,965.21)
------------ ------------
Total Deferred Technology Costs 862,801.59 878,598.28
------------ ------------
Total Assets 1,287,867.39 1,112,489.42
============ ============
Northstar Technical Inc.
Liabilities and Shareholders' Equity
As at July 31, 1999
Unaudited
Liabilities
Current Year Ended
Balance Dec. 31, 98
Current
Payables and Accruals 47,185.18 80,567.36
Trade Payables 49,376.33 128,415.22
Total Current Liabilities 96,561.51 208,982.58
Short Term Loan
Accounts Payable adventure 0.00 55,305.76
A/P Eastern Meridian Mining 15,569.54 83,036.27
Loan Payable (TD 32101169) 5,100.16 0.00
Total 20,669.70 138,342.03
Long Term Liabilities
Adventure Capital 240,000.00 240,000.00
Acoa Provisonally Repayable 325,346.00 325,346.00
Acoa Action Loan 150,000.00 150,000.00
Cabot Management 118,838.55 138.338.55
Accounts Payable Enl 19,261.91 20,473.23
Due to STI 679,024.85 3,055.40
Shareholders Loans Russel 64,831.87 120,369.55
Total Long Term Liabilities 1,597,303.18 997,582.73
Equity
Shareholders Equity
Common W. E. Russel 80.00 80.00
Common Adventure Capital 10,000.00 10,000.00
Common J. Radford 5.00 5.00
Class A Common Shareholders 612,368.31 612,368.31
Total Shareholders' Equity 622,453.31 622,453.31
Retained Earnings (854,871.23) (854,871.23)
Profit (Loss) For period (194,249.08) 0.00
Total (1,287,867.39) (854,871.23)
Total Liabilities and Equity 1,287,867.39 1,112,489.42
Northstar Technical Inc.
Accounts Receivable
As at July 31, 1999
Unaudited
Current Year Ended
Balance Dec. 31, 1998
Accounts Receivable
Accounts Receivable Control 148,665.04 20,051.40
A/R Employee Advances 500.00 0.00
A/R HST 20,206.12 0.00
A/R SR&ED 60,517.54 128,382.54
A/R Other 148.40 149.00
Total Receivable 230,037.10 148,582.94
Northstar Technical Inc.
Consolidated Departments
Statements of Earnings
7 Periods Ended July 31, 1999
Unaudited
Current Current
Month YTD
Revenue:
Sales/Contract/Misc Revenue 220.17 257,654.84
Revenue 220.17 257,654.84
Cost of goods sold
Cost of goods sold 552.37 109,218.51
Total cost of goods sold 552.37 109,218.51
Gross Profit (332.20) 148,436.33
Add Government support
Total Government Support 0.00 0.00
Total (332.20) 148,436.33
Expenses:
Lab Expenses 24,597.02 126,993.12
Business Tax (428.91) 192.08
Depreciation 67,421.07 81,611.46
Interest 4,618.52 30,350.25
Office Expenses 2,277.50 38,327.26
Salaries/wages/Emp/ Benefits 11,284.39 74,598.86
Professional Fees 2,645.00 23,326.24
Rent 3,633.75 25,188.14
Insurance 274.34 1,571.06
Marketing 525.00 2,239.22
Less: Allocation to deffered Technology Cost (61,712.28) (61,712.28)
55,135.40 342,685.41
Earnings (Loss) (55,467.60) (194,249.08)
Earnings (Loss) Before Income Taxes (55,467.60) (194,249.08)
Net Earnings (Loss) For Period (55,467.60) (194,249.08)
</TABLE>
- --------------------------------------------------------------
iv) NORTHSTAR ELECTRONICS INC
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
(Unaudited)
September 30, 1999
C O N T E N T S
Page
Interim Consolidated Balance Sheet 1
Interim Consolidated Income Statement 2
Interim Consolidated Statement of Shareholders' Equity 3
Interim Consolidated Statement of Changes in Cash Resources4
Notes to Interim Consolidated Financial Statements 5
NORTHSTAR ELECTRONICS, INC.
INTERIM CONSOLIDATED BALANCE SHEET
(U.S. Dollars)
(Unaudited)
September 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
(Note 4) September 30, December 31,
1999 1998
Current
Cash $13,471 $2,231
Receivables 275,229 99,055
Inventory 83,029 37,519
Prepaid expenses 4,393 1,513
376,122 140,319
Capital Assets 25,431 17,016
$401,553 $157,335
LIABILITIES
Current
Payables and accruals $86,784 $167,541
Loans payable 27,026 116,039
113,810 283,580
Long term debt ( Note 2) 526,061 476,897
Loans payable to Cabot Management Limited 77,959 92,226
Loans payable to shareholder 63,740 80,246
Contigent liabilites (Note 5) -0- -0-
Total Liabilites 781,570 932,949
SHAREHOLDERS' EQUITY
Share Capital (Note 3) 1,003,069 440,069
Deficit (1,383,086) (1,215,684)
(380,017) (775,615)
$401,553 $157,334
</TABLE>
NORTHSTAR ELECTRONICS, INC.
INTERIM CONSOLIDATED INCOME STATEMENT
(U.S. Dollars)
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
(Note 4)
Nine Months Nine Months
Ended Ended
September 30, 1999 December 31, 1998
Sales $321,013 $168,377
Cost of goods sold 112,862 98,103
Gross profit 208,151 70,274
Expenses
Business Development 1,430 -
Business Tax 271 833
Commissions 46,300 -
Depreciation 3,517 4,662
Dues and fees 5,010 -
Exchange 2,400 -
Insurance 1,410 1,226
Interest and bank charges 23,081 39,287
Lab Expenses 15,958 2,482
Marketing 4,592 5,061
Misc. 1,392 -
Office Expenses 69,490 27,573
Professional Fees 62,119 11,425
Rent 21,015 10,898
Salaries/Wages/employee benefits 117,568 75,030
Organizational cost - 38,000
Commitment fees - 10,000
Research and development cost - 10,527
Contract manufacturing cost - 35,622
375,553 272,626
Net loss (167,402) (202,352)
Deficit, beginning of period (1,215,684) (1,013,332)
Deficit, end of period $(1,383,086) $(1,215,684)
Net loss per share $(0.02) $(0.09)
Weighted average number of
common shares outstanding 6,971,244 2,140,000
</TABLE>
NORTHSTAR ELECTRONICS INC.
INTERIM CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(U.S. Dollars)
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Common Shares Additional Total
Number Amount Paid-In Capital Deficit Shareholders
Equity
Balance, 2,140,000 $214 $439,855 $(1,215,684) $(775,615)
December 31, 1998
Common shares
issued for
cash for
$1.00 per share
January 25, 1999 100,000 10 99,990
January 29, 1999 200,000 20 199,980
January 29, 1999 63,000 6 62,994
June 29, 1999 200,000 20 199,980
Common shares
on exchange 4,901,493 490 (490)
(Note 3a)
Balance,
September 30,1999 7,604,493 $760 $1,002,309 $(1,383,086) $(380,017)
</TABLE>
NORTHSTAR ELECTRONICS INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(U.S. Dollars)
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
(Note 4)
Nine Months Ended Nine Months Ended
September 30, 1999 December 31, 1998
Cash provided by (used in)
Operations
Net loss $(167,402) $(202,352)
Depreciation 3,517 4,662
Net change in non-cash working capital items (394,333) 138,352
(558,218) (59,338)
Financing activities
Proceeds from issuance of common shares 563,000 36,487
Proceeds from long term debt 50,355 -
Advances (to) from Cabot Management Limited (14,267) 1,206
Advances (to) from shareholder (16,506) 24,512
Repayment of long term debt (1,191) -
581,391 62,205
Investing activities
Purchase of capital assets (11,933) (3,189)
Increase in cash 11,240 (322)
Cash, beginning of period 2,231 2,553
Cash, end of period $13,471 $2,231
</TABLE>
NORTHSTAR ELECTRONICS INC. 5.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
1. Basis of presentation
These unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles in the United States for interim financial information.
These financial statements are condensed and do not include all
disclosures required for annual financial statements. The organization
and business of the Company, accounting policies followed by the
Company and other information are contained in the notes to the
Company's audited consolidated financial statements filed as part
of the Company's Registration Statement Form SB-1.
In the opinion of the Company's management, these financial statements
reflect all adjustments necessary to present fairly the Company's
consolidated financial position at September 30, 1999 and the
consolidated results of operations and the consolidated statement
of cash flows for the nine months ended September 30, 1999. The
results of operations for the nine months ended September 30, 1999
are not necessarily indicative of the results to be expected for the
entire fiscal year.
2. Long term debt
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1999 1998
10% loan payable to Pathfinder Enterprises Inc.
in monthly interest payments only to July 5, 2002 $160,000 $160,000
ACOA (Federal Government Agency) interest free
loan repayable in sixty monthly and consecutive
installments of $ 2,170 130,221 130,221
ACOA (Federal Government Agency) interest free
loan repayable in twenty-four monthly and
consecutive installments of $ 4,167 98,809 100,000
ACOA (Federal Government Agency) interest free
loan payable in 36 monthly and consecutive
installments of $ 4,373 beginning when full loan
draw down is received. Secured by postponements
on Cabot Management Limited's loan of $ 87,224
and a shareholders' loan of $ 12,707. 137,031 86,676
$526,061 $476,897
</TABLE>
NORTHSTAR ELECTRONICS INC. 5a.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
3. Capital stock
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1999 1998
Authorized
20,000,000 preferred shares at $ 0.0001 par value
100,000,000 common shares at $ 0.0001 par value
Issued and outstanding
7,604,493 common shares (1998 - 2,140,000) $760 $214
Additional paid in capital 1,002,309 439,855
$1,003,069 $440,069
</TABLE>
a) On January 15, 1999 and January 26, 1999 the shareholders of
Northstar Technical Inc. exchanged their 14,704,479 common shares
for 4,901,493 common shares of Northstar Electronics Inc. on the
basis of three Northstar Technical shares for every one share of
Northstar Electronics Inc. The value of these shares were $ 414,969.
b) Also during January, 1999 the company completed offerings for
363,000 shares of its common stock at $ 1.00 per share. Proceeds
from these offerings were $ 363,000.
c) On June 29, 1999 the company completed an offering for 200,000
shares of its common stock at $ 1.00 per share. Proceeds from this
offering was $ 200,000.
4. Comparative figures
The comparative figures were for the nine months ended December 31,
1998 as the nine months ended September 30, 1998 were not readily
available and there would be no material differences in these comparatives.
5. Contingent liability
The company is a defendant in a lawsuit commenced against
them by their former master distributor. The former distributor
has alleged that the company has interfered with the ability
of the former distributor to selll products. The company has
filed a counterclaim for monies owing by the former distributor
to the company. An adverse outcome to the lawsuit could have
an adverse material impact upon the company and the range of
possible loss could be from $ 0 to $ 1,300,000.
Purchase Order No.: 198422
Date: October 18, 1999
Seller: Northstar Technical, Inc.
687 Water Street
St. Johns NF A1C 6J9
Attn: Wilson Russell
PARTIES/TYPE OF CONTRACT
This `Firm Fixed Priced' Purchase Order between Lockheed Martin
Corporation (LMC) acting through its Underseas Systems business unit
(LMUSS) (hereinafter referred to as "Buyer") located at 9500 Godwin
Drive, Manassas, VA 20110 and NTI (hereinafter referred as "Seller")
located at 687 Water Street, St. Johns, New Foundland,
Canada is placed on the basis set forth herein.
The Buyer's procurement representative is the only person authorized to
approve changes to the terms and conditions or the requirements of the
Purchase Order. If the Seller complies with any order, direction,
interpretation, approval, or disapproval, conditional approval, or
determination (written or oral) from someone other than the Buyer's
procurement representative, it shall be at Seller's own risk and Buyer
shall not be liable for any increased cost or delay in performance in
accordance with the requirements set forth herein. The Seller shall
ensure that all Seller's personnel are aware of this provision.
Buyer is a signatory to the Defense Industry initiatives on Business
Conduct and Ethics (DII).
PRODUCT/SERVICES
Seller shall furnish the necessary personnel, materials, equipment,
and services required to accomplish the build, assembly, and test of
the Fire Control Consoles (FCC) in accordance with the requirements
of Statement of Work No. INT-98-001 dated March 10, 1998.
Price for all hardware and services will be in accordance with Schedule "A".
REQUIREMENTS/DATA
Work is to be performed in accordance with the following requirements data:
Attachment A: Multi-Function Work Station Statement of Work No. INT-98-001
dated 3/10/98 (Pages 1-42) and Appendix (38 Pages).
Attachment B: Schedule "A" Payment Schedule & Milestone Dependencies
(2 pages).
Attachment C: Lockheed Martin Corporation General Provisions, for
International Commercial Subcontracts/Purchase Orders (CORPDOC 1 INT
dated 3/99) (6 pages including coversheet).
Attachment D: Subcontract No. 198422 Prime Contract Flowdowns dated
10/4/99 (39 pages including coversheet).
Attachment E: Material Inspection and Receiving Report for Victoria
Class Submarine Fire Control System (2 pages including coversheet).
Attachment F: Certificate of Milestone Completion. (2 pages
including coversheet)
Attachment G: Public Works and Government Services Canada Loan
Agreement (6 pages including coversheet).
Attachment H: Vendor Shipping Procedural Instructions for Shipments
to the United States, Revision B, dated 9/02/99 (19 pages including
coversheet).
: LMUSS Property Loan Agreement No. 198422-001 (4 pages).
All drawings, specifications or other documents referenced in this
Purchase Order but not attached are incorporated and made a part by
this reference.
PERIOD OF PERFORMANCE AND/OR DELIVERY SCHEDULE
All articles, services and/or data shall be delivered in accordance
with Schedule A. Early delivery of completed milestones is acceptable.
<PAGE>
SHIPPING INSTRUCTIONS
All shipments should be sent to one (1) of the following addresses as
directed in writing by the LMUSS Procurement Representative:
Lockheed Martin Underseas Systems
9500 Godwin Drive
Manassas, VA 20110
Attn: Traffic 001/030
Base Commander W0100
Canadian Forces Base Halifax
Bldg 6, Willow Park
Windsor Street
Halifax, Nova Scotia
B3X 2X0
Shipping Terms: INCOTERMS 1990 DDP (Manassas, VA). Delivery shall
be to the locations specified above. The acceptance point of the
hardware is the NTI Facility in Newfoundland, Canada.
Customs Import Broker
All shipments to the LMUSS Facility will be cleared through the
following customs import broker and subject to the following document:
Emery Customs Broker
44901 Falcon Place, Suite 104
Sterling, VA 20166
Vendor Shipping Procedural Instructions for Shipments to the United
States, Revision B, dated 9/02/99.
Deliverables will be released for shipment using a Certificate of
Milestone Completion and Material Inspection and Receiving Report
for Victoria Class Submarine Fire Control System and will be prepared
by the Subcontractor and, when properly completed and signed, be
distributed via facsimile to the following address and point of contact:
Lockheed Martin Undersea Systems
9500 Godwin Drive
Manassas, VA 20110
Attention: David Batz
CONSIDERATION AND PAYMENT
BUYERS TOTAL LIABILITY/OBLIGATED FUNDS: This Purchase Order is fully
funded for the negotiated price. Therefore, the total commitment of
this Purchase Order is $ 1,910,848 (U.S. Dollars).
AUTHORIZATION TO PROCEED
Seller is not authorized to procure any material or hardware listed on
the Bill of Materials until receipt of written authorization from the
LMUSS Procurement Representative, David Batz.
INSPECTION AND ACCEPTANCE
FCC (10 EACH) MATERIAL RECEIVED LESS PROCESSORS:
Final Acceptance occurs when LMUSS and the Canada Department of National
Defense (DND) Design Authority approves Seller furnished documents
verifying receipt of acceptance material less processors. LMUSS and
the DND Design Authority shall provide written determination of its
findings within 10 days of receipt of the documents. After Final
Acceptance, these items will be made available to the Seller as
Government Furnished Equipment (GFE).
FCC (10 EACH) PROCESSORS RECEIVED:
Final Acceptance occurs when LMUSS and the DND Design Authority approves
Seller furnished documents verifying receipt and acceptance of processors.
LMUSS and the DND Design Authority shall provide written determination of
its findings within 10 days of receipt of the documents. After Final
Acceptance, these items will be made available to the Seller as GFE.
COMPLETE FIRE CONTROL CONSOLE (10 EACH):
The FCC's will be completed and presented for final acceptance. Inspection
for Final Acceptance shall be conducted in accordance with the Fire Control
Console Factory Acceptance Test (FAT) Procedures to be supplied as customer
furnished equipment by LMUSS. The FAT shall be conducted at the Seller's
facility in Canada. LMUSS and the DND Design Authority, at its option,
may witness FAT. Final Acceptance occurs when LMUSS and the DND Design
Authority approves Seller furnished documents verifying successful
completion of FAT. The DND Design Authority shall provide written
determination of its findings within 10 days of receipt of the documents.
ORDER OF PRECEDENCE
In the event of an inconsistency in this Purchase Order, unless otherwise
provided herein, the inconsistency shall be resolved by giving precedence
in the following order.
A) Subcontract 198422 Including Special Provisions
B) Schedule "A" Payment Schedule & Milestone Dependencies
C) Lockheed Martin Corporation General Provisions
D) Subcontract No. 198422 Prime Contract Flowdowns
E) Multi-Function Work Station Statement of Work No. INT-98-001
F) All other documents
<PAGE>
ACCEPTANCE
This Purchase Order is the entire agreement between Buyer and Seller.
It supersedes all prior agreements, oral or written and all other
communications relating to the subject matter of this Purchase Order.
Any terms contained in Seller invoices, acknowledgments, shipping
instructions or other forms that are inconsistent with or different
from this Purchase Order shall be void and of no effect.
This Purchase Order is executed in duplicate originals as of the date
specified on page one.
Please sign and return this Purchase Order to Buyer within ten (10) working
days after receipt.
Lockheed Martin Corporation
/s/ By: David W. Batz
Title: Sr. Subcontract Administrator
Date: October 18, 1999
Northstar Technical Inc.
/s/ By: Wilson E. Russell
Title: President & CEO
Date: October 18, 1999
<PAGE>
ATTACHMENT A
Multi-Function Work Station Statement of Work
Gage code #52088
Number INT 98-0001
March 10, 1998
1. SCOPE
This Statement of work (SOW) defines the subcontractor's
effort required to fabricate, test and deliver of the Muiti-Function
Work Station (MEWS) The Multi-Function Work Station is a form, fit
and function equivalent replacement for the MK1 Fire Control
Console. This console is used to evaluate to operational suitability
of a new generation Fire Control Consoles used on open architecture
and the use of COTS components.
2. Supplies and Services
The subcontractor shall furnish the necessary personnel, materials,
equipment. and services requirements to accomplish the development
of the Multi-Function Work Station in accordance with requirements
of this SOW. The supplies/services to be provided shall be as follows:
1) Equipment/manufacturing design-as defined in section 3.1
2) Multi-function work station-as defined in section 3.2
3) Project Management-as defined in section 3.3
4) Configuration Management-as defined in section 3.4
5) Test and Evaluation-as defined in section 3.5
3. Description of Items
This section contains the description and requirements far the item,
specified in Section 2. The subcontractor shall implement and adhere
to the plans identified in this section. Any significant deviations
from these plans shall be described and justified to LMPS.
3.1 Equipment Manufacturing Design (Item 1)
The high level packaging requirements for the Multi-Function Work
Station Unit are specified in sections 4.1.1 and 4.1.3. These
requirements. which define the form, fit and function equivalent
replacement for the MK1 Fire Control Console, are mandatory requirements
that must be met. The subcontractor shall redesign, modify, or use
"as is" these drawings to support the manufacture and fabrication of
these units.
3.2 Multi-Function Work Station Consoles (item 2)
The subcontractor shall fabricate, test and deliver 10 Multi-Function
Work Stations in accordance with the requirements as specified in
section 4 of this SOW. These units shall be bulit to best commercial
practices. The first unit shall be delivered 6 month. After Receipt of
Order (ARO) The other 9 units shall be delivered 9 months (ARO). Five
units shall be delivered to LMFS-Manassas. The other five units shall be
delivered to sites in Canada that will be specified after the award of
contract. Costs of the units shall include all hardware, manuifacturing,
and software licensing costs-
3.3 Project Management (Item 3)
The subcontractor shall establish a Project (program) Management
activity that coordinates and controls all program activities. The
project management shall schedule, control, monitor, and report program
activities,
3.4 Configuration Management (Item 4)
The subcontractor shall establish and maintain a program for configuration
management. The program stall include configuration management of the
Multi-Function Work Station, the special test and inspection equipment
and associated software used for Factory Acceptance Test (PE.
3.5 Test & Evaluation (item 5)
The subcontractor shall plan, implement, conduct, and document all testing
of the Multi-Function Work Station to demonstrate that it is 'built to
print'.The subcontractor shall provide the test facility, test equipment,
and personnel for testing of the Multi-Function work Stations.
3.5.1 Contractor Furnished Items:
IMES-Manassas shall provide the items as listed in section
to support test and evaluation of the Multi-Function Work Station.
The following Items will be funinshed by LMPS-Manassas to suppon Factory
Acceptance Tcsting/work Stations.
1. Personal Computer (DND Furnished Equipment)
2. LWK-20 a)ND Furnished Equipment)
3. All unit external cabling.
4. FAT procedures
5. FAT software
4. Multi-Function Work Station unit Description
4.1 Functional Description
The Multi-Function Work station is a format and function replacement
for the existing ANEGYO-5O1 FCC based on an open architecture and use
of COTS components. The enclosure of the work station is of welded
aluminum construction and designed to meet the requirements of MIL-STD
901 as mitigated by the shock isolated platforms. The enclosure houses
two state of the an flat panel displays and aruggedized standard 15 slot
VMS card cage. 6 out of the 15 slots are populated with commercial off
the shelf VME cards. The card set consists of 1 DY-4 PDM'er PC, 2
Sliver Graphics modules, 2 NTDS modules, and a Digital IEO module.
A desk assembly is added to the enclo sure to support Human to Machine
interface. The desk assembly consists of a bullnose housing a 486 DX CPU,
a 6 inch diagonal AMLC display with touch screen, and 6 input devices.
4.1.1 Console Form Factor
The critical dimensions of the Multi-Function Work Station are shown in
Figure 1 "Console" and Figure 2 "Connector Plate". These drawings define
the unit form factor needed for "drop in" replacement for the existing
AN/GYE5O1 FCC. The subcontractor shall not deviate from these dimensions
without approval from LMFS-Manassae.
4.1.2 Unit Functional Block Diagram
The funcional block diagram of the Multi-Function Work Station is shown
in Figure 3 "System Block Diagram". This diagram shows the functional
interface between various electronic components within the Multi-Function
Work Station
4.1.3 Environmental requirements
The Multi-Function Work Station enclosure is designed and manufactured
to meet the special environmental conditions as specified in MIL-SID- 901.
To assure that the console will meet tbe environment requirements, the
subcontactor shall not modify the enclosure design without approval from
LMFS-Manassas. Furthermore, the enclosure manufacturer as specified in the
parts list The same constraint shall also apply to the flat panel displays.
4.1.4 Manufacturing Drawings
Sets of manufacturing drawings and cabling lists are attached with this
document. These drawings are for reference use only. The subcontractor
shall modify use 'as is', or redo these drawings to support manufacturing
of the Multi-Function Work Station.
Attachment B
SUBCONTRACT # 198422
Schedule A
Schedule A- Payment schedule and Milestone Dependences-
This remains propriatary and sensisity material.
Attachment C- Subcontract # 198422
GENERAL PROVISIONS
LOCKHEED MARTIN CORPORATION GENERAL PROVISIONS
INTERNATIONAL COMMERCIAL SUBCONTRACTS/PURCHASE ORDERS
1 Acceptance of Contract/Terms and Conditions.
2 Applicable Laws
3 Assignment
4 Changes
5 Communication with Lockheed Martin Customer
6 Contract Direction
7 Default
8 Definitions
9 Disputes
10 Ecusable Delay
11 Export Control
12 Extras
13 Furnished Property
14 Gratuities/Kickbacks
15 Importer of Record
16 Independent Contractor Relationship
17 Information of Lockheed Martin
18 Information of Seller
19 Inspection and Acceptance
20 Insurance/Entry on Lockheed Martin's Property
1. ACCEPTANCE OF CONTRACT/TERMS AND CONDITIONS
(a) This Contract integrates, merges,and supersedes any prior offers,
negotiations and agreements concerning the subject matter
hereof and constitutes the entire agreement between the parties
(b) SELLER'S acknowledgment, acceptance of payment or commencement of
performance shall constitute SELLER's unqualified acceptance of
this Contract.
(c) Additional or differing terms or conditions proposed by SELLER
or included in SELLER's acknowledgment hereof are
hereby objected to by LOCKHEED MARTIN and have no effect
unless expressly accepted in writing
by LOCKHEED MARTlN.
2. APPLICABLE LAWS
(a) This Contract shall be governed by and construed in accordance
with the law of the State within the United States from which this
Contract is issued, excluding its choice of law rules.
b) SELLER agrees to comply with all applicable laws, orders, rules,
regulations and ordinances of the United States and the country
where SELLER will be performing the Contract. The provisions
of the "United Nations Convention on Contracts for International
sale of Goods" shall not apply to this contract.
c) If the Work is to be shipped to, or performed in the United
States:
(i) SELLER represents that each chemical substance
constituting or contained in Work transferred to
LOCKHEED MARTIN hereunder is on the list of
chemical substances compiled and published by the
Administrator of the Environmental Protection
Administration pursuant to the Toxic Substances Control
Act(l5 U.S.C. Sec. 2601 et seq.) as amended.
(ii) SELLER shall provide to LOCKHEED MARTIN with
each delivery any Material Safety Data Sheet applicable to
the Work in conformance with and containing such
information as required by the occupational Safety and
Health Act of 1970 and regulations promulgated
thereunder, or its State approved counterpart.
3. ASSIGNMENT
Any assignment of SELLER's contract rights or delegation of duties
shall be void, unless prior written consent is given by LOCKHEED
MARTIN.
4. CHANGES
(a) The LOCKHEED MARTIN Procurement Representative may
at any time, by written notice, and without notice to sureties
or assignees, make changes within the general scope of this
Contract in any one or more of the following: (I) drawings,
designs or specifications;(ii) method of shipping or packing;
(iii) place of inspection, acceptance or point of delivery; and
(iv) delivery schedule.
(b) If any such change causes an increase or decrease in the cost
of, or the time required for, performance of any part of this
Contract, LOCKHEED MARTIN shall make an equitable adjustment
in the Contract price and/or delivery schedule, and
modify the Contract accordingly. Changes to the delivery
schedule will be subject to a price adjustment only.
(c) Any claim for an equitable adjustment by SELLER must be
submitted in writing to LOCKHEED MARTIN within 30 days
agree in writing to a longer period.
d) Failure to agree to any adjustment shall be resolved in
accordance with the "Disputes' clause of this Contract.
However, nothing contained in this "Changes" clause shall
excuse SELLER from proceeding without delay in the
performance of this Contract as changed.
5. COMMUNICATION WITH LOCKHEED MARTIN
CUSTOMER
(a) LOCKHEED MARTIN shall be solely responsible for all
liaison and coordination with the LOCKHEED MARTIN
customer, as it affects the applicable prime contract, this
Contract, and any related contract.
(b) Unless otherwise directed in writing by the
authorized LOCKHEED MARTIN PROCUREMENT Representative, all
documentation requiring submittal to, or action by, the
LOCKHEED MARTIN customer shall be routed to, or through, the
LOCKHEED MARTIN Procurement Representative, or as otherwise
permitted by this contract.
6. CONTRACT DIRECTION
(a) Only the LOCKHEED MARTIN Procurement Representative,
has authority to amend this Contract. Such amendments must be
in writing.
(b) LOCKHEED MARTIN engineering and technical personnel may
from time to time render assistance or give technical advice or
discuss or effect an exchange of information with SELLER's
personnel concerning the Work hereunder. Such actions shall
not be deemed to be a change under the "Changes" clause of this
Contract and shall not be the basis for equitable adjustment.
(c) Except as otherwise provided herein, all notices to be furnished
by the SELLER shall be sent to the LOCKHEED MARTIN
Procurement Representative.
7. DEFAULT
(a) LOCKHEED MARTIN, by written notice, may terminate this
contract for default, in whole or in part, if SELLER fails to
comply with any of the terms of this Contract, fails to make
progress as to endanger performance of this Contract, or fails to
provide adequate assurance of future performance. SELLER
shall have ten ([0) days (or such longer period as LOCKHEED
MARTIN may authorize in writing) to cure any such failure after
receipt of notice from LOCKHEED MARTIN. Default
involving delivery schedule delays shall not be subject to the
cure provision.
(b) LOCKHEED MARTIN shall not be liable for any Work not
accepted; however, LOCKHEED MARTIN may require
SELLER to deliver to LOCKHEED MARTIN any supplies and
materials, manufacturing materials, and manufacturing drawings
that SELLER has specifically produced or acquired for the
terminated portion of this Contract. LOCKHEED MARTIN and
SELLER shall agree on the amount of payment for these other
deliverables.
(c) SELLER shall continue all Work not terminated.
(d) If under termination under paragraph(a), it is later determined
that SELLER was not in default, such termination shall be deemed a
Termination for Convenience.
8. DEFINITIONS
The following terms shall have the meanings set forth below:
(a) "Work" means all required articles, materials, supplies, goods,
and services constituting the subject matter of this Contract.
(b) "SELLER" means the party identified on the face of the contract
with whom LOCKHEED MARTIN is contracting.
(c) "LOCKHEED MARTIN", means LOCKHEED MARTIN
CORPORATION, acting through its companies, or business
units, as identified on the face of the Contract. If a subsidiary or
affiliate of Lockheed Martin Corporation is identified on the face
of the Contract than "LOCKHEED MARTIN" means that
subsidiary, or affiliate.
(d) "LOCKHEED MARTIN Procurement Representative" means the
person authorized by LOCKHEED MARTIN's cognizant
procurement organization to admister and/or execute this
Contract.
(e) "Contract" means the instrument of contracting, such as "PO".
"Purchase Order, or other such type designation, including all
referenced documents, exhibits and attachments. If these terms
and conditions are incorporated into a "master" agreement that
provides for releases, (in the form of a purchase order or other
such document) the term "Contract" shall also mean the release
document for the Work to be performed.
(f) "PO" or "Purchase Order" as used in any document constituting
part of this contract shall mean this contract.
9. DISPUTES
All disputes under this Contract which are not disposed of by mutual
agreement may be decided by recourse to an action at law or in
equity exclusively in a United States Court of competent jurisdiction
located in the State from which this contract is issued. Until final
resolution of any dispute, SELLER shall diligently proceed with the
performance of this Contract as directed by LOCKHEED MARTIN
10. EXCUSABLE DELAY
(a) Subject to (b) and wben mutually agreed by the parties,
SELLER shall be excused from, and shall not be liable for, failure
of performance due to one or more of the following qualifying
events (such list being exclusive):
(i) war; warlike operation; insurrection; riot; fire, explosion,
accident, governmental act; material control regulations
or orders; act of God; act of the pubfic enemy; epidemic;
and quarantine restriction; and if
(ii) Such event was beyond Seller's control and not
occasioned by its negligence or default. The contract will
be extended for that period of time attributable to such
event.
(b) In order to be excused from performance under (a) Seller shall
submit, within ten (10) calendar days of the start of the
qualifying event, a written notice stating a complete and
detailed description of such event, the date of commencement,
an estimate of the probable period of delay. and explanation
indicating how such event was beyond the control of the
SELLER and not due to Its negligence rr fault and what efforts
SELLER will make to minimize the length of delay. SELLER
shall submit within ten (10) calendar days of the end of the
event a written notice stating the impact to the schedule and
evidence justifying the length of the delay. If the delay extends
for thirty (3O) days or more this Contract may be terminated by
LOCKHEED MARTIN without additional cost.
(c) Failure of the United States Government to issue any required
export license, or withdrawal/termination or a required export
license by the United States Government shall relieve
LOCKHEED MARTIN of its obligations under this Contract,
and shall relieve SELLER of its' corresponding obligations.
11. EXPORT CONTROL
(a) Seller agrees to comply with all applicable United Statas export
control laws and regulations. Without limiting the foregoing,
Seller agrees that it will not transfer any export controlled item,
data or service, to include transfer to foreign nationals
employed by or associated with, or under contract to SELLER
or SELLER'S lower-TIER supplier, without the authority of an
Export License or applicable license exception.
(b) SELLER agrees to notify LOCKHEED MARTIN if any
deliverable work under this Contract is restricted by export
control laws or regulations.
12. EXTRAS
Work shall not be supplied in excess of quantities specified in the
Contract. SELLER shall be liable for handling charges and return
shipment costs for any excess quantities.
13. FURNISHED PROPERTY
(a) LOCKHEED MARTIN may provide to SELLER property
owned by either LOCKHEED MARTIN or its customer
(Furnished Property). Furnished Property shall be used only for
the performance of this Contract.
(b) Title to Furnished Property shall remain in LOCKHEED
MARTIN or its customer. SELLER shall clearly mark (if not so
marked) all Furnished Property to show its ownership.
(c) Except for reasonable wear and tear, SELLER shall be
responsible for, and shall promptly notify LOCKHEED
MARTIN of any loss or damage. Without additional charge,
SELLER shall manage, maintain, and preserve Furnished
Property in accordance with good commercial practice.
(d) At LOCKHEED MARTIN'S request, and/or upon completion of
this Contract the SELLER shall submit, in an acceptable form,
inventory lists of Furnished Property and shall deliver or make
such other disposal as may be directed by LOCKHEED
MARTIN.
14. GRATUITIES/KICKBACKS
No gratuities (in the form of entertainment, gifts or otherwise) or
kickbacks shall be offered or given by SELLER to any employee of
LOCKHEED MARTIN with a view toward securing favorable
treatment as a supplier.
15. IMPORTER OF RECORD
(Applies only if the Contract involves importation of Work into the
United States.)
(a) If elsewhere in the Contract LOCKHEED MARTIN is indicated
as importer of record, SELLER warrants that all sales hereunder
are or will be made at no loss than fair value under the United
States Anti-Dumping Laws (19 U.S.C. l673 et seq.).
(b) If elsewhere in the Contract LOCKHEED MARTIN is not
indicated as importer of record, then SELLER agrees that:
(i) LOCKHEED MARTIN will not be a party to the
importation or Works, the transaction(s) represented by this
contract will be consummated after importation, and SELLER
will neither cause nor permit LOCKHEED MARTIN'S name to
be shown as "Importer Of Record" on any customs declaration;
and
(ii) Upon request and where applicable, SELLER will
provide to LOCKHEED MARTIN Customs Form 7501 entitled
"Customs Entry", properly excecuted.
16. INDEPENDENT CONTRACTOR RELATIONSHIP
(a) SELLER is an independant contractor in all its operations and
activities hereunder. The employees used by SELLER to perform
Work under this Contract shall be SELLER's employees
exclusively without any relation whatsoever to LOCKHEED
MARTIN.
(b) SELLER shall be responsible for any costs or expenses including
attorneys' fees, all expenses of litigation and/or settlement, and
court costs, arising from any act or omission of SELLER, its
officers, employees, agents, suppliers, or subcontractors at any
tier, in the performance of any of its obligations under this
Contract.
17. INFORMATION OF LOCKHEED MARTIN
Information provided by LOCKHEED MARTIN to SELLER remains
the property of LOCKHEED MARTIN. SELLER agrees to comply
with the terms of any Proprietary Information Agreement with
LOCKHEED MARTIN and to comply with all Proprietary Information
markings and Restrictive Legends applied by LOCKHEED MARTIN
to anything provided hereunder to SELLER. SELLER agrees not to
use any LOCKHEED MARTIN provided information for any purpose
except to perform this Contract and agrees not to disclose such
information to third parties without the prior written consent of
LOCKHEED MARTIN.
18. INFORMATION OF SELLER
SELLER shall not provide any propietary information to
LOCKHEED MARTIN without prior execution by LOCKHEED
MARTIN of a proprietary information agreement.
19. INSPECTION AND ACCEPTANCE
(a) LOCKHEED MARTIN and its customer may inspect all
Work at reasonable times and p1aces, including, when
practicable, during manufacture and before shipment.
SELLER shall provide all information, facilities, and
assistance necessary for safe and convenient inspection
without additional charge.
(b) No such inspection shall relieve SELLER of Its obligations to
furnish all Work in accordance with the requirements of this
Contract. LOCKHEED MARTIN's final inspection and
acceptance shall be at destination.
(c) If SELLER delivers non-conforming Work, LOCKHEED
MARTIN may: (i) accept all or part of such Work at an
equitable price reduction; (ii) reject such Work; or (iii) make,
or have a third party make all repairs, modifications, or
replacements necessary to enable such Work to comply in all
respects with Contract requirements and charge the cost
incurred to SELLER.
(d) SELLER shall not re-tender rejected Work without disclosing
the corrective action taken.
20. INSURANCE/ENTRY ON LOCKHEED MARTIN'S
PROPERTY
In the event that SELLER, its' employees' agents, or subcontractors
enter LOCKHEED MARTIN's or its' customer's premises for any
reason in connection with this Contract, SELLER, its subcontractors
and lower-tier subcontractors, shall procure and maintain worker's
compensation, comprehensive general liability, bodily injury and
property damage insurance in reasonable amounts, and such other
insurance as LOCKHEED MARTIN may require and shall comply
with all site requirements. SELLER shall indemnify and hold
harmless LOCKHEED MARTIN, its officers, employees, and
agents from any losses, costs, claims, causes of action, damages,
liabilities, and expenses, including attorney's fees, all expenses of
litigation and/or settlement, and court costs, by reason of property
damage or personal injury to any person caused in whole or In part
by the actions or omissions of SELLER, its officers, employees
agents, suppliers, or subcontractors at any tier. SELLER shall
provide LOCKHEED MARTIN thirty days advance written notice
prior to the effective date of any cancellation or change in the term
or coverage of any of SELLER's required insurance. If requested,
SELLER shall send a "Certificate of Insurance" showing SELLER'S
compliance with these requirements. SELLER shall name
LOCKHEED MARTIN as an additional insured for the duration of
this Contract. Insurance maintained pursuant to this clause shall be
considered primary as respects the interest of LOCKHEED
MARTIN and is not contributory with any insurance which
LOCKHEED MARTIN may cary.
21. INTELLECTUAL PROPERTY
(Subparagraph (a) is NOT applicable for commercial off-the-shelf
purchases.)
(a) SELLER agrees that LOCKHEED MARTIN shall be the
owner of all inventions, technology, designs. works of
authorship, mask works, technical information, computer
software, business information and other information
conceived, developed or otherwise generated in the
performance of this Contract by or on behalf of SELLER.
SELLER hereby assigns and agrees to assign all right title and
interest in the foregoing to LOCKHEED MARTIN, including
without limitation all copyrights, patent rights and other
intellectual property rights therein and further agrees to
execute, at LOCKHEED MARTIN's request and expense, all
documentation necessary to perfect title therein in
LOCKHEED MARTIN. SELLER agrees that it will maintain
and disclose to LOCKHEED MARTIN written records of, and
otherwise provide LOCKHEED MARTIN with full access to, the
subject matter covered by this and that all such subject matter
will be deemed information of LOCKHEED MARTIN and
subject to the protection provisions of the clause entitled
'Information of Lockheed Martin". SELLER agrees to assist
LOCKHEED MARTIN, at LOCKHEED MARTIN's request and
expense, in every reasonable way, in obtaining, maintaining, and
enforcing patent and other intellectual property protection on the
snbject matter covered by this Clause.
(b) SELLER warrants that the Work performed and delivered under
this Contract will not infringe or otherwise violate the intellectual
property rights of any third party in the United States or any
foreign country. SELLER agrees to defend, indemnity and hold
harmless LOCKHEED MARTIN and its customers from and
against any claims, damages, losses costs and expenses,
including reasonable attorney's fees, arising out of any action by
a third party that is based upon a claim that the Work performed
or delivered under this Contract infringes or otherwise violates
the intellectual property rights of any person or entity.
22. LANGUAGE AND STANDARDS
All reports; correspondence, drawings, notices, marking, and other
communications shall be in the English language. The English
version of the Contract shall prevail. Unless otherwise providcd in
writing all documentation and work, shall employ the units of
United States Standard weights and measures.
23. NEW MATERIALS
The Work to be delivered hereunder shall consist of new materials,
not used, or reconditioned, or of such age as to impair its
useflness or safety).
24. OFFSET/CREDIT CORPORATION
All offset or countertrade credit value resulting from this
Contract shall accrue solely to the benefit of LOCKHEED MARTIN.
SELLER agrees to coorperatewith LOCKHEED MARTIN in the fullfilment
of any foreign offset/countertrade obligations.
25. PACKING AND SHIPMENT
(a) Unless otherwise specified, all Work is to be packed in
accordance with good commercial practice.
(b) A complete packing list shall be enclosed with all shipments.
SELLER shall mark containers or packages with necessary
lifting, loading, and shipping information, including the
LOCKHEED MARTIN contract number, item number, ddates of
shipment, and the names and addresses of consignor and
consignee. Bills of lading shall include this Contract number.
(c) Unless otherwise specified, delivery shall be DDP LOCKHEED
MARTIN's facility named on the face of the Contract, in
accordance with INCOTERMS 1990.
26. PAYMENTS, TAXES, AND DUTIES
(a) Unless otherwise provided, terms of payment shall be net 30
days from the latest of the following: (i) LOCKHEED
MARTIN's receipt of the SELLER's proper invoice; (ii)
Scheduled delivery date of the work; or (iii) Actual delivery
of the Work. LOCKHEED MARTIN shall have a right of setoff
against payments due or at issue under this Contract or any
other contract between the parties.
(b) Payment shall be deemed to have been made as of the date of
mailing LOCKHEED MARTIN's payment or electronic funds
transfer.
(c) Unless otherwise specified, prices include all applicable
federal, state and lcal taxes, duties, tariffs, and similar
fees imposed by any government. all of wluch shall be listed
separately on the invoice.
(d) All taxes, assessments and similar charges levied with respect
to or upon any such products or work owned by LOCKHEED
MARTIN while in SELLER's possession or control, and for
which no exemption is available, shall be born by SELLER.
(e) The prices stated in the Contract are firm, fixed prices in
United States dollars.
27. PRECEDENCE
Any inconsistencies in this Contract shall be resolved in accordance
with the followinf descending order of precedence:(1) Face of the
Purchase Order, Release document or Schedule, (which shall
include continuation sheets),as applicable, including any Special
terms and conditions; (2) Any master-type agreement (such as
corporate, sector or blanket agreements); (3) these General
Provisions; (4) Statement of Work.
28. QUALITY CONTROL SYSTEM
Unless this Contract contains other specific quality requirements:
(a) SELLER shall provide and maintain a quality control system
to an industry recognized Quality Standard for the Work
covered by this Contract.
(b) Records of all quality control inspection Work by SELLER
shall be kept complete and available to LOCKHEED
MARTIN and its customers.
29. RELEASE OF INFORMATION
Except as required by law, no public release of any information, or
confirmation or denial of same, with respect to this Contract or the
subject matter hereof, will be made by SELLER without the prior
written approval of LOCKHEED MARTIN.
30. STOP WORK ORDER
(a) SELLER shall stop Work for up to ninety (90) days in
accordance with the terms of any writen notice received from
LOCKHEED MARTIN, or for such longer period of time as
the parties may agree and shall take all reasonable steps to
minimize the incurrence of costs allocable to the Work
covered by this Contract during the period of Work stoppage.
(b) Within such period, LOCKHEED MARTIN shall either
terminate or continue the Work by written order to SELLER.
In the event of a continuation, an equitable adjustment in
accordance with the principles of the "Changes" clause, shall
be made to the price, delivery schedule, or other provision
affected by the Work stoppage, if applicable, provided that the
claim for equitable adjustment is made within thirty (30) days
after such continuation
31. SURVIVABILITY
If this Contract expires, is completed or terminated, SELLER shall
not be relieved of those obligations contained in this Contract for the
following provisions:
Applicable Laws, Clause#2
Export Control, Clause#10
Independent Contractor Relationship, Clause#16
Information of Lockheed Martin, Clause #17
Insurance/Entry on Lockheed Martin's Property,
Clause#20
Intellectual Property, Clause#21
Release of Information, Clause#29
Warranty, Clause#35
Year 2000 Compliance, Clause#36
32. TERMINATION FOR CONVENIENCE
(a) For specially performed Work: LOCKHEED MARTIN may
terminate part or all of this Contract for its convenience by
giving written notice to SELLER, LOCKHEED MARTIN's only
obligation shall be to pay SELLER a percentage of the price
reflecting the percentage of the Work performed prior to the
notice of termination, plus reasonable charges that SELLER can
demonstrate to the satisfaction of LOCKHEED MARTIN, using
generally accepted accounting principles, have resulted from the
termination. SELLER shall not be paid for any Work performed
or costs incurred which reasonably could have been avoided.
(b) In no event shall LOCKHEED MARTIN be liable for lost or
anticipated profits. or unabsorbed indirect costs or overheed, or
for any turn in excess of Ow total Contract EcL SELLER's
termination claim shall be submined within 90 days ItOrn The
Effective date 0f the tertnitttiE
(c)For other than specially performed Work. LOCKHEED
MARTIN may terminate part or all of this contract for Its
convenience by giving written notice to SELLER and
LOCKHEED MARTIN'S only obligation to SELLER shall be
payment of a mutually agread-upon restocking or service charge
(d)SELLER shall continue all Work not terminated,
33. TIMELY PERFORMANCE
(a) SERLLER's timely performance is a critical element of this
Contract
(b) Unless advance shipment has been authorized in writing by
LOCKHEED MARTIN, LOCKHEED MARTIN mau store at
SELLER's expense, or return, shipping charges collect, all Work
received in advance of the scheduled delivery date.
(c) If SELLER becomes aware of difficulty in performing the Work,
SELLER shall timely notify LOCKHEED MARTIN, in writing,
giving pertinent details. This notification shall not change any
delivery schedule.
(d) In the event of a termination for convenience or change, no claim
will be allowed for any manufacture or procurement in advance
of SELLER'S normal flow time unless there has been prior
written consent by LOCKHEED MARTIN.
34. WAIVER, APPROVAL, AND REMEDIES
(a) Failure by LOCKHEED MARTIN to enforce any of to
provision(s) of this Contract shall not be construed as a waiver of
the requirement(s) of such provision(s), or as a waiver of the
right of LOCKHEED MARTIN thereafter to enforce each and
every such provision(s).
(b) LOCKHEED MARTIN's approval of documents shall not
relieve SELLER from complying with any requirements of this
Contract.
(c) The rights and remedies of LOCKHEED MARTIN in this
Contract are cumulative and in addition to any other rights and
remedies provided by law or in equity.
35. WARRANTY
SELLER warrants that all Work furnished pursuant to this Contract
shall strictly conform to applicable specifications, drawings, samples,
and descriptions, and other requirements of this Contract and be free
from defects in design, material and workmanship. The warranty shall
begin upon final acceptance and extend for a period of one year or the
manufacturer's warranty period, whichever is longer. If any non-
conformity with Work appears within that time, SELLER, at
LOCKHEED MARTIN'S option, shall promptly repair, replace, or
reperform the Work. Transportation of replacement Work and return
of non-conforming Work and repeat performance of Work shall be at
SELLER's expense. If repair or replacement or reperformance of
Work Is not timely, LOCKHEED MARTIN may elect to return the
non-conforming Work or repair or replace Work or reprocure the
Work at SELLER's expense. All warranties shall run to
LOCKHEED MARTIN and its customer(s).
36. YEAR 2000 COMPLIANCE
(a) Year 2000 compliant, as used in this clause, means that with
respect to information technology, that the information
technology accurately processes date/time data (including but
not limited to, calculating, comparing, and sequencing)from,
to, and between the twentieth and twenty-first centuries, and
the years 1999 and 2000 tna 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.
(b) Any and all Work provided hereunder will be Year 2000
compliant at the time of delivery to LOCKHEED MARTIN.
including but not limited to accuratel inputting, storing,
manipulating, comparing, calculating, updating, displaying,
outputting, and transferring such dates and data unless
otherwise expressly provided herein by LOCKHEED
MARTIN.
(c) This provision takes precedence over all other provisions of
this Contract with respect to being Year 2000 compliant. In
the event of a discovery of any non-compliance, either before,
concurrent with, or subssequent to delivery of a good or service
under this Contract, the discovering party shall notify the other
party within five(5) business days. If the defective good or
service is being presented for acceptance or has already been
delivered, at LOCKHEED MARTIN'S option, the defective
good or service shall be repaired or replaced within ten (10)
business days notice at no cost to LOCKHEED MARTIN.
(d) Nothing in this provision shall be construed to limit any other
rights under this Contract, at law or in equity that
LOCKHEED MARTIN may have with respect TO Year 2000
compliance.
Attachment E
SUBCONTRACT No.198422
MATERIAL INSPECTION AND RECEIVING
REPORT
(2 pages)
Material Inspection and Receiving Report For
Victoria Class Submarine Fire Control System
Page 1 of 1
Prime Contract Administered By
Public Works and Government
W8472-8-OO12/OO1/QF
Lockheed Martin Corporation
Lockheed Martin Undersea Systems
Services Canada (PWGSC)
Aerospace, Marine and
LMUSS Subcontract Number Business Unit (LMUSS) Electronic Systems (AMES)
9500 Godwin Drive Electronic Systems Group, QC
Manassas, VA 20110 Section
Quality Assurance Representative - Canada DND
Subcontract Number: Date Shipment Invoice
(Procurement Instrument)
Seller Shipped Number Number
Northstar Technical Inc.
687 Water Street
St.Johns NF AIC 6JQ
Canada
Shipped From FOB Invoice will be mailed to:
Northstar Technical Inc. Destination
687 Water Street
St Johns NF A1C 6J9
Canada
*Shipped To/Mark For
Unclassified Data Deliverable to LMUSS 0 Hardware to LMUSS
Lockheed Martin Corporation Lockheed Martin Corporation
Lockheed Martin Undersea Systems Lockheed Martin Undersea Systems.
9500 Godwin Drive 9500 Godwin Drive
Manassas, VA 20110 Manassas VA 20110
Windsor Street
0 Hardware To CFB, Halifax
Base commander WO1OO
Canadian forces Base Halifax
Bldg 6, Willow Park
Halifax, Nova Scotia
Attn:
B3X2X0
Line Item Description of Contract Line Item(s)Shipped
Quantity Unit Unit Price (USD) Amount(USD)
Attachment F SUBCONTRACT No.198422
CERTIFICATE 0F MILESTONE COMPLETION
Certificate of Milestone Completion - No.
This certificate, when signed & dated by NTI below, certifies
that Milestone #___ entitled:
was completed by NTI.
All items identified below have been completed in full conformance
with the subcontract requirements:
It is mutually understood that acceptance of this milestone
certificate by LMUSS is deemed to acknowledge substantial completion
of the identified milestone tasks and shall not in any manner be
construed as a waiver of LMUSS' rights under the subcontract to full
and complete performance of all subcontract requirements. To the extent
of any deficiencies identified below, acceptance of this certificate by
LMUSS is conditional and it is accordingly mutually understood that LMUSS
may withdraw acceptance of this certificate if NTI fails to make timely
and satisfactory correction of the deficiencies.
Deficiencies:
Signatures:
Submitted on behalf of NTI by:
Accepted on behalf of LMUSS by:
Larry Fox - Program Manager
Date: Date:
Attachment G
SUBCONTRACT No.198422
PUBLIC WORKS AND GOVERNMENT
SERVICES CANADA LOAN AGREEMENT
(6pages)
Loan Agreement
Covering loan of Department of National Defence equipment through
Department of Supply and Services.
Instructions to Contractor
1. Submit original and four copies to the contracting officer,
Department of Supply and Services and two copies to the cognizant
DND Technical Services Detachment. The contracting officer shall
forward the Loan Agreement to Production Assets Management Services
for processing.
2. The equipment to be listed in Schedule B may include machine tools,
special tools test equipment tooling and ground handling equipment,
but not the following: consumable materials, prototypes, sealed samples,
models or equipment for catering contractors.
Schedule A
Terms ot Loan Agreement
Terms applicable to Canadian and Foreign Defence Work
1. The equipment is to be used for the purpose of performing the defence
work identified in this Agreement or such other defence work as may be
authorized in writng by DSS from time to time.
2. Commercial work shall not be carried out using the equipment.
3. The Contractor shall ensure that at all times each item of equipment
bears a clearly visible identification number corresponding to that shown
on the Notice to Ship, or other issue document issued in respect thereof.
and shall be responsible for making any changes n that number that may
be notified from time to time by DSS.
4. The Crown's representatives shall have the right to inspect the
equipment at any time and the contractor shall provide any reasonable
assistance required therefore
5. Unless DSS otherwise authorizes the contractor in writing, the
Contractor shall return the equipment to the destination designated in
writing by DSS upon the completion of its use in performing the defence
work. In the absence of such designation in writing, the Contractor shall
request instructions from DSS. When equipment is ready to be returned to
DND, the Contractor shall prepare a condition report and arrange for the
cognizant DND Technical Services Detachment to inspect and evaluate the
condition of the equipment. In cases where a Technical Services Detachment
is not available the Contractor shall request DSS to arrange for inspection.
6. DSS may terminate the loan or any part thereof at any time. and recal1
the equipment concerned with that termination.
7. The Contractor shall indemnify and save harmless the Crown, its
ministers, officers, servants, agents, employees, and members of the
Canadian Forces from and against all claims, demands, damages, loss
costs, expense, actions, causes of action, suits or other proceedings by
whomsoever made, arising out of any injury to persons (including injuries
resulting in death) or loss of or damage to property of others that may
be caused by or suffered as a result of the operation, use or
transportation of the equipment by the Contractor or any action taken or
things done by virtue of this loan.
Terms Applicable to Canadian Defence Work
8. No rent shall be payable by the Contractor to the Crown in respect
of equipment loaned for Canadian defence work.
9. The Department of National Defence will pay or reimburse the
Contractor for reasonable and proper costs incurred by the contractor
in taking possession of the equipment and moving it to and from the
Contractors plant or other location authorized by DSS, including the
cost of labor and materials in connection with the packaging and
transportation of the equipment.
10. The Contractor shall take reasonable and proper care of the
equipment, including the maintenance thereof during the term of this
loan and shall be responsible for any loss or damage resulting from
its failure to do so other than loss or damage caused by fire
or by ordinary wear and tear. The maintenance of the equipment shall
be in accordance with OND Standards, a copy of which the Contractor
acknowledges to have in its possession. In the event of loss or damage
and where the Minister so directs, the Contractor shall repair or
replace or have repaired or replaced the equipment to the satisfaction
of the Minister. or reimburse the Crown to the full value of the
equipment as indicated in Schedule S.
l1. The Contractor may insure the equipment against loss or damage
by fire or supplemental perils or any other risks while the equipment
is in its care, custody or control but no portion of the premium cost
will be assumed by the Crown.
12. Should the equipment consist of or include one or more
vehicles. the contractor shall obtain vehicle liability insurance
with respect to each such vehicle in an aggregate amount of not
less than $500,000 for each occurence against claims arising
from loss of life, bodily injury and property damage. Should the
equipment be an aircraft, the Contractor shall carry aircraft
liability insurance in an aggregate amount of not less than
$1,000,000 for each occurrence against claims arising from loss of
life, bodily injury and property damage. The vehicle or aircraft
insurance policy shall include a cross liability clause naming the
Crown as an insured party.
Schedule A (continual)
Terms of Loan Agreement
Terms Applicable to Foreign Defence Work
13. Canadian defence work must be given prionty over foreign defence
work.
14. No rent shall be payable by the Contractor in respect of the loan
of the equipment for foreign defence work provided that benefit of
such rent-free use is reflected in the price charged to the purchaser.
15. The Contractor shall submit to DSS statements showing the costs
incurred and profits realized from such foreign defence work, provided
however, that the Minister may in his/her discretion, cause audits to
be conducted at any time in order to determine such profits. In the
event it has been determined that the Contractor has received profits
in excess of an amount which the Minister considers reasonable such
excess profits shall be recover by the Minister.
18. The Contractor shall be responsible for all cost's incurred in
taking possession of, returning, transferring, insuring, maintaining
and servicing the equipment and in no event will such costs be
chargeable to the Crown either directly or indirectly.
17. The Contractor shall take reasonable and proper care of the
equipment, including the maintenance thereof, during the term of this
loan and shall be responsible for any loss or damage resulting from
the failure to do so other than loss or damage caused by ordinary
wear and tear. The maintenance of the equipment shall be in accordance
with DND Standards, a copy of which the Contractor acknowledges to
have in its possession. In the event of loss or damage and. where
the Minister so directs, the Contractor shall repair or replace or
have repaired or replaced the equipment to the satisfaction of The
Minister, or reimburse the Crown to the full value of the equipment
as indicated in Schedule S.
Attachment D
Section 1
Canadian Government Clause Flowdowns 9/29/99
(Canadian Government Clauses ID 9601 and ID 9403 negotiated)
Date ID Title Status Usage
1998/02116 9601 General Conditions- Long Form Active
MODIFIED AS ANNOTATED FOR APPLCABILITY TO LMUSS SUBCONTRACT TO NTI
960100 (16/02/98) General Conditions - Long Form
Public Works and Government Services Canada
Ol Interpretaion
02 Powers of the Minister
03 Status of the Contractor
04 Amendments and Waivers
O5 Conduct of the Work
06 Compliance with Applicable Laws
07 Specifications
08 Subcontracting
09 Replacement of Personnel
10 Assignment
11 Time of the Essence
12 Excusable Delay
13 Security and Protection of the Work
14 Payment
15 Interest on Ovcrdue Accounts
16 changes in Taxes and nudes
17 Discounts, Wastes and Spoilage
18 Inspection of the Work
19 Title
20 Warranty
21 Government Properly
22 Indemnity Against Third-Party Claims
23 Royalties and Infringement
24 Copyright
25 Suspension of the Work
26 Default by the Contractor
27 Termination for Convenience
28 Accounts and Audit
29 Notice
30 Members of the House of Commons
31 Conflict of Interest
32 No Bribe
33 Survival
34 Severability
35 Successors and Assigns
36 Entire Agreement
37 Certification - Contingency Fees
This document reflects certain Canadian Government prime
contract clauses that Lockheed Martin Undersea Systems
(LMUSS), the first tier subcontractor for the Victoria
Submarine Fire Control Modification (SFCM) Contract, is
required to include in its subcontract with Northstar
Technical Inc. (NTI). For clarification purposes,identification
of the contracting parties in certain clauses is changed as set
out below.
a) The term "Contract" means "Subcontract" and the term
"Contractor" means "NTI",
b) The terms "Representative of the Minister",
Authority", "Technical Authority" and Canada refers
to LMUSS except were the context would require a different
construction.
c) The terms "Party", "Parties," or Contracting Parties"
Subcontract.
9601 Ol (16/02/98) Interpretation
1. In the Contract, unless the context otherwise requires,
"Canada", "Crown", "Her Majesty" or "the Government" means Her
Majesty the Queen in right of Canada;
"Work" means the whole of the activities. services, materials,
equipment, software, matters and things reqnirnd to be done,
delivered or performed by the Contractor in accordance with
the terms of the Contract.
"Contract" means the written agreement between the Parties,
these general conditions, any Supplemental General Conditions
specified in the written agreement, and every other document
specified or referred to in any of them as forming part of the
Contract, all as amended by agreement of the Parties from time
to time;
"Contracting Authority" means the person designated as such in
the Contract, or by notice to the Contractor, to act as the
representative of the Minister in the management of the
Contract;
"Contractor" means the person or entity whose name appears on
the signature page of the written agreement and who is to
supply goods or services to Canada under the Contract;
"Contract Price" means the amount expressed in the Contract to
be payable to the Contractor for the Work;
"Cost" means cost determined in accordance with Contract Cost
Principles DSS-MAS 1031-2 as revised to the date of the bid
solicitation;
"Government Property" means all materials, parts, components,
specifications, equipment, software, articles and things
supplied to the Contractor by or on behalf of Canada for the
purposes of performing the Contract and anything acquired by the
Contractor in any manner in connection with the Work the cost of
which is paid by Canada under the Contract and, without
restricting the generality of the foregoing, includes Government
Issue as defined in the Defence Production Act, R.S.C 1985,
c. D-1, Government Furnished Equipinent and Government Supplied
Materiel;
"Inspection Authority" means the person designated as such in
the Contract, or by notice to the Contractor, to act as the
representative of the minister for whose department or agency
the Work is being carried out in matters concerning the
inspection of the Work, and for purposes of section 18
(Inspection of the Work) includes a Quality Assurance Authority
if such an authority is mentioned in the Contract;
"Minister" means the Minister of Public Works and Government
Services and any other person duly authorized to act on behalf
of that Minister;
"Moral Rights" has the same meaning as in the Copyright Act,
RES.C. 1985, c. C-42;
"Party" means Canada or the Contractor or any other signatory to
the Contract and "Parties" means all of them;
"Specifications" means the functional or technical description
of the Work set out or referred to in the Contract, including
drawings, samples and models, and funher includes, except to the
extent inconsistent with anything set out or referred to in the
Contract, any such description set out or referred to in any
brochure, product literature or other documentation furnished by
the Contractor in relation to the Work or any part thereof;
"Subcontract" includes a Contract let by any subcontractor at
any tier for the performance or supply of a part of the Work,
and includes a purchase referred to in paragraph 2 (a) of
section 8 at any such tier, and the derivatives of the word
shall be construed accordingly:
"Technical Audiority" means the person designated in the
Contract, or by notice to the Contractor, to act as the
representative of the Minister for whose department or agency
the Work is being carried out in matters concerning the
technical aspects of the Work;
2. The headings used in these general conditions are inserted
for convenience of reference only and shall not affect their
interpretation.
3. If the Contract is a defence Contract within the meaning of
the Defence Production Act, R.S.C. 1985. c. D-1, it is
subject to that Act and shall be governed accordingly.
4. In the Contract, words importing the singular number include
the plural and vice versa, and words importing the masculine
gender include the feminine gender and the neuter.
9601 02 (04/01/94) Powers of the Minister
Evcry right, remedy, power and discretion vested in or acquired
by Canada or -the Minister under the Contract or by law shall
be cumulative and nonexclusive.
9601 03 (04101194) Status of the Contractor
The Contractor is engaged as an independent Contractor for the
sole purpose of performing the Work. Neither the Contractor nor
any of its personnel is engaged as an employee, servant or agent
of Canada. The Contractor is responsible for all deductions and
remittances required by law in relation to its employees
including those required for Canada or Quebec Pension Plans,
unemployment insurance, workers' compensation, or income tax.
9601 04 (04/01/94) Amendments and Waivers
1. No design change, modification to the Work, or amendment to
the Contract shall be binding unless it is incorporated into
the Contract by written amendment or design change memorandum
executed by the authorized representatives of the Minister
and of the Contractor and the Contractor and Subcontractor
agree to and execute a subcontract modification which
incorporates these changes.
2. While the Contractor may discuss any proposed changes or
modifications to the scope of the Work with the Technical
Authority, Canada shall not be liable for the cost of any
such change or modification until it has been incorporated
into the Contract in accordance with subsection 1.
3. No waiver shall be valid, binding or affect the rights of the
Parties unless it is made in writing by) in the case of a
waiver by Canada. the Contracting Authority and, in
the case of a waiver by the Contractor, the authorized
representative of the Contractor.
4. The waiver by a Party of a breach of any term or condition of
the Contract shall not prevent the enforcement of that term
or condition by that Party in the case of a subsequent
breach, and shall not be deemed or construed a waiver of any
subsequent breach.
9601 05 (04/01/94) Conduct of the Work
1 The Contractor represents and warrants that:
(a) it is competent to perform the Work; and
(b) it has the necessary qualifications. including knowledge,
skill and experience, to perform the Work, together with
the ability to use those qualifications effectively for
that purpose.
2. Except for Government Property specifically provided for in
the Contract, the Contractor shall supply everything
necessary for the performance of the Work, including all the
resources, facilities, labour and supervision, managernent,
services, equipment1 materials, drawings, technical data,
technical assistance, engineering services, inspection and
quality assurance procedures, and planning necessary to
perform the Work.
3. The Contractor shall:
(a) carry out the Work in a diligent and efficient manner,
(b) apply as a minimum quality assurance tests, inspections
and controls consistent with those in general usage in the
trade and that are reasonably calculated to ensure the
degree of quality required by the Contract; and
(c) ensure that the Work:
(1) is of proper quality, material and workmanship;
(2) is in full conformity with the Specifications; and
(3) meets all other requirements of the Contract.
4. The Contractor agrees to accept and be bound by the
Inspection or Quality Assnrance Authority's interpretation of
the Specifications, insofar as such an interpretation is not
inconsistent with any other part of the Contract.
9601 08 (04/01/94) Subcontracting
1. Unless otherwise provided in the Contract, the Contractor
shall obtain the consent of the Minister in writing prior to
Subcontracting or permitting (he Subcontracting of any
portion of the Work at any tier. The Minister shall not
unreasonably withhold consent.
2. Notwithstanding subsection 1, the Contractor may, without
prior consent of the Minister:
(a) purchase "off-theEsbelf' items and software and such
standard articles and materials as arc ordinarily produced
by manufacturers in the normal course of business;
(b) Subcontract for the provision or such incidental services
as might ordinarily be subcontracted in performing the
Work;
(c) in addition to purchases and services referred to in
paragraphs (a) and 0,) subcontract any part or parts of
the Work to one or more subcontractors up to a
total value in the aggregate of 40 percent of the Contract
Price; and
(d) permit its subcontractors at any tier to make purchases or
subcontract as permitted in paragraphs (a), (b) and (c)
A Subcontract at any tier may not be let without consent,
under paragraph (b), (c) or (d), where the Subcontractor would
obtain title to intellectual property developed as part of the
Work.
3. In any Subcontract other than a Subcontract referred to in
paragraph 2 (a), the Contractor shall, unless the Minister
otherwise consents in writing, ensure that the subcontractor
is bound by terrns and conditions compatible with and, in the
opinion of the Minister, not less favourable to Canada than
the terms and conditions of the Contract. Deviations in any
Subcontract from the terms of the Contract, including any
right of termination of the Contract, shall be entirely at
the risk of the Contractor.
4. The Contractor is not obliged to seek consent to subcontracts
speciflcaly authorized in the Contract.
5. Any consent to a Subcontract shall not relieve the Contractor
from its obilgations under the Contract or be construed as
authorizing any flability on the part of Canada or the
Minister to a subcontractor.
9601 09 (04/01/94) Replacement of Personnel
I. When specific persons have been named in the Contract as the
persons who must perform the Work, the Contractor shall
provide the services of the persons so named unless the
Contractor is unable to do so for reasons beyond its control.
2. If at any time the Contractor is unable to provide the
services of any specific person named in the Contract, it
shall provide a replacement person with similar
qualifications and experience.
The Contractor shall, as soon as possible, give notice to the
Minister of:
(a) the reason for the removal of the named person from the
Work;
(b) the name, qualifications and experience of the proposed
replacement person; and
(c) proof that the person has the required security clearance
granted by Canada, if applicable.
3. The Minister may order the removal from the Work of any such
replacement person and the Contractor shall immediately
remove the person from the Work and shall, in accordance with
subsection 2, secure a farther replacement.
4. The fact that the Minister does not order the removal of a
replacement person from the Work shall not relieve the
Contractor from its responsibility to meet the requirements
of the Contract.
960110 (04/01/94) Assignment
1. The Contract shaH not be assigned, in whole or in part, by
the Contractor without the prior consent in writing of the
Minister and any purported assignment made without that
consent is void and of no effect. However, the subcontractor
may reassign to any of its successor organizations as a
result of re-organizations, consolidations, divestitures,
mergers or any similar organization changes.
2. No assignment of the Contract shall relieve the Contractor
from any obligation under the Contract or impose any
liability upon Canada or the Minister1 unless otherwise
agreed to in writing by the Minister.
960112 (04/01/94) Excusable Delay
1. A delay in the performance by the Contractor of any
obligation under the Contract which is caused solely by an
event that
(a) was beyond the reasonable control of the Contractor,
(b) could not reasonably have been foreseen,
(c) could not reasonably have been prevented by means
reasonably available to the Contractor, and
(d) occurred without the fault or neglect of the contractor1
subsections 2, 3 and 4, constitute an "Excusable Delay"
Contractor invokes this section by notice under subsection
4.
2. If any delay in the Contractor's performance of any
obligation under the Contract is caused by a delay of a
Subcontractor. such a delay may constitute an-Excusable Delay
for the Contractor, but only if the delay of the
Subcontractor meets the criteria set out in this section for
an Excusable Delay by the Contractor and only to the extent
that the delay has not been contributed to by the Contractor.
3. Notwithstanding subsection I, any delay caused by lack of
financial resources of the Contractor or an event that is a
round for termination provided for in subsection 26(2)
(Default by the Contractor). or any delay in the Contractor
fulfilling an obligation to deliver a bond, guarantee, letter
of credit or other security relating to performance or the
payment of money, shall not qualify as an Excusable Delay
4. The Contractor shall not benefit from an Excusable Delay
unless the Contractor has:
(a) used its reasonable efforts to niinimize the delay and
recover lost time;
(b) advised the Minister of the occunence of the delay or of
the likelihood of a delay occurring as soon as the
Contractor has become aware of it;
(c) within 15 working days of the beginning of a delay or of
the likelihood of a delay coming to the attention of the
Contractor. advised the Minister of the full facts or
matters giving rise to the delay, and provided to the
Minister for approval (which approval shall not be
unreasonably withheld) a clear "work-around" plan
indicating in detail the steps that the Contractor
proposes to take in order to minimize the impact of the
event causing the delay; this plan shall include
alternative sources of materials and labour, if the event
causing the delay involves the supply of them; and
(d) carried out the work-around plan approved by the Minister.
5. In the event of an Excusable Delay, any delivery date or
other date that is directly affected shall be postponed for a
reasonable time not to exceed the duration of the Excusable
DCIBy. The Parties shall, negotiate and amend all affected
areas of the Contract, as appropriate, to reflect any such
change in dates.
6. Notwithstanding subsection 5, the Minister may, after an
Excusable Delay has continued for 30 days or more, in the
Minister's absolute discretion terminate the Contract. In
such a case, the Panics agree that neither will make any
claim against the other for damages, costs, expected profits
or any other loss arising out of the termination or the event
that gave rise to the Excusable Delay. The Contractor agrees
to repay immediately to Canada the portion of any advance
payment that is unliquidated at the date of the termination.
Subsections 26(4), (5) and (6) (Default by the Contractor)
apply in the event of a termination... under this subsection.
7. Except to the extent that Canada is responsible for the delay
for reasons of failure to meet an obligation under the
Contract, Canada shall uot be iabie for any costs or charges
of any nature incurred by the Contractor or any of its
Subcontractors or agents as a result of an Excusable Delay.
960113 (16/02198) Security and Protection of the Work
1. The Contractor shall keep confidential all information
provided to the Contractor by or on behalf of Canada in
connection with the Work and all information developed by the
Contractor as part of the Work title to which vests in Canada
under the Contract, and shall not disclose any such
information to any person without the written pennission of
the Minister, except that the Contractor may disclose to a
Subcontractor authorized in accordance with section 8
(Subcontracting) information necessary to the performance of
the Subcontract.
2. Subject to the Access to Information Act, R.S.C. 1985, c. A-I
and to any right of Canada under this Contract, Canada shall
not release or disclose outside the Government of Canada any
information delivered to Canada under the Contract that is
proprietary to the Contractor or a Subcontractor. The Prime
Contractor and the Canadian Government shall abide by all US
Security and export regulations.
3. The obligations of the Parties set out in this section do not
apply to any information where the same information:
(a) is publicly available from a source other than the other
Party; or
(b) is or becomes known to a Party from a source other than
the other Party, except any source that is known to be
under an obli8ation to the other Party not to disclose
the information, or
(c) is developed by a Party without use of the information of
the other Patty.
4. wherever practical, the Contractor shall mark or identify any
proprietary information delivered to Canada under the
Contract as "Property of (Contractor's name), permitted
Oovcrnrncnt uses derined under Dcp&tmcnt of Public Works and
Government Services EWGSC) Contract No. (fill in Contract
number)tt, and Canada shall not be liable for any
unauthorized use or disclosure of information that conid have
been so marked or Identified and was not.
5. When the Contract, the Work, or any information referred to
in subsection 1 is idenfified as TOP SECRET, SECRET,
CONFIDENTrAL, or PROThCTED by Canada, the Contractor shall at
all times take all measures reasonably necessary for the
safeguarding of the material so identified, including those
set out in the PWOSC Industrial Security Manual and its
supplements and any other instructions issued by the
Minister.
6. Without limiting the generality of subsections I and 2, when
the Contract, the Work. or any information referred to in
subsection I is identified as TOP SECRET, SECRET.
CONFIDENTIAL", or PROTECThD by Canada, the Minister shall be
entitled to inspect the Contractor's premises and the
premises of a Subcontractor at any tier for security purposes
at any time during the term of the Contract, and the
Contractor shall comply with, and ensure that any such
subcontractor complies with, all written instructions issued
by the Minister dealing with the material so identified,
including any requirement that employees of the Contractor or
of any such subcontractor execute and deliver declarations
relating to reliability screenings, security clearances and
other procedures. Notwithstanding the above, subcontractor
shall abide by US Security regulations and. as such, passage
of classified data shall be on a government to government
basis.
7. Any proposed change in the security requirements after the
effective date of the Contract that would involve a
significant increase in cost to the Contractor shall require
an amendment to the Contract under the provisions of section
4 (Arnendritents and Waivers).
9601 18 (04/01/94) bispection of the Work
1. The Work and any and all parts thereof shall be subject to
such inspection as the Technical or Inspection Authority
determines to be appropriate, consistent with the relevant
provisions of the Contract, if any, prior to acceptance by
Canada. The Contracting Authority and the Technical or
Inspection Authority) or their representatives, shall have
access to the Work at any time during working hours where any
part of the Work is being carried out and may make
examinations and such tests of the Work as they may think
fit. Should the Work or any part thereof not be in accordance
with the requirements of the Contract, the Technical or
Inspection Authority shall have the right to reject the Work
and require its correction or replacement at the Contractor's
expense. The Technical or Inspection Authority. as the case may
be, shall inform the Contractor of the reasons for any such
rejection.
2. The Contractor shall provide reasonable assistance and
facilities, test pieces. samples and documentation that the
Technical or Inspection Authority may reasonably require for
the carrying out of any such inspection, and the Contractor
shall forward such test pieces and examples to such person
or location as the Technical, Inspection or (DND) Contracting
Authority may direct. Inspection by the Technical or The
Inspection Authority shall not relieve the Contractor from
responsibility to meet the requirements of the Contract
3. No part of the Work shall be submitted for acceptance or
delivery until it has been inspected and approved by the
Contractor and, wherever practicabe, marked with an approval
stamp satisfactory to the Technical or Inspection Authority.
The Contractor shall keep accurate and complete inspection
records which shall, upon request, be made available to the
Technical or Inspection Authority, who may make copies thereof
and take extracts therefrom during the performance of the Contract
and for any period of time thereafter provided for in the
Contract.
960119 (04(01/94) Title
1. Except as otherwise provided in the Contract including the
intellectual prope fly provisions, and except as provided in
subsection 2, tide to the Work or any part thereof shall vest
in Canada upon delivery and acceptance thereof by or on behalf of
Canada.
2. Except as otherwise provided in the intellectual property
provisions of the Contract, upon any payment being made to the
Contractor for or on account of materials,
parts. work-in-process or finished work, either by way of
progress payments or
accountable advances or otherwise, title in and to all materials,
parts, work-in-process and finished work so paid for shall vest
in and remain in Canada unless already so vested under any other
provision of the Contract.
3. Notwithstanding any vesting of title referred to in this section
and except as otherwise provided in the Contract, the risk of loss
or damage to the materials, parts, work-in-process or finished work
or part thereof so vested shall remain with the Contractor until
their delivery to Canada in accordance with the Contract. For
purposes of this dause, all deliveries, including items delivered
under the subcontract and items that 'nay later be returned to the
Subcontractor for repair or replacement under warranty are FOB at
the Subcontractor's facility. The Contractor shall he liable for
any loss or damage to any part of the Work caused by the Contractor
or any subcontractor after such delivery.
4. Any vcsting of title referred to in subsection 2 shall not
constitute acceptance by Canada of the materials, parts. work-in-
process or finished work, and shall not relieve the Contractor of
its obligation to perform the Work in accordance with the Contract.
5. where tide to any materials, pans, workEin-process or finished
work becomes vested in Canada, the Contractor shall, upon the
Minister's request, establish to the Minister's satisfaction that
the tide is free and clear or all claims. liens, attachments,
charges or encumbrances and shall execute such conveyances thereof
and other instruments necessary to perfect that title as the Minister
may request.
6. if the Contract Is a defence Contract within the meaning of
the Defencc Production Act, R.S.C. 1985. c. D-l, title to the Work
or to any materials, parts, work-in-process or finished work shall
vest in Canada free and clear of all claims, lions, attachments,
charges or encumbrances, and the Minister shall be entitled at any
time to remove, sell or dispose of it or any part of it in accordance
with section 20 of that Act.
9601 20 (O4E0lI94) Warranty
1. Notwithstanding inspection and acceptance of the Work by or an
behalf of Canada and without restricting any other provision of the
Contract or any condition, warranty or provision implied or imposed
by law, the Contractor warrants that, for a period of 12 months from
the date of deivery, or if acceptance takes place on a later date,
the date of acceptance, or for such other period as may be specified
in the written agreement between the Parties, the Work shall be free
from all defects in design1 materials or workmanship, and shall
conform with the requirements of the Contract, provided that with
respect to Government Property, the Contractor's warranty shall extend
only to its proper incorporation into the Work.
2. In the event of a defect or non-conformance in any part of the
Work during the warranty period defined in subsections I and 5, the
Contractor, at the request of the Minister to do so, shall as soon
as possible repair, replace or otherwise make good at its own option
and expense the part of the Work found to be defective or not in
conformance with the requirements of the Contract.
3. The Work or any part thereof found to be defective or
non-conforming shall be returned to the Contractors plant for
replacement. repair or making good; provided that, when in the
opinion of the Minister it is not expedient to remove the Work
from its location, the Contractor shall carry out any necessary
repair or making good of the Work at that location, and shall he
paid the fair and reasonable cost (including reasonable travelling
and living expenses) incurred in so doin8, with no allowance therein
by way of profit, less an amount equal to the cost of rectifying the
defect or non-conformance at the Contractor's plant.
4. Canada shall pay the transportation cost associated with
returning any work or part thereof to the Contractor's plant pursuant
to subsection 3, and die Contractor shall pay the transportation
cost associated with forwarding the replacement or returning the Work
or part thereof when rectified to the delivery point specified in the
Contract. or such lesser cost as may be required to transport the
Work or part thereof to another location directed by the Technical
Authority.
5. The warranty period act out in subsection 1 shall be extended by
the duration of any period or periods during the life of the warranty,
including any such extension, in which the Work is unavailable for
use or cannot be used because of a defect or non conformance referred
to in this section, less the duration of any delay by Canada in
informing the Contractor or the defect or nonconformance or in
returning the Work or part thereof to the ContractorE plant. Upon
returning the Work or part thereof to Canada, the Contractor shall
advise the Minister in writing of the warranty period remaining,
including any such extension.
6. The warranties set out in subsection 1 shall apply to any
part of the Work repaired replaced or otherwise made good
pursuant to subsection 2, for the greater of:
(a) warranty period remaining under subsection 5.; or,
(b) 90 days or such other period as may be specified for that
purpose in the written agreement between the parties.
MI of the provisions of subsections 2 to 6 of this section
incusIve apply, with such minimum changes as the context may
require, to any such part of the Work that is found during
that period to be defective or not in conformance with the
Contract.
9601 21 (04101194) Government Property
I. Unless otherwise provided in the Contract, all Government
Property shall be used by the Contractor solely for the purpose
of the Contract and shall remain the property of Canada, and
the Contractor shall maintain adequate accounting records
of all Government Property, and, whenever feasible, shall
mark the same as being the property of Canada.
2. The Contractor shall take reasonable and proper care of
all Government Property while the same is in, on, or about
the plant and premises of the Contractor or otherwise in its
possession or subject to its control, and shall be responsible
for any loss or damage resulting from its failure to do so
other than toss or damage caused by ordinary wear and tear.
3. All Government Property. except such as is installed or
incorporated into the Work, shall, unless otherwise specifically
provided in the Contract. be returned to Canada on demand.
4. All scrap and all waste materials, articles or things that
are Government Property shall, unless otherwise provided in the
Contract, remain the property of Canada and shall be disposed
of only as directed by the Minister..
5. At the time of completion of the Contract, and if requested
by the Contracting Authority, the Contractor shall provide an
inventory of all Government Property relating to the Contract
to both the Contracting Authority and the Technical Authority.
Th8 provisions of the Loan Agreement between Canada and the
Subcontractor shall, except as agrecd herein, 8ovem the
requirements of the loan agreement.
9601 22 (04101/94) Indemnity Against Third-party Claims
1. The Contractor shall indemnify and save harmless Canada,
the Minister and their servants and agents from and against
any damages, costs or expenses or any claim, action1 suit
or other proceeding which they or any of them may at any
time incur or suffer as a result of or arising out of
(a) any injury to persons (including injuries resulting
in death) or loss of or damage to property of others which
may be or be alleged to be caused by or suffered as a result
of the performance of the Work or any part thereof, except
that Canada and the Minister shall not claim indemnity under
this section to the extent that the injury, loss or' damage
has been caused by Canada, and
(b) any liens, attachments, charges or other encumbrances
or claims upon respect of any materials, parts, work-in-process
or finished work furnished in respect of which any payment
has been made by, Canada.
2. The Minister shall give notice to the Contractor of any claim,
action, suit or proceeding referred to in subsection I and the
Contractor shall. to the extent requested by the Anorney General
of Canada, at its own expense participate in or conduct the
defence of any such claim, action, suit or proceeding and any
negotiations for settlement of the same, but the Contractor
shall not be liable to indemnify Canada for payment of any
settlement UnleSS it has consented to the setfiement.
9601 23 (04/01/94) Royalties and Infringement
1. In this section, "Royalties" includes
(a) license fees and all other payments analogous to
royalties for. and also claims for damages based upon, the
use or infringement of any patent, registered industrial design,
trade mark, copyrighted work, trade secret, or other
intellectual property right, and
(b) any costs or expenses incurred as a result of the
exercise by any person of Moral Rights.
2 Subject to subsection 4, the Contractor shall indemnify
and save harmless Canada, the Minister and their servants
and agents against any claim, action, suit or other proceeding
for the payment of Royalties, that results from or is alleged
to result from the carrying out of the Contract or the use or
disposal by Canada of anything furnished by the Contractor
under the Contract.
3 Canada shall indemnify and save harmless the Contractor and
its servants and agents against any claim, action, suit or
other proceeding for the payment of Royalties, that results
from or is alleged to result from
(a) the use by the Contractor in perforating the Contract
of equipment, Specifications or other information not prepared
by the Contractor and supplied to the Contractor by or on
behalf of Canada, or
(b)the Contractor complying with production drawings
not prepared by the Contractor and supplied by or on behalf
of Canada which direct an alteration of or modification to the
Work, provided that the Contractor notifies the Minister
immediately of any such claim, action, suit or other
proceeding, but Canada shall not be liable to indemnify or
save harmless the Contractor for payment of any settlement
unless Canada has consented to the settlement.
4. The Minister shall give notice to the Contractor of any
claim, action, suit or proceeding referred to in subsection
2 and the Contractor shall, to the extent requested by the
Attorney General of Canada, at its own expense participate
in or conduct the defence of any such claim1 action, suit or
proceeding and any negotiations for settlement of the same,
but the Contractor shall not be liable to indemnify or save
harmless Canada for payment of any seulement unless it has
consented to the settlement.
5. The Contractor shall notify the Minister of all Royalties
which it or any of its subcontractors will or may be obligated
to pay or propose to pay in respect of carrying out the
Contract, and the basis thereof, and the parties to whom
the same are payable, and shall promptly advise the Minister
of any and all claims which would or might result in further
or different payments by way of Royalties being made by the
Contractor or any of its subcontractors.
6. Where and to the extent that the Minister so directs,
the Contractor shall not pay and shall direct its
subcontractors not to pay any Royalties in respect of
the carrying out of the Contract.
7. After the giving of any direction provided for in
subsection 6, and subject to compliance by the Contractor
with the foregoing provisions, Canada shall indemnify the
Contractor and its subcontractors from and against all
claims, actions, suits or proceedings for payment of such
Royalties as are covered by the direction.
8. The Contractor shall not be entitled to any' payment
in respect of any Royalties included in the Contract Price
to which the indemnity provided in subsection 7 applies.
9601 25 (04101194) Suspension of the Work
I. The Minister may at any timeE by written notice, order
the Contractor to suspend or stop all or part of the Work
under the Contract for a period of up to 180 days. The
Contractor shall irrirnediately comply with any such
order in the manner that minimizes (he cost of so doing.
While such an order is in effect, the Contractor shall
not remove any part of the Work from any premises without
the prior written consent of the Contracting Authority. At
any time prior to the expiration of the 180 days, the Minister
shall either rescind the order or terminate the Contract, in
whole or in part, under section 26 (Default by the Contractor)
or section 27 (Termination for Convenience).
2. When an order is made under subsection 1, unless the
Minister terminates the Contract by reason of default by
the Contractor or the Contractor abandons the Contract,
the Contractor shall be entided to be paid its additional
costs incurred as a result of the suspension plus a fair
and reasonable profit thereon.
3. when an order is made under subsection 1 and is rescinded:
(a) the Contractor shall as soon as practicable resume
work in accordance with the Contract;
(b) if the suspension has affected the Contractor's
ability to meet any delivery date under the Contract, the
date for the performance of that part of the Work affected
by the suspension shall be extended for a period equal to
the period of suspension plus a period, if any, which in the
opinion of the Minister following consultation with the
Contractor is reasonably necessary for the Contractor
resume the Work; and
(c) subject to section 4 (Amendments and Waivers), an
adjustment shall be made as necessary to affected terms
and conditions of the Contract.
9601 26 (04/01/94) Default by the Contractor
1. Where the Contractor is in default in carrying out any of
its obligations under the Contract, the Minister may, upon
giving written notice to the Contractor, terrainate for default
the whole or any pan of the Contract, either immediately, or at
the expiration of a cure period specified in the notice if the
Contractor has not cured the default to the satisfaction of the
Minister within that cure period.
2. Where the Contractor becomes bankrupt or insolvent, makes
an assignment for the benefit of creditors, or takes the beneflt
of any statute rclating to bankrupt or insolvent debtors, or
where a receiver is appointed under a debt instrument or a
receiving order is made against the Contractor, or an order
is made or a resolution passed for the winding up of the
Contractor, the Minister may, to the extent permined by the
laws of Canada, upon giving notice to the Contractor, immediately
terminate for default the whole or any part of the Contract.
3. Upon the giving of a notice provided for in subsection 1 or 2,
the Contractor shall have no claim for further payment other
than as provided in this section, but shall be liable to Canada
for any amounts, including milestone payments, paid by Canada
and for all losses and damages which may be suffered by Canada
by reason of the default or occtrrrence upon which the notice was
based, including any increase in the cost incurred by Canada in
procuring the Work from another source. The Contractor agrees to
repay immediately to Canada the portion of any advance payment
that is unliquidated at the date of the termination. Nothing in
this section affects any obligation of Canada under the law to
mitigate damages.
4. Upon termination of the Contract under this section, the
Minister may require the Contractor to deliver to Canada,
in the manner and to the extent directed by the Minister, any
completed parts of the Work which have not been delivered and
accepted prior to the termination and any materials, parts,
plant. equipment or work-in-process which the Contractor has
acquired or specifically in the fulfilment of the Contract.
5. Subject to the deduction of any claim that Canada may have
against the Contractor arising under the Contract or out of the
termination, Canada shall pay or credit to the Contractor the
value, determined on the basis of the Contract Price including the
proportionate part of the Contractor's profit or fee included in
the Contract Price, of all completed parts of the Work delivered
to Canada pursuant to a direction under subsection 4 and accepted
by Canada, and shall pay or credit to the Contractor the
cost to the Contractor that the Minister considers reasonable
in respect of all materials, parts, plant. equipment or work-in-
process delivered to Canada pursuant to a direction under
subsection 4 and accepted by Canada, but in no event shall the
aggregate of the amounts paid by Canada under the Contract to
the date of termination and any arnounts payable pursuant to
this subsection exceed the Contract Price.
6. Title to all materials, parts, plant, equipment, work-in-
process and finished work in respect of which payment is made
to the Contractor shall, upon such payment being made, pass to
and vest in Canada unless already so vested under any other
provision of the Contract, and such materials, parts. plant,
equipment, work4n-process and finished work shall be delivered
according to the order of the Minister, but Canada will not accept
and will not pay for materials, pans, plant, equipment or work-in-
process that would not have been required to perform the Work or
that exceed what would have been required to perform the Work.
7. Where. subsequent to issuance of a notice pursuant to
subsection 1, the Minister is satisfied that grounds did not
exist for a termination under this section, the notice shall be
deemed a notice of termination for convenience issued under
subsection 27(1) Crermination for Convenience).
9601 27 c04/01194) Termination for Convenience
1. Notwithstanding anything contained in the Contract, the
Minister may, at any time prior to the completion of the Work,
by giving notice to the Contractor (in this section sometimes
referred to as a "termination notice"), terminate the Contract
as regards all or any part of the Work not completed. Upon a
termination notice being given, the Contractor shall cease work
(including the manufacture and procuring of materials for the
fulfilment of the Contract) in accordance with and to the extent
specified in the notice, but shall proceed to complete such
part or parts of the Work as are not affected by the termination
notice. The Minister may, at any time or from time to time, give
one or more additional termination notices with respect to any or
all parts of the Work not terminated by any previous termination
notice.
2. In the event of a termination notice being given pursuant to
subsection 1, the Contractor shall be entitled to be paid, to the
extent that costs have been reasonably and properly incurred for
purposes of performing the Contract and to the extent that the
Contractor has not already been so paid or reimbursed by including
the unliquidated portion of any advance payment:
(a) on the basis of the Contract Price, for all completed
work that is inspected and accepted in accordance with the
Contract1 whether completed before, or after and compliance
with the instructions contained in, the termination notice;
(b) the cost to the Contractor plus a fair and reasonable
profit thereon, for all work terminated by the termination
notice before completion, the cost to the Contractor being
determined in accordance with the terms of the Contract and
with Subcontract cost Principics customarily used in US
Government Contracts;
(c) the amount of any capital expenditures actually incurred
only if they were specifically authorized under the Contract or
approved in writing by the Minister for the purpose of the
Contract, less any depreciation in respect thereof already taken
into account in determining cost, to the extent that the capital
expenditures are properly apportionable to the performance
of the Contract;
(d) if the Contract is exclusively for the making of capital
expenditures in respect of additional equipment or plant additions,
in lieu of the amounts described in paragraphs (a) to (c)
inclusive, the reasonable and proper cost to the Contractor of:
(1) all additional equipment that, prior to the giving of
the termination notice, has been purchased. acquired or
manufactured by the Contnctor or contracted for and for which
the Contractor is obligated to make payment, and
(2) all additional equipment in process of manufacture by
the ContractorEat the date of giving of the termination notice
and all work in connection with the construction of the plant
additions to that date, including the cost of materials and parts
Contracted for by the Contractor for the purpose of such
manufacture or construction and for which the Contractor is
obligated to make payment; and
(e) all costs of and incidental to the termination of the
Work or part thereof, including the cost of cancellation of
obligations incurred by the Contractor with respect to the
terminated Work or part thereof, the cost of and incidental
to the taking of an inventory of materials, components, work-in-
process and finished work on hand related to the Contract at the
date of the termination, and the cost of preparation of
necessary accounts and statements with respect to work performed
to the effective date of the termination and commitments made by
the Contractor with respect to the terminated portions of the
Work; but not including the cost of severance payments or damages
to employees whose services are no longer required by reason of
the termination except wages that the Contractor is obligated
by statute to pay them and except for reasonable severance
payments or damages paid to employees hired to perform the
Contract whose hiring was expressly required by the Contract
or approved in writing by the Minister for the purpose of tne
Contract.
3. In paragraphs 2(c) and (d), 1'capital expenditures" includes
the entry into leases of real property and equipment.
4. Tbe Minister may reduce the payment in respect of any of the
Work to the extent that, upon inspection, it is deficient in
meeting the requirements of the Contract.
5. Notwithstanding anything in subsection 2, the total of the
amounts to which the Contractor is entitled under paragraphs 2
(a) to (d) inclusive, together with any amounts paid or due or
becoming due to the Contractor under other provisions of the
Contract, shall not exceed the Contract Price or the portion
thereof that is applicable to the pan of the Work that is
terminated, and shall not exceed the proportion of the price
quoted by the Contractor for all of the Work that is reasonably
attributable to the proportion of the Work performed to the
effective date of the termination.
6. In the procuring of materials and parts required for the
performance of the Contract and in the subcontracting of any
of the Work, the Contractor shall, unless otherwise authorized
by the Minister, place purchase orders and subcontracts on
terms that will enable the Contractor to terminate the same
upon terms and conditions similar in effect to those provided
in this section, and generally the Contractor shall co-operate
with the Minister and do everything reasonably within its power
at all times to minimize the amount of Canad?s obligations
in the event of a termination under this section.
7. Tide to all materials, parts, plant, equipment, work-in-
process and finished work in respect of which payment is made
to the Contractor shall, upon such payment being made, pass
to and vest in Canada unless already so vested under any other
provision of the Contract, and such materials1 parts, plant,
equipment, work-in-process and finished w9rk shall be delivered
according to the order of the Minister, but Canada will not
accept and will not pay for materials, parts, plant, equipment
or work-in-proceSs that would not have heen required to perform
the Work or that exceed what would have been required to perform
the Work.
8. The Contractor shall have no claim for damages, compensation.
loss of profit, allowance or otherwise by reason of, or directly
or indirectly arising out of, any action taken or termination
notice given by the Minister under this section. except to
the extent that this section expressly provides.
9601 28 (04/01/94) Accounts and Audit
1. The Contractor shall keep proper accounts and records
of the cost to the Contractor of the Work and of all expenditures
or commitments made by the Contractor in connection therewith,
and shall keep all invoices, receipts and vouchers relating
thereto. The Contractor shall not, without the prior written
consent of the Minister, dispose of any such accounts, records,
invoices, receipts or vouchers until the expiration of 6 years
after final payment under this Contract, or until the settlement
of all outstanding claims and disputes. whichever is later.
2. All such accounts and records as well as any invoiCes,
receipts and vouchers shall at all times during the retention
period referred to in subsection 1 be open to audit, inspection
and examination by the authorized representatives of the Minister,
who may make copies and take extracts thereof The Contractor
shall provide facilities for such audits and inspections and
shall furnish all such information, within reason, as the
representativeS of the Minister may from time to time require
with respect to such accounts, records, invoices, receipts and
vouchers.
3, Notwithstanding the above, detailed Subcontract proposed
pricing data which may include competition sensitive rates and
factors will not be audited by Canada, if this level of audit is
required, Canada will arrange for assist audit services direcfly
with DCAA and the Subcontractor shall provide the detailed
pricing data to US Defense Contract Audit Agency ECAA) for use
in their independent audit of Subcontractor's proposal to Canada.
DCAA audits shall be to verify that the rates and factors proposed
on US Government contracts were applied to Subcontractor's proposal
for corresponding cost elements. Only Canada's contracting officer
may receive DCAA audit findings. Pricing data. including rates
received shall not be used for any purpose other than to evaluate
Subcontractor's proposal nor will it be disclosed to any other
Party or individual..
9601 29 (04101/94) Notice
Any notice shall he in writing and may be delivered by hand
or by courier, by registered mail, or by facsimile or other
electronic means that provides a paper record of the text of
the notice, addressed to the Party for whom it is intended at
the address in the Contract or at the last address of which
the sender has received notice in accordance with this section.
Any notice shall be deemed to be effective on the day it is
received at that address.
9601 30 (04/01/94) Members of the House of Commons
No member of the House of Commons shall be admitted to any share
or part of the Contract or to any benefit arising from the
Contract.
9601 31 (01105/96) Conflict of Interest
The Contractor agrees that it is a term of the Contract that
no person who is not in compliance with the provisions of the
Conflict of Interest and Post-Employment Code for Public Office
Holders or the Conflict of Interest and Post-Employment Code for the
Public Service, shall derive any direct benefit from this Contract.
9601 32 (01106194) No Bribe
The Contractor represents and covenants that no bribe,
gift, benefit, or other inducement has been or will be
paid, given1 promised or offered directly or indirectly to
any official or employee of Canada or to a member of the
family of such a person, with a view to influencing the
entry into the Contract or the administration of the Contract.
9601 33 (04/01/94) Survival
All of the Contractor's obligations of confidentiality and all
of the Contractor's representationS and warranties set out
in the Contract as well as the provisions concerning
specificafions, warranty, Government Propefly. indemnity against
third-party claims. royalties and infringement, intellectual
property rights and accounts and audit shall survive the expiry
of the Contract or the termination of the Contract for
default, for convenience, pursuant to subsection 12(6)
(Excusable Delay), or by mutual consent, as shall any other
provision of the Contract which, by the nature of the rights
or obligations set out therein, might reasonably be expected to
be intended to survive.
9601 34 (04/01/94) Severability
if any provision of the Contract is declared by a court of
competent jurisdiction to be invalid, illegal or unenforceable,
such provision shall be severed from the Contract and all other
provisions of the Contract shall remain in full force and effect.
9601 35 (04/01/94) Successors and Assigns
The Contract shall enure to the benefit of, and shall be
binding upon, the successors and permitted assignees of
Canada and of the Contractor.
9601 36 (04/01/94) Entire Agreement
The Contract constitutes the entire and sole agreement
between the parties with respect to the subject matter of
the Contract and supersedes all previous negotiations.
communications and other agreementS, whether written or
oral, relating to it, unless they are incorporated by reference
in the Contract. There are no termS, covenants, representations,
statements or conditions binding on the parties other than those
contained in the Contract.
9601 37 (06/06/94) Certification - Contingency Fees
1. The Contractor certifies that it has not directly or
indirectly paid or agreed to pay and covenants that it will
not directly or indirectly pay a contingency fee for the
solicitation, negotiation or obtaining of this Contract to
any person other than an employee acting in the normal course
of the employee's duties.
2. All accounts and records pertaining to payments of fees
or other compensation for the solicitation, obtaining or
negotiation of the Contract shall be subject to the Accounts
and Audit provisions of the Contract.
3. if the Contractor certifies falsely under this section
or is in default of the obligations contained therein, the
Minister may either terminate this Contract for default in
accordance with the termination for default provisions of
the Contract or recover from the Contractor by way of reduction
to the Contract Price or otherwise the toll amount of the
contingency fee.
4. In this section:
"contingency fee" means any payment or other compensation
that is contingent upon or is calculated upon the basis of a
degree of success in soliciting or obtaining a government
Contract or negotiating the whole or any part of its tcnns;
"employee" means a person with whom the Contractor has an employee
to employee relationship;
'tperson" includes an individual or group of individuals, a
corporation. a partnership- an organization and an association and,
without restricting the generality of the foregoing, includes any
individual who is required to file a return with the registrar
pursuant to section 5 of the Lobbyist Registration Act R.S.
1985 c.44 (4th Supplement) as the same may he amended from time
to time.
SUPPLEMENTAL GENERAL CONDTIONS - CANADIAN GOVERNMENT CLAUSE
FLOWDOWNS
A.4 Defence Contract
This subcontract is in support of a Canadian defence contract
within the meaning of the Defence Production Act and shall be
read accordingly.
A.6 Title to Property
This subcontract in support of a Canadian defence Contract
within the meaning of the Defence Production Act. In accordance
with the provisions of section 20 of the ActE title to any
Government Issue (as defined in that Act) furnished or made
available to the Contractor, or obtained or constructed by the
Contractor with money proved by Canada, remalns vested or vests
in Canada free and clear of all claims, liens, charges and
encumbrances and notwithstanding any law in force in any province
of any territory of Canada but subject to the provisions of the
Contract. Canada is entitled at any time to remove, sell or
dispose of the Government Issue.
B.1 1 Government Furnished Equipment
a. "Government Furnished Equipment" or "OFE" means any equipment,
other than Government Supplied Material (OSM), which is the
property of tbe Government and which the Government has agreed
under the Contract to deliver or have delivered, or make available
or have made available, to the Contractor for the Contractor's use
in performing the Work as described in the Statement Of Work.
b. Conditions for the provision of Government Furnished
Equipment to the Contractor include the following:
1, that the Contractor shall have submitted a request,
in writing to the Contracting Authority,
ii, that the Department of National Defence shall have
agreed to provide the requested OFF, and
iii. that the Contractor shall have submitted properly
certified loan agreements(s).
c. GEE will be loaned to the Contractor using, and upon
the terms and conditions set out in form DSS-MAS 7118'
The Contractor shall prepare and sign the loan agreement
form and forward the original and four (4) copies to the
Contracting Authority and two copies to the local CFQAR
representative.
d. The Contractor shall be responsible for packaging, packing
and niarking of GEE when it is returned to the Government.
e. DND loaned equipment shall be properly maintained by the
Contractor in accordance with terms detailed in the General
Conditions and in the Loan Agreement (Form DSS 7118). The
exercise of such responsibility is subject to verification by
the Quality Assurance Representative (QAR) who will also
authorize. as necessary, repair andlor modifications to
such equipment as a charge to the Contract.
B. 14 special Prodnetion Tooling and Test Equipment
1. The Contractor shall provide the production tooling
and test equipment required to perform the Work under
this contract. The Coniractor shall submit a list of the
tooling and test equipment that is to be procured or
manufactured for this contract within 90 days from the
Contract award date.
2. The Contract shall take reasonable and proper care
of the tooling. During the course of the contract, maintenance
and replacement shall be at the Contractor's expense.
3. Title to the tooling and any replacement shall vest in
Canada and shall remain so vested at all times.
4. The Contractor shall give written notice to Production
Assets Management Services, Aerospace. Marine and Electronics
Systems Sector, Department of Public Works and Government
Services, Ottawa, Ontario, IClA 055 at least sixty (60) days
before the date when the tooling will no longer be required
for use in the performance of any contract with Canad& if the
tooling at no direct cost to Canada for a period of ninety
(90) days from the contract completion date. if inhibiting,
packaging and crating charges are Involved, then these will
be the subject of a new contract with this Department.
5. Each item of production tooling shall be identified as
Canada property by affixing a plate) or by etching or stamping.
Such plate or marking shall include reference to the Department
of Public Works and Government Services File Number and Contract
Number as well as tool number to identify the individual item.
6. As a prerequisite to payment for the tooling, the Contractor
shall submit an inventory of the tooling verified by Statutory
Declaration made before a Notary Pubic or a Commissioner for
Authority, which shall contain the following particulars:
(a) the Contractor's name;
(b) date and reference numbers of the contract;
(c) supplies or components in the manufacture of which the tooling
is used; quantity, tool or item number (reference subsection 5
above), production part number to which the tool relates and a
brief description of the tool; and, (d) price of each item of
production tooling, where available, and the total amount.
7. The original two (2) copies of the tooling inventory
(verified as provided above) are to be subrnitted tot he
Production Assets Management Services, Aerospace. Marine
and Electronics Systems Sector, Department of Public Works and
Government Services. Ottawa, Ontario, KIA 0SF, and one (I)
copy is to be forwarded to the Contracting Authority.
D.3 Dangerous goods/Hazardous Products
1. Dangerous goods/Hazardous Products - material which is
classified as dangerous/hazardous shall be marked:
(a) shipping container- in accordance with the Transportation
of Dangerous Goods Act: and
(b) Immediate product container in accordance with the
Hazardous Products Act.
2. Bilingual Material Safety Data Sheets (2 copies) indicating
the NATO Stock Number shall be provided as follows
(a) one (1) copy to be enclosed with the shipment, and
(b) one (1) copy to be mailed to:
National Defense Headquarters
Mgen George R. Pearks Building
101 Colonel By Drive
Ottawa, Ontario KIA 0K2
Attn.: D Sup 24-6
3. It is the responsibility of the Contractor to ensure proper
labeling and packaging in the supply and shipping or hazardous
and dangerous goods to the Government of
Canada.
4. All merchandise labels are to be clearly marked with
the percentage of volume that is a hazardous item. Failure
to do so will result in the Contractor being held responsible
for damages caused in the movement of goods by government vehicles
or government personnel.
5 Canada shall not be held liable for any damages caused by
improper packaging labelling or carriage of goods/products.
6. Suppliers must ensure they adhere to all levels of regulations
regarding dangerous goodslhazardous products as set forth by
federal, provincial and municipal laws, by-laws and acts of
Parliament.
7. suppliers of dangerous goods must contact the consignee
(i.e. Supply Depot Traffic Section) at least 48 hours prior to
shipping in order to schedule a receiving time.
F.1 International Sanctions
1. Persons and companies in Canada are bound by economic sanctions
imposed by Canada be regulafions passed pursuant to the United
Nations Act, R.S.C 1985. C. U-2, the special Economic Measures Act,
SEC. 1992, c. 17, or the Export and Import Permits Act, R.S.C.
1985. c EEl9. As a result, the Government of Canada cannot accept
delivery of goods or services that originate, either directly or
indirectly. from the countries subject to economic sanctions At
the time of contract award the following regulation implernent
economic sanctions:
(a) United Nations Iraq Regulations;
(b) United Nations Libya Regulations;
(c) United Nations Federal Republic of Yugoslavia
(Serbia and Montenegro) Regulations.
2. It is a condition of this Contract that the Contractor
not supply to the Government of Canada any &oods or
services which are subject to economic sanctions as described
in paragraph 1. above.
3. During the performance of the Contract should the additional
of a country to the list of sanctioned countries or the
additions of a good or service to the list of sanctioned
goods or services cause an impossibility of performance
for the Contractor, the situation will be treated by the
Parties as a force majeure. The contractor shall forthwith
inform Canada of the situation; the procedures applicable to
force majeure shall then apply.
F.2 Y2O0O Warranty - Goods
I. The Contractor warrants that:
a) all hardware,, software andlor firmware products delivered
individually, or
b) hardware. software and firmware products delivered in
combination as an integrated system under this Contract,
as the case may be, shall meet the contractual requirement
so as to accurately and automatically process any and all date
and date-related data including, but not limited to calculating,
comparing, and sequencing and that such date-related processing
will take into consideration leap year calculations when used in
accordance with the documentation provided by the Contractor
and accepted by Canada.
2. To that end, the contractor also warrants that
date-related processing will not in any way, prevent
hardware, software or firmware from conforming to the
requirement of the contract prior to, during, or
after the year 2000. Canada may; at no additional cost,
require the Contractor, at time of acceptance, to demonstrate
compliance andlor compliance techniques and test procedures it
intends to follow in order to comply with all of the
obligations contained
herein.
3. The obligations contained herein apply to the
products delivered by the Contractor an its subcontractor(s)
involved in the performance of this Contract.
4. The warranties contained herein are separate and
discrete from any other warranties specified in this Contract,
and are not subject to any disclaimer of warranty which may
be specified in this Contract, its appendices, its schedules,
its annexes or any document incorporated in this Contact by
reference. The warranties contained herein are subject
to any limitation of the Contractor9s liability specified
in the Contract.
5. The warranties contained herein shall not apply where
a modification has been made to a deliverable provided under
this Contract by a party other than the Contractor or a
subcontractor or a party approved in writing by either of them.
6. Notwithstanding the foregoing. the provtsions set out In
the applicabte Supplemental General Conditions, if any, under
the section entItled "Warranty" apply
7 The warranties contained herein shall have a term
extending either:
(a) to June 30,2000, or,
(b) for a period of six months following acceptance of
the hardware, software and/or firmware, whichever is later date
Attachment D
Section 2
Prime Contract flow Asides of Agreement
9.0 QUALITY ASSURANCE
9.1 MI work shall be subject to Government Quality Assurance
(GQA) at the Subcontractor's facility or that of the
subcontractor(s) and at the installation site by the Director
General Quality Assurance, Department of National Defence,
MOen George R. Pcarkes Building, 101 Colonel By Drive, Ottawa,
Ontario KIA OKI or an .. other designated Canadian Government
Quality Assurance Representative. hereinafter referred to as
the QAR.
9.2 Agency or QAR with whom the Subcontractor mast make
arrangements for OQA. This will normally be the Agency/QAR
performing GQA in the Subcontractor's facility or area. if
the Subcontractor has not been contacted within 45 working
days of award of this subcontract, the Subcontractor shall
notify the Contracting Authority.
9.3 The Subcontractor is responsible for perforating,
or having, performed, all inspections and tests necessary
to substantiate that the material or service provided conforms
to the subcontract requirements.
9.4 The Subcontractor shall provide, at no additional
cost to the price of the Subcontract, applicable test data,
subcontractor technical data, test pieces and samples as may
reasonably he required for the QAR to verify conformance to
the subcontract requirements. The subcontractor shall
forward at its own expense such technical data, test data,
test pieces and samples to up to one location as the QAR may
direct.
9.5 Quality Control. Inspection, and Test Records that
substantiate conformance to the specified requirements,
including records of Corrective actions, shall be retained by
the Subcontractor for three (3) years from the date of completion
or termination of the Subcontract and shall be made
availabe to the DND/QAR upon request.
10.0 QUALTTY CONTROL
Assistance for Government Quality Assurance (OQA)
The Subcontractor shall provide the Quality Assurance
Representative (QAR) with the accommodation and facilities
required for the proper accomplishments of OQA and shall provide
any assistance required by the QAR for evaluation, verification.
validation, documentation or release of product. The QAR shall
have the right of access to any area of the Subcontractor's or
itssubcontractor's facilities where any part of the Work is being
pedo anal. The QAR shall be afforded unrestricted opportunity
to evaluate and verify Subcontractor compliance with Quality
System procedures and to validate produdt conformance with the
Subcontract requirements. The Subcontractor shall make available
for reasonable use by the QAR the equipment necess&y for all
validation purposes. Subcontractor personnel shall he made
available for operation of such equipment as required.
When the QAR determines that GQA is required at a
subcontractor's facilities, the Subcontractor shall provide
for this in the purchasing document and forward copies to the
QAR, together with relevant technical data as the QAR may request.
The Subcontractor shall notify the QAR of non-conforming
product received from a subcontractor when the product has
been subject to GQA.
11 GOA AT SOURCE/RELEASE DOCUMENTS
Material is to he released for shipment using the release
documents as documented in the Subcontractor's proposal which
include letters of Acceptance (endorsed by the Canadian
Government) and letters of Verification, both properly endorsed
by the Subcontractor's Quality Assurance Representative. Material
is to be released for shipment using these forms as long, as
these documents contain the same information as would be provided
in a DD 250 and if it is acceptable to the QAR. Release document(s)
shall be prepared by the Subcontractor.
12 STANDARDS SPECIFICATIONS AND DRAWINGS
Copies of Canadian Standards. Specifications and Drawings
required are available from the Contractor.
13. MILITARY NOMENCLATURE AND DENTIFICATION PLATES
The Subcontractor shall prepare nomenclature data (or confirm
existing data) in accordance with DND Specification
D-O1-()()0-2O()ISF4)()l, or ML-STD-196D, for System #1. Boat
and SOIT Modiflcation Kits and the new Fire Control Consoles.
To ensurt timely processing necess&Y documentation should
be submitted at the earliest opportunity, but in any event not
later than ninety (90) days prior to the delivery of the equipment.
The Subcontractor shall arrange for the design and manufacture
of identification plates, in accordance with DND Standard
1, for System No. I, Boat and SOTT Modification
Kits. and the new Fire Control Consoles and all units thereof.
These plates arc required to be affixed prior to delivery of the
equipment. Identification plate drawings are to be submitted for
approval prior to production. Any queries, drawings and documentation
regarding nomenclature and identification plates are to be
referred to the Contractor.
venfication by government audit, at the Minister's discretion1
before or after
payment is made to the Subcontractor under the terms and
conditions of the Subcontract. if the said audit demonstrates that
the certification is in error, it is agreed that the Subcontractor
shall make repayment to Canada in the amount found to be in excess
of the lowest price.
Attachment H
SUBCONTRACT 198422
Vendor Shipping Procedural Instructions
For Shipments to the United States
INTRODUCTION
The Shipping Procedural Instructions (SF1) provides instructions
to non-U.S. vendors on how to prepare shipments and documents
for Importing into the United States.
OVERALL RESPONSEBILITIES
The SPI contains information on invoice preparation. Other documentation
required, case marking, hazardous materials, Lockheed Martin Corporation
(LMC) authorized U.S. import brokers, authorized routings to the
United States, billings, etc. Following the instructions in the
SPI will ensure that importation of goods will be as effortless and
timely as possible.
About this Document:
Do not use these shipping Instructions Lockheed Martin Corporation
Manassas or supported by Manassas are not the Importer at Record.
This document contains instructions for non-U.S. vendors who are
shipping their goads to a U.S, Lockheed Martin Corporation
purchasing location and/or vendor location.
Use these instructions only if Lockheed Martin Corporation is
the Importer of Record. The Import of Record is in the "Invoice-to"
area of an invoice. The Importer of Record is responsible
for paying for the goods an/or the import charges.)
If Lockheed Martin Corporation is the Importer of Record,
import all goods (regardless of value) through
a Lockheed Martin Corporation authorized Import broker
and route these goods through the ports.
If the seller is the Importer of Record, send the shipment
to the appropriate U.S. representative. The representative will
arrange the shipments delivery and handle the importing
costs and responsibilities.
If you need additional information, use one of the following references
* For information about shipping goods -
contact an international trade organization (such as
the International Chamber of Commerce), your
government authorities, or the nearest U.S.
Consulate.
* The Lockheed Martin Corporation ordering location.
1.10 Non-U.S Vendor SPI
This document provides information related to shipping goods
to a U.S. Lockheed Martin Corporation
purchasing location. The six topics Included in this document are:
* Section 1.20 * Marking of Goods country of Origin
* Section 1.3O * Handling an Assist
* Section 1.40 * Packing the Goods
* Section 1.50 Insuring the Goods
* Section 1.60 * Shipping the Goods
* Section 1.70 * Temporary Import Bond
1.20 Marking of Goods -Country of Origin
U.S. Customs regulations require every article of
foreign origin (or its container) imported into the United
States be marked in a conspicuous place, as legibly, indelibly
and permanently as the nature of the, article (or its container)
will permit, in such manner as to indicate to the
"ultimate purchaser' in the U.S.the English name of the article's
country of origin at the time of importation into the customs territory of
the U.S. The "ultimate purchaser" is generally the last person
in the U.S. who will receive the article in the
form in which ii was imported.
Reference Title 19 CFR 134.1
Country of origin marking requirements are described below:
* Finished products must be marked using the phrase "Made in ________
"Assembled in _________ or similar wording.
Finished products include:
- Machines (whether imported as a machine type or parts)
- Supplies (ribbons, diskfiles, cartridges, etc.)
- Major peripheral equipment (displays. keyboards. conssoiles, etc.)
- Software
- Publications
* Sub-products must be marked with the country of origin on either
the article itself or on the immediate container.
The immediate container is the package. bag, box, carton,
etc., closest to the sub-product.
sub-products include:
- Modules Pans
- Components
Sub-assemblies
Note: Normally, the country lo origin is marked on the sub-product
or on the sub-product's immediate container. However,
in special aftuations, the country Of origin can be marked
on a higher level of packaging.
For example, if you were shipping modules that were packed
in reusable plastic tubes, the tubes
would not be suitable as shipping containers. So,
you would ship the tubes in a white box and
print the pan number and quantity' on the box. In this
situation. the country of origin could be
marked on the white box. The marking on the box must
state the "Contents made in
Containers made in ______ or similar wording to identify
the country of origin of the modules and
the reusable tubes.
If you can not mark the country of origin on a sub-product or
its container. contact the Lockheed Martin Corporation receiving
location for guidance. - - -
Non-produdion goods-
Because of an exception in the U.S, Customs regulations,
non-production goods for use or consumption within Lockheed
Martin Corporation do not have to be marked with country of
origin. Crhis includes the article itself. its immediate
package, or its container.) Non-production goods are articles
that Lockheed Martin Corporation Is not in the business of
selling to others (such as tools, test equipment, cleaning
supplies, office supplies, etc.).
Note, even though Lockheed Martin consumes the material
internally, if the material is TSCA regulated Lockheed Martin
is still considered the importer of record and all appropriate
paperwork is still required. Contact the procurement agent
for additional information.
The country of origin must appear on the invoice.
The shipper must ensure that the country of origin on
the invoice is the same as the country of origin
marked on an article (or the container).
1.30 Handling an Assist
Reference Title 19 CFR 152.102
An "assist' means any of the following, it supplied directly or
indirectly (either tree of charge or at a
reduced cost) by the buyer of imported merchandise
for use in connection with the production or the sale
of merchandise for export to the United states.
1. Materials, components, parts, and similar items incorporated
in the imported merchandise
2. Tools, die molds, and similar items used in the
production of the imported merchandise
3. Merchandise consumed in the production of
the imported merchandise
4. Engineering, development, artwork. design work, and
plans and sketches that are undertaken outside of the U.S.
and are necessary for the production to the Imported merchandise
Do not treat any service or work in this category as an assist
if that service or work meets all three of
the following crtteria:
* The service or work is performed by an individual domiciled
in the U.S.
* The service or work is performed by that individual
while acting as an employee or agent of
the buyer of the irriponed merchandise
* The service or work is incidental to other engineering,
development, artwork, design work, or plans or sketches that
are undertaken in the U.S.
When any of these assists are provided and not included in the
Invoice price of the goods, you must declare the assist to U.S
Customs as a separate flne flern on the commercial invoice. Records to
substantiate assist must be kept by the invoicing vendor.
Notes:
* Treat money given to a vendor for buying any of these items as an assist.
* when a Lockheed Martin Corporation engineer travels to a
foreign country for engineering or development work,
the foreign travel may qualify as an assist. (See
the description about engineering in the list above.)
Assist Value
Reference Title 19 CER 152.103 - 152.108
In determining the value of an assist, the following general rules apply:
* The value is either:
- - The cost of acquiring the assist - if acquired by the location
providing the assist
- - The cost of producing the assist - if produced by the location
providing the assist
* The value includes all costs of transporting the assist to
the place of productionE and the duty
incurred on an assist when it arrives in the foreign location
(If the UES. location providing the assist pays for the
freight charges and duty').
* The value should reflect depreciation of the assists that were
used by the importer before being shipped abroad or on the other hand.
the value should reflect the enhancement if the assist were modified
or repaired resulting in an increase in value. Assists. which can
depreciate or increase in value. are tangible items such as
tools, dies, molds, test equipment, and other. related items.
* In the case of engineering, development. artwork, design works,
and plans and sketches undertaken outside at the U.S the value is
determined by;
- - The cost of obtaining copies of the assist provided the
assist is publicly available.
- - The cost of the purchase of the lease, if the assist was
bought or leased by the importer from an unrelated party.
- - The value added outside the U.S., is a joint effort involving
the U.S. and one or more foreign countries, existed in the
production of the assist.
Declaring the Assist on the First Shipment
Declaring the assist on the first shipment is the preferred
method. It is acceptable to Customs and it is
easy to track and control.
* The U.S. Lockheed Martin Corporation location giving the assist
has the responsibility to notify the shipping country with the
following information:
- Assist number
- Assist value (normally in U.S. dollars but may be in non-U AS.
currency)
- Assist purchase order (P0) number or intercompany agreement
(ICA) number that the assist
was given on
* include all of the assist information on a separate line of
your first export invoice and dollar the
total assist for the part number. The following must be
included on the assist declaration.
- - Assist value
- - Assist Poor CA number
If you plan to declare an assist and you do not have
all of this assist information, contact the person who
placed the order. If this information is not on the export
invoice, your goods will be held at the UES. port of entry.
A few guidelines about the export invoice are:
The assist value should normally be expressed in U.S. dollars
(unless the U.S. location requests the value be stated in a
different currency). Always use the assist value given by
the U.S. location. Do not list the assist value in two different
currencies (e.g., U.S. dollars and yen). If you think
that the U.S. location has given you an incorrect assist value,
contact the person who placed the order.
- - Do not declare supplemental payments as an assist.
Prorating the Assist Value
Prorating the assist value means taking me assist value and
declaring the value over multiple shipments
rather than declaring it in a lump sum on the first
invoice. This method of assist declaration requires prior
approval by U.S. Customs. You should only prorate an assist
if so instructed by the U.S. location, and the
value should be notated on the invoice as instructed by
the U.S. location. The assist value (prorated) and
the assist PO/ICA number are still required on your
export invoice.
Note: Component assists may be declared as they are used instead
of lump sum declaration. This is not considered prorating the
assist and does not require U.S. Custom's approval.
For any questions or concerns about the U.S. assist
process, contact the ordering location.
1.40 Packing the Goods
This section contains information about package labels and
package documentation. If you need specific
packing instructions, contact the U.S. Lockheed
Martin corporation receiving location for guidance.
Package Labels
The following sections provide detailed information about the
labels that are used on a package that is
exported to the United States. These labels include:
shipping labels, and carton labels.
Shipping Labels
An example of a shipping label is shown in Frigure 4,
A shiping label is sometimes called an 'address
label".
TO: Lockheed Martin Corporation
do Emery Customs Brokers
44901 ralcon Place, Suite 104
Sterling, Va. 2016$
FOR: Lockheed Martin corporation
9500 Godwin Dr.
Dock B
Manassas, VA. USA 20110
ATTENTlON: John Doe
Figure 4. Shipping Label Example
The areas shown in figure 4 are described below:
TO:
FOR:
ATTENTION TO:
The address of the appropriate broker (see Temporal Broker? on pagel2).
The address of the final U.S. receiving location.
The name of the person receiving the goods.
Place the shipping label on the front of the case.
Include the complete shiping to address from the
commercial invoice on the shipping label.
Carton Labels
Each carton must have a carton label that identities the
contents of the carton. A carton label is also
called a "package label."
Figure 5 shows an example of a canon label.
Lockheed Martin Corporation Part number 1876578
E/C level 776123
Package quantity'
Country of Origin United Kingdom
Package Documentation
Reference, Title 19 CFR 141.81-141.92
Each package must contain speoific documentation. The requirements
for this documentation are explained in the following sections.
General Requirements
This section describes the documents that are required
in each package. II any documents are missing or incorrect,
U.S. Customs will hold your shipment at the port of entry.
Some general documentation guidelines are:
* Prepare all documents in English.
* For truck and air shipments - Place all documents in an
envelope addressed to the consignee specified in
"1.60 Shipping the Goods". Attach the envelope to the
truck bill folding or air waybill that is sent with the
shipment.
* For ocean shipments - Send all documents by Express
airmail to the consignee specie in "1.60 Shipping the
Good? on page 11.
The documentation requirements for each package are
explained below:
* commercial Invoice - S copies (no exception). See
"Commercial Invoice Requirements" on
page Sort detailed information about commercial
invoices.
* Packing List - 1 original. The packing list must
be in an envelope and attached to (or inside)
the first package or case for each purchase order.
If the placing list is inside a package or
case, stamp the outside the "PACKING LIST ENCLOSED.-
Use any accepted format to list the content and
quantities of each package or case without prices.
Include all of the information on the oommercial
invoice except cost.
If the commercial invoice does not itemize the
contents of each package, include 3 copies of
the packing slip with the other documents.
Certificate roiling- 1 original and a copies are
required. For shipments from Canada Reference Title
19 CPA 141.81- 141E92
* Hazardous Materials certificate- For hazatdous
materials, give the required original documents to
the carrier and send I copy of the certificate with
the other shipping documents.
Air waybill- 2 copies for air shipments
e Ocean Bill of Lading - 2 originals. and 2 copies
Truck Bill of Lading - I original for truck shipments
from Canada and Mexico only
* U.S. Government documentaion - Obtain any necessary
Food and Drug Administration (FDA) or Federal
Communications Commission (FCC) documents
(if applicable). If 'you have any questions, contact
the Lockheed Martin Corporation buying location.
- Shipments of Electronic Products - For ah shipmehts
of electronic products built as a subassembly or
final product. Reference Title 19 CFR 12.90 & 12.91
FDA: Shipments of Laser and flails Products - For
products that could emit hazardous electromagnetic
or particle radiation, you are required to file
regulatory affidavits with the USE. FDA's Center for
Devices and Radiological Health. These affidavits
are required for color and monochrome computer
displays, television receivers, lasers and laser
products, x-ray devices and other products that could
emit hazardous radiations (by nature of high voltage,
high energy, or coherent light properties).
- Before shipping these products, notify the person
placing the order with flight detail and consignee
information.
If you have any questions, contact the Lockheed Martin
Corporation buying location.
Reference Title 19 CFR 12.118 - 12.127 for Chemicals
* chemicals - For all chemical shipmentsA include a complete
and accurate Toxic Substance
Certification Act (OATS) Certificate with the shipment
documents. All questiqns regarding
whether or not a shipment contains or is a chemical, please
contact the Lockheed Martin corporation buying location.
This includes epoxies, solders,chemical kits of all kinds,
cleaning supplies, touch paints, etc.
* ARTICLES CONTAINING ANODE MANUFACTURED WITH OZONE DEPLETING
SUBSTANCES:
U.S. Regulations require that articles entered into the U.S.
Commerce as of May 15,1993 and mahufactured using an
Ozone Depleting Substance be labeled accordingly. 40 CFR
Part 82 specifies that such products or their associated
containers or documents mustcontain the statement:.
Consult with your contact at the Lockheed Martin Corporation
importing location for details on compliance with
this requirement. The site may have requirements that
are in addition to U.S. Regulation.
Commercial Invoice Requirements
You may use any accepted international document format for
international commercial transactions.
Notes:
* The commercial invoice sent with the shiprnent slum be the same
as the invoice sent for payment.
* An INVOICE-TO and SHIP-TO code are required on all invoices.
* If the bill in currency is different than the payment currency,
show both curnencies.
Country Home: United States
The fields of the invoice shown in urger S are described below:
INVOICE TO The complete name and address of the location to be billed
INVOICE DATE The date of the invoice (day, month, year)
INVOICE TYPE The type of the invoice - Charge, No Charge,
or Charge/No Charge
INVOICE #
U/M
The number of the invoice (usually pre-printed)
The unit of measure of the product - two-digit numeric code
(e.g., each; pair). Some items (such as chemicals and scalps)
equire additional measurement in information (
TOY The quantity of the product
UNIT COST The cost of each unit (in U.S. dollars)
AMOUNT The total cost of each line item - Quantity x Unit Cost
(in U.S. dollars)
TOTAL VALUE The total value of the items on the invoice
(in U.S. dollars)
The purchasing location must supply the information for these fields
of the invoice:
SHIP TO The codes for the country and location where the goods
will be received.
PART NO.The terms of delivery (e.g., Ex-factory, FOB, etc.)
The description of the product. Provide a complete, accurate, and
detailed description of each item. Use complete names. Do not use
acronyms.
The pan number of the product. Provide either an Lockheed Martin
Corporation pan number (example: 7362487) or an Lockheed Martin
Corporation machine type/model number- If you are using a machine
type/model number, list it as follows:
* Machines with a serial number: 8565 001
(serial number)
* Machines without a serial number: Add a
'E" prefix to the machine type: ES565 001.
If available, use the top-level part number
instead of the machine type (model). Do
not list items identified
by machine (model) on the same invoice
as items identified by
part number.
* Non-Lockheed Martin Corporation product
number or vendor part
number. Add a "VEND prefix to the number
to identify that the number is a non-Lockheed
Martin Corporation
number.
Measurement Information
Chemicals (dry)
Chemicals (liquid)
Unit Measurement
Kilograms
Liters
Kilograms
Kiloarams
Carats
bid meters
a. 5.5, 8Eo
Meters
Kilograms
Meters
Optical fiber cables Length
Paper products Weight Kilograms
Photographic film and plates Clause area Square meters
Plastic plate and films Surface area Square meters
Plastics weight Kilograms - --
Plastics Adhesive Tapes Surface area Square meters
weight Kilograms
Precious metals
Radioactive isotopes
V-belts -
vldeotape
Figure 7 Measurement Information
1.50 Insuring the Gods
Do not insure shipments going to a Lockheed Martin Corporation
location. Lockheed Martin Corporation has its own insurance for
international shipments. If one of the following circumstances
applies to your goods, contact the Lockheed Final Corporation buying
location before shipping them:
* The value of an invoice(s) shipped on a conveyance exceeds
$100,000,000 us. dollars
* An ocean shipment bill of lading that an invoice
value of $100,000,000 or more U.S. dollars
1.60 Shipping the Goods
send the shipment by the mode of transport (air, ocean, or truck)
specified in the purchase order or other instructions from Lockheed
Martin Corporation. Do not mail, or use courier service. Contact
the Lockheed Martin Corporation buying location if you can not comply
with the mode of transport specified in the purchase order.
Mode at Transport
The requirements for transportation to supplies and orders by sea
for applicable military contracts is identified in the Department of
Defense Federal Acquisition Regulations (FADS) clauses 252.247-7022.
252.247-7023. and 252.247-7024 (with reference to OAF clause 247.573
and Federal Acqusition Regulation (FAR) clause 47.500).
Generally, these clauses require U.S.-flag vessels to transport any
supplies by sea under the appropriate military contract. In certain
situations, you can forward a request to the Contracting Officer for
authorization of a foreign-flag vessel.
Note: Any routing or carriage contrary to these Federal regulations
could result in tines and/or penalties to Lockheed Martin Corporation.
If Lockheed Martin Corporation is the Importer of Record (the invoice
shows that Lockheed Martin Corporation is paying for the goods and/or
the Import charges), you are required to import the items through a
Lockheed Martin Corporation authorized import broker. See "Import
Brokers" Figure 12 for a listing of authorized brokers.
Import Brokers
The following is a list of Lockheed Martin approved Forwarders and
Brokers with Power of Attorney. Only a company from this approved list
can be used. Contact the Broker directly for the correct location
closest to the deliver to site. Contact the ordering location for
updated Brokers list or if help is needed in determining the correct
Broker.
Emery Customs Brokers
44901 Falcon Place, Suite 104
Sterling, VA. 20166
1-800-443-6379
www.emervworld.com
DHL World wide Express
8528 Toy Road
Vienna, VA. 22182
1-800-225-5345
wwwvw.dht.com
SAND Corp.
22900 Wash Road
Set it 9, Vs. 20166
www.danzas.oom
Nippon Express U.& A., Inc.
281 Pickets Line
Newport News, A. 23603
1-800-438-1934
www.nipponexDressusa.com
Figure 12. Import Brokers
Product Information
Circle International
22660 Venue Drive
Suite 110
Sterling, A 20168
www.circIeintl.com
suntan A Cargo
1457 Miller Store Road
Fetus 101-A
Virginia Beach, A 23465
1-800864-7827
www, unistaraicargo. corn
MASS Cargo
www.rnsas-corn
Reference: Harmonized Tariff Schedule (HTS)
Harmonized Tariff Product Information numbers are required on the
invoice when shipping products to U.S. Lockheed Martin Corporation
locations. If you need additional information, see the harmonized tariff
schedule or cant the Lockheed Martin Corporation ordering location.
Invoice Details for Special Conditions
In specific situations, additional information is required on the
commercial invoice. These situations are;
. Articles exported from the US, and returned
* American goods returned: not advanced in value or improved in
condition
* Returned non-American goods: not conforming to sample or
specification
The invoice information required in these situations is described
in the following section.
Articles Exported from the U.S. and Returned
The commercial invoice must state whether or not the article was
originally exported from the United States to your country for
temporary use.
If the shipment was registered when it was exported from the
United States, include the registration number and the port where
the goods were registered.
American Goods Returned: Not advanced in Value or improved in Condition
In addition to the U.S. export details, invoices for American
goods returned must contain the statement
"American Goods Returned."
The value of the returned articles exceeds $1000, the invoice
must also contain a declaration that the articles listed on the
invoice has an American origin and has not been improved while
abroad. The declaration must be written as follows:
____________ declare that to the best of my knowledge and
belief, the articles herein specified are products of the U.S.,
that they are returned without having been advanced in value or
improved in condition by any process of manufacture or other
means.
Si9nature Date____________
Returned Non-American Good: Not conforming to Sample or Specificatlon
Goods of nouns. non that were exported from the United states and
are being returned to the U.S. may be entered duty-free under the
following conditions:
* The articles wore exported within 3 years flare they were imported
* While abroad. the articles were not advanced in value or improved
in condition by any manufacturing process or other means
* The articles did not conform to sample or specification. Lockheed
Martin Corporation originally imported the goods and then exported
them. The goods were exported without the advantage of duty drawback.
In addition to U.S. pelf details, the invoice must include the
statement "Returned Goods - Do Not conform to Sample or Specification
and have the following Description:
I declare that the (description of article) was received
by me from (name and address to U.S. exporter). that they have
not been advanced in value or improved in condition by any
process of manufacture or other means and are being returned to
(name and address of the consignee in the U.S.) because they
do not croon to replans or specification for the following reasons:
(State reason why the goods do not meet your specifications).
Signature
Date____________
Goods Returned After Being Used Temporarily
Goods that are returned after they are used temporarily may be
entered without duties (regardless of country of origin), if they
were used for the following purposes:
. Exhibition. examination, or experimentation for scientific or
educational purposes
. Exhibition at any public exposition. fair or conference
The following conditions are required for duty-free entry:
* The goods must be registered when exported from the USE.
* The invoice must include:
The U.S. export details, including the registration number
and U.S. port where they were registered
- - The statement "Goods returned after temporary use matador
- - The following Description:
________________(Place and Date)
I, _____________ declare that the articles herein were
received by me from (name and address of U.S. exporter): that
the said articles were used solely for temporary scientific or
educational purposes and for no other use abroad than air exhibition,
examination or experimentation; that they are being returned
without having been changed in condition in any manner except by
reason of their bona fide use as follows: (Describe change in
condition.)
Signature
Date___________
Articles Returned After Repairs or Alterations
Articles exported from the U.S. to be repaired or altered are bisect
to duty on the cost or value of the repairs or alterations. The
requirements for these articles
* The goods must be registered when exported from the U.S.
* The invoice must include:
- - The U.S. export details, including registration runner and
the port verve registered
- - The repair cost and full value of the sod. This value must
be shown even if the repair was done on a changer basis.
- - The statement 'Goods returned to the U.S. after being repaired
or altered abroad (KTS 9802.40.40 Program)"
The following Declaration:
_____________ (Place and DAte)
I, ___________ declare that Hi article herein specified are
the articles which, in the condition they ware exported from the US,
were received by me (us) on (date) from (name and address of owner or
exporter in the U.S.); that they were received by me (us) for the
sole purpose of being repaired or altered; that only the repairs or
alterations described below were performed by me (us); that the full
cost or fair market value of such repairs
or alterations are correctly stated below;. and the no substitution
whatever has been made to replace any of the articles originally received
by me (us) from the owner or exporter thereof mentioned above.
(Give brief description of repairs/alterations.)
Signature
Date_____________
Metal Articles Exported for Processing and returned to the U.S. for
Further Processing
Metal articles that have been exported for processing and are being
returned to the US for further processing are subject to duty on the
cost or value of the processing performed abroad.
The following requirements apply to these articles:
* The goods must be registered when exported from the U.S.
* The invoice for the processed goods must show:
- - The U.S. export details Including the registration number
and the port where registered
- - The processing cost and full value of the goods. This value
must be shown even if the processing was done on a no-charge basis.
- - The statement "Matte articles returned to the U.S. after being
processed abroad (HTS 9802.06.60 Program)
The following declaration:
_______________(Place and Date)
____________ declare that the article herein specified
are the articles which, in the condition they were exported from
the U.S., were received by me (us) on (date) from (name and address
of owner or exporter in the US-): that they wore received by me (us)
for the sole purpose of being processed: Hit only the processing
described below was performed by me (us); that the full cost or
(when no charge is made) fair market value of such processing is
correctly stated below; and that no substitution whatever has been
made to replace any of the articles originally received by me (us)
from the owner or exporter thereof mentioned above. (Give a brief
description of processing)
American Goods Assembled Abroad
Articles assembled abroad (in whole or in pair) from components
produced in the USE may be eligible for reduced duty under the
following conditions:
* When the components were exported, they were ready for assembly
without further processing.
* The U.S. components have not lost their physical identity by
change in form, shape, or otherwise.
* The U.S. components have not been advanced in value or
improved in condition abroad except by being assembled and except
by operations incidental to the assembly process such as cleaning,
lubrication, and painting.
Duty is paid on the full value of the article less the value
of the U.S. components.
The invoice must include the following information:
* The full value of the assembled article
The value of the U.S. components, using the following statement:
9802.00.80 Program: American Goods Assembled Abroad Value of
U.S. Components: $X.XX times Quantity -- $X.XX
Can a copy of the Declaration of Assembly to the invoice. List all
of the U.S. components and their value on the Declaration of Assembly.
Note: Before the first shipment of the assembled articles, give a
copy of the Declaration of Assembly to U.S. Customs for approval
* A copy of the Declaration of Assembly must be attached to all
shipments.
1.70 Temporary Import Bond
Reference Title 19 CFR 10.31
Only use a BIT if instructed by the Lockheed Martin Corporation
buying location. If you have any questions, contact that location.
Merchandise imported into the US for test, evaluation, or
exhibition, and subsequently re-exported within one (1) year without
being altered in function or improved in value while in the U.S.,
are entered duty free. Any article imported under ITS provision cannot
be considered for sale or for sale on approval.
The value of the duty paid should be compared to the cost of
implementing the BIT (i.e. customs brokers fees etc.) It may be more
cost effective to pay the duty than to implement a BIT.
Attachment H
SUBCONTRACT 198422
Vendor Shipping Procedural Instructions
For Shipments to the United States
INTRODUCTION
The Shipping Procedural Instructions (SF1) provides instructions
to non-U.S. vendors on how to prepare shipments and documents
for Importing into the United States.
OVERALL RESPONSIBILITIES
The SPI contains information on invoice preparation. Other
documentation required, case marking, hazardous materials, Lockheed
Martin Corporation (LMC) authorized U.S. import brokers, authorized
routings to the United States, billings, etc. Following the
instructions in the SPI will ensure that importation of goods will
be as effortless and timely as possible.
About this Document:
Do not use these shipping Instructions Lockheed Martin Corporation
Manassas or supported by Manassas are not the Importer at Record.
This document contains instructions for non-U.S. vendors who are
shipping their goads to a U.S, Lockheed Martin Corporation
purchasing location and/or vendor location.
Use these instructions only if Lockheed Martin Corporation is
the Importer of Record. The Import of Record is in the "Invoice-to"
area of an invoice. The Importer of Record is responsible
for paying for the goods an/or the import charges.)
If Lockheed Martin Corporation is the Importer of Record,
import all goods (regardless of value) through
a Lockheed Martin Corporation authorized Import broker
and route these goods through the ports.
If the seller is the Importer of Record, send the shipment
to the appropriate U.S. representative. The representative will
arrange the shipments delivery and handle the importing
costs and responsibilities.
If you need additional information, use one of the following
references
* For information about shipping goods -
contact an international trade organization (such as
the International Chamber of Commerce), your
government authorities, or the nearest U.S.
Consulate.
* The Lockheed Martin Corporation ordering location.
1.10 Non-U.S Vendor SPI
This document provides information related to shipping goods
to a U.S. Lockheed Martin Corporation
purchasing location. The six topics Included in this document are:
* Section 1.20 * Marking of Goods country of Origin
* Section 1.3O * Handling an Assist
* Section 1.40 * Packing the Goods
* Section 1.50 Insuring the Goods
* Section 1.60 * Shipping the Goods
* Section 1.70 * Temporary Import Bond
1.20 Marking of Goods -Country of Origin
U.S. Customs regulations require every article of
foreign origin (or its container) imported into the United
States be marked in a conspicuous place, as legibly, indelibly
and permanently as the nature of the, article (or its container)
will permit, in such manner as to indicate to the
"ultimate purchaser' in the U.S.the English name of the article's
country of origin at the time of importation into the customs
tertittory of the U.S. The "ultimate purchaser" is generally the
last person in the U.S. who will receive the article in the
form in which ii was imported.
Reference Title 19 CFR 134.1
Country of origin marking requirements are described below:
* Finished products must be marked using the phrase "Made in ________
"Assembled in _________ or similar wording.
Finished products include:
- Machines (whether imported as a machine type or parts)
- Supplies (ribbons, diskfiles, cartridges, etc.)
- Major peripheral equipment (displays. keyboards. conssoiles, etc.)
- Software
- Publications
* Sub-products must be marked with the country of origin on either
the article itself or on the immediate container.
The immediate container is the package. bag, box, carton,
etc., closest to the sub-product.
sub-products include:
- Modules Pans
- Components
Sub-assemblies
Note: Normally, the country lo origin is marked on the sub-product
or on the sub-product's immediate container. However,
in special aftuations, the country Of origin can be marked
on a higher level of packaging.
For example, if you were shipping modules that were packed
in reusable plastic tubes, the tubes
would not be suitable as shipping containers. So,
you would ship the tubes in a white box and
print the pan number and quantity' on the box. In this
situation. the country of origin could be
marked on the white box. The marking on the box must
state the "Contents made in
Containers made in ______ or similar wording to identify
the country of origin of the modules and
the reusable tubes.
If you can not mark the country of origin on a sub-product or
its container. contact the Lockheed Martin Corporation receiving
location for guidance. - - -
Non-produdion goods-
Because of an exception in the U.S, Customs regulations,
non-production goods for use or consumption within Lockheed
Martin Corporation do not have to be marked with country of
origin. Crhis includes the article itself. its immediate
package, or its container.) Non-production goods are articles
that Lockheed Martin Corporation Is not in the business of
selling to others (such as tools, test equipment, cleaning
supplies, office supplies, etc.).
Note, even though Lockheed Martin consumes the material
internally, if the material is TSCA regulated Lockheed Martin
is still considered the importer of record and all appropriate
paperwork is still required. Contact the procurement agent
for additional information.
The country of origin must appear on the invoice.
The shipper must ensure that the country of origin on
the invoice is the same as the country of origin
marked on an article (or the container).
1.30 Handling an Assist
Reference Title 19 CFR 152.102
An "assist' means any of the following, it supplied directly or
indirectly (either tree of charge or at a
reduced cost) by the buyer of imported merchandise
for use in connection with the production or the sale
of merchandise for export to the United states.
1. Materials, components, parts, and similar items incorporated
in the imported merchandise
2. Tools, die molds, and similar items used in the
production of the imported merchandise
3. Merchandise consumed in the production of
the imported merchandise
4. Engineering, development, artwork. design work, and
plans and sketches that are undertaken outside of the U.S.
and are necessary for the production to the Imported merchandise
Do not treat any service or work in this category as an assist
if that service or work meets all three of
the following crtteria:
* The service or work is performed by an individual domiciled
in the U.S.
* The service or work is performed by that individual
while acting as an employee or agent of
the buyer of the irriponed merchandise
* The service or work is incidental to other engineering,
development, artwork, design work, or plans or sketches that
are undertaken in the U.S.
When any of these assists are provided and not included in the
Invoice price of the goods, you must declare the assist to U.S
Customs as a separate flne flern on the commercial invoice.
Records to substantiate assist must be kept by the invoicing vendor.
Notes:
* Treat money given to a vendor for buying any of these items as
an assist.
* when a Lockheed Martin Corporation engineer travels to a
foreign country for engineering or development work,
the foreign travel may qualify as an assist. (See
the description about engineering in the list above.)
Assist Value
Reference Title 19 CER 152.103 - 152.108
In determining the value of an assist, the following general
rules apply:
* The value is either:
- - The cost of acquiring the assist - if acquired by the location
providing the assist
- - The cost of producing the assist - if produced by the location
providing the assist
* The value includes all costs of transporting the assist to
the place of productionE and the duty
incurred on an assist when it arrives in the foreign location
(If the UES. location providing the assist pays for the
freight charges and duty').
* The value should reflect depreciation of the assists that were
used by the importer before being shipped abroad or on the other hand.
the value should reflect the enhancement if the assist were modified
or repaired resulting in an increase in value. Assists. which can
depreciate or increase in value. are tangible items such as
tools, dies, molds, test equipment, and other. related items.
* In the case of engineering, development. artwork, design works,
and plans and sketches undertaken outside at the U.S the value is
determined by;
- - The cost of obtaining copies of the assist provided the
assist is publicly available.
- - The cost of the purchase of the lease, if the assist was
bought or leased by the importer from an unrelated party.
- - The value added outside the U.S., is a joint effort involving
the U.S. and one or more foreign countries, existed in the
production of the assist.
Declaring the Assist on the First Shipment
Declaring the assist on the first shipment is the preferred
method. It is acceptable to Customs and it is
easy to track and control.
* The U.S. Lockheed Martin Corporation location giving the assist
has the responsibility to notify the shipping country with the
following information:
- Assist number
- Assist value (normally in U.S. dollars but may be in non-U AS.
currency)
- Assist purchase order (P0) number or intercompany agreement
(ICA) number that the assist
was given on
* include all of the assist information on a separate line of
your first export invoice and dollar the
total assist for the part number. The following must be
included on the assist declaration.
- - Assist value
- - Assist Poor CA number
If you plan to declare an assist and you do not have
all of this assist information, contact the person who
placed the order. If this information is not on the export
invoice, your goods will be held at the UES. port of entry.
A few guidelines about the export invoice are:
The assist value should normally be expressed in U.S. dollars
(unless the U.S. location requests the value be stated in a
different currency). Always use the assist value given by
the U.S. location. Do not list the assist value in two different
currencies (e.g., U.S. dollars and yen). If you think
that the U.S. location has given you an incorrect assist value,
contact the person who placed the order.
- - Do not declare supplemental payments as an assist.
Prorating the Assist Value
Prorating the assist value means taking me assist value and
declaring the value over multiple shipments
rather than declaring it in a lump sum on the first
invoice. This method of assist declaration requires prior
approval by U.S. Customs. You should only prorate an assist
if so instructed by the U.S. location, and the
value should be notated on the invoice as instructed by
the U.S. location. The assist value (prorated) and
the assist PO/ICA number are still required on your
export invoice.
Note: Component assists may be declared as they are used instead
of lump sum declaration. This is not considered prorating the
assist and does not require U.S. Custom's approval.
For any questions or concerns about the U.S. assist
process, contact the ordering location.
1.40 Packing the Goods
This section contains information about package labels and
package documentation. If you need specific
packing instructions, contact the U.S. Lockheed
Martin corporation receiving location for guidance.
Package Labels
The following sections provide detailed information about the
labels that are used on a package that is
exported to the United States. These labels include:
shipping labels, and carton labels.
Shipping Labels
An example of a shipping label is shown in Frigure 4,
A shiping label is sometimes called an 'address
label".
TO: Lockheed Martin Corporation
do Emery Customs Brokers
44901 ralcon Place, Suite 104
Sterling, Va. 2016$
FOR: Lockheed Martin corporation
9500 Godwin Dr.
Dock B
Manassas, VA. USA 20110
ATTENTlON: John Doe
Figure 4. Shipping Label Example
The areas shown in figure 4 are described below:
TO:
FOR:
ATTENTION TO:
The address of the appropriate broker (see Temporal Broker,
on pagel2). The address of the final U.S. receiving location.
The name of the person receiving the goods.
Place the shipping label on the front of the case.
Include the complete shiping to address from the
commercial invoice on the shipping label.
Carton Labels
Each carton must have a carton label that identities the
contents of the carton. A carton label is also
called a "package label."
Lockheed Martin Corporation Part number 1876578
Package quantity
Country of Origin United Kingdom
Package Documentation
Reference, Title 19 CFR 141.81-141.92
Each package must contain speoific documentation. The requirements
for this documentation are explained in the following sections.
General Requirements
This section describes the documents that are required
in each package. II any documents are missing or incorrect,
U.S. Customs will hold your shipment at the port of entry.
Some general documentation guidelines are:
* Prepare all documents in English.
* For truck and air shipments - Place all documents in an
envelope addressed to the consignee specified in
"1.60 Shipping the Goods". Attach the envelope to the
truck bill folding or air waybill that is sent with the
shipment.
* For ocean shipments - Send all documents by Express
airmail to the consignee specie in "1.60 Shipping the
Good
The documentation requirements for each package are
explained below:
* commercial Invoice - S copies (no exception). See
"Commercial Invoice Requirements" on
page Sort detailed information about commercial
invoices.
* Packing List - 1 original. The packing list must
be in an envelope and attached to (or inside)
the first package or case for each purchase order.
If the placing list is inside a package or
case, stamp the outside the "PACKING LIST ENCLOSED.-
Use any accepted format to list the content and
quantities of each package or case without prices.
Include all of the information on the oommercial
invoice except cost.
If the commercial invoice does not itemize the
contents of each package, include 3 copies of
the packing slip with the other documents.
Certificate roiling- 1 original and a copies are
required. For shipments from Canada Reference Title
19 CPA 141.81- 141E92
* Hazardous Materials certificate- For hazatdous
materials, give the required original documents to
the carrier and send I copy of the certificate with
the other shipping documents.
Air waybill- 2 copies for air shipments
e Ocean eiEI or Lading - 2 originals. and 2 copies
Truck Sill of Lading - I original for truck shipments
from Canada and Mexico only
* U.S. Government documentaion - Obtain any necessary
Food and Drug Administration (FDA) or Federal
Communications Commission (FCC) documents
(if applicable). If 'you have any questions, contact
the Lockheed Martin Corporation buying location.
- Shipments of Electronic Products - For ah shipmehts
of electronic products built as a subassembly or
final product. Reference Title 19 CFR 12.90 & 12.91
FDA: Shipments of Laser and flails Products - For
products that could emit hazardous electromagnetic
or particle radiation, you are required to file
regulatory affidavits with the USE. FDA's Center for
Devices and Radiological Health. These affidavits
are required for color and monochrome computer
displays, television receivers, lasers and laser
products, x-ray devices and other products that could
emit hazardous radiations (by nature of high voltage,
high energy, or coherent light properties).
- Before shipping these products, notify the person
placing the order with flight detail and consignee
information.
If you have any questions, contact the Lockheed Martin
Corporation buying location.
Reference Title 19 CFR 12.118 - 12.127 for Chemicals
* Chemicals - For all chemical shipmentsA include a complete
and accurate Toxic Substance Certification Act (OATS)
Certificate with the shipment documents. All questions
regarding whether or not a shipment contains or is a chemical,
please contact the Lockheed Martin Corporation buying location.
This includes epoxies, solders, chemical kits of all kinds,
cleaning supplies, touch paints, etc.
* ARTICLES CONTAINING ANODE MANUFACTURED WITH OZONE DEPLETING
SUBSTANCES:
U.S. Regulations require that articles entered into the U.S.
Commerce as of May 15,1993 and manufactured using an Ozone
Depleting Substance be labeled accordingly. 40 CFR Part 82
specifies that such products or their associated containers
or documents must contain the statement:.
* Consult with your contact at the Lockheed Marlin Corporation
importing location for details on compliance with this
requirement. The site may have requirements that are in
addition to U.S. Regulation.
Commercial Invoice Requirements
You may use any accepted international document format for
international commercial transactions. See Figure 8 on page 9
for a sample of a commercial invoice. Include 5 copies of the
commercial invoice with your shipment.
Notes:
* The commercial invoice sent with the shiprnent slum be the
same as the invoice sent for payment.
* An INVOICE-TO and SHIP-TO code are required on all invoices.
* If the bill in currency is different than the payment
currency, show both currencies.
Harmonized Tariff Product Information numbers are
required on the evince when shipping products to
U.S. Lockheed Martin Corporation locations. If you need
additional information, see the harmonized tariff
schedule or cant the Lockheed Martin Corporation ordering
location.
Invoice Details for Special Conditions
In specific situations, additional information is
required on the commercial invoice. These situations are;
*Articles exported from the US, and returned
* American goods returned: not advanced in value or
improved in condition
* Returned non-American goods: not conforming to sample
or specification.
The invoice information required in these situations is
described in the following section.
Metal Articles Exported for Processing and returned to
the U.S. for Further Processing
Metal articles that have been exported for processing and
are being returned to the US for further
processing are subject to duty on the cost or value of the
processing performed abroad.
The following requirements apply to these articles:
* The goods must be registered when exported from the U.S.
* The invoice for the processed goods must show:
- - The U.S. export details Including the registration number
and the port where registered
- - The processing cost and full value of the goods. This value
must be shown even if the processing was done on a no-charge basis.
- - The statement "Matte articles returned to the U.S. after
being processed abroad (HTS 9802.06.60 Program)
The following declaration:
_______________(Place and Date)
____________ declare that the article herein
specified are the articles which, in the
condition they were exported from the U.S., were
received by me (us) on (date) from
(name and address of owner or exporter in the US-):
that they wore received by me (us)
for the sole purpose of being processed: Hit only
the processing described below was
performed by me (us); that the full cost or (when no
charge is made) fair market value of
such processing is correctly stated below; and that
no substitution whatever has been
made to replace any of the articles originally
received by me (us) from the owner or
exporter thereof mentioned above. (Give a brief
description of processing)
Attachment I
SUBCONTRACT 198422
Northstar Technical, Inc.
667 Water Street
St. Johns NF
A1C 6J9
Attention: Wilson Russell
Subject: LMUSS Property Loan Agreement No. 196422-001
Dear Mr. Russell:
This letter agreement constitutes a no charge Property Loan
Agreement between Lockheed Martin Corporation (LMC) acting
through ties Business Unit (hereinafter referred to as LO")
and Northstar Technical, Inc. (hereinafter referred to as
"Cells') sets forth the basic requirements to be observed
by the Seller to maintain and control property listed in
Purchase Order No.198422, dated October 8,1999 refered herto
and made a part hereof by reference. The effective date of
this letter agreement is October 8,1999 and shall remain in
effect until such time as the property is recalled at LMC's
request or is otherwise properly disposed of at LMC's
direction.
The parties agree as follows:
1. Seller acknowledges that the listed items of tooling and
equipment, hereinafter called "equipment", in Sellers
possession, together with all drawings and other
documentation with respect thereto, hereinafter called
documentation'l, are theproperty of LMC. The equipment
has been marked with an LMC identification number.
Seller shall not mortgage, pledge or encumber the
equipment in any way.
2. Whenever requested by LMC, Seller shall return any or
all equipment and documentation to LMC without cost except
that transportation charges shall be billed collect. In
such cases, LMC will pay for reasonable special packing
charges where.appropClate. If for any reason Seller
should fail to comply promptly with such a request,
LMC shall have the right to enter Sellers premises
to remove the equipment and documentation, and Seller
expressly waives any rights or remedies it has with
regard to the LO equipment and documentation,
including but not limited to any right Seller has
to notice and a hearing or to a bond, undertaking,
or surety before a writ of repine, order of seizure,
or similar writ or order will be issued or become
enforceable.
3. During the time the equipment and documentation
are in its possession, Seller at its own expense shall:
3.1 Develop and maintain the expertise to operate the
equipment independent of LMC and ensure that the equipment
complies at all times with all federal, state
and local governmental safety and other requirements
(including OHS regulations). If Seller determines that
equipment received from LMC tails to
comply with any such requirements, Seller shall
notify LMC, and LMC shall either replace the equipment
or instruct Seller to modify the equipment so that
complies, at LMC's expense.
3.2 Replace or repair all items lost, damaged or destroyed
except to the extent Seller proves to LMC that such loss,
damage or destruction is caused by circumstances
beyond Seller's control. All replacement equipment
and documentation shall become LMC property and shall
be subject to all the terms and conditions of this agreement.
3.3 Seller shall indemnify LMC for, and save LMC
harmless from, all liability and expense, causes of action,
suits and claims of any nature, arising out of or in
connection with Seller's possession, operation, or
maintenance of the equipment or failure of the equipment
to comply with any federal, state, or local governmental
safety or other requirement. However, Seller's indemnity and
save harmless obligation shall not extend to personal jury
liability arising from LMC's own negligence in servicing
or maintaining the equipment identified in Schedule
4. NO WARRANTIES OR REPRESENTATIONS ARE MADE BY LMC WITH
RESPECT TO TH EQUIPMENT OR DOCUMENATATION, INCLUDING THE
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
5.LMC reserves the right to inspect the equipment and
documentation at all reasonable times. Seller shall not
move the equipment or documentation to another manutacturing
location or to a supplier's location without the prior written
approval of LMC.
6.Seller shall not alter any equipment in any manner
whatsoever ithout the priorwritten approval of LMC. Further,
Seller shall not purchase, design or fabricate
any additional or replacement equipment for LMC
ownership without the prior written approval of LMC.
7. The equipment shall be used only for work being performed
by Seller for LMC and shall not be used for any other purpose
whatsoever without the prior written approval of LMC.
8. Upon request, Seller shall furnish LMC drawings, photographs,
instructions or such other material as may be necessary
for identification or operation of the equipment.
9.Seller shall inventory all such property at LMC's request.
10.If for any reaps Seller is unable to continue
production. he shall notify LMC immediately and LMC
shall have the right to enter Seller's premises to remove
he equipment and documentation, and Seller expressly
waives any right or remedies Seller has with regard
to the LMC equipment and documentation,including but
not limited to any right Seller has to notice and a
hearing or to a bond, undertaking or surety before a writ
of replebine, order of seizure, or similar
writ or order will be issued or become enforceable.
11. If, in order to perform the work required by an LMC
purchase order, Seller orders from its suppliers any parts,
material or other goods that require the use of any of
the equipment or documentation for their production. Seller
shall be responsible as provided in this agreement for
any of the equipment or documentation which Seller may
loan to its suppliers. Seller shall enter into a loan
agreement with Seller's suppliers that will not diminish
rights nor enlarge LMC's responsibilties, as defined in
this agreement, with respect to the equipment or
documentation loaned by the Seller to its suppliers.
12.Seller shall place the following ownership statement
on all design, process,technical or other documentation
generated by Seller in the performance of work
for LMFS relating to the design, build or
use of the equipment:
"This document is the property of LMC. Its use is
authorized only for responding to a Request for Quotation
or for performance of work for LMC."
13. The terms and conditions of this agreement shall prevail
and take precedence over any inconsistency with or conflicting
provision in any other documents,except as may be
specifically agreed to in writing by LMC.
By acknowledgement of this letter agreement, Seller
agrees that the scope of work required is understood by
the Seller; that there are no informal commitments by LMC,
the Seller or the Government that in any way affect the
work under this agreement; that there are not open or
unresolved issues related to this agreement except as
explicitly stated herein: and that Seller, therefore,
understands and agrees with this letter agreement.
This agreement is executed in duplicate originals
as of the effective date specified on page 1.
This agreement must be signed and returned to LMC
within ten (10) working days after receipt.
BY: /s/David w. Batz
TITLE. Sr. Subcontract Administrator
DATE:October 18, 1999
SELLER. Northstar Technical Inc.
687 Water Street
St. Johns, NF A1C 6J9
Canada
BY:/s/ Wilson Russell
TITLE: CEO
DATE: October 19, 1999
ATLANTIC CANADA OPPORTUNITIES AGENCY
Newfoundland Office
AAP Project No. 600-4031828-1
April 6, 1995
Northstar Technical Inc.
223 Duckworth Street
St. John's, Newfoundland
A1C 1G8
Attention: James Radford
Dear Sir:
Re: ACOA Action Program- (AAP)
In response to your application dated February 1, 1995, the
Atlantic Canada Opportunities Agency ("the Agency), hereby
offers to provide a term loan to Northstar Technical Inc. ("the
Applicant") upon the following terms and conditions.
1.00 Basis of offer
1.01 The Agreement resulting from the acceptance of this offer
("this Agreement") is made pursuant to the ACOA Action
Program. This offer embodies and is subject to the Action
Loan Regulations made pursuant to the Atlantic Canada
Opportunities Agency Act. This Agreement is that which is
referred to as the "Action Loan Agreement" in those
Regulations and should there be a conflict between the
conditions included in this Agreement and the said
Regulations the latter shall prevail. The basis of this
Aqreernent is that the Agency will make a Loan to the
Applicant in consideration of the Applicant repaying the
Loan in a manner set out in this offer and also carrying
out the Project consistent with the term's and conditions
which are detailed in this offer.
1.02 In this Agreement, financial terms, unless the context
indicates otherwise, should be interpreted in accordance
with "generally accepted accounting principles" as
determined by the handbook, as amended from time to time,
published by the Canadian Institute of Chartered
Accountants.
1.03 In this Agreement the following definitions shall apply:
Control Period: means the period beginning on and including
the day on which the first disbursement of the Loan is made
and ending on and including the day on which the Loan and
any accrued interest is fully repaid, or until otherwise
discharged, to the satisfaction of the Agency.
"Loan", is as described in Clause 3 in this Agreement.
"Project", is as described in Clause 2 in this Agreement.
"Comnencement Date", means the date on which, in the
opinion of the Agency, the first major commitment is made
by the applicant to implement the Project.
"Completion Date", means the date on which, in the opinion
of the Agency, all eligible costs have been incurred and
the work completed to the satisfaction of the Agency.
2.00 The project
2.01 The project is that which is described in Annex I which is
attached to and forms part of this Agreement as though the
Annex and its provisions were set out in this Agreement.
2.02 The Applicant shall commence the Project on or before
June 30, 1995.
2.03 The Applicant shall complete the Project to the
satisfaction of the Agency on or before
june 30, 1996.
3.00 The Loan
3.01 The principal amount of the loan shall be $150,000.
3.02 Disbursements
(a) The first disbursement of the loan shall take place at
the discretion of the Agency but shall not be later
than June 30, 1995.
(b) At the discretion of the Agency, a disbursement, not
exceeding 25% of the Loan, may be made to the Applicant
for the purchase of eligible.assets or services as
described in Annex I, without the presentation of
quotations or invoices. In that event, the Applicant
must demonstrate to the satisfaction of the Agency that
the disbursement was exclusively used for the purchase
of eligible assets or services before any further
disbursement can be made.
(c) Disbursements may be made on a reimbursernent basis upon
presentation of invoices together with satisfactory
proof of payment, for eligible assets or services as
described in Annex I or may be made jointly to the
Applicant and Supplier(s) for eligible assets or
services upon presentation of quotations or invoices.
3.03 Repayment
The repayment of principal shall be in 24 consecutive
monthly instalments of $6,250 on the first day of each
month beginning with the month following the third
anniversary of the date of the first disbursement.
3.04 rnterest Pavable
(a) The Loan shall be interest free for a period of
2 years commencing on the date of the first
disbursement
(b) Beginning on the day following the day of the expiry
at the interest free period, interest on the unpaid
balance of the Loan is payable for a period of one
year at the lowest published base rate of interest
charged on that day by the Federal Business
Development bank plus two percent.
(c) Beginning on a day one year following the day of the
expiry of the interest free period, interest is
payable for the remainder of the Control period at the
lowest published base rate of interest charged on that
day by the Federal Business Development Bank plus four
percent.
(d) The interest rate established in the applicable
foregoing paragraph (b) or (a), expressed as a percent
rate per annum, shall be known as the "Annual Interest
Rate". Interest on the Loan is to be payable on the
first day of each month, in arrears, and is to be
calculated by multiplying one twelfth of the Annual
Interest Rate by the trainimum principal balance
outstanding during the month. For any period of less
than one month, the interest shall be calculated by
dividing the number of days in the period by three
hundred sixty and multiplying the result by the Annual
Interest Rate and the minimum principal balance during
the period.
(e) Notwithstanding the foregoing, in the event that
published base rates of interest charged by the
Federal Business Development flank are unavailable for
the applicable day or days as specified in the
foregoing paragraphs (b) and (c) the published base
rates for the day of the approval of the Loan shall be
used.
4.00 Special Conditions
4.01 Pre-disbursement
(a) The Applicant shall provide to the Agency, prior to
disbursement, complete information on all liens,
unpaid taxes, debts and obligations.
(b) The Applicant shall obtain equity satisfactory to the
Agency, in the total amount of $43,000 prior to the
date of the first disbursement of the Loan. This
level of equity shall be maintained until the end of
the Control period.
(c) The Applicant shall inform the Agency promptly in
writing of any other federal, provincial or municipal
assistance which has been received or is to be
received for the Project, and the Agency shall have
the right to adjust the amount of the Loan to take
into account the amount of any such further assistance
that is to be received.
4.02 After Disbursement
(a) The proceeds of the Loan shall be exclusively used for
the purchase or eligible assets and services as
indicated in the Project as described in Annex I.
(b) The Applicant shall submit to the Agency, within 90
days of the end or each fiscal year for which the
Control period is in effect, a copy of its annual
auditor-prepared financial statements signed by an
authorized officer of the Applicant.
(c) The Applicant shall, at the discretion of the Agency,
submit to the Agency, within 43 days of the end of
each fiscal quarter of each fiscal year during the
Control period, a copy of its interim, internally
prepared, financial statements including a Balance
Sheet and a statement of Profit and Loss signed by an
authorized officer of the applicant. The Applicant
shall promptly submit other or more frequent
information, satisfactory to the Agency whenever
requested to do so by the Agency.
(d) The Applicant shall immediately notify the Agency in
writing of any material change occurring during the
Control Period, with respect to liens, debts,
obliqations, Lines of credit or Term Loans
(e) The Applicant shall not make changes to the capital
Structure without the prior approval of the Agency
(i.e. Preferred or Common Shares1 Shareholder Loans,
etc.).
(f) The Applicant shall not use any assets financed under
the terms of this Agreement as specified or general
security for any other debt or obligation, until the
end of the control Period except with the prior
approval of the Agency.
(g) The Applicant shall not provide any loans, loan
guarantees, or investments to any company,
organization or individual until the end of the
Control period.
(h) The Applicant shall not pay any dividends whatsoever,
nor make payments, except payments which are made in
the normal course of. business and which reflect fair
market value, to a parent company or any of its
affiliates without the prior approval of the Agency
until the end of the Control Period.
(i) The Applicant shall not increase the total management
remuneration, including salaries, fees and other
benefits, until the end of the Control Period, except
with prior approval of the Agency
(j) The Applicant shall ensure that any insurance policy
or policies on the fixed assets or inventory specify
the Agency as the loss payee subordinate only to
secured creditors.
(k) The Applicant shall comply with environmental
protection measures in relation to the Project that
satisfy the requirements of all regulatory bodies of
appropriate jurisdiction.
(1) The Applicant shall obtain all necessary licences and
perutits in relation to the Project that satisfy the
requirements of all regulating bodies of appropriate
juriadiotion.
5.00 Events of Default
5.01 The following shall constitute events of default by the
Applicant.
(a) The Applicant fails to make a repayment as provided in
Section 3.03, or an interest payment as provided in
Section 3.04, or both.
(b) The Applicant fails to comply fully with any term or
condition at this Agreement.
(c) The Applicant becomes bankrupt or insolvent, goes into
receivership, or takes the benefit of any statute from
time to time in force relating to bankrupt or
insolvent debtors.
(d) An order is made or resolution passed for the winding
up of the Applicant, or the Applicant is dissolved.
(e) In the opinion of the Agency the Applicant ceases to
carry on business
(f) The Applicant has submitted false or rnisleadinq
information to the Agency.
(g) The Applicant makes a false or misleading statement
concerning assistance by the Agency in a prospectus or
other document related to raising funds.
(h) The Applicant is not entitled to the Loan.
(i) The amount of the Loan exceeds the amount to which the
Applicant is entitled.
(j) The Applicant is in default of any other agreement
with the Agency.
6.00 Remedies on Default
6.01 Should any event of default as provided in clause 5.01
occur, then the Agency may upon a formal demand in writing,
require the Applicant to repay the entire Loan together
with accrued interest and the amount on the date of such
formal demand shall constitute a debt due to Her Majesty in
the flight of Canada and may be recovered as such.
7.00 General conditions
7.01 The general conditions attached to this Agreement and
designed "General Conditions" shall form part of this
Agreement and shall be of the same force and effect as if
they were contained in the body of this document.
8.00 Other Conditions
8.01
Public Announcement
(a) The Applicant consents to a public announcement of the
Project, by or on behalf of the Atlantic Canada
Opportunities Agency. The Agency shall inform the
Applicant of the date on which the announcement is to
be made and the Applicant shall keep this offer
conf idential until such date. After official
announcement of this project by the Agency, or 60 days
after the applicant's acceptance of this offer,
whichever is earlier, information appearing on the
Fact Sheet will be considered to be in the public
domain.
(b) The Applicant will advise the Agency at least 30 days
in advance of any special event, (official opening,
ribbon cutting, sod-turning, etc), the Applicant
wishes to organize in connection with the Project. A
ceremony shall only be held on a date which is
mutually acceptable to the Minister and the Applicant.
Furthermore, the Applicant consents to having the
Minister or his designate participate in any such
ceremony.
8.02 Notice
(a) Any notice or correspondence to the Agency, including
the attached duplicate copy of this Agreement signed
by the Applicant, shall be addressed to:
Atlantic Canada Opportunities Agency
P.O. Eox 1060, station C
Suite 801, Atlantic Place
215 Water Street
St. John's, Newfoundland
A1C 5M5
Attention: Ms. Karen Skinner
Account Manager
or to such other address as is designated by the Agency in
writing.
8.03 Entire Contract
This Agreement, including the statement or Work and General
conditions constitute the entire contract between the
parties with respect to its subject matter. No amendment
shall be made to this contract unless confirmed in writing.
ANNEX 1
THE PROJECT
Statement of Work
Applicant: Northstar Technical Inc.
Project No.: 600-4031828-1
Project Location: St. John's, Newfoundland
Purpose: The Applicant is requesting assistance to fund working
capital requirements associated with the production. sales, and
service of the NETMIND trawl management system.
program and Financing: ACOA Action Proqram (AAP)
<TABLE>
<CAPTION>
<S> <C> <C>
Costs: Financing
Working capital $200,0O0 Action Loan $150,000
Internally Generated
Funds 50,000
Total $200,000 Total $200,000
</TABLE>
Estimated Project Start Date: June 30, 1995
Estimated Project completion Date: June 30, 1996
Form of Equity:
Share capital, Subordinated Loans, Retained Earnings.
Eligible costs:
Eligible costs are $200,000 comprised of the following items:
Equipment
Internal Labour
Sub-Contractors
Rental
Materials
Communications
Administration
This offer will remain open for 40 daye from its date and
will be considered to have been accepted on receipt of the
duplicate copy of the offer, duly and unconditionally
executed by the Applicant.
If further information is required, please contact your Account
Manager, Ms. Karen Skinner, at (709) 772-2753.
Yours truly.
/s/Phonse Leonard
Manager
ACOA programs
Attachments:
Annex 1 - The Project - Statement of Work
The foregoing offer is hereby accepted this 7th day of April, 1995
Northatar Technical Inc.
AAP Project No. 600-4031825-1
Per: /s/ Jim Radford
Title: Vice-president
(Corporate seal)
NATIONAL RESEARCH COUNSIL
Newfoundland and Labrador Region
May 18,1995
Mr. J Redford
Nortbstar Technical Inc
80 Glencoe Drive
P.O Box 13488
St John's NF
A1B 4B5
Dear Sir:
RE: LETTER OF ARRANGEMENT
Project: #03978E
Title: Technology Enhancement of the NETMIND System, Distance
Measuring Pair
Date Received: May 9, 1995
We are pleased to advise you that your 1)roposaI for the above project
has been approved for support under the NRC Industrial Research Assistance
Program (IRAP).
IRAP amount and timing of contribution is as shown in the following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Govt' Internal External Total Contributions
Fiscal Company Company by NRC
YEAR COSTS COSTS COST DATES
1995/96 $28,900 $1,100 $30,000 May 22/95
to 8/95
TOTAL.........................$30,000
</TABLE>
Further details of IRAP contributions are given in the attached RDA-3 form.
It is agreed that IRAP will contribute to research in support of the
following objectives:
(1)determine exact parameters
(2)verify the parameters and,
(3)minimize the negative implications of parameter choices.
A Work Plan for the above project is attached
A copy of your company's agreement with each consultant or subcontractor,
employed on the project must be sent Mr. D.K. Bailey, IRAP Project Manager.
Your company is requested to provide the IRAP project Manager with the
following:
- -monthly invoices accompanied by a brief (1-2 page) status report outlining
tasks accomplished and if is proceeding as planned,
- -final Project Technical Report and final invoice by September 8/95,
which is considered as the Project Completion Date and,
- -Project Audit report by your company's duly appointed external auditors by
December 8,1995 Please see attached "Instructions of External Auditors".
Any extension to the approved funding or to the project completion date
will only be considered after receipt and acceptance of a report indicating
satisfactory progress and an updated Work Plan by July 8, 1995.
Would you please notify us of your acceptance of this assistance
and of the attached "Conditions of Contributions" dated September 1993,
by signing and returning one complete copy of this letter and
the Conditions of Contribution to the address indicated on the first page.
Please note in particular Condition No.4, regarding acknowledgement IRAP
assistance in media announcments or technical publications(but not commercial
literature), Condition No. 12, regarding the audit of the project,
Condition No. 15, regarding invoicing, and Condition No.21, which
deals with the ownership of the technology to be developed.
This letter of Arrangement, along with the enclosed Work Plan,
Form RDA-3, and Conditions of Contribution, when signed by an authorized
official at your company and af the National Research Council, comprises
your agreement with NRC/IRAP.
As soon as we have received notice of your acceptaince of this support,
we will send you the documentation required for claims against the NRC
Contribution.
Your truly,
/s/ David W. Rideout
Regional Director
attachments
ACCEPTED: /s/ Wilson E. Russell-President Northstar Technical, Inc.
signed at St. John's this 29th day May 1995.
October 23, 1995
Northstar Technical, Inc.
80 Glencoe Drive
P.O. Box 13458
St John', N.F.
A1B4B8
RE: Technology Enhancement of the NETMIND System, PC Based
Deck Unit, RDA #04132E
We are pleased to advise you that your proposal for the
above-referenced project has been approved for support under
the NRC Industrial Research Assistance Program (IRAP).
You will find enclosed two copies of the Contribution Agreement.
Please have a duly authorized officer of your Firm sign
both copies and return one to:
National Research Counci
136 Crosbie Pond
St .Iohn's N.F.
A1B 3K3
You will also find enclosed claim statement forms:
For refernece purposes, the project no. 04132E should be used on all
future correspondence relating to this project.
For matters pertaining to this Agreement, please contact
David K Bailey at (709)772-5228.
Yours Sincerely,
/s/ David W. Rideout
Regional Director
Enclosures
CONDITIONS OF CONTRIBUTIONS:
This Contribution Agreement is conditional upon the Firm's adherence
to all conditions set out below. A breach of any of the following
conditions, or a submission to NRC of falsr or misleading information
is grounds for suspension or immediate termination of NRC's Financal
assistance to the project, in addition to any other action permitted
by law. NRC will notify the Firm, in writting, of any such suspension
or termination. Failure on the part of NRC to act on any breach does
not constitute a waiver of NRC's right to act on that or any other
breach of the following conditions:
1. The Firm must undertake the project as described in the Statement
of Work. Any significant of change proposed in relation to anything
that is written in the Statementof Work or the Basis of Payment
requires an amendment to this agreement signed by both the Firm
and NRC.
2. The Firm must submit reports and claims to NRC as specified in the
Basis of Payment. Payment of claims is contingent upon receipt of
reports.
3. The Firm must notify NRC in writing if it seeks or receives financial
assistance for the project from a government at any level, beyond
that disclosed in the Firm's proposal for the project. In Such cases,
NRC reserves ttne right to reduce the amount of its contribution to
the project.
4.The Firm must maintain adequate records of the research conducted for
the project and of direct and indirect costs incurred on the project.
Upon reasonable written notice by NRC, the Firm must take such records
available to authorized representatives at NRC for inspection, auditing,
or copying, and must permit authorized representatives of NRC to have
access to the Firm's facilities and personnel for the purpose of
inspection and interviewing. The Firm must obtain an audit of the
project from an external auditor upon the request of NRC. The auditor
is required to follow "Instructions for "External Auditors" which will
be supplies by NRC. This clause 4 remains in effect for 2 years after
the termination of the project.
5. inc tirm mus-, rtaintain data relating to the economic benefits
traceable to the project for at least the first five years of their
commercial significance to the Firm, and pro--ude NRC with such data
upon recuest.
6. The Firm must demonstrate, to the satisfaction of NRC, acceptable
performance of the project and capability of continuing the project.
The Firm must permit NRC to inspect the facilities used by the Firm
in connection with the project, and to discuss the project with
IRAP-supported personnel.
7. The Firm must contributed its agreed portion of the total project costs.
If the Firm has not contributed its share as agreed in the Basis of
of Payment, or if the funds were not spent as intended, NRC shall be
entitled to claim a refund up to the percentage by which
the Firm's contribution has fallen short of the agreed amount.
8.The Firm must make reasonable efforts to protect intellectual property
arising from the project, If a patent appears possible but tha Firm does
not want to apply for it the Firm must offer to assign ownership of the
invention to NRC, without charge.
9. The Firm must obtain prior written consent from NRC if, at any time
during the project or within five years after the end of the project
the Firm intends:
(a) to enter into third party agreernents that would limit the Firm's
control of the results derived from the project,
(b) to do part of the project outside Canada,
(c) to manufacture using the results of the project outside Canada, or
(d) to sell, assign, transfer, or otherwise dispose of any rights to
intellectual property arising out of the project to any person or
organization Outside Canada, or to any government other than
the Government of Canada.
10. The Firm must indicate in writing, or by a clear label, the
confidentiality of any specific information which it wishes' to
be treated as confidential by NRC. Protection from third-party access
to confidential business information supplied to NRC is provided by the
federal Access to information Act.
11.The Firm must provide to NRC the names of employees and major
shareholders who were formerly employed in the federal public service
at or above the Senior Manager Level, with a written confirmation of
compliance with the post-employment provisions of the federal
"Conflict of Interest and Post Employment Code", No member of the House
of Commons shall be admitted to any share or part of this agreement
or to any resulting benefit.
12.The Firm must maintain environmental protection measures in relation to
the project that satisfy the requirement of all relevant regulatory bodies.
The Firm must comply with protocols that have been established in
relation to aspects of the project involving human subjects, animals,
and biohazardous material.
13.This agreement terminates immediately if the Firm ceases operations,
assigns its rights under this agreement, enters into receivership, or
becomes insolvent or bankrupt.
14.The Firm must indemnify NRC in respect of any claim against NRC by
a third party resulting directly or indirectly from the project. The
Firm must not take action against NRC for failure or delay in performance
caused by circumstances beyond NRC's reasonable control, nor for
incorrectness of data supplied,advice given, or opinions
expressed in relation to the project.
15.Either party may terminate this agreement for any reason, by giving the
other party notice in writing. A notice given by NRC must allow at l
least two months before the termination. The Firm shall have no
obligation to NRC to work on the project after notice is given or
received, and NRC shall not reimburse costs incurred subsequent to
the termination date, nor any costs incurred at a rate greater than
the typical rate before the notice was given. Any termination is
without prejudice to the rights and obligations of the parties which
have accrued before termination, and the obligations to protect
intellectual property and submit reports continue.
CONTRIBUTION AGREEMENT
Project Number: 04732E
Between: National Research Council of Canada
136 Crosbie Road
St. John's, NF A1B 3K3
AND: Northstar Technical Inc.
8O Glencoe Drive
P.O. Box 13458
St. John's, NF
A1B 4B5
(herein called the Firm)
1. This agreement comes into effect on the 25th day of September 1995 and
terminates on the 12th day of March, 1996.
2. The NRC agrees to contribute up to a maximum of $36,500 for research
and development undertaken by the Firm as described in the attached
Statement of Work and in accordance with the attached Basis of Payment
and Conditions of Contribution.
3. The Firm agrees to undertake the work described in the Statement of
Work and understands and accepts all the Conditions of Contribution.
4 This agreement shall become null and void if not signed and returned
to NRC within thirty (30) days ot the effective date.
National Research Council of Canada
/s/ David Rideout
Regional Director, Newfoundland Date: Oct. 23, 1995
Firm Northstar Technical, Inc Date: Oct. 23, 1995
/s/ James Radford
Operations Manager
TEAMING AGREEMENT
Between Loral Librascope Corporation
and
Northstar Technical, Incorporated
1.0 PURPOSE
1.1 This Agreement, effective as of 15 November 1995 is
betweenLoral Librascope Corporation (hereinafter "Loral")
andNorthstar Technical Incorporated (hereinafter "you"
or "your")and defines the parties' respective
responsibilities relative to the Canadian submarine
Capability Life Extension Program, proposal 5F-9025-W,
(hereinafter "Program") . The obligations and commitments
arising hereunder shall apply only to such units and Program
and not to any other sector, group,
division, subsidiary or affiliate of the parties, or any other
program or opportunity respectively.
2.0 INTENT TO TEAM
2.1 Loral intends to prepare and submit a proposal
for the Program prime contract. subject to your agreement
as provided herein,and to receiving an acceptable cost and
technical proposal,Loral intends to name your company
as the proposed subcontractor for the Program for the
following specific tasks: assemble and test ten multi-function
workstations. Four command display consoles will be added
if acceptance issues are resolved. Your company will also be
strongly considered for the fabrication of cabinets for
these workstations.
2.2 Loral agrees to recognize your contribution in
the proposal and, if awarded a prime contract resulting
from this proposal,will award a subcontract to your company
for the specific areas of responsibility set forth in paragraph
2.1 to the extent they are included in Lorat's prime contract,
provided:
a) your cumulative performance under this Agreement has been
satisfactory; b) the award of such subcontract will be
acceptable to the customer; and c) we successfully negotiate
mutually acceptable terms and conditions, including
competitive prices, and other provisions required by law or
regulations as well as terms or conditions consistent with the.
prime contract which Loral deems necessary for efficient
contract administration and/or prime contract compliance.
3.0 PROPOSAL PREPARATION
3.1 This proposal is being prepared at Loral's facility
located at 811 Sonora Ave., Glendale, California 91201.
Mr. L. F. Fox is acting as our Proposal Manager for this
program and Interface Representative for this Agreement.
The parties will work cooperatively and exert all reasonable
efforts to produce a proposal which will cause the selection
of Loral as the Prime contractor for the Program and the
acceptance of your company as the subcontractor for the
work identified in paragraph 2.1
You agree to supply in a timely fashion necessary liaison
effort (if required) to draft and write that portion of the
proposal within your specific area of responsibility and to
furnish Loral with all information necessary for the submittal
of the most responsible proposal practicable. It is
anticipated that all effort as described above will be made
available to Loral no later than December 21, 1995. In
addition to performing the specific proposal activity
associated with your anticipated work scope, you agree to
perform the following activities or provide the following
resources in support of the overall proposal effort: support
liaison with Provincial companies and Governmental agencies.
3.2 Loral shall have the overall responsibility for final
preparation and submittal of this proposal and shall be
designated in the proposal as prime contractor and Northstar
Technical as subcontractor.
4.0 ALLOCATION OF COSTS
4.1 Each party will perform all responsibilities under this
Agreement at no cost to the other.
5.0 CONFIDENTIAL OBLIGATIONS
5.1 It is understood that during the course of this agreement,
it will not be necessary for either party to disclose
any company confidential proprietary information to the
other - OR - During the term of this agreement, it may be
necessary foreither party to provide confidential
information to the other.In such event, the disclosure and
use of all confidential proprietary information shall be
in accordance with a Confidential Disclosure Agreement.
5.2 Northstar Technical agrees not to use any confidential
proprietary information, product or data of any third party
in performance of this Agreement without the prior written
consent of the third party.
Such written consent shall be provided to Loral
immediately upon receipt from such third
party.
6.0 TERM OF AGREEMENT
6.1 This agreement shall remain in effect until the
first of the following shall occur:
a) Loral awards a subcontract to you pursuant to this
Agreement or the parties are unable to agree to
acceptable terms and conditions, including competitive
price.
b) Twelve months from the date of agreement.
c) Award of a prime contract for this program to an
organization other than Loral (unless Loral initiates a
protest of such award, then until such protest is finally
decided against Loral).
d) Cancellation of the requirement by the customer.
e) Disapproval by the customer of the award of a subcontract
to you.
f) The elimination or substantial reduction by the
Government of the subcontract work to be performed by
Northstar Technical.
g) Written notice by Loral that it will not submit a
proposal for the program.
7.0. FREEDOM TO MARKET AND EXCLUSIONS
7.1 Except as limited by paragraph 7.2., it is understood
that neither party shall be precluded from its normal
marketing efforts in connection with the sale of its
products and/or services, including sales efforts to
organizations submitting proposals competitive to that
contemplated by this agreement.
7.2 Both Northstar Technical and Loral will be expending
effort at their own expense with a view toward developing
the best approach to the opportunity. In recognition
thereof, except as limited by any Confidential Disclosure
Agreement, both parties agree that the joint work product
resulting from our combined efforts which is unique to the
proposal contemplated by this Agreement will not knowingly
be disclosed to anyone competing for this same program until
such time as the award has been made, the opportunity is
canceled or withdrawn, or this Teaming Agreement is no
longer in effect.
7.3 Each party shall act as an independent contractor.
No agency, partnership, joint venture or other joint
relationship is created by this agreement or any reference
to the parties operating as a "team" or as "team members".
Neither party shall be liable to the other for any costs,
expenses, risks or liabilities, including special,
consequential, or incidental damages, arising out of the
other company's efforts in connection with this agreement
or the preparation and submission of any proposal
for the Program.
8.0 INTELLECTUAL PROPERTY
8.1 The parties agree that during the course of the
work called for by this Agreement, inventions shall
be subject to the following understanding:
a) Each invention, discovery, process, or improvement,
whether patentable or not, (hereinafter referred to as
"Invention") conceived or first actually reduced to
practice, by one or more employees of one of the parties
hereto and resulting directly from the exchange of
information during the course of this Agreement, relative
to work performed in carrying out effort contemplated by
the Agreement, shall be the sole property of the party
whose employee(s) made or conceived the Invention and
shall be identified to the other party; provided however,
that the other party hereto is hereby granted a
non-exclusive irrevocable, nontransferable paid-up
license throughout the world under such inventions; said
license includes the right to make, have made, use, have
used, any Product and/or practice and have practiced any
Method. All licenses granted shall include the right of
a grantee to grant sublicenses to its parent corporation
or subsidiaries with such sublicenses including the right
of sublicensed parent or subsidiaries correspondingly to
sublicense other subsidiaries.
b) Any Invention conceived or first actually reduced to
practice jointly by employees of both parties hereto, and
resulting from the exchange of information during the
course of this Agreement relative to work performed in
carrying out the effort contemplated by this Agreement,
shall be jointly owned by both parties hereto without
accounting. Patent applications covering such joint
inventions shall be filed by attorneys mutually
acceptable to both parties hereto and the costs therefore
shall be equally shared.
c) Nothing herein is intended nor implied to affect the
rights of the parties with respect to pre-existing
patents or patent applications respectively held or made
by the parties. Further, except as specifically provided
in Subsection 8.1(a) and 8.1(b), nothing contained in
this Agreement shall: 1) be deemed to grant either
directly or by implication, estoppel, or otherwise, any
license under any other patents or patent applications
arising out of any other Inventions of either party; or
2) be construed as affecting the scope of any license or
other right otherwise granted to a party under any other
patent or patent application.
8.2 The parties do not contemplate that any joint development
of code, modification of the other party's code, or the
creation of other copyrightable work of significant
commercial value will occur under this Teaming Agreement;
however, any copyrightable works which are developed
jointly by employees of both parties during the term of,
and pursuant to, this Agreement shall be jointly owned,
with each party having the right, subject to any applicable
limitations on the disclosure of bid or other confidential
information to freely use such joint works and derivatives
thereof and to license others
without accounting.
9.0 RIGHT OF WITHDRAWAL
9.1 If, during this relationship, there is a significant
change in the requirement being addressed by the parties
such that one or both no longer have the capability
to satisfactorily address such requirements, either
party may withdraw from this agreement by advising the
other party in writing not less thanten (10) days prior
to date of withdrawal.
9.2 If, during this relationship, there is a significant
change in the ability of Northstar Technical to
satisfactorily address the specific areas of responsibility
set forth in Section 2.1,e.g., including but not
limited to:debarment or the filing of a petition or
bankruptcy or reorganization under the bankruptcy laws;
the loss of strategically valuable employees and
failure to provide replacement employees of comparable
expertise within a reasonable time; the loss or material
degradation of corporate capabilities which are essential
to the program requirements; a violation of State or
Federal laws or regulations and such violation in the
reasonable judgment of Loral will adversely impact the
likelihood of a prime contract award to Loral; conduct by
the principal officers of Northstar Technical evincing
moral turpitude; or, any other action which jeopardizes
the likelihood of a prime contract to Loral, Loral may
withdraw from this Agreement by advising Northstar Technical
in writing not less than ten (10) days prior to the
date of withdrawal.
9.3 In the event of any withdrawal, both parties are
bound to honor the provisions of paragraph 5.0
covering confidential proprietary information.
10.0 TERMINATION FOR DEFAULT
10.1 This Agreement may be terminated for default by either
party(hereinafter "the terminating party) in the event of
the other party's material breach of any obligation,
warranty or representation specified under this Agreement
which is not
a) it is capable pf performing all of its obligations under
Program any work contemplatedEhereby without assistance
from the other party hereto or any third party except as
may be provided for herein or in the subcontract);
b) it is not subject to any restriction, contractual or
otherwise (except as provided herein), which limits in
any manner its ability to perform any of its obligations
under this Agreement or any subcontract arising out of
this Agreement, including but not limited to any
agreement, covenant, duty or understanding regarding any
proprietary information, product, or data of any third
party to which it is a party or by the terms of which it
may be bound; and
c) it is a responsible contractor and has not been debarred
or suspended from Government contracting by any agency of
the United States Government or Canadian Government.
20.0 SIGNED AGREEMENT
If the foregoing meets with your approval, please indicate
your acceptance by having an authorized representative of your
company sign one copy of this agreement in the space provided
and return it to the above address.
ACCEPTED:
Northstar Technical Corporation
By:/s/ Wislon Russell
Title: Chairman and CEO
Date: 11/25/95
Loral Librascope Corporation
By: /s/ Edward J. Arnold
Title:President
Date: 11/22/95
ATLANTIC CANADA OPPORTUNITIES AGENCY
Newfoundland Office
St. John, NFLD.
AAP Project No. 600-4024021-1
March 5, 1996
Northatar Technical Inc.
60 Glenoce Drive
Donovan's Industrial Park
St. John's, Newfoundland
A1B 4B8
Attention. Mr. Wilson E. Russell
Chairman/CEO
Dear Sir:
RE: ACOA Action Program (AAP)
In response to your letter of February 22, 1996,
requesting an amendment to our Letter of Offer dated
June 9, 1993, as amended May 11, 1994, the Atlantic
Canada Opportunities Agency (ACOA) has approved your
request and hereby amends your contract.
Accordingly, subsections 4.04 (b) and (c) are deleted
and subsection 4.04(a) of the aforementioned Letter of
offer is deleted and replaced as follows:
4.04 (a) The Applicant shall repay the Contribution to
the Agency in 5 annual and consecutive installments
beginning in May, 1997. In addition, Annex 1 and 2 have
been amended as per the enclosed revised copies.
All other terms and conditions of our Letter of Offer
dated June 9, 1993, as amended May 11, 1994, remain
unchanged.
To signify your acceptance of this amendment, please
return the second copy of this letter unconditionally
accepted and duly executed by appropriate officials
within 30 days from the date that appears on its face.
should you have any questions concerning this matter,
please contact Ms. Karen Skinner at (709) 772-2753
Yours truly,
/s/Richard Comerford
Director
Business Programs
Annexes: Annex 1 - The Project - Statement of Work
Annex 2 - Project Fact Sheet for News Release
The foregoing amendment is hereby accepted the 5th day
of March, 1996.
Northstar Technical Inc.
ALP Projoct No. EOO-4024021-1
Per:/s/Wilson E. Russell
Chairman and CEO
(Corporate Seal)
ANNEX 1
THE PROJECT
Statement of Work
Applicant: Northatar Technical Inc.
Project No.: 600-4024021-1
Project Location: St. John's, Newfonndland
The Applicant will complete the development of their Trawl
Manager System and bring it to full comercializatian including
all field testing and final packaging.
Program and Financing: ACOA Action Program
Cost: Financing
Project Costs $300,509 AAP Repayable
Contribution $195,331
Applicant $105,178
Total.........$300,509 Total........$300,509
Timing.
Estimated Project Start Date: August 31, 1993
Estimated Project Completion Date: December 31, 1994
Form of Equity:
Subordinated Shareholder Loans
ANNEX 2
PROJECT FACT SHEET
FOR NEWS RELEASE
Program: Project No:600-4024021-1
ACOA Action Program
Account Manager:Ms. Karen Skinner
Name & Addrens of Applicant: Applicant Contact:
Northstar Technical Inc. Name: Wilson E. Russell
80 Glencoe Drive Title: Chairman/CEO
Donovan's Industrial Park Telephone: (709) 745-6440
St. John's, Newfoundland
A1B 4B8
Project Location. Project Type: Innovation
St. John's. Newfoundland
Industrial Sector: Product/service:
Manufacturing Trawl Manager System
Project Description:
The applicant will complete the developinent of their Trawl
Manager System and bring it to full commercialization including
all field testing and final packaging.
Estimated Total Costs:$300,509
Estimated Eligible Cost: $300,509
Authorized Assistance:$195,331 (65% repayable contribution)
Impact on Jobs: create 6
Estimated Sales Resulting from Project : 1 million per year
Estimated Project Start Date:
Angust 31. 1993
Estimated Project Completion Date:
December 31, 1994
NATIONAL RESEARCH COUNCIL
Newfounland and Labrador Region
NRC-CNRC
27 March 1997
Northstar Technical Inc.
P.O. Box 13397
St- John's, NF
Al B 4R7
Attention: Mr. Wilson Russell
Amendment No.1
Re: Contribution Agreement for Project No. 04702E
Project Title: Headline Height Project
The above referenced Contribution Agreement is hereby amended
follows:
a) The completion date for this agreement has been changed from
of January 1997 to 7th day of March 1997.
b) Delete Basis of Payment 1.0 and replace with the revised
version shown in bold italics on the attachment.
All other terms and conditions remain unchanged.
The amended version ot the Contribution Agreement is in effect
starting on the 25th. day of November 1996.
Please have a duly authorized officer of your firm sign both
copies of this amendment and return one copy to:
Dave Rideout
Regional Director
National Research Council
136 Crosbie Road
St. John's, NF
A1R 3K3
# 04702E - Amendment No.1
This amendment shall become null and void if not signed and
returned to NRC within thirtv days of the date of the signature
of the Regional Director.
NATIONAL RESEARCH COUNCIL
/s/ David W. Rideout Date: March 27, 1997
IRAP Regional Director
NORTHSTAR TECHNICAL INC.
/s/ Wilson Russell Date: March 27, 1997
President '
# 04702E - Amendment No.1
1.0 NRC agrees to reimburse the Firm for work performed on the R&D
project as follows:
The actual direct costs incurred over the project period
expended by the research iteam under this agreement up to a
maximum of $35,500. Allowable direct cost under this agreement
are: client direct labour, consultants direct labour.
NATIONAL RESEARCH COUNCIL
Northstar Technical, Inc.
P.O. Box 13397
St. John's, NF
AIB 4B7
Dear Sir:
RE: Headline Height Project
We are pleased to advise you that your proposal for the
above-referenced project has been approved for support under the NRC
Industrial Research Assistance Program (IRAP).
You will find enclosed two copies Of the Contribution Agreement.
Please have a duly authorized officer of your Firm sign both copies
and return one to:
National Research Council
136 Crosbie Road
St.John's, NF
A1B 3K3
Under BASIS OF PAYMENT, Section 5.0, please take particular note
of condition No.3.
For reference purposes, the project no. 04702E should be used on all
future correspondence relating to this project. You will also find
enclosed claim statement forms.
For matters pertaining to this agreement, Please contact:
ITA David K. Bailey at #772-5228.
Yours sincerely,
/s/
David Rideout, M. Eng
Regional Director
CONTRIBUTION AGREEMENT
This Agreement is made in duplicate -
Between: National Research Council of Canada
136 Crosbie Road
St. John's, NF
A1B 3K3
(herein called the NRC)
Project Number: 04702E
And: Northstar Technical Inc.
P.O. BOX 13397
St. John's, NF
AiB 4B7
(herein called the Firm)
1. This agreement comes into effect on the 25th day of November 1996 and
terminates on the 31st day of January 1997.
2. The NRC agrees to contribute up to a maximum of $35,500 for research
and development undertaken by the Firm as described in the attached
Statement of Work and in accordance with the attached Basis
of Payment and Conditions of Contribution.
3. The Firm agrees to undertake the work described in the Statement of
Work and understandsand accepts all the Conditions of Contribution.
4. This agreement shall become null and void if not signed and
returned to NRC within thirty (30) days of the signature date
of the Regional Director.
NATIONAL RESEARCH COUNCIL of CANADA
/s/ David Rideout
Regional Director, Newfoundland Date: December 19, 1996
NORTHSTAR TECHNICAL INC.
/s/ Wilson Russell
President Date January 15, 1997
NATIONAL RESEARCH COUNCIL
Idustrial Research Assistance Program
Newfoundland and Labrador Region
November 28. 1997
Northstar Technical Inc.
80 Glencoe Drive
P.O. Box 13397
St. John's. NF
A1B 4B7
Dear Sir:
Subject: Technology Development of the Netmind Systems Grid Sensor
Project #O51OOE
We are pleased to advise you that your proposal for the above-referenced
project has been approved for support under the NRC Industrial Research
Assistance Program (IRAP).
You will find enclosed two copies of the Contribution Agreement. Please
have a duly authorized officer of your Firm sign both copies and return
one copy to:
Mr. David W. Rideout
Regional Director
National Research Council
136 Crosbie Road
St. John's, NF
A1B 3K3
For reference purposes. the project No.05100E should be used on all future
correspondence relating to this project.
For matters pertaining to this Agreement. please contact David Bailey, ITA at
772-5228.
Yours truly.
/s/ David W. Rideout, M. Eng
Regional Director
Enclosures
Industrial Research Assistance Program
Contribution Agreement
Project No: 05510E
This Agreement is made in Duplicate-
Between: National Research Council of Canada
Kerwin Place, Memorial University Campus
P.O. Box 12093, Ste. A
St. John's, NF A1B 3T5
(herein called the NRC)
And: Nortnstar Technical Inc
80 Glencoe Drive
St. John's. NF
AlB 4B7
(herein called Firm)
1.This agreement comes into effect on tne 1st day of October 1997 and
terminates on tne 15th day of May 1998
2.The NRC agrees to contribute up to a maximum of $90,300
for research and development undertaken by the Firm as described
in the attached Statement of Work (SW) and in accordance with the attached
Basis of Payment (BP) and Conditions of Contribution (CC).
3.The Firm agrees to undertake tne work described in the statement
of Work and understands and accepts all the Conditions of Contribution.
4 This agreement shall become null and void it not signed and returned to
NRC within thirty (30) days of the signature date of the authorized officer
of the NRC
National Research Council Canada
/s/ David Rideout Date: Nov. 14, 1997
Regional Director
Northstar Tecnnical Inc Date: Nov. 28, 1997
/s/ Jim Hall
Production Manager
NATIONAL RESEARCH COUNCIL CANADA
Industrial Research Assistance Program
Newfoundland and Labrador Region
June 10,1998
Northstar Technical Inc.
597 Water Street
St. John's, NF
AiC 6J9
Attention: Jim Hall:
Subject: Contribution Agreement No.300062 (previously O51OOE)
Amendment No. 1
The above-referenced Contribution Agreement is hereby amended as follows:
a) Under Article 1.0 of the Cover Page, change the termination date from
May 15, 1998 to August 15,1998.
b) Under the Statement of Work, change the following completion dates of
the Task(s) named below to dates indicated:
Task 4.24 Estimated completion date August15, 1998
c) Under the Basis of Payment, delete Article 4 and replace with:
Final Report due: August 15, 1998; Project Follow-up form and
Final invoice due: August 15, 1998.
All other terms and conditions remain unchanged.
The amended version of the Contribution Agreement is in effect
starting May 15,1998.
Please have a duly authorized officer of your Firm sign both copies of
this amendment and return
one copy to:
David W. Rideout
National Research Council
Industrial Research Assistance Program
Kerwin Place, MUN Campus
P.O. Box 12093 Stn. A
St. John's, NE
A1B 3K3
If not signed and returned to NRC within thirty days of
This amendment shall becorne null and void
the date of this letter.
National Research Council
/s/ David W. Rideout DATE: June 11, 1998
Regional Director, Newfounland
Northstar Technical Inc.
/s/ Jim Hall
Production Manager DATE: June 15, 1998
ATLANTIC CANADA OPPORTUNITIES AGENCY
Newfoundland Office
Project No.: 620-4032924-1
April 10, 1997
Northstar Technical Inc.
P0. Box 13397
St. John's, Newfoundland
AlE 4B7
Attention Mr Wilson Russell- President
Dear Sir:
Re: ACOA Business Development Program
In response to your application dated December 3, 1996, the Atlantic
Canada Opportunities Agency ("the Agency"), hereby offers to make a
repayable contribution to Northstar Technical
Inc. ("the Applicant") upon the following Terms and Conditions:
1.00 Contribution
1.01 Subject to all other provisions of this Agreement, the Agency will
make a repayable contribution ("the Contribution") to the applicant to
assist in the execution by the Applicant ofthe project as described
and defined in Annex 1 (Statement of Work) calculated as the
lesser of (a) and (b) as follows:
(a) (1) 50% of eligible capital costs estimated to be $88,200; plus
(2) 50% of working capital requirements estimated to be $197,000;
plus
(3) 75% of the fees to be incurred for the engagement of expertise
estimated to be $60,000; plus
(4) 75% of marketing related activities estimated to be $64,750;
and
(b) $236,163.
2.00
2.Ol Advance Payment
At the discretion of the Agency and at the request of the Applicant,
an advance payment not exceeding 40% of the Contribution, may be
made to the Applicant based on a three (3) month forecast of cash
requirements pertaining to eligible costs to be incurred
in accordance with the Statement of Work Except where the Agency
has given specific permission to the contrary, the Applicant must
demonstrate to the satisfaction of the Agency that the advance was
applied exclusively to the payment of eligible costs within
six (6) months after the date of the disbursement.
Progress Payments:
At the request of the Applicant the Agency may make progress payments
to the Applicant based on claims for eligible costs which have been
incurred. Each claim shall be completed in accordance with instructions
to be provided by the Agency to the Applicant.
JointPayments:
At the discretion of the Agency or at the request of the Applicant,
the Agency may make a payment's Jointly to the Applicant and the
supplier for eligible costs which have been incurred.
Final Payments:
Notwithstanding the foregoing, 10% of the contribution will normally
be reserved for a final payment to be based on a claim submitted by
the Applicant at the time of Project Completion and normally after
all eligible costs have been incurred and paid.
2.02 It is a requirement of this agreement that the Applicant shall
keep the original invoices and proof of payment for all claimed
costs readily available for examination by the Agency during any
payment verification ot audit and until 36 months following the end
of the Control Period.
3.00 Repayment Terms
3.01 The Applicant shall repay the Contribution to the Agency in thirty-six
(36) consecutive monthly instalments of $6,560 each commencing on July 1,
1998 and ending on June 1, 2001 however, the last instalment will
be adjusted to include all sums owing.
3.02 The Applicant shall, at the request of the Agency, on or before each
Anniversary of the Project Completion Date, provide the Agency
with post dated cheques or arrange pre-authorized payments for
any repayments scheduled in the next twelve months.
3.03 The Applicant shall pay interest on overdue repayment instalments at
rate 3% higher than the Bank Rate as determined by the Bank of Canada
for the day the first disbursement on account of the repayable
contribution was made to the Applicant.
3.04 The Applicant may, at any time, make prepayments on account of repayment
instalments and each such prepayment will be applied first to interest
owing and secondly to repayment instalments in reverse order of maturity.
4.00 Conditions
4.01 The Agency shall not contribute to any cost incurred by the Applicant
prior to December 5, 1996.
4.02 As a condition of the Agency's assistance,
(a) The Applicant shall ensure the Project commences on or
before June 1,1997.
(b) The Applicant shall ensure the Project is completed as
described in the Statementof Work on or before June 1,1998.
4.03 The Applicant shall inform the Agency promptly in writing of any
assistance from other federal, provincial or municipal sources
which had been received or is to be received for the Project,
the Agency shall have the right to adjust the amount of the
assistance to take into account the amount of any such further
assistance received.
4.04 The Applicant shall comply with environmental protection measures in
relation to theProject that satisfy the requirements of all regulatory
bodies of appropriate jurisdiction.
4.05 The Applicant shall attain equity, satisfictory to the Agency, in the
total amount of $350,000 on or before the date of the first
disbursement by the Agency to the Applicant.
4.06 Unless otherwise authorized by the Agency in writing, this level of
equity shall be maintained until the end of the control period.
4.07 Prior to the end of the control penod, the Applicant shall not pay any
dividends whatsoever, make payments to a parent Company or any of its
affiliates, nor payoutshareholders loans without the approval of
the Agency.
4.08 The Applicant, on or before the date of disbursement shall
obtain the following financing:
Additional Equity $75,000
5.01 From the date of Project Commencement until the Project Completion date,
the Applicant shall submit, at the request of the Agency, status r
reports on the progress and results of the Project in a form
satisfactory to the Agency.
5.02 The Applicant shall submit to the Agency, within 90 days of the end
of each fiscal year which commences before end of the Control Period,
as defined in the attached general conditions, a copy of its
unaudited financial statements.
6.00 NOTICE
6.01 Any notice or correspondence to the Agency, including the attached
duplicate copy ofthis Agreement signed by the Applicant, shall he
addressed to:
Atlantic Canada Opportunities Agency
P.O Box 1060, Station "C"
Suite 801, Atlantic Place
St. John's, Newfoundland
A1C 5M5
Attention: Ms. Jocelyn Chaytor
Account Manager
or to such address as is designated by the Agency in writing.
7.00 Entire Contract
7.01 This offer, if accepted, including Annex I (Statement of Work),
Sheet for News Release) and Annex 3 (General Conditions) will constitute
the entire agreement between the parties with respect to its
subject matter. No amendments shall be made to the resulting contract
unless confirmed in writing.
This offer is open for acceptance for 60 days from the date that
appears on its race. The date of acceptance shall be the date the
duplicate copy or this offer, unconditionally accepted and duly
executed by the Applicant is received by the Agency.
ANNEX I
Statement of Work
Applicant: Northstar Technical Inc.
Project No: 620-4032924-1
Project Location: Mount Pearl, Newfoundland
Project Description:
The Applicant will create a Contracts Management Division) in parallel
with the existing NETMIMD production facility, aimed primarily at
manufacturing control consoles for submarines and surface ships,
sonar arrays for navies and offshore petroleum seismic
exploration, and contract work on Major Crown Projects. In addition, it will
target contracts pertaining to other Canadian Government Procurement,
Federal Department Operations and Maintenance, and U.S, Defence activities.
Project and Financing: Business Development Program (BDP)
<TABLE>
<CAPTION>
<S> <C>
Total Cost Financing
Leasehold Improvements $ 2Q000 ACOA Repayable Contribution $236,163
Machinery/Equipment 88,200 Cashflow 146,437
Office Equipment 9,900 Additional Equity 225,000
Working Capital 326,000
Consultants 60,000
Internal Labor Training 27,500 Total.......................$607,600
Marketing 76,000
Total.................$607,600
</TABLE>
Timing:
Estimated Project Commencement Date: June 1,1997
Estimated Completion Date: June 1,1998
Eligible Cost:
Machinery/Equipment $ 88,200
Working Capital 197,000
Consultants 60,000
Marketing 64,750
Total................$409,950
ANNEX 2
PROJECT FACT SHEET
FOR NEWS RELEASE
Program: Project No: 620-4032924-1
Applicant Contact:
ACOA Business Development Program
Name & Address of AppIicaut.E
Northatar Technical Inc.
P.O. Box 13397
St. John's, Newfoundland
AID 4B7
Project Location:
Mqunt Pearl, Newfoundland
Project Description:
Name: Wilson Russell
Tide: President
Tdephone: (709) 745-6440
Project Type: Expansion
The Applicant will create a Contracts Management Division) in parallel
with the existing NETMIND production facility, aimed primarijy at
manufacturing control consoles for submarines and surface ships,
sonar arrays for navies and offshore petroleum seismic exploration,
and contract work on Major Crown Projects. In addition, it will target
contracts pertaining to other Canadian Government Procurement,
Federal Department Operations and Maintenance,
and USA Defence activities.
Total Costs:$607,600 Eligible Costs: $409,950
Authorized Assistance: $236,163
Job Creation/Maintenance:Create 25 jobs, maintain 13 jobs
Estimated Sales Resulting from Project (3 years): $16 825,000
Estimated Project Commencement Date: June 1 1997
Estimated Completion Date: June 1 1998
ANNEX 3
General Conditions
(Revised February 1996)
1.The Agreement resulting from the acceptance of this ofler
('this Agreement") is made pursuant to the ACOA Business Development
Program. This offer embodies and is subject to the Terms and Conditions
of the Atlantic Canada Opportunities Agency Small business Development
Program as approved by Treasury Board. ThisAgreement is that which is
referred to as the "Contribution Agreement" in the Terms and Conditions,
and should there be a conflict between the conditions included in this
Agreement and the Terms and Conditions as approved by Treasury Board,
the latter shall prevail.
2. In this Agreement, the following definitions shall apply:
"Control Period" For commercial projects, this refers to the period
beginning on the date of first disbursement and ending on the date
on which all amounts due by the Applicant to the Agency under this
Agreement have been paid in fill or until that obligation is otherwise
discharged to the satisfaction of the Agency. For noncommercial
projects, the Control period ends on the date of Project Completion.
"Project Commencement Date" means the date on which, in the opinion
of the Agency, the first major Commitment is made by the Applicant to
implement the Project.
"Project Completion Date" means the date on which, in the opinion
of the Agency, all the eligible costs have beenincurred and the
work completed to the satisfaction of the Agency.
3. The Applicant shall obtain the approval of the Agency before preparing
any announcements, brochures, advertisements or other materials that
will display the ACOA logo or otherwise make reference to the Agency.
4. The Applicant consents to a public announcement of the Project, by or on
behalf of the Atlantic Canada Opportunities Agency. The Agency shall
inform the Applicant of the date on which the announcement is to be
made and the Applicant shall keep this offer confidential until such
date. After official announcement of this Project by the Agency, or
60 days after the Applicants acceptance of this offer, whichever is
earlier, information appearing on the Project fact sheet, as attached
hereto, will be considered to be in the public domain
5. The Applicant will advise the Agency at least 30 days in advance of
any special event, official opening, ribbon Cutting, sod-turning, etc),
the Applicant wishes to organize in connection with die Project.
A ceremony shall only be held on a date which is mutually acceptable
to the Minister and the Applicant. Furthermore, the Applicant consents
to having the Minister or designate participate in any such ceremony.
6. The Applicant consents to the P1acement of a site sign, at the start of
construction, which recognizes federal participation in the Project.
The sign, to be provided by the Agency. Shall be erected by the
Applicant on or near the Project site, using a solid hacking made of
plywood, presswood or similar material. The sign must be in a highly
visible location where it can be easily seen by passing traffic and
not be overshadowed by other signs. It shall be removed by the
Applicant after construction is completel and a waill plaque will be
provided by the Agency to be placed by the Applicant in a visible
location inside the facility.
7. The Applicant shall not alter the scope of the Project without
the prior written consent of tile Agency.
8. The Agency shall not contribute to any cost that is not a
reasonable and proper direct cost of the Project, nor to any
Cost which is not substantiated by satistactory supporting documentation.
9. The Applicant shall obtain the prior written consent of the Agency
to any material change in the ownership, management, financing,
location, size of iacijities, timing, job creation, federal,provincial
or municipal assistance with respect to the Project
10. Upon request by the Agency, the Applicant shall provide elaboration of
any report required under this Agreement, promptly and at no cost to
the Agency.
11. The Applicant shall obtain insurance coverage on assets acquired
for the Project, satisfactoiy to the Agency, and maintain this
insurance until the end of the control period.
12. The Applicant shall not, prior to the end of the control period,
cease to use, sell or otherwise dispose of eligibleassets without
the written consent of the Agency except where the assets disposed
of are immediately replaced by Comparable assets of equal or greater
value and used in the assisted facility. Any lunds recovered by the
Agency pursuant to the sale or disposal of assisted assets, will be
applied first to interest owing and secondly to repayment instalments
in reverse order of maturity.
13. For a period of 36 months after end of the Control Period, the
representative of the Agency reasonable access to its premises to:
and 2) to audit the books, accounts, and records of the costs of the
project
14. (a) The following constitute Events of Default:
(i) The Applicant becomes bankrupt or insolvent, goes into receivership,
or takes the benefit of any statute from time to time in force
relating to bankrupt or insolvent debtors;
(ii) an order is made or resolution passed for the winding up
of the Applicant or the Applicant is dissolved;
(iii) in the Opinion of the Agency the Applicant ceases to carry on
business;
(iv) the Applicant has submitted false or misleading information
to the Agency;
(v) the Applicant makes a false or misleading statement concerning
assistance by the Agency in a prospectus or other document
related to raising funds;
(vi) the Applicant has not met or satisfied a term or
condition to which the Contribution is subject.
(b) if an Event of Default has occured or in the opinion of the Agency
is likely to occur, the Agency may exercise either or both of the
following remedies:
(i) terminate any obligation by the Agency to contribute or
continue to contribute to tile costs of the Project,
including any obligation to pay an amount owing prior to
the date of such termination;
(ii) require the Applicant to repay part of or all of
the Contribution forthwith to the Agency, and that
amount is a debt due to Her Majesty in right of Canada
and may be recovered as Such.
(c) The Applicant acknowledges the policy objectives served by the
Minister's agreement to make the Contribution, that the Contribution
comes from the public monies, and that the amount of damages sustained
by the Crown in an event of default is difficult to ascertain and
therefore that it is fair and reasonable that the Minister be entiled
to exercise any or all of their remedies provided for in this
Agreement and to do so in the manner provided for in this Agreement
if an event of default occurs.
15. The Applicant shall, no later than 60 days following the Project
Completion, submit to the Agency a satisfactory claim for an eligible
project costs peflaining to goods received, or services performed prior
to the Project Completion Date and which have not already been claimed.
Any costs not claimed in accordance with the foregoing shall be
deleted from the authorized project costs.
16. The Applicant must repay to the Agency any amount of the Contribution
which exceeds the amount to which the Applicant is entitled,
within thirty days of written notification by the Agency.
17. The Applicant shall pay, in addition to any amount payable as a result
of an Event of Default, interest on such amount which interest
(or the rate thereof) shall be equal to three (3%) higher than
the Bank Rate as determined by the Bank of Canada for the day the
first disbursement on account of the contribution was made.
18. When any payment is received from the Applicant on account of a
repayable contribution or an Event of Default, tile Agency shall
apply that payment first to reduce any accrued interest owing
and then, if any part or the payment remains, to reduce the
outstanding principal balance.
19. Any notice required to be given with respect to this Agreement
shall be in writing and shall be effectively given if delivered or
if sent by ordinary or registered wail, telegram, fax or telex
addressed to the party for whom the notice is intended. Any notice
shall be deemed to have been received on delivery; any notice sent
by telegram, fax or telex shall be deemed to have been received
one working day after being sent; any notice mailed shall be
deemed to have leeen neceived eight calendar days after being mailed.
20. This Agreement shall not be assigned by the Applicant without
the prior written consent of the Agency.
21. No member of the House of Commons of Canada or the Senate of
Canada shall be admitted to any share or part
of this Agreement or to any benefit to arise therefrom.
22 This Agreement is binding on the Applicant and its Successors
and assigns.
23. The Agency and Applicant declare that nothing in this Agreement
shall be construed as creating a partnership, joint venture or
agency relationship between the Agency and the Applicant,
24. Any payment by the Agency under this Agreement is subject to
there being an appropriation for the fiscal year in which the
payment is to be made.
(a) Should general reductions be applied to operating /contribution
budgets at ACOA by the Treasury Board, proportional reductions
to the Applicant's contribution will be negotiated. ACOA will
provide notice to the Applicant as early as possible regarding
such reductions
(b) Retroactive adjustments may apply to payments made under this
agreement if the Treasury Board reduction applies to
Operating/contributions which have already been disbursed.
25. The Applicant shall obtain all necessary licenses and
peimits in relation to the Project that satisfy the
requirements of all regulating bodies of appropriate jurisdiction
26 The Applicant declares that no contingency fee for the solicitation,
negotiation or obtaining Of this agreement has been paided agreed
to be paid or will be paid directly or indirectly to any person
other than to an employee of the Applicant acting within the scope of
their employment
27 The Agency may, at any time, by thirty days notice to the
Applicant, cancel this agreement if in the Agency's
Opinion, the Statement Of Work has not been executed in a
satisfactory manner, or if the progress and objectives
outlined in the contract have not been met
28. The Applicant shall indemnify and save harmless, ACOA from and
against all claims, losses, damages, costs and expenses relating
to any injury to, or death of; a person or loss or damage to
properly caused or alleged to be caused by the Applicant or its
servants or agents in carrying out die Applicant's activities.
29. The Applicant shall proceed in a good and workmanlike manner and
using qualified personnel to carry out the Project described in
the Statement of Work.
30. All information obtained by ACOA from the Applicant pursuant to
an application or during tile course of this Agreement will be
kept confidential unless otherwise required by law.
If further information is required, please contact your Account Manager,
Ms. Jocelyn Chaytor, at (709) 772-3539
Yours truly,
/s/Richard J.Cornerford
Director Business Programs
Attachments:
* Annex I - The Project - Statement of work
* Annex 2 - Project Fact Sheet fbr News Release
* Annex 3 - General Conditions
* Costing Memorandum
The foregoing offer is hereby accepted this 15th day of April, 1997
Northstar Technical Inc.
Project No. 6ZO-4O3292E1
Per :/s/ Wilson E Russel
Chairman and CEO
Corporate seal
National Oceanic and Atmospheric Administration.
Host Agency serving:
Economic Development Administration
International Trade Administration
Minority Business Development Agency
Bureau of Export Administration
U.S. DEPARTMENT OF COMMERCE
Western Administrative Support Center
7800 Sand Point Way N.E.
BIN C15700
Seattle, Washington 98115-0070
September 22, 1999
Wilson E. Russell
Northstar Technical, Inc.
687 Water Street
St. Johns, NF, Canada
A1E 1C2
Reference: NOAA Solicitation No. 52ABNF900059, Acoustic
Wireless Trawl Net Management System
Dear Mr. Russell:
I am very pleased to inform you that Northstar Technical has been
selected for award of the contract resulting from the above
referenced solicitation. The fully executed contract documments
are enclosed.
Incorporated into the award of the basic contract is our first
order for supplies. The amount of this order is $134,263.00.
Mr. Russell E. Nelson Jr. is appointed as my Technical
Representative for this contract. Mr. Nelson can be reached by
phone, at (206) .526-4103. His mailing address is the same as the
"Deliver To" address included in Block 15 of the contract cover
page (standard Form 1449). Technical and delivery questions
should be addressed to Mr. Nelson.
Finally, I've enclosed a payment information form, and ask that
you complete and return it at your earliest convenience. This
form will speed up the payment prosess by allowing us to make a
direct deposit to your bank account.
Again, congratulations on your selection for award of this
contract. If you have any questions about this notice or the
enclosed documentation, please call Don Wadhams at (206) 526-6036.
Sincerely,
/s/ Heide Sickles
Heide Sickles
Contracting officer
PART I
SERVICES AND PRICES/COSTS
1.1 COMMERCIAL ITEM ACQUISITION: This is a commercial item
acquisition which will use Federal Acquisition Regulations (FAR)
Part 12 and the special simplified acquisition procedures for
the acquisition of supplies as set forth in FAR, PART 13.5.
1.2 INDEFINITE DELIVERY/ INDEFINITE QUANTITY TYPE CONTRACT for
Acoustic, wireless trawl net management/mensuration
system/components for the Department of Commerce, National
Oceanic and Atmospheric Administration CNOAA) National Marine
Fisheries Service (NMFS), Alaska Fisheries Science Center,
Seattle, WA. All supplies shall conform to contract
specifications and shall be delivered in accordance with the
terms and conditions, and provisiona contained in this contract
and as specified in each individual delivery order.
1.3 EFFECTIVE PERIOD OF THE CONTRACT: The effective period of this
contract shall commence with the date the contract is executed
by the Government Contracting Officer and extend through
September 30, 2000.
1.4 MINIMUM AND MAXIMUM CONTRACT AMOUNTS: During the period
specified in the ORDERING clause (FAR 52.216-18), the Government
shall place orders totaling a minimum of $25,000. The amount of
all orders may not exceed $350,000. The stated minimum is for
information purposes only and is not intended to imply that the
minimum stated is an exact indication at the total quantities
that will be required. The actual requirements will be
established by individual order(s).
1.5 SCHEDULE: The Contractor shall provide the items specified at
the prices listed, in strict accordance with the Statement of
Work and all other terms and conditions of the contract.
ITEM ESTIMATED* UNIT EXTENDED
No. DESCRIPTTON QUANTITY UNIT PRICE PRICE
0l Receiver/Processor Unit
9 Each $ $
02 Headrope Sensor 12 Each $ $
(with batteries)
O3 Door/Wing Sensor (Master and slave unit pair with batteries)
12 Each $ ________ $
04 Towed hydrophone 12 Each $ _________ $
(With 45 meter cable)
MORGUARD REAL ESTATE INVESTMENT TRUST
Landlord
- - and -
NORTHSTAR ELECTRONICS, INC
Tenant
LEASE OF OFFICE SPACE
MULTI-TENANT OFFICE PROJECT
PROJECT: Suite 1455, 409 Granville Street
Vancouver, British Columbia
INDEX
SECTION PAGE
TERM SHEET 1
ARTICLE 1.00- DEFINITIONS 3
1.01 Definitions 3
ARTICLE 2.00- GRANT OF LEASE AND GENERAL COVENANTS 3
2.01 Grant 3
2.02 Landlord's General Covenants 3
2.03 Tenant's General Covenants 3
ARTICLE 3.00- TERM AND POSSESSION 4
3.01 Term 4
3.02 Early Occupancy 4
3.03 Delayed Possession 4
3.04 Acceptance of Leased Premises 4
ARTICLE 4.00- RENT 4
4.01 Rent 4
4.02 Security Deposit 4
4.03 Intent 5
4.04 Payment of Rent - General 5
4.05 Partial Month 5
4.06 Payment of Tenant's Occupancy Costs 5
4.07 Estimates of Indirect Expenses and Resolution of Disputes 6
4.08 Area Determination 7
4.09 Vacancy 7
4.1O Method of Payment 7
ARTICLE 5.00-USE AND OCCUPATION 7
5.01 Use of Leased Premises 7
5.02 Compliance with Laws 7
5.03 Prohibited Uses 8
5.04 Common Elements 8
5.05 Hazardous Use 8
5.06 Security Interest 8
5.07 Rules and Regulations 9
5.08 Permitted Signs 9
5.09 Prohibited Signs 9
5.10 Window Coverings 9
5.11 Parking 9
5.12 Authorization of Enquiries 9
5.13 Records 9
5.14 Overloading 10
ARTICLE 6.00- SERVICES. MAINTENANCE. REPAIR AND
ALTERATIONS BY THE LANDLORD 10
6.01 Operation of Project 10
6.02 Building Services and Facilities 10
6.03 Maintenance, Repair, and Replacement 10
6.04 Alterations/Renovations by Landlord 11
6.05 Access by Landlord 11
6.06 Energy Conservation 11
6.07 Supervision and Extended Services 11
6.08 Landlord's Work 12
6.09 Control by the Landlord 12
ARTICLE 7.00- PAYMENT4EOR SERVICES AND MAINTENANCE. REPAIR
AND ALTERATIONS BY THE TENANT 12
7.01 Utilities 12
7.02 Lights 12
7.03 Heating, Ventilation and Air Conditioning 12
7.04 Alterations by Tenant 13
7.05 Tenant's Trade Fixtures and Personal Property 13
7.06 Maintenance and Repair 13
7.07 Inspection 13
7.08 Failure to Maintain 14
7.09 Liens 14
7.10 Roof 14
ARTICLE 8.00- TAXES 14
8.01 Taxes Payable by Landlord 14
8.02 Taxes Payable by Tenant 14
8.03 Tax Increases Attributable to Tenant 15
8.04 GST 15
8.05 Landlord's Election 15
8.06 Right to Contest 15
ARTICLE 9.00- INSURANCE. LIABILITY AND ENVIRONMENTAL 15
9.01 Landlord's Insurance 15
9.02 Tenant's Insurance 16
9.03 Placement of Tenant's Insurance by Landlord 17
9.04 Limitation of Landlord's Liability 17
9.05 Environmental Issues 17
ARTICLE 10.00-DAMAGE AND DESTRUCTION 18
10.01 Limited Damage to Leased Premises, Access or Services 18
10.02 Major Damage to Leased Premises 18
10.03 Damage to Building 18
10.04 No Abatement 19
10.05 Notify Landlord 19
10.06 Expropriation 19
ARTICLE 11.00- DEFAULT 19
11.01 Interest 19
11.02 Costs of Enforcement 19
11.03 Performance of Tenant's Obligations 20
11.04 Events of Default 20
11.05 Remedies on Default 21
11.06 Availability of Remedies 21
11.07 Waiver 22
11.08 Waiver of Exemption and Redemption 22
11.09 Companies' Creditors Arrangement Act 22
ARTICLE 12.00-ASSIGNMENT. SUBLETTING AND OTHER
TRANSFERS 22
12.01 Request for Consent 22
12.02 Basis for Consent 22
12.03 Terms and Conditions Relating to Consents 23
12.04 Subsequent Transfers 24
12.05 Profit Rents upon Transfers 24
12.06 Advertising 24
12.07 Grant of Security Interest by Assignee or Sub-tenant 24
ARTICLE 13.00 TRANSFER BY LANDLORD 24
13.01 Sale, Conveyance and Assignment 24
13.02 Effect of Transfer 24
13.03 Subordination 24
13.04 Attornment 24
13.05 Effect of Attornment 24
13.06 Repurchase 24
ARTICLE 14.00 - SURRENDER 25
14.01 Possession and Restoration 25
14.02 Tenant's Trade Fixtures and Personal Property 25
14.03 Overholding 25
ARTICLE 15.O0 - GENERAL 25
15.01 Estoppel Certificates 25
15.02 Entire Agreement 25
15.03 No Registration of Leases or Notices ... 26
15.04 Project Name and Trademarks 26
15.05 Demolition I Substantial Renovation ... 26
15.06 Relocation 26
15.07 "For Lease" Signs 26
15.08 Unavoidable Delays 26
15.09 Limitation of Recourse 26
15.10 Notice 26
15.11 Delegation of Authority 27
15.12 Relationship of Parties 27
15.13 Governing Law 27
15.14 Amendment or Modification 27
15.15 Legal and Administration Costs 27
15.16 Construction 27
15.17 Captions and Headings 27
15.18 Interpretation 27
15.19 Time of the Essence 27
15.20 Successors and Assigns 27
15.21 Counterparts 27
15.22 Further Schedules 27
15.23 Independent Legal Advice 27
15.24 No Offer 28
15.25 Landlord's Security Interest 28
15.26 Survival of Covenants and Indemnities 28
15.27 Exculpatory Provisions 28
15.28 Brokerage Commissions 28
15.29 Covenants to be Performed at Landlord's 28
15.30 Radiation 28
TERM SHEET - FORMING PART-OF LEASE OF OFFICE SPACE, MULTI-TENANT
1. LANDLORD: Morguard Real Estate Investment Trust
ADDRESS: 1650 - 409 Granville Street
Vancouver, British Columbia
V6C 1T2
TELEPHONE: 681-9474
FAX NUMBER:685-0161
Landlord's "Environmental Contact" Manager. Environmental Affairs
Attention: Senior Vice-President. Operations
United Kingdom Building Limited holds registered title to the Project as
nominee for the Landlord.
2. TENANT: NORTHSTAR ELECTRONICS, INC.
ADDRESS: Suite 1455, 409 Granville Street
Vancouver, British Columbia
V6C 1T2
3. PROJECTNAME: United Kingdom Building
MUNICIPAL ADDRESS OF PROJECT: 409 Granville Street
Vancouver, British Columbia
V6C lT2
4. LEASED PREMISES:
Attached as Schedule A to the Lease is a plan of the Project showing the
Leased Premises by a distinguishing outline. The Leased Premises are
designated as unit(s) 1455.
5. RENTABLE AREA OF LEASED PREMISES:
1,775 square feet subject to adjustment in accordance with the definition
of Rentable Area and Section 4.08.
6. (i) SECURTIY DEPOSIT: $3,089.00 (Section 4.02)
(ii) OTHER DEPOSIT: $3,305.23 (Schedule E)
7. TERM: Three (3) Years
(i) FIRST DAY OF TERM: January 1, 2000
(ii) LAST DAY OF TERM: December 31, 2002
8. BASIC RENT:
For the said Term commencing on the 1st day of January, 2000, and ending on
the 31st day of December, 2002, the Basic Rent shall be Nineteen Thousand
Five Hundred Twenty Five Dollars ($19,525.00) per annum, in equal monthly
instalments of One Thousand Six Hundred Twenty Seven Dollars and Eight Cents
($1,627.08) each and payable on the first day of each month.
9. USE OF LEASED PREMISES:
The premises shall be used for no purpose other than as general office space.
The Tenant will be responsible for obtaining all necessary approvals,
including zoning, development and business permits, for its intended use of
the premises and will submit all applications for such approvals to the
Landlord for its consent prior to making application. Notwithstanding the
Landlord's consent to an application, the Tenant will indemnify and defend
the Landlord and save it harmless from and against any and all expenses,
losses or damages incurred or suffered by the Landlord.directly or indirectly
arising out of the Tenantfs application for such approvals and permits or the
resulting approvals and permits with respect to the use, intended or
otherwise, of the premises, whether such expenses, losses or damages are in
respect of the premises or in respect of the building or buildings of which
the premises form a part. The Landlord makes no representations or
warranties, express or implied, respecting the use or intended use of the
premises by the Tenant or respecting whether or not necessary approvals can
be obtained for the Tenant's use or intended use.
10. ENVIRONMENTAL ISSUES:
LEASE SECTION 9.05: Applies X Does not apply
RIDER 1 (SECTION 9.05): Applies Does not apply X
11.N/A
Additional Covenants, Agreements and Conditions (if any) listed here are more
particularly set out in Schedule E.
- - DEPOSIT
- - LIMITATIONS
LEASE OF OFFICE SPACE
MULTI-TENANT OFFICE BUILDING
This LEASE is made as of the 21st day of September, 1999
BETWEEN: MORGUARD REAL ESTATE INVESTMENT TRUST
(the "Landlord")
AND: NORTHSTAR ELECTRONICS INC., a Company duly
incorporated Delaware, USA
(the "Tenant")
IN CONSIDEERATION of the mutual covenants contained herein, the Landlord and
Tenant hereby agree as follows:
ARTICLE l.00 DEFINITIONS
1.01 Definitions - In this Lease the terms defined in Schedule B shall have
the meanings designated therein respectively.
ARTICLE 2.00- GRANT OF LEASE AND GENERAL COVENANTS
2.01 Grant - The Landlord hereby leases to the Tenant and the Tenant hereby
leases from the Landlord the Leased Premises, to have and to bold during the
Term, subject to the terms and conditions of this Lease.
2.02 Landlord's General Covenants - The Landlord covenants with the Tenant:
(a) subject to the provisions of this Lease, for quiet enjoyment of
the Leased Premises so long as the Tenant shall observe and perform
all the covenants and obligations of the Tenant herein; and
(b) to observe and perform all the covenants and obligations of the
Landlord herein.
2.03 Tenant's General Covenants - The Tenant covenants with the Landlord;
(a)to pay Rent without any deduc4on, abatement or set-off
whatsoever; and
(b)to observe and perform all the covenants and obligations
of the Tenant herein.
ARTICLE 3.O-TERM AND POSSESSION
3.01 Term - The Term of this Lease shall begin on the Commencement
Date and end on the date set out in Item 7(b) of the Term Sheet unless
terminated earlier as provided in this Lease.
3.02 Early Occupancv - The Tenant may, with the Landlord's prior written
consent, use and occupythe Leased Premises or portions thereof before the
Commencement Date. In the event of early occupancy, the Tenant shall pay
to the Landlord on the date of occupancy a rental for the period from the
date the Tenant begins to use or occupy the Leased Premises or portions
thereof to the Commencement Date, which rental shall be that proportion
of the Rent for the first calendar year of the Term which the number of
days in such period is of 365, multiplied by that proportion that the
part of the Leased Premisesused and occupied from time to time by the
Tenant prior to the Commencement Date is of the total area of the Leased
Premises. Except where clearly inapplicable, all provisions of this Lease
shall apply during such period.
3.03 Delayed Possession - If the Landlord is unable to deliver possession
of all or any portion of the Leased Premises by the Commencement Date, this
Lease shall remain in full force and effect and the Tenant shall take
possession of the Leased Premises on the date when the Landlord delivers
possession of all of the Leased Premises, which date shall be conclusively
established by notice in writing from theLandlord to the Tenant at
least 10loss, damage or inconvenience resulting from any delay in d
deleveringpossession of the Leased Premises but, unless the delay is
caused by or attributable to the Tenant, its servants, agents or
independent contractors,no Rent shall be payable by the Tenant for
the period prior to the date on which the Landlord can deliver
possession of all of the Leased Premises,unless the Tenant elects to
take possession of a portion of the Leased Premises, in which case Rent
shall be payable in respect thereof from the date such possession is
so taken. Despite anything contained to the contrary in this Section
3.03, if the Landlord is of the opinion that it is unable
to deliver possession of all or any part of the Leased
Premises by the expiration of 6 months from the Commencement
Date, the Landlord shall have the right to terminate this Lease
upon written notice to the Tenant,whereupon neither party shall
have any liability to the other.
3.04 Acceptance of Leased Premises - Taking possession of all or any portion
of the Leased Premises by the Tenant shall be conclusive evidence as against
the Tenant that the Leased Premises or such portion thereof and the Common
Elements are in satisfactory condition on the date of taking possession,
subject only to latent defects and to deficiencies (if any) listed in
writing in a notice delivered by the Tenant to the Landlord not more
than 10 days after the date of taking possession.
ARTICLE 4.00- RENT
4.01 Rent - The Tenant shall pay to the Landlord as Rent for the Leased
Premises the aggregate of:
(a) Basic Rent in respect of each year of the Term, payable in advance and
without notice or demand in monthly instalments as set out in Item 8 of the
Term Sheet commencing on the Commencement Date and on the first day of each
calendar month thereafter during the Term;
(b) Tenant's Occupancy Costs, which shall include Tenant's Proportionate
Share of Taxes, during the Term, payable in monthly instalments at the
times and in the manner provided in Section 4.06; and
- ------------------------------------------------------------------------------
(c) all amounts (other than payments under Subsections 4.01 (a)and(b) payable
by the Tenant to the Landlord under this Lease, at the times and in the
manner provided in this Lease or, if not so provided, as reasonably required
by the Landlord.
4.02 Security Deposit - The Landlord acknowledges receipt on or before the
Commencement Date of the amount set out in Item 6(a) of the Term Sheet
(the "Security Deposit") to be held by the Landlord,without any liability
whatsoever on the part of the Landlord for the payment of interest thereon,
as a security deposit for the faithful performance by the Tenant of the
terms, covenants and conditions of this Lease during the Term hereof and not
to be applied on account of Rent except as otherwise provided in this Section
4.02. The Security Deposit will not be a limitation on the Landlord's damages
or other rights and remedies available under this Lease or at law or equity,
nor shall the Security Deposit be either a payment of liquidated damages or
an advance payment of Rent. The Landlord shall have no fiduciary
responsibilities or trust obligations whatsoever with regard to the Security
Deposit and shall not assume the duties of a trustee for the Security
Deposit. The Security Deposit shall not be mortgaged, assigned or encumbered
by the Tenant and the Landlord shall not be bound by any such mortgage,
assignment or encumbrance. It is understood and agreed between the parties
that any portion of the Security Deposit may, at the Landlord's option, be
applied toward the payment of overdue or unpaid Rent and may also be applied
as compensation to the Landlord for any loss or damage sustained with respect
to the breach on the part of the Tenant of any terms, covenants and
conditions of this Lease, provided in all cases, however, that the Tenant's
liability hereupder is not limited to the amount of the Security Deposit. If
during the Term any portion of the Security Deposit is so applied,
then the Tenant shall on written demand deliver to the Landlord a
sufficient amount iflEash or by certified cheque to restore the Security
Deposit to the original sum deposited. The Landlord shall refund to the
Tenant after the expiry date of this Lease any portion of the Security
Deposit not used by the Landlord after application by the Landlord to any
damage incurred by the Landlord by reason of the default of the Tenant
under the terms of this Lease. It is further provided that the Landlord
will be discharged from all liability to the Tenant with respect to the
Security Deposit to the extent that it is transferred to any purchaser
of the Landlord's interest in the Leased Premises.
4.03 Intent - It is the stated pumose and intent of the Landlord and the
Tenant that this Lease and the Rent shall be fully net to the Landlord.
4.04 Payment of Rent - General - All amounts payable by the Tenant to the
Landlord pursuant to this Lease shall be deemed to be Rent and shall be
payable and recoverable as Rent in the manner herein provided and the
Landlord shall have all rights against the Tenant for default in any such
payment as in the case of arrears of Rent. Rent shall be paid to the
Landlord in lawful money of Canada, without deduction, abatement or set-off,
at the local address of the Landlord set out in ltem.1 of the Term Sheet or
to such other Person or such other address as the Landlord may from time to
time designate in writing. The Tenant's obligation to pay Rent shall survive
the expiration or earlier termination of this Lease. Any Rent or other sum
received or accepted by the Landlord and paid by anyone other than the
Tenant, on behalf of the Tenant, shall not release or in any way affect the
covenants of the Tenant set out in this Lease and is not to be construed by
the Tenant as the Landlord's consent to a Transfer under Article 12.00. Any
Rent or other sum received by the Landlord from or for the account of the
Tenant while the Tenant is in default under this Lease may be applied at
the Landlord's option to the satisfaction in whole or in part of any
of the obligations of the Tenant then due under this Lease in such manner
as the Landlord sees fit regardless of any designation or instruction
of the Tenant to the contrary.
4.05 Partial Month - If the Commencement Date is a day other than
the first day of a calendar month, the instalment of Rent payable on
the Commencement Date shall be that proportion of annual Rent payable
as of the Commencement Date which the number of days from the
Commencement Date to the last day of the month in which the Commencement
Date falls is of 365. If the Term ends on a day other than the last day
of a calendar month, the instalment of Rent payable on the first day
of the calendar month in which the last day of the Term falls shall be
that proportion of annual Rent then payable which
the number of days from the first day of such last calendar month
to the last day of the Term is of 365.
4.O6 Payment of Tenant's Occupancy Costs
(1) Estimate and Payment
(a) The Landlord shall deliver to the Tenant a written estimate or
a written revised estimate of:(i) Tenant's Occupancy Costs for each
Fiscal Year; and (ii) Tenant's Proportionate Share of those Taxes
that are imposed against the Project or any part of it including the
Common elements. The Tenant shall pay to the Landlord the amount so
estimated in equal monthly instalments (except as otherwise required
in this Section 4.06 with respect to Property Taxes) in advance over
that Fiscal Year simultaneously with the Tenant's payments on account
of Basic Rent. If the Landlord does not deliver to the Tenant such an
estimate, the Tenant shall continue to pay Tenant's Occupancy Costs
and Tenant's Proportionate Share of Taxes based on the last such
estimate delivered by the Landlord until a further estimate is
delivered by the Landlord and the next payment on account of
Tenant's Occupancy Costs or Taxes shall be adjusted to take into
account any over or under payment in the preceding instalments paid
in the Fiscal Year to which the estimate or revised estimate
relates. Notwithstanding the foregoing, as soon as bills for
all or any portion of amounts included in Operating
Costs (including, without limitation, Taxes) as so estimated are
received, the landlord may bill the Tenant for the Tenant's
Proportionate Share thereof and the Tenant shall pay the Landlord
such amounts so billed (less all amounts previously paid on account
by the Tenant on the basis of the Landlord's estimate as aforesaid)
as Rent within 5 days following demand therefore.
(b) Within a reasonable time after the date in each calendar
year when the final instalment of Property Taxes is due in
respect of commercial properties generally in the municipality in
which the Project is located (the "Final Payment Date"), the Landlord
shall deliver a statement (the "Tax Statement") to the Tenant that
(I) specifies the Tenant's Proportionate Share of Taxes for the Property
Tax Year and (ii) sets out the total (the "Prepayment Total") of
amounts payable under this Section 4.06(b) that have been paid
by the Tenant between the final Payment Date in the previous
Property Tax Year and the Final Payment Date of the current Property
Tax Year. If the Prepayment Total, less anyE amounts that were previously
credited to the Tenant, and any amounts paid for arrears in respect
of previous Property Tax Years, (the "Net Prepayment Total")
is less than the Tenant's Proportionate Share of Taxes
specified in the Tax Statement, the Tenant shall pay the
deficiency with the next monthly payment of Basic Rent If the
Net Prepayment Total exceeds the Tenant's Proportionate
Share of Taxes specified in the Tax Statement, the Landlord shall,
unless the Tenant is then in default under this Lease, credit
the excess to the Tenant on account of the next succeeding payments of
Tenant's Occupancy Costs. The Landlord may estimate Property
Taxes for the Property Tax Yeai+llowing the then current Property
Tax Year, and the Tenant shall continue after the FinaL Payment Date is
to make monthly payment in advance, in amounts determined by the Landlord,
for periods determined by the Landlord. The monthly payments paid by the
Tenant after the Final Payment Date shall be credited against the Tenant's
proportionate Share of Taxes for the subsequent Property Tax Year.
(c) Any portion of the Tenant's Proportionate Share of Taxes accrued
with respect to the Term or any part thereof paid by the Landlord prior
to the Commencement Date shall be reimbursed by the Tenant to the Landlord
on the Commencement Date or on demand thereafter. Subject to Sections
8.03 and 8.05, the Tenant shall pay the Tenants Proportionate Share of
any Property Taxes or of the Landlord's reasonable estimate thereof
monthly in advance in the same manner as for payment of Tenant's Occupancy
Costs.
Notwithstanding the foregoing, the Landlord shall always have the right:
(i) to revise the amount of instalments on account of Property Taxes
payable by theTenant to an amount that allows the Landlord to collect
all Property Taxes payable by the Tenant by the final due date of
Property Taxes for the calendar year; and/or
(ii) to schedule and require payment by the Tenant of instalments
on account of Property Taxes payable by the Tenant such that by the
final due date of Property Taxes for any calendar year, the Tenant
shall have paid to the Landlord the full amount of Property
Taxes payable by the Tenant for such calendar year, which
arrangement may include payment of instalments by the Tenant
in a calendar year on account of Property Taxes
payable by the Tenant for the next calendar year; and/or
(iii) (but not the obligation) to allocate Taxes among categories
of rentable premises in the Project on the basis of such factors
as the Landlord determines to be relevant, such as, by way of example,
the types of business or activity carried on therein, the locations
in the Project, costs of construction, relative benefits
derived by rentable premises, relative assessment values, non-public
school support designations and vacancies. The Landlord shall be entitled
to adjust the Tenant's Proportionate Share of Taxes, having regard to the
category in which the Tenant is placed by the Landlord. In determining
the share of Taxes whieh is payable by the Tenant pursuant
to this Lease,Taxes shall include such additional 'amounts
as would have formed part of the Taxes had the Project been
fully assessed during the whole of the relevant period as fully
without taking into account any acEual or potential reduction of
Taxes or change of assessment category or class for rentable
premises within the Project which are vacant.
- ------------------------------------------------------------------------------
(2) Annual Statement and Adjustment - The Landlord
shall deliver to the Tenant within 120 days after the
end of each Fiscal Year or as soon after that date as the same
shall be prepared by or for the Landlord, a written statement setting
out in reasonable detail the amount of Operating Costs and Tenant's
Occupancy Costs for such Fiscal Year. If the total of monthly
instalments of Tenant's Occupancy Costs actually paid by the Tenant
to the Landlord during that Fiscal Year differs from the amount of Tenants
Occupancy Costs payable for that Fiscal Year under Section 4.01(b), the
Tenant shall pay to the Landlordor, if the Tenant is not in
default, the Landlord shall credit to the Tenant on account of the
next succeeding payments of Tenant's Occupancy Costs, as the
case may be, the difference,without interest, within 30 days
after the date of delivery of the statement.
(3) Disputes - If the Tenant disputes the Landlord's statement setting
out Operating Costs and Tenant's Occupancy Costs or the Tax Statement for
any Fiscal Year, the Tenant shall provide notice thereof in writing to
the Landlord within 60 days of delivery of the statement in respect of
that Fiscal Year. Notwithstanding delivery of such notice, the
Tenant shall continue to pay Rent in accordance with the terms of
this Lease. In the event of a dispute, the determination of
Operating Costs and Tenant's Occupancy Costs or Tenants Proportionate
Share of Taxes as made by the Landlord's auditors shall be conclusive
and binding upon both the Landlord and the Tenant. All costs
of obtaining such determination shall be included in Operating
Costs; provided that if the Landlord's auditors confirm the
Landlord's calculations within a variance of 5%,
the Tenant shall be solely responsible for the entire cost of such
determination and shall pay such costs to the Landlord forthwith
upon demand. If the Tenant and anyone or more of the other tenants in
the Project are responsible to pay such costs, the Tenant shall be
jointly and severally liable with such other tenant or tenants.
4.07 Estimates of Indirect Expenses and Resolution of Disputes -
Any expense not directly incurred by the Landlord but which
is included in Operating Costs may be estimated by the Landlord
onwhatever reasonable basis the Landlord may select if and to
the extent that the Landlord cannot ascertain the actual amount
of the expense from the party who incurred it. In the event
of any disagreement as tothe amount or propriety of any amount
included in Operating Costs, a certificate of the auditor
of theLandlord, acting reasonably, shall be conclusive as
to the amount of Operating Costs for any period which such
certificate relates.
4.08 Area Determination - The LandlotEEinay from time to time, as it deems
necessary, cause the Rentable Area of the Leased. Premises, the Building or
any part thereof to be recalculated or remeasured and the cost thereof shall
be included in Operating Costs (except as otherwise provided in this Section
4.08). Upon any such recalculation or remeasurement, Rent (including without
limitation Basic Rent) shall be adjusted accordingly. If any calculation or
determination by the Landlord of the Rentable Area of any premises (including
the Leased Premises) is disputed or called in question, it shall be
calculated or determined by the Landlord's architect or surveyor from time
to time appointed for that purpose, whose certificate shall be
conclusive and binding upon the parties hereto. The cost of
such calculation or determination shall be included In Operating
Costs; provided that if the Tenant disputes the Landlord's calculation
or determination and the calculation or determination by the
Landlord's architect or surveyor agrees with the Landlord's
calculation or determination within a 2% variance, the Tenant shall
pay the full cost of such calculation or determination forthwith
upon demand. If the Tenant and any one or more of the other tenants in the
Project are responsible to pay such costs, the Tenant shall be jointly
and severally liable with such other tenant or tenants.
If any error shall be found in the calculation of the Rentable Area of the
Leased Premises or in the calculation of Tenant's Proportionate Share, Rent
(including without limitation Basic Rent) shall be adjusted for the Fiscal
Year in which that error is discovered and for the Fiscal Year preceding the
Fiscal Year in which the error was discovered, if any, and thereafter but
not for any prior period.
4.09 Vacancy - If any part of the Building available for leasing is not
occupied, the Landlord shall have the right, in respect of amounts forming
part of Operating Costs which vary with occupancy, to include in Operating
Costs a larger amount of costs, which larger amount shall be based on a
reasonable estimate of the actual cost which would have been incurred if
the unoccupied parts of the Building available for leasing were occupied,
it being intended hereby that the Landlord shall obtain, to the extent
reasonably possible, full reimbursement of Operating Costs attributable
to or in respect of occupied premises, and not that (a) the Tenant shall
subsidize Operating Costs incurred by the Landlord attributable to or in
respect of vacant premises; or (b) the Landlord shall recover more than
actual Operating Costs.
4.10 Method of Payment
(1) Unless the Landlord advises otherwise in writing, the Tenant shall
provide to the Landlord on or before the Commencement Date and thereafter on
cir before the beginning of each Fiscal Year during the Term and within 10
days after the delivery of the Landlord's estimate of any payment
constituting Rent, postdated cheques in the amount of Rent for each month
during that Fiscal Year.
(2) At the Landlord's mquest, the Tenant shall paijticipate in a
preauthorized payment plan whereby the Landlord will be authorized to debit
the Tenant's bank account each month or from time to time for Rent payable
on a monthly basis, and any amount payable provisionally on an estimated
basis. The Tenant hereby undertakes to execute and deliver such documents
as may reasonably be required to give full force and elect to this
Subsection 4.iO(2) within 5 days of presentation.
ARTICLE 5.00-USE AND OCCUPATION
5.O1 Use of Leased Premises - The Tenant shall use and occupy only the
usable part of the Leased Premises and only for office purposes to carry
on the business set out in Item 9 of the Term Sheet and shall not use or
permit the Leased Premises or any part thereof to be used or occupied for
any other purpose or business, except as otherwise expressly permitted
under this Lease or by any Person other than the Tenant. The Tenant shall
be responsible for obtaining at its expense all necessary approvals,
licences and permits, including but not limited to zoning, development,
building, occupancy and business approvals, licences and permits, for its
intended use of the Leased Premises and shall submit all applications for
such approvals, licences and permits to the Landlord for its consent (which
consent, if the application pertains to the zoning applicable to the
Project or may adversely affect the value or use of the Project or any part
thereot may be arbitrarily withheld by the Landlord) prior to making
application. Notwithstanding the Landlord's consent to an application, the
Tenant shall indemnify and defend the Landlord and save it harmless from
and against any and all Claims incurred or suffered by the Landlord
directly or indirectly arising out of the Tenant's application
for such approvals,licences or permits or the resulting approvals,
licences and permits with respect to the use, intended or otherwise,
of the Leased Premises whether such Claims are in respect of
the Leased Premises or in respect of the Building or the Project.
The Landlord makes no representation whether or not necessary
approvals can be obtained for the Tenant's use or intended
use. The Landlord makes no representations or warranties,
express or implied, that the present or future use of the
Leased Premises, if such use is anything other than office use,
is legally fit for the intended use, or complies with any law,
by-law or regulation governing the use of the
Leased Premises.
5.02 Compliance with Laws - The Tenant shall promptly and at its own cost
comply with all present and future laws, regulations and orders relating to,
and obtain and maintain in force all approvals, permits, licences and
registrations required for, any of the following:
(a) the occupation or use of and the conduct of any business in or from the
Leased Premises;
(b) the condition of the LeaseholcEknprnvements, fixtures, furniture and
equipment installed therein;
(c) Pollutants and the protection of the environment so far as those laws,
regulations and orders or any of them relate to the Project; and
(d) the making by the Tenant of any repairs, changes or improvements in or
to the Project; and the Tenant shall immediately give written notice to the
Landlord of the occurrence of any event in the Leased Premises constituting
an offence thereunder or being in breach thereof and if the Tenant shall,
either alone or with others, cause the happening of any such event, the
Tenant shall immediately give the Landlord notice to that effect and
thereafter give the Landlord from time to time written notice of the extent
and nature of the Tenant's compliance with the foregoing provisions of
this Section.
The Tenant agrees that if the Landlord determines in its sole discretion that
the Landlord, its property, its reputation or the Leased Premises or any one
or more of the foregoing is placed in any jeopardy, as determined by the
Landlord, by the requirements for any work required to ensure compliance with
the foregoing provisions of this Section 5.02, or the Tenant is unable to
fulfil its obligations under this Section, the Landlord may itself undertake
such work or any part thereof at the cost and expense of the Tenant.
The Tenant shall, at its own expense, remedy any damage to the Leased
Premises caused by such event or work or by the performance of the
Tenant's obligations under this Section.
If altemtions or impmvements to the Leasehold Improvements or to the
Leased Premises are necessary to comply with any of the foregoing
provisions of this Section or with the requirements of insurance
carriers, the Tenant shall forthwith complete such work, complying
always with the applicable provisions of this Lease, to the extent
that it can be done within the Leased Premises and in any event
shall pay the entire cost of alterations and improvements so required.
In the event that structural repairs or upgrading of the Building,
including but not limited to seismic upgmding, is required to permit
the Tenantts use, the Landlord may, at its sole discretion,
terminate the Lease.
5.03 Prohibited Uses - The Tenant shall not commit, cause or permit any
nuisance in or about or any damage to the Leased Premises or any part
thereof, the Building or any of the Leasehold Improvements or goods or
fixtures therein, any overloading of the floors of the Leased Premises
or any use or manner of use causing annoyance to other tenants or
occupants of the Project. Without limiting the generality of the foregoing,
the Tenant shall not use or permit rndE use of any portion of the Leased
Premises for any dangerous, illegal, noxious, odorous or offensive trade,
business or occurrence. The Tenant shall keep the Leased Premises free of
debris, Pollutants and anything of a dangerous, noxious, odorous or
offensive nature or which could create a fire hazdrd (through undue load
on electrical circuits or otherwise) or vibration, heat or noise detectable
outside the Leased Premises in the sole discretion of the Landlord. The
Tenant shall not use equipment in the Leased Premises in a manner that
results in its being seen or heard outside the Leased Premises.
5.04 Common Elements - The Tenant and its employees and invitees shall be
entitled to use, in common with others entitled thereto, for purposes for
which they are intended and only during such hours as the Landlord may
designate from time to time, the Common Elements. The Tenant and its
employees and invitees shall not obstmct the Common Elements or use the
Common Elements other than for their intended purposes and then only in
accordance with the rules and regulations set by the Landlord from time
to time.
5.05 Hazardous Use - The Tenant shall not do, omit to do or permit to be
done anything which will cause or may have the effect of causing
the cost of the Landlord's insurance in respect of the Project
or any part thereof to be increased at any time during the
Term or any policy of insurance on or relating to the Project
to be subject to cancellation. Without waiving or
limiting the foregoing prohibition, the Landlord may
demand and the Tenant shall pay to the Landlord upon demand,
the amount of any increase in the cost of insurance caused by
anything so done or omitted or permitted to be done.
The Tenant shall forthwith upon the Landlord's request comply with the
requirements of the Landlord's insurers, cease any
activity complained of and make good any circumstance which has
caused any increase in insurance premiums or the cancellation
or threatened cancellation of any insurance policy.
In determining the amount of increased premiums for which the
Tenant is responsible, a schedule or statement issued by the Person who
computes the insurance rates for the Landlord showing the components of
the rate shall be conclusive evidence of the items that make up the rate.
If any policy of insurance in respect of the Project or any part thereof
is cancelled or becomes subject to cancellation by reason of anything so
done or omitted or permitted to be done, the Landlord may without prior
notice terminate this Lease and rEenter the Leased Premises.
5.06 Security Interest - The Tenant shall not, without the
Landlord's prior written consent, create a security interest
in Leasehold Improvements installed by the Tenant or the Landlord
in the Leased Premises.
5.07 Rules and Regulations - The Tena#f shall observe and cause its
employees, servants, agents, invitees, customers, subtenants, licencees
and others over whom the Tenant can reasonably be expected to exercise
control to observe the rules and regulations attached as Schedule C hereto
and such further and other reasonable rules and regulations and amendments
and additions thereto as may be made by the Landlord and notified to the
Tenant by mailing a copy thereof to the Tenant or by posting same in a
conspicuous place in the Building. All such rules and regulations now or
hereafter in force shall be read as forming part of this Lease; pmvided
that if there is a conflict between the rules and regulations and this
Lease, the terms of this Lease shall prevail. The Landlord shall not be
responsible to the Tenant for the nonobservance of any mle or regulation
or the terms of anyElease or agreement to lease by any other tenant of
the Project.
5.08 Permitted Signs - The Tenant shall use only such identification
signs as are prescribed by the Landlord from time to time and
as comply with all applicable by-laws, regulations and codes as to
size, location, arrangement, type of lettering, colour, appearance
and design for uniform use by office tenants in the Eullding.
Such signs shall contain only the name under which
the Tenant carries on business.
5.09 Prohibited Signs - Except with the prior written consent of the
Landlord, which consent may be arbitrarily withheld or rescinded
in the Landlord's sole discretion, or as provided in Section 5.08,
the Tenant shall not paint, display, inscribe, place or affix any
sign, symbol, notice, advertisement,display or direction of any kind
anywhere outside the Leased Premises or on the interior of any glass,
windows or doors or elsewhere within the Leased Premises
so as to be visible from the outside of the Leased Premises.
5.1O Window Coverings - Without the prior written consent of the
Landlord, the Tenant shall not install any blinds, drapes, curtains
or any other window coverings in the Leased Premises and shall not
remove, add to or change the blinds, curtains, drapes or other
window coverings installed by the Landlord from time to time. The
Tenant shall keep all window coverings open or closed at various times
as the Landlord may from time to time direct by the rules
and regulations or otherwise.
5.11 Parking - Any parking area or facility provided by the
Landlord shall at all times be subject to the exclusive control
and management of the Landlord or those whom the Landlord may
designate from time to time. The Landlord shall have the right
from time to time to establish, modify and enforce reasonable
rules and regulations with respect to any parking area or facility
and shall have the right from time to time:
(a) to expand, reduce, or change the area, level, location and
arrangement of the parking area or facility and to construct
any parking facility;
(b) to enforce parking charges with appropriate provisions
for free parking ticket validating by tenants of the Building;
(c) to close all or any portion of the parking area or facility to such
extent as may, in the Lajidlord's opinion, be legally sufficient to prevent
a dedication thereof or the accrual of rights to any Person or the public;
(d) to obstruct or close off all or any part of the parking area or facility
for the purpose of maintenance or repair; and
(e) to do and perform such other acts in and to the parking area or facility
as, in the judgment of the Landlord, shall be advisable with a view to the
improvement of the convenience of and use of the Building by tenants, their
employees and invitees.
The Landlord will operate and maintain the parking area or facility in such
manner as the Landlord in its sole discretion shall determine from time to
time. Without limiting the scope of such discretion, the Landlord shall have
the sole right to employ all personnel and make all rules and regulations
pertaining to and necessary for the proper operation and maintenance of
the parking area or facility. The Tenant shall participate in any free
parking or other ticket validation system established by the Landlord and
abide by all rules and regulations pertaining thereto and the Tenant shall
pay to the Landlord monthly, together with payments on account of Basic
Rent, all parking charges attributable to the Tenant as evidenced by
parking tickets validated by the Tenant in accordance with any system
established by the Landlord.
5.12 Authorization of Enquiries - The Tenant hereby authorizes the Landlord
to make enquiries from time to time of any government or municipality or
governmental or municipal agency with respect to the Tenanrs compliance
with any and all laws and regulations pertaining to the Tenant or the
business conducted in the Leased Premises including, without limitation,
laws<End regulations pertaining to Pollutants and the protectionEof the
environment; and the Tenant covenants and agrees that the Tenant shall
from time to time provide to the Landlord such written authorization
as the Landlord may reasonably require in order to facilitate the
obtaining of such information.
5.13 Records - The Tenant shall keep on the Leased Premises or at the
Tenanrs head office complete records of all goods stored on, or
processed, manufactured, packaged or used in any process in the Leased
Premises by the Tenant and by any other occupant of the Leased Premises
or any part thereof. Such records shall include all parff&ulars which the
Landlord may require. The Landlord may examine such records and the
Tenant shall provide extracts from or copies thereof all as required by
the Landlord from time to time. This requirement to maintain such
records shall survive the expiry or earlier termination of the Term.
5.14 Overloading - The Tenant shall not install or permit the
installation of equipment that in the opinion of the Landlord's engineer
overloads the capacity of any utility or of any electrical or mechanical
facility in the Project or which may exceed the load-bearing capacity of
the floors of the Project. If damage is caused to the Leased Premises or
to the Project as a result of any installation in contravention of this
Section, the Tenant shall repair the damage or, St the Landlord's option,
pay to the Landlord on demand the cost of repairing the damage incurred
by the Landlord.
ARTICLE 6.00-SERVICES, MAINTENANCE, REPAIR AND ALTERATIONS BY THE LANDLORD
6.01 Operation of I'roiect - During the Term, and so long as no Event of
Default shall exist, and so long as no event shall occur which, with the
passage of time or the giving of notice or both, would constitute an
Event of Default, the Landlord shall operate and maintain the Project in
accordance with applicable laws and regulations and with standards from
time to time prevailing for similar projects in the area in which the
Project is located and, subject to payment by the Tenant of Rent, shall
provide the Services set out in this Article 6.00; provided that the
Landlord shall not be responsible for providing those Services or
operating, maintaining, repairing or replacing the systems, facilities
or equipment for the provision of such Services to the extent that such
Services, operation, maintenance, repair or replacement are specifically
stated in this Lease to be the responsibility of the Tenant.
6.02 Building Services and Facilities- The Landlord shall provide:
(a) washrooms accessible to the Leased Premises for the use of the Tenant,
its employees and invitees in common with other persons entitled thereto;
(b) domestic mnning water to the building standard washrooms in the Leased
Premises, if any, and to washrooms available for the Tenant's use in common
with others entitled thereto;
(c) access to and egress from the Leased Premises for use by the Tenant,
its employees and invitees in common with other persons tentitled thereto,
provided that the Landlord may restrict access for security purposes or
require that all persons seeking access produce identification;
(d) heating, ventilation and air conditioning to the Building, including
the Leased Premises, to a level sufficient to maintain therein conditions
of reasonable temperature and comfort provided that, unless otherwise agreed
by the parties, a full standard of interior climate control shall only be
maintained during those hours and on those days established by the Landlord
as being operating periods for the Building, having reasonable regard to
energy conservation;
(e) lighting and electrical power to the Common Elements as reasonably
required;
(f) electrical power to the Leased Premises for lighting and for standard
office equipment capable of operating from the voltage circuits available
and then standard for the Building;
{g) janitorial services to the Leased Premises and Common Elements to a
standard consistent from time to Ume with similar buildings in the area
in which the Building is located;
(h) a directory board located in the Common Elements providing
identification of the tenants in the Building in such manner and containing
such information as the Landlord may determine; and
(i) appropriate ducts for bringing telephone services to the Leased Premises.
6.03 Maintenance. Repair and Replacement - Subject to payment by the Tenant
of Rent, the Landlord shall operate, maintain, repair and replace the
systems, facilities and equipment necessary for the proper operation of the
Project and for provision of the Landlord's Services set out in Section 6.02
(except as may be installed by or be the property of the Tenant) and shall
maintain and repair the foundations, stmcture and the roof of the Building
and repair damage to the Building which the Landlord is obligated to insure
against under Article 9.00, provided that:
(a) if all or part of the systems, facilities and equipment are destroyed,
damaged or impaired, the Landlord shall have a reasonable time within which
to complete the necessary repair or replacement and, during that time, shall
onW be required to ma.intain such Services as are reasonably possible in the
circumstances;
(b) the Landlord may temporarily discontinue such Services or any of them at
such times as may be reasonably necessary;
(c) the Landlord shall use reasona6fEEdiligence in carrying out its
obligations under this Section 6.03, but shall not be liable under any
circumstances for any consequential damages, whether direct or indirect,
to any Person or property for any failure to do so;
(d) no reduction or discontinuance of Services under this Section 6.03 shall
be construed as a breach of the Landlord's covenant therefor or as an
eviction of the Tenant or, except as specifically provided otherwise in this
Lease, release the Tenant from any obligation under this Lease;
(e) the Landlord shall not be liable under any circumstances for any damage
caused by interruption or failure of any utility, wiring, elevator or
escalator;
(f) the Landlord shall have no responsibility for any inadequacy of
performance of any systems within the Leased Premises if the Leased Premises
or the use thereof depart from the design criteria for such system as
established by the Landlord for the Building; and
(g) nothing contained herein shall derogate from the provisions of
Article 10.00.
6.04 AlterationsiRenovations bv Landlord - During the Term or any renewal or
extension thereof, it is understood and agreed that if the Landlord intends
to make changes, additions or improvements to or renovate the Project or any
part thereof, of which the Leased. Premises form a part (the "Renovation
Work"), notwithstanding anything contained in this Lease to the contrary,
the Landlord, its servants, agents, contractors and representatives may
proceed with the Renovation Work without further consent or approval of the
Tenant and the Tenant hereby irrevocably grants to the Landlord its consent
to the carrying out of the Renovation Work; provided that the Renovation
Work shall not materially interfere with or adversely affect the business
of the Tenant carried on in the Leased Premises. It is specifically
understood and agreed that there shall be no compensation paid tb the Tenant
nor shall there be any abatement of Rent in connection with the Renovation
Work. In exercising its rights pursuant to this Section 8.04, the Landlord
shall be entitled to:
(a) enter the Leased Premises from time to time to make changes or additions
to the structure, systems, facilities and equipment in the Leased Premises
where necessary to serve the Leased Premises or other parts of the Building;
(b) limit from time to time as may be necessary by reason of the Renovation
Work, ingress to and egress from the Leased Premises and/or the Project;
(c) change, add to, diminish, demolish, dedicate for public purposes part or
parts of, improve or alter any part of the Project not in or forEing part of
the Leased Premises; and
(d) change, add to, diminish, improve or alter the location and extent of
Common Elements.
The Landlord agrees to give to the Tenant 10 days' prior written notice of
its intention to proceed with the Renovation Work. Provided that notice is
given as aforesaid, the Tenant shall cooperate with the Landlord in order
to allow the Renovation Work to be completed as expeditiously as possible.
It is specifically agreed by the Landlord and the Tenant that the Landlord
shall not, by reason of exercising its rights pursuant to this Section
6.04, be in default or be deemed to be in default of any covenant.
6.05 Access by Landlord - The Tenant shall permit the Landlord to enter the
Leased Premises at any time outside normal business hours in case of an
emergency, either real or perceived, and otherwise during normal business
hours where such entry will not unreasonably disturb or interfere with the
Tenant's use of the Leased Premises or operation of its business, to
examine, inspect and show the Leased Premises for purposes of leasing, sale
or financing, to provide Services or make repairs, replacements, changes or
alterations as provided for in this Lease and to take such steps as the
Landlord may deem necessary for the safety, improvement or preservation of
the Leased Premises or the Project. The Landlord shall, whenever possible,
consult with or give reasonable notice to the Tenant prior to entry but
no such entry shall constitute an eviction or a breach of the Landlord's
covenant for quiet enjoyment or entitle the Tenant to any abatement of
Rent.
6.06 Energy Conservation - The Landlord shall be deemed to have observed
and performed its obligations under this Lease, including those
relating to the provision of utilities and Services, if in so
doing it acts in accordance with a directive, policy or request
of an authority having jurisdiction in the field of energy
conservation, security or environmental matters.
6.07 Supervision and Extended Services - The Landlord,
if it shall from time to time so elect, shall have the right
to supervise the moving of furniture or equipment of the
Tenant and (in addition to supervising the
Tenants work as provided for in this Lease) to supervise the making of
repairs conducted within the Leased Premises and the exclusive right to
supervise or make deliveries to the Leased Premises. In addition, and by
arrangement with the Tenant, the Landlord may provide extended cleaning
or other Services to the Tenant in addition Ethose normally supplied and
referred to in this Lease. In each case, the Landlord's
costs and expensesincurred with respect thereto together
with a reasonable administration
fee shall be paid to the Landlord by the Tenant from time to time
promptly upon receipt of invoices from the Landlord.
6.08 Landlord's Work - The Tenant agrees that it has entered into
this Lease on the express understanding that the Landlord's Work
in respect of the Leased Premises is limited to the scope delineated
as Landlord's Work in Schedule D and all other improvements to the Leased
Premises shall be performed at the sole expense of the Tenant in accordance
with the terms of this Lease, including but not limited to Section 7.04 of
this Lease.
6.09 Control by the Landlord - The Tenant agrees that the Landlord shall
have control of the Project and, without limiting the generality of anything
contained elsewhere in this Lease, the Landlord may make such use of the
Common Elements and permit others to make such use of the Common Elements as
the Landlord may from time to time determine subject, in the case of use by
others, to such terms and conditions and for such consideration as the
Landlord may in its discretion determine, provided that such uses do not
materially obstruct access to the Leased Premises and the Landlord
may close all or any part or parts of the Project to
such extent as may, in the opinion of the Landlord or any
Consultants engaged by the Landlord in that regard, be legally
sufficient to prevent a dedication thereof or the accrual
of rights therein to any Person or the public.
ARTICLE 7.00- PAYMENT FOR SERVICES AND MAINTENANCE. REPAIR AND ALTERATIONS
BY THE TENANT
7.01 Utilities - In addition to the payment of Tenant's Occupancy Costs
and notwithstanding Sections 6.01 and 6.02, the Tenant shall
be responsible for the cost of all utilities including electricity
supplied to the Leased Premises. The Tenant shall not, without the
prior written approval of the Landlord, which may be arbitrarily
withheld, install or cause to be installed in the Leased Premises
any equipment that will require additional utility usage in excess
of that normally required for office premises. If with the Landlord's
approval such additional equipment is installed, the
Tenant shall be solely responsible for such excess utility usage. If
utilities are supplied to the Tenant through a meter common to other
tenants in the Project (there being no obligation on the Landlord to
install separate meters), the Landlord shall pay the cost of
the utilities and apportion the cost pro rata iamong the tenants
supplied through the common meter, based on all relevant factors
including, but not limited to, the hours
of use, number and types of lights and electrical equipment and the
proportion of each tenant's Rentable Area to the Rentable Area of
all tenants to which the common meter relatest Upon receipt of the
Landlord's statementof apportionment, the Tenant shall promptly
reimburse the Landlord for all amounts apportioned to the Tenant
by the Landlord provided that the Landlord may elect by notice
to the Tenant to estimate the amount which will be
apportioned to the Tenant and require the Tenant to pay that
amount in monthly instalments in advance simultaneously with
the Tenant's payments of Basic Rent. Notwithstanding the foregoing,
and whether the Leased Premises are separately metered or not, the
Landlord may purchase in bulk from the utility supplier the
aggregate utility requirements of the Project at the
applicable rates determined by a single meter on the Project and
may, in billing the Tenant for its share of such utility,
apply a scale of rates not greater than the current scale of rates
at which the Tenant would from time to time be purchasing the
whole of its utilities required and consumed in respect of the
Leased Premises if the Tenant were purchasing directly from the
utility supplier. The Tenant shall upon the Landlord's
request install a separate utility meter or meters in the Leased
Premises at the Tenant's expense.
In addition to the payments to the Landlord required by this Article
7.00, the Tenant shall pay all rates, charges, costs and expenses as
may be assessed or levied by any supplier of utilities to the Tenant
other than those supplied by the Landlord.
7.02 Lights - In addition to the payment of Tenant's Occupancy Costs
and notwithstanding Sections 6.01 and 6.02, the Tenant.shall pay to
the Landlord monthly in advance, with its payments of Basic Rent, a
reasonable amount as determined by the Landlord in respect of replacement
of building standard fluorescent tubes, light bulbs and ballasts in the
Leased Premises on a periodic basis or as required from time to time and
the costs of cleaning, maintaining and servicing of the electrical light
fixtures in the Leased Premises.
7.03 Heating, Ventilation and Air Conditioning - In addition to the
payment of Tenant's Occupancy Costs and notwithstanding Sections 6.01
and 6.02, the Tenant shall be responsible for the cost of all heating,
ventilation and air conditioning required in the Leased Premises or any
part thereof in excess of that required to be provided by the Landlord
under Section 6.02(d). If at any time during the Term the Landlord shall
determine that the cost of the heating, ventilation and air conditioning
required in the Leased Premises or any part thereof is in excess of that
normally required in other parts of the Building which are used for
normal office purposes, the Landlord may deliver to the Tenant a
statementin writing setting out the cost of the excess and upon
receipt of the statement from time to time the Tenant shall
promptly reimburse the Landlord for the amount shown in the
statement as attributable to the Leased Premises.
7.04 Alterations by Tenant - The Tenacy from time to
time at its own expense make changes, additions and
improvements.to the Leased Premises to better adapt the same
to its business, provided that any change, addition
or improvement shall:
(a) comply with the requirements of the Landlord's insurers and any
governmental or municipal authority having jurisdiction;
(b) be made only after detailed plans and specifications therefor have been
submitted to the Landlord and received the prior wriflen consent of the
Landlord, and the Tenant acknowledges that the Landlord's consent does not
mean that any alterations made by the Tenant to the Leased Premises pursuant
to this Section 7.04, comply with any municipal byH laws or any other
applicable laws, by-laws, codes or requirements. All costs incurred with
respect to such approval shall be at the expense of the Tenant. Any changes,
additions and/or improvements affecting the Building's electrical, mechanical
and/or structural components shall only be performed by contractors selected
by the Landlord (the "Landlord's Contractors"). A list of the Landlord's
Contractors is available upon request;
(c) equal or exceed the then current standard for the Building;
(d) be carried out in a good and workmanlike manner and only by Persons
selected by the Tenant and appmved in writing by the Landlord who shall,
if required by the Landlord, deliver to the Landlord before commencement
of the work, performance and payment bonds as well as proof of workers1
compensation and public liability and property damage insurance coverage,
with the Landlord and the Landlord's agent and nominee (if any) named as
additional insureds, in amounts, with companies and in a form reasonably
satisfactory to the Landlord, which shall remain in effect during the
entire period in which the work will be carried out; and
(e) be made only after the Tenant has provided to the Landlord evidence
of all requisite permits and licences and any other information
reasonably required by the Landlord. Upon completion of such change,
addition or improvement, the Tenant shall provide to the Landlord as-built
drawings and/or a CAD disk of same.
7.05 Tenants Trade Fixtures and Personal Property- The Tenant may install
in the Leased Premises its usual trade fixtures and personal property in a
proper manner; provided that no installation or repair shall interfere with
or damage the mechanical or electrical systems or the structure of the
Building. If the Tenant is not then in default hereundet, the trade
fixtures and personal property installed in the Leased Premises by
the Tenant may be removed by the Tenant from time to time in the
ordinary course of the Tenant's business or in the course of reconstrution
renovation or alteration of the Leased Premises by the Tenant,
subject to the provisions of Article 14.00 of this Lease, and
provided that the Tenant promptly repairs at its own expense any
damage to the Leased Premises and the Building resulting
from the installation and removal and provided further that in the
event of removal of trade fixtures the Tenant shall promptly
replace such trade fixtures with trade fixtures of equal or
greater quality and value, subject to the provisions of Section 14.01.
7.06 Maintenance and Repair - Except to the extent that the Landlord is
specifically responsible therefor under this Lease, the Tenant, at its cost,
shall maintain, repair and replace the Leased Premises, all Leasehold
Improvements and all apparatus therein in good order and condition, and in
compliance with the requirements of all authorities having jurisdiction
including without limitation:
(a) keeping the Leased Premises and the immediate surrounding
area in a clean and tidy condition and free of debris
and garbage;
(b) repainting and redecorating the Leased Premises and
cleaning and maintaining drapes and carpets at reasonable
intervals as reasonably requiredby the Landlord;
(c) making repairs and replacements as needed to the Leased Premises
including, without limitation, to glass, plate glass, doors, hardware,
partitions, walls, fixtures, lighting and plumbing fixtures, wiring,
piping, ceilings, floors and thresholds in the Leased Premises; and
(d) keeping the Leased Premises in such condition as to comply with the
requirements of any authority having jurisdiction.
7.07 Inspection - The Landlord and its Consultants may from time to time
enter upon the Leased Premises:
(a) to inspect the Leased Premises and its condition; and
(b) to inspect any work being done by the Tenant both during
the course of such work and following completion thereof.
If the Landlord or its agents shall determineA hat the work
being done by the Tenant is in breach of this Lease or fails
to comply with the requirements of this Lease in any respect,
the Tenant shall forthwith remedy such breach or
failure to comply and shall desist from continuing the same. The Tenant
shall, at its own cost, make good any deficiency in such work and remedy any
failure to comply with the requirements of this Lease.
7.08 Failure to Maintain - If the Tenant fails to perform any obligation
under this Article 7.00, then on not less than 5 days' notice to the Tenant,
the Landlord may enter the Leased Premises and perform the obligation without
liability to the Tenant for any loss or damage thereby incurred. The Tenant
shall promptly after receiving the Landlord's invoice therefor reimburse the
Landlord for all costs incurred by the Landlord in performing the obligation
plus 20% of the costs for overhead and supervision.
7.09 Liens - The Tenant shall:
(a) pay promptly when due all costs for work done or caused to be done or
goods affixed by the Tenant in the Leased Premises which could result in
any lien or encumbrance on the Landlord's interest in the Project or any
part thereof, or the filing or registration of any security interest or
notice thereof:
(b) keep the title to the Project, including every part thereof and the
Leasehold Improvements, free and clear of any lien, encumbrance or security
interest or notice thereof; and
(c) indemnify and hold harmless the Landlord against any Claims
arising out of the supply of goods, materials, services or
labour for the work.
The Tenant shall immediately notify the Landlord of any lien, encumbrance,
claim of lien, security interest, or notice thereof or other action
of which it has, or reasonably should have, knowledge and
which affects the title to the Project including the Leased
Premises or any part thereof and, except for those contemplated
by Section 15.25, shall cause the same to be removed within
5 business days (or such additional time as the Landlord may consent
to in writing), failing which the Landlord may take such action as the
Landlord deems necessary to remove same and the entire cost thereof shall
immediately become due and payable by the Tenant to the Landlord. The
Tenant shall not affix or cause to be affixed to the Project any
goods acquired under conditional sale or with respect to which any
lien, encumbrance or security interest exists. The Landlord may
from time to time post such notices in such places on the Leased
Premises as the Landlord considers advisable to prevent or limit the
creation of any liens upon the Project orany part thereof
7.10 Roof - The Tenant shall not be entitled to install upon the roof of
the Building any equipment except as consented to in writing by the
Landlord, whi9h consent may be arbitrarily withheld, but if given shall
be subject to whatever conditions the Landlord, in its sole discretion,
deems necessary in the cirdumstances.
ARTICLE 8.00- TAXES
8.01 Taxes Payable by Landlord - The Landlord covenants and agrees to
pay all Taxes assessed against the Landlord or the Project on account
of its ownership when due (except for Taxes payable directly to the
taxing authority by the Tenant under Subsection 8.02(c)) and subject
to the provisions hereinafter contained in this Article 8.00.
Provided however, that the Landlord may defer payment of any such Taxes
or defer compliance with any statute, law, by-law, regulation or
ordinance in connection with the levy of such Taxes in each case to the
fullest extent permitted by law as long as it shall diligently prosecute
any contest or appeal of such Taxes.
8.02 Taxes Pavable bv Tenant - The Tenant shall pay promptly when due to
the taxing authority or the Landlord at the Landlord's direction every
Tax upon or on account of the following:
(a) Property Taxes in respectEof the Leased Premises;
(b) Tenant's Proportionate Share of the amount assessed as Property
Taxes for the Common Elements if separately identified and
if not separatelyidentified than as may be reasonably
attributed or allocated by the Landlord; and
(c) any Taxes imposed or assessed against or in respect of the personal
property and Leasehold Improvements of the Tenant in the Leased Premises
or in respect of any business operations carried on or in respect of the
use or occupancy thereof by the Tenant or by any subAenant or licensee,
if levied or assessed separately from Taxes upon the remainder of the
Land and Building and referred to herein as "Business Taxes".
The Tenant agrees to provide to the Landlord within 3 days of receipt
thereof, an original or duplicate copy of any separate Tax bill.
In the event that there shall not be a sepahifli assessment and separate tax
bill for Property Taxes or Business Taxes levied in respect of the Leased
Premises, the Tenant shall pay at the same time as Basic Rent, Tenant's
Proportionate Share of Taxes which may be assessed, levied, rated or imposed
against the Project. The Tenant shall deliver promptly, upon request of the
Landlord, receipts for all such payments and will furnish such other
information as the Landlord may require.
8.03 Tax Increases Attributable to Tenant - If any Taxes in respect of the
Leased Premises or Project are greater than they otherwise would have been
by reason of the constitution or ownership of the Tenant, the use of the
Leased Premises by the Tenant, the' school support of the Tenant, or any
other reason peculiar to the Tenant, the portion of such Taxes in each
year attributable to such reason, as determined by the Landlord, shall
be paid by the Tenant to the Landlord at least 15 days prior to the due
date for payment thereof by the Landlord, and in addition to Property
Taxes and other Taxes otherwise payable by the Tenant under this Lease.
8.04 GST - The Tenant shall pay to the Landlord the amount of all GST
accruing due with respect to Rent at the time the Rent is due and
payable to the Landlord under this Lease. The Tenant's obligation
to pay GST under this Section shall not be limited or precluded by any
limitation contained in this Lease upon the Landlord's right to recover
or receive payment from the Tenant of taxes upon Landlord's income
or profits or otherwise.
8.06 Landlord's Election - Notwithstanding that any Taxes (including
without limitation, any of the foregoing payable by the Tenant under
Section 8.02) may be separately imposed, levied, assessed or charged
by the appropriate authority for or in respect of the Leased Premises
and other portions of the Project, the Landlord may elect that such
Taxes shall be added to Operating Costs and the Landlord may in its
absolute discretion allocate such amount among tenants of the Building
and the amount allocated to the Tenant shall form part of Tenant's
Occupancy Costs.
8.06 Right to Contest - Each of the Landlord and the Tenant (provided
the Tenant is legally entitled to do so) shall have the right to
contest in good faith the validity or amount of any Taxes which, in the
case of the Landlord, the Landlord is responsible to pay under this
Article 8.00. and which, in the case of the Tenant, the Tenant is
responsible to pay under Section 8.02 and for which it is separately
assessed. Notwithstanding anything to the contrary herein, the Tenant
may, upon notice to the Landlord, defer payment of any amount payable
by it pursuant td Section 8.02 for which it is separately assessed,to
the extent permitted by law; provided that no contest by the Tenant
shall involve the possibility of forfeiture, sale or disturbance of the
Landlord's interest in the Leased Premises or the imposition of any
penalty or interest, charge or lien and that, upon the final
determination of any contest by the Tenant, the Tenant shall immediately
pay and satisfy the amount fQund to be due, together with any costs;
penalties and interest. It as a result of any contest by the Tenant,
any tax, rate, levy, assessment, fee or other charge is increased, the
Tenant shall be responsible for the full amount of such increase in
respect of the period to which the contest relates and to any subsequent
tax periods which commence during the Term.
The Tenant shall not contest any amount payable by it under Section 8.02
or appeal any assessment therefor except as follows:
(a) the Tenant shall deliver to the Landlord any notices of appeal or other
like instrument and obtain the Landlord's consent thereto, which consent
shall not be unreasonably withheld, before filing the same,
(b) the Tenant shall deliver whatever security the Landlord reasonably
requires;
(c) the Tenant shall promptly and diligently prosecute the contest or
appeal at its sole expense; and
(d) the Tenant shall keep the Landlord fully informed thereof.
ARTICLE 9.00- INSURANCE, LIABILITY AND ENVIRONMENTAL
9.01 Landlord's Insurance - During the Term, the Landlord shall place
insurance coverage on and with respect to the Project excluding the
area(s)to be insured by the Tenant as set out in Section 9.02,
which coverage shall include the following, if available at
reasonable cost in the opinion of the Landlord:
(a) all risks insurance for the full reconstruction value
of the Project, excluding Leasehold Improvements, as
determined by the Landlord;
(b) as an extension to the insurance maintained pursuant to Subsection
9.01(a), insurance on the rental income derived by the Landlord from the
Project on a gross rental income form with a period of indemnity of not
less than the period as estimated by the Landlord from time to time which
would be required to rebuild and, if necessary, to re-tenant the Project
in the event of the complete destruction thereof;
(c) boiler and machinery insurance,Eluding repair or replacement and
rental income coverage, if applicable;
(d) plate glass insurance (not including plate glass fronting or
within the Leased Premises) if deemed appropriate by the Landlord;
(e) bodily injury and property damage liability insurance; and
(f) such other insurance which is or may become customary or reasonable
for owners of projects similar to the Project to carry in respect of
loss of, or damage to, the Project or liability arising therefrom.
The insurance referred to in this Section shall be carried in amounts
determined reasonably by the Landlord. The insurance shall be written in
the name of the Landlord with loss payable to the Landlord
and to any mortgagee (including any tmstee under a deed of trust and
mortgage)of the Project from time to time. The policies of insurance
referred to in Subsections 9.01(a),(b),(c)and(d) shall contain a waiver
of the insurer's right of subrogation as against the Tenant. The Landlord
hereby waives its right of recovery against the Tenant, its employees and
those for whom the Tenant is in law responsible with respect to occurrences
required to be insured against by the Landlord hereunder.
Notwithstanding any contribution by the Tenant to insurance premiums as
provided for in this Lease, no insurable interest is conferred upon the
Tenant under policies carried by the Landlord. Except as specifically
provided in this Lease, the Landlord shall in no way be accountable to the
Tenant regarding the use of the insurance proceeds arising from any Claims.
9.02 Tenants Insurance - At its own expense the Tenant shall take out and
thereafter maintain in force at all times during the Term insurance policies
as follows:
(a) all risks insurance on Leasehold Improvements and on all other property
of every description, nature and kind owned by the Tenant or for which the
Tenant is legally liable, which is installed, located or situate within the
Leased Premises or elsewhere in the Project, including without limitation,
all inventory or stock-inArade in an amount not less than the full
replacement cost thereof without deduction for depreciation; such insurance
shall be subject to a replacement cost endorsement and shall include a
stated amount co-insurance clause and a breach of conditions clause;
(b) comprehensive or commercial general boEily injury and property damage
liability insurance to respond to any and all incidents occurring in the
Leased Premises in the minimum amount of $3,000,000 including the following
exteEsions: owners and contractors protective; limited pollution coverage
endorsement; products and completed operations; personal injury; occurrence
basis property damage; blanket contractual and non-owned automobile
liability; such insurance shall include the Landlord and the Landlord's
agent and nominee (if any) as addflional named insureds, and shall protect
the Landlord and the Landlord's agent and nominee (if any) in respect of
Claims by the Tenant as if the Landlord and the Landlord's agent and
nominee(if any) were separately insured; such insurance shall
include cross liability and severability of interest clauses;
(c) boiler and machinery insurance, if applicable, including repair or
replacement endorsement in an amount satisfactory to the Landlord and
providing coverage with respect to all objects introduced into the Leased
Premises by or on behalf of the Tenant or otherwise constituting Leasehold
Improvements;
(d) plate glass insurance on all internal and external glass within or
fronting the Leased Premises; however, notwithstanding the foregoing, the
Tenant may elect to self-insure for the insurance described in this
Subsection (d);
(e) business interruption insurance on the profit form providing all risks
coverage with a period of indemnity of not less than 12 months and subject
to a stated amount co-insurance clause; and
(f) any other form of insurance in such amounts and against such risks as
the Landlord may from time to time reasonably require.
The Tenant acknowledges and agrees that it shall be solely responsible for
insuring the Leasehold Improvements, its equipment and stock and any other
property owned dr brought into the Leased Premises by the Tenant whether
affixed to the Building or not.
The insurance policies referred to in this Section shall be subject to such
higher limits as the Tenant, or the Landlord acting reasonably, or any
mortgagee of the Landlord's interest in the Project may require from time
to time. The policies of insurance referred to in Subsections 9.02(a),(c),
(d), (e), and (f) shall contain a waiver of the insurer's right of
subrtgation as against the Landlord. The Tenant hereby waives its right of
recovery against the Landlord; its employees and those for whom the
Landlord is in law responsible with respect to occurrences required to be
insured against by the Tenant hereunder. Any and all deducubles in the
Tenanfs insurance policies shall be borne solely by the Tenant and
shall not be recovered or attempted to be recovered from the Landlord.
In addition, all such policies shall be non-contributing with,
and will apply only as primary and not excess to, any insurance
proceeds available to the Landlord.
The Tenant shall provide to the Landlord at the commencement of the Term and
at least 30 days prior to the renewal of all insurance referred to in this
Section 9.02, and promptly at any time upon request, a certificate of
insurance evidencing the insurance coverage maintained by the Tenant in
accordance with this Section 9.02. The delivery to the Landlord of a
certificate of insurance or any review thereof by or on behalf of the
Landlord shall not limit the obligation of the Tenant to provide and
maintain insurance pursuant to this Section 9.02 or derogate from
the Landlord's rights if the Tenant shall fail to fully insure.
All policies shall provide that the insurance shall not be cancelled or
changed to the prejudice of the Landlord without at least 30 days' prior
written notice given by the insurer to the Landlord. All policies of
insurance shall be placed with a company licensed to sell commercial
insurance in Canada.
The Tenant acknowledges and agrees that, if it fails to obtain and
maintain in force any of the insurances set out in this Section 9.02,
then the Tenant shall indemnify the Landlord in respect of any losses
arising therefrom.
9.03 Placement of Tenants Insurance bv Landlord - If the Tenant fails
to place or maintain all or any of the insurance coverage referred to
in Section 9.02, the Landlord may, at its option, place all or any
part of such insurance in the name of or on behalf of the Tenant and the
Tenant shall pay to the Landlord upon demand all costs incurred by the
Landlord in so dbing including, without limitation, the premium or
premiums for such insurance together with the Landlord's administrative
fee of 15% of such premium.
9.04 Limitation of Landlord's Liability - The Landlord, its agents and
employees and any Person for whom it is in law responsible shall not be
liable under any circumstances for any damage caused by anything done
or omitted to be done by any other tenant of the Project or any damage
resulting from the exercise of the Landlord's control over the Project
or any part thereof.
9.05 Environmental Issues
(1) Landlord's Requirements - The Tenant shall not bring into or allow
to be present in the Leased Premises or the Project any Pollutants
except such as are disclosed in Schedule H hereto. If the Tenant shall
bring or create upon the Project, including tije Leased Premises, any
Pollutants, then such Pollutants shall be and remain the sole property
of the Tenant and the Tenant shall remove same at its sole cost at the
expiration or sooner termination of the Term or sooner if so directed
by any governmental authority or if required to effect compliance with
any Environmental Laws or if required by the Landlord.
(2) Governmental Requirements - If any governmental authority shall
require the clean-up of any Pollutant:
(a)held in, released from, abandoned in, or placed upon the Leased
Premises or the Project by the Tenant or its employees or those for
whom it is in law responsible; or
(b)released or disposed of by the Tenant or its employees or those
for whom it is in law responsible;
then the Tenant shall, at its own expense, carry out all required work,
including preparing all necessary studies, plans and approvals and
providing all bonds and other security required and shall provide full
inforrnation with respect to all such work to the Landlord provided that
the Landlord may, at its option, perform any such work at the Tenant's
sole cost and expense1 payable on demand as additional Rent.
(3) Environmental Covenants - In addition to and without restricting any
other obligations or covenants herein, the Tenant covenants that it will:
(a)comply in all respects with all Environmental Laws relating to the
Leased Premises or the use of the Leased Premises;
(b)promptly notify the Landlord in writing of any notice by any governmental
authority alleging a possible violation of or with respect to any other
matter involving any Environmental Laws relating to operations in the Leased
Premises or relating to any Person for whom it is in law responsible or any
notice from any other party concerning any release or alleged release of
any Pollutants; and
(c)permit the Landlord to:
(i) enter and inspect the Leased Premises and the operations conducted
therein; and
(ii) conduct tests and environmental assessments or appraisals; and
(iii) remove samples from the Leased Premises; and
(iv) examine and make copies of any documents or records relating to the
Leased Premises and interview the Tenant's employees as necessary; and
(d)promptly notify the Landlord of the existence of any Pollutant in the
Project.
(4) Environmental Indemnification - The Tenant shall indemnify and hold
the Landlord harmless at all times from and against any and all losses,
damages, penalties, fines, costs, fees and expenses (including legal fees
on a solicitor and client basis and Consultant's fees and expenses)
resulting from:
(a) any breach of or non-compliance with the foregoing environmental
covenants of the Tenant; and
(b) any legal or administrative action commenced by, or claim made or
notice from, any third party, including, without limitation, any
governmental authority, to or against the Landlord anti pursuant to or
under any Environmental Laws or concerning a release or alleged
release of Pollutants at the Leased Premises into the
environment and related to or as a result of the operations of
the Tenant or those acting under its authority or control
at the Leased Premises, and any and all costs
associated with air quality issues, if any.
[It Rider 1 (Section 9.05) is attached to this Lease this Section will be
deleted and initialled and the terms and conditions stated on Rider 1 will
govern the relationship between the Landlord and the Tenant with respect
to environmental issues.
ARTICLE 10.00- DAMAGE AND DESTRUCTION
10.01 Limited Damaae to Leased Premises, Access or Services - If during
the Term, the Leased Premises or any part thereof, or other portions of
the IBuilding providing access or Services essential to the Leased
Premises, shall be destroyed or damaged by any hazard against which the
Landlord is obligated to insure pursuant to Section 9.01, the Landlord,
if permitted by law so to do, shall proceed with reasonable diligence to
rebuild and restore or repair the Leased Premises or comparable premises
or such access routes or Service systems, as the case may be, in
conformance with current laws to the extent of insurance proceeds received.
The covenants of the Tenant to repair shall not include any repairs of
damage required to be made by the Landlord under this Section 10.01. Rent
payable by the Tenant shall abate from the date of such damage or
destruction to the date of substantial completion of the Landlord's work as
determined by the Landlord's architect or engineer or restoration of access
or Services, as the case may be. If less than all of the Leased Premises is
destroyed or damaged as contemplated in this Section 10.01, Rent payable
by the Tenant shall abate from the date of such damage ordestruction to the
date of substantial completion of the Landlord's work in the same
proportion as the Rentable Area of the Leased Premises so damaged or
destroyed is of the total Rentable Area of the Leased Premises.
10.02 Major Damage to Leased Premises - Notwithstanding anything contained
in this Lease to the contrary, if the Leased Premises shall be damaged or
destroyed by any hazard against which the Landlord is obligated to insure
under this Lease; and if in the opinion of the Landlord's architect or
engineer, given within 30 business days of the happening of said damage or
destruction, said damage or destruction is to the extent that the Leased
Premises shall be incapable of being rebuilt or repaired or restored with
reasonable diligence within S months after the occurrence of such damage
or destruction, then the Landlord may, at its option, terminate this Lease
by notice in writing to the Tenant given within 15 days after the giving
of the opinion by the Landlord's architect or engineer. If such notice is
given by the Landlord under this Section 10.02, then this Lease shall
terminate on the date of such notice and the Tenant shall immediately
surrender the Leased Premises and all interest therein to the Landlord
and Rent shall be apportioned and shall be payable by the Tenant only to
the date of such damage or destruction and the Landlord may rEenter and
repossess the Leased Premises.
1O.03 Damage to Building - Notwithstanding that the Leased Premises may
not be affected, if in the reasonable opinion or determination of the
Landlord or the Landlord's architect or engineer, rendered within 30
business days of the happening of damage or destruction, the Building
shall be damaged or destroyed to the extent that any one or more of the
following conditions exist:
(a) in the reasonable opinion of the Landlord the Building must be totally
or partially demolished, whether or not to be reconstructed in whole or in
part; or
(b) in the reasonable opinion of mb Landlord's architect or engineer the
Building shall be incapable of being rebuilt or repaired or restored with
reasonable diligence within 6 months after the occurrence of such damage
or destruction; or
(c) any tenant of the Building which, in the Landlord's absolute discretion,
is a major tenant of the Building becomes entitled to terminate its lease as
a result of such damage or destruction; or
(d) more than 35% of the Rentable Area of the Building is damaged or
destroyed as reasonably determined by the Landlord's architect or engineer;
or
(e) any or all of the heating, ventilating, air conditioning, electrical,
mechanical or elevator systems in the Building are damaged or destroyed as
reasonably determined by the Landlord's architect or engineer;
then the Landlord may at its sole option terminate this Lease by notice in
writing to the Tenant given within 15 days after the rendering of such
opinion or determination. If notice is given by the Landlord under this
Section 10.03, then this Lease shall terminate from the date of such notice
and the Tenant shall immediately surrender the Leased Premises and all
interest therein to the Landlord and Rent shall be apportioned and shall
be payable by the Tenant only to the date of such notice and the Landlord
may thereafter re-enter and repossess the Leased Premises. If the Building
is damaged to the extent described in this Section 10.03 and the Landlord
does not terminate this Lease, the Landlord will rebuitd or repair the
Building to base building standards, but the rebuilt or repaired Building
may be different in configuration and design from that comprising the Project
prior to the damage or destruction.
10.04 No Abatement - Except as specifically provided in this Article 10.00,
there shall be no abatement of Rent and the Landlord shall have no
liability to the Tenant by reason of any injury to, loss of or interference
with the Tenants business or pmperty arising directly or indirectly from fire
or other casualty, howsoever caused, or from the making of any repairs
resulting therefrom or to any portion of the Building or the Leased Premises.
10.05 Notify Landlord - The Tenant shall immediately notify the Landlord or
its representative in the Project of any accident or defect in the Project,
the Leased Premises or any systems thereof and, as well, of any matter or
condition which may cause injury or damage to the Project or any person or
property located therein.
10.06 Expropriation - If at any time during the Term the whole or any part
of the Leased Premises shall be taken by any lawful power or authority by
the right of Expropriation, the Landlord may, at its option, give notice
to the Tenant of termination of this Lease either in its entirety or only
insofar as it affects the part of the Leased Premises taken by the
lawful power or authority by right of Expropriation, on the date when
the Tenant or the Landlord is required to yield up possession thereof
to the Expropriating authority. Upon such termination, or upon
termination by operation of law, as the case may be, the Tenant shall
immediately surrender the Leased Premises or the part of the Leased
Premises taken by the Expropriating authority, as the case may be, and
all its interest therein, and Rent shall abate and be apportioned to the
date of termination and the Tenant shall forthwith pay to the Landlord
the apportioned Rent and all other amounts which may be due to the
Landlord up to the date of termination. The Tenant shall have no claim
upon the Landlord for the value of its property or the unexpired Term,
but the parties shall each be entitled separately to advance their claims
for compensation for the loss of their respective interests in the Leased
Premises so taken, and the parties shall each be entitled to receive and
retain such compensation as may be awarded to each respectively. However,
to the extent that a part of the Project other than the Leased Premises
is Expropriated the full proceeds paid or awarded will belong solely to
the Landlord and the Tenant will assign to the Landlord any rights it
might have or acquire in respect of the proceeds or awards and will
execute those documents that the Landlord reasonably requires in order
to give effect to this intention.
Where used in this Section 10.06 "Expropriation" means expropriated by
a governmental or municipal authority, or transferred, conveyed or
dedicated in contemplation of a threatened expropriation and "Expropriated"
and "Expropriating" have corresponding meanings.
ARTICLE 11.00- DEFAULT
11.01 Interest - The Tenant shall pay monthly to the Landlord interest at
a rate per annum equal to the lesser of the Prime Rate plus 5% and the
maximum rate permitted by applicable law upon all Rent required to be
paid hereunder from the due date for payment thereof until the same is
fully paid and satisfied.
11.02 Costs of Enforcement - The Tenant shall indemnify the Landlord
against all costs and charges (including legal fees on a solicitor and
client basis) reasonably incurred either during or after the Term in
enforcing payment of Rent hereunder and in obtaining possession of the
Leased Premises after default of the Tenant or upon expiration or earlier
te+inination of this Lease or in enforcing any covenant, proviso or
agreement of the Tenant herein contained. All such costs and charges shall
be paid by the Tenant to the Landlord forthwith upon demand.
11.03 Performance of Tenants Obligations - All covenants and agreements
to be performed by the Tenant under any of the terms of this Lease shall
be performed by the Tenant, at the Tenant's sole cost and expense, and
without any abatement of Rent If the Tenant fails to perform any act to
be performed by it hereunder, then, in the event of an ertiergency, either
real or perceived, or if the failure continues for 10 days following
notice thereof, the Landlord may (but Shall not be obligated to) perform
the act without waiving or releasing the Tenant from any of its obligations
relative thereto. All sums paid and costs incurred by the Landlord in so
performing the act, plus 20% of the cost for overhead and supervision
together with interest thereon at the rate set out in Section 11.01 from
the date payment was made or such cost incurred by the Landlord, shall
be payable by the Tenant to the Landlord on demand.
11.04 Events of Default - If and whenever
a)all or any part of the Rent hereby reserved is not paid when due; or
b)the Term or any goods, merchandise, stock in trade, chattels or
equipment of the Tenant or any Indemnifier is or are seized or taken or
exigible in execution or in attachment or if a creditor takes possession
thereof or if a writ of execution is issued against the Tenant or any
Indemnifier; or
(c) the Tenant or any Indemnifier or any Person bound to perform the
obligations of the Tenant in this Lease either as guarantor or indemnifier
or as one of the parties constituting the Tenant takes any steps in
furtherance of or suffers any order to be made for its winding-up or other
termination of its corporate existence or becomes insolvent or commits an
act of bankmptcy or becomes bankrupt or takes the benefit of any statute
that may be in force for bankrupt or insolvent debtors or becomes involved
in voluntary or involuntary winding-up proceedings or if a receiver or
receiver/manager shall be appointed for all or any part of the business,
property, affairs or revenues of the Tenant or such Indemnifier or
Person; or
(d) the Tenant makes a bulk sale of its goods or moves or commences,
attempts or threatens to move its goods, chattels and equipment, or
any of them, out of the Leased Premises (other than in the normal course
of its business) or ceases to conduct business in the Leased Premises; or
(e) the Tenant fails to move into or take possession of the Leased Premises
or vacates or abandons the Leased Premises in whole or in part or fails to
actively carry on business therein; or
(f) the Tenant or any Indemnifier or any Person bound to perform the
obligations of the Tenant pursuant to this Lease either as guarantor
or indemnifier or as one of the parties constituting the Tenant fails to
observe, perform and keep each and every covenant, agreement, provision,
stipulation and condition herein contained to be observed, performed and kept
by the Tenant or the Indemnifier (other than payment of Rent) and persists
in the failure after 10 days' notice by the Landlord requiring the Tenant
to remedy, correct, desist or comply (or if any breach would reasonably
require more than 10 days to rectify, unless the Tenant commences
rectification within the 10 day notice period and thereafter promptly,
effectively and continuously proceeds with the rectification of the breach)
(g) any Transfer occurs except as permitted by and in accordance with
Article 12.00; or
(h) any Pollutant is present in the Leased Premises without the prior
written consent of the Landlord or otherwise than in compliance with all
terms and conditions imposed by the Landlord in giving its consent thereto;
or
(i) a report or statement required from the Tenant under this Lease is false
or misleading except if it results from an innocent clerical error as
determined by the Landlord; or
(j) any policy of insurance taken out by either the Landlord or the Tenant
with respect to the Project shall be cancelled by reason of any act or
omission bf the Tenant; or
(k) the Tenant fails to observe and perform the rules and regulations; or
(l) the use of the Leased Premises is not in accordance with that set out
in Item 9 of the Term Sheet;
then the Landlord shall be entitled to any oEil of those remedies set out
in Section 11.05. Each of the foregoing circumstances constitutes an "Event
of Default" for the purposes of this Lease.
11.05 Remedies on Default - Upon the happening of an Event of Default the
Landlord may, at its option, and in addition to and without prejudice to
all rights and remedies of the Landlord available to it either by any other
provision of this Lease or by statute or the general law:
a)the full amount of the current month's and the next
ensuing 3 months instalments of Rent which shall immediately become due and
payable and the landlord may immediately distrain for the same, together
with any arrears then unpaid; or
b) without notice or any form of legal process, forthwith re-let or sublet
the Leased Premises or any part or parts thereof for whatever term or terms
and at whatever rent and upon whatever other terms, covenants and conditions
the Landlord considers advisable including, without limitation, the payment
or granting of inducements all on behalf of the Tenant; and on each such
rEleWing or subletting the rent received by the Landlord therefrom will be
applied first to reimburse the Landlord for any such inducements and for any
expenses, capital or otherwise, incurred by the Landlord in making the
Leased Premises ready for re-letting or subletting; and secondly to the
payment of any costs and expenses of re-letting or subletting including
brokerage fees and legal fees on a solicitor and client basis; and third to
the payment of Rent; and the residue, if any, will be held by the Landlord
and applied to payment of Rent as it becomes due and payable. If rent
received from re-letting or subletting during any month is less than Rent
to be paid during that month hereunder, the Tenant will pay the deficiency
which will be calculated and paid monthly on or before the first day of
every month; and no re-letting or subletting of the Leased Premises by the
Landlord or entry by the Landlord or its agents upon the Leased Premises
for the purpose of re-letting or subletting or other act of the Landlord
relating thereto including, without limitation, changing or permitting a
subtenant to change locks, will be construed as an election on its part
to terminate this Lease unless a written notice of termination is given to
the Tenant; and if the Landlord elects to rElet or sublet the Leased
Premises without terminating, it may afterwards elect to terminate this
Lease at anytime by reason of any Event of Default then existing; or
(c) seize and sell such goods, chattels and equipment of the Tenant as
are in the Leased Premises and the Landlord may, but shall not be
obligated to, apply the proceeds thereof to all Rent to which the
Landlord is then entitled under this Lease. Any such sale may be effected
by public auction, private sale or otherwise, and either in bulk or by
individual item, or partly by one means and partly by anqther, all as the
Landlord in its sole discretion may decide; or
(d) terminate this Lease by leaving upon the Leased Premises notice in
writing of the termination, and such termination shall be without
pretjudice to the Landlord's right to damages, it being agreed that the
Tenant shall pay to the Landlord on demand as damages the loss of income
of the Landlord to be derived from this Lease and the Leased Premises for
the unexpired portion of the Term had it not been terminated; or
(e) rEenter into and upon the Leased Premises or any part thereof in the
name of the whole and repossess and enjoy the same as of Landlord's former
estate, anything herein contained to the contrary notwithstanding;
and the Tenant shall pay to the Landlord forthwith upon demand all expenses
of the Landlord in re-entering, terminating, rEletting, collecting sums due
or payable by the Tenant or realizing upon assets seized or otherwise
exercising its rights and remedies under this Section 11.05 including tenant
inducements, leasing commissions, legal fees on a solicitor and client basis
and all disbursements and the expense of keeping the Leased Premises in good
order, repairing the same and preparing the same for re-letting.
In addition, and without limiting the generality of the foregoing provisions
of this Section 11.05, upon the happening of an Event of Default, and
whether or not this Lease is terminated in accordance with such provisions:
(i) the Landlord shall have no further liability to pay to the Tenant or any
third party any amount on account or in respect of a refund of any Security
Deposit, prepaid Rent or prepaid Taxes or any tenant inducement, leasehold
improvement allowance, lease takeover or lease subsidy or any other
concession or inducement otherwise provided to the Tenant under or
with respect to this Lease, and any Rent free period otherwise provided
to the Tenant hereunder shall be null and void and of no further
force or effect and Rent shall be payable in full hereunder
without regard to any such Rent free period; and
(ii) any cash allowance, inducement payment, and the value of any other
benefit paidEto or conferred on the Tenant by or on behalf of the Landlord
in connection with the Leased Premises or this Lease shall be recoverable
in full as additional Rent and shall be payable to the Landlord on demand.
11.06 Availabilitv of Remedies - The Landlord may from time to time resort
to any or all of the rights and remedies available to it upon the
occurrence of an Event of Default either by any provision of this Lease or
by statute or the general law, all of which rights and remedies are intended
to be cumulative and not alternative, and the express provisions herein as
to certain rights and remedies are not to be interpreted as excluding any
other or additior"aEEl rights or remedies available to the Landlord by
statute or the general law.
11.07 Waiver - If the Landlord shall overlook, excuse, condone or
suffer any default, breach or nonobservance by the Tenant of any
obligation hereunder, this shall not operate as a waiver of the
obligation in respect of any continuing or subsequent default, breach
or nonobservance and no such waiver shall be implied but shall only
be effective if expressed in writing.
The Landlord's acceptance of Rent after a default is not a waiver
of any preceding default under this Lease even if the Landlord knows of
the preceding default at the time of acceptance of the Rent. No
term, covenant or condition of this Lease shall be considered to
have been waived by the Landlord or the Tenant unless the waiver
is in writing. The Tenant waives any statutory or other rights in
respect ofabatement, set-off or compensation in its favour that may
exist or come into existence hereafter with respect to Rent.
11.08 Waiver of Exemption and Redemption - Notwithstanding anything
contained in any statute now or hereafter in force limiting the right
of distress, none of the Tenant's goods or chattels in the Leased
Premises at any time during the Term shall be exempt from levy by
distress for Rent in arrears, and this agreement of the Tenant in this
Section may be pleaded as an estoppel against the Tenant.
11.09 Companies' Creditors Arrangement Act - By virtue of its
interest in this Lease, the importance of the Tenant continuing to
carry on business in the Leased Premises in accordance with this Lease,
and the Landlord's entitlement to damages where this Lease is terminated
by reason of an Event of Default, the Landlord does and will
(despite any changes in circumstances of the Tenant or its business)
consfitute a separate class or category of creditor in any plan of
arrangement or other proposal submitted by or on behalf of the Tenant
under the Companies' Creditors Anangement Act (Canada) or any similar
legislation for bankmpt or insolvent debtors.
ARTICLE 12.00-ASSIGNMENT. SUBLETTING AND OTHER TRANSFERS
12.01 Request for Consent- The Tenant shall noteffect a Transfer of
this Lease or of all or part of the Leased Premises without the prior
consent in writing of the Landlord, which consent shall not, provided
no Event of Default has occurred, be unreasonably wfthheld. Provided
that the Tenant shall, at the time the Tenant shall request the consent
of the Landlord,t deliver to the Landlord such information in writing
(herein called the "required information") as the Landlord may reasonably
require respecting the proposed Transferee including, without
limflation, the name, address, nature of business, financial
responsibility and standing of such proposed Transferee. Provided
further that after receiving such request, the Landlord shall
have the right, at its option, to terminate this Lease if the
request relates to all of the Leased Premises or, if the request
relates to a portipn of the Leased Premises only, to terminate
this Lease with respect to such portion, by giving, within 10
days after receiving the required information, not less than
30 nor more than 60 days' written notice of termination
to the Tenant. In the event of such termination the Rent and
other payments required to be made by the Tenant hereunder
shall be adjusted to the date of termination and in the case of
a partial termination, Rent shall abate in the proportion that
the area of the portion of the Leased Premises for which this
Lease is terminated beam to the area of the Leased Premises and
this Lease shall be deemed to be amended accordingly.
If the Landlord elects to terminate this Lease as to all or part of
the Leased Premises, the Tenant mayby written notice (given within 10
days or such longer time as the Landlord may consent to in writing after
receipt bf the Landlord's notide of termination) notify the Landlord
of the Tenant's intention to refrain from the Transfer which gave rise
to the Landlord's notice of termination or of the Tenant's intention
to accept such notice of termination. If the Tenant gives such written
notice to the Landlord within such time period that it intends to refrain
from such Transfer, then the Landlord's election to terminate this Lease
in whole or in part shall become null and void. Otherwise, the Landlord's
termination shall take effect on the date stipulated by the Landlord in
its notice of termination.
12.02 Basis for Consent - Notwithstanding anything in the Landlord and
Tenant Act, the Commercial Tenancies Act or any other statute or law
and without limiting the grounds upon which a consent may be
refused, the Landlord will not be deemed to be unreasonable in
refusing consent when:
(a) the giving of such consent would place the Landlord in breach of any
other tenant's lease in the Project or the proposed use by the Transferee
is not substantially the same as that of the Tenant;
b) such consent is requested for a mortgage, charge, debenture
(secured by floating charge or otherwise) or other encumbrance of, or
in respect of, this Lease or the Leased Premises or any part of them;
c) the Transferee, in the opinion of the Landlord, (i) does not have
a history of successful business operation in the business to be
conducted in the Leased Premises, (ii) does not have a good credit
rating or a substantial net worth, or (iii) there is a history of
default under other leases by the Transfere&& by companies or partnerships
that the Transferee was a principal shareholder of or a partner in
at the time of the defaults;
(d) the Transferee is an existing tenant in the Project or in any other
project of the Landlord; or has been within 3 months prior to
the proposed assignment or sublease taking effect;
(e)the Landlord has other premises in the Project available for
leasing to the Transferee;
f)in the case of a Transfer to a subtenant of lessee than the entire
Leased Premises, if suchwould result in a configuration which would
require access to be provided through spaceleased or held for lease
to another tenant or improvements to be made outside of the Leased
Premises;
(g) the required information received from the Tenant or the
Transfereeis not sufficient in the Landlord's opinion to enable
the Landlord to make a determination concerning the
matters set out above; or
(h) the use of the Leased Premises by the proposed Transferee, in the
Landlord's opinion arrived at in good faith, could result in excessive use
of the systems or Services in the Project, be inconsistent with the image
and standards of the Project or expose the occupants of the Project to
risk of harm, damage or interference with their use and enjoyment thereof, or
reduce the value of the Project.
The Landlord shall not be liable for any claims, actions, damages,
liabilities, losses or expenses of the Tenant or any proposed Transferee
arising out of the Landlord's unreasonably withholding its consent
to any Transfer and the Tenants only recourse will be to bring an
application for a declaration that the Landlord must grant its consent
to the Transfer.
In no event shall any Transfer to which the Landlord may have consented
release or relieve the Tenant or any Indemnifier from its obligations
fully to perform all the terms, covenants and conditions of this
Lease, the Indemnity Agreement or any renewals or extensions of this
Lease or the Term, on its part to be performed and in any event the
Tenant shall be liable for the Landlord's costs incurred in connection
with the Tenant's request for consent as set out in Subsection 12.03(g).
12.03 Terms and Conditions Relating to Consents - The following terms
and conditions apply in respect of a consent given by the
Landlord to a Transfer:
(a) the consent by the Landlord is not a waiEer of the requirement for
consent to subsequent Transfers, and no Transfer shall relieve the Tenant
of its obligations under this Lease, unless specifically so provided in
writing;
(b) no acceptance by the Landlord of Rent or other payments by a
Transferee is: (i) a waiver of the requirement for the Landlord to
consent to the Transfer, (ii) the acceptance of the Transferee as
tenant, or (iii) a release of the Tenant or Indemnifier from its
obligations under this Lease or any Indemnity Agreement;
(c) the Landlord may apply amounts collected from the Transferee
to any unpaid Rent;
(d) the Transferor, unless the Transferee is a suEtenant of the Tenant,
will retain no rights under this Lease in respect of obligations to
be performed by the Landlord or in respect of the use or occupation
of the Leased Premises after the Transfer and will execute
an Indemnity Agreement on the LandIord's standard form in
respect of obligations to be performed after the Transfer
by the Transferee;
(e) the Transferee shall, when required by the Landlord, jointly and
severally with the Tenant, enter into an agreement directly with the
Landlord agreeing to be bound by this Lease as if the Transferee had
originally executed this Lease as the Tenant, and the Tenant will not be
released nor relieved from its obligations under this Lease including,
without limitation, the obligation to pay Rent;
(f) in the event that this Lease is disaffirmed, disclaimed or terminated
by any trustee in bankruptcy of a Transferee, the original Tenant named
in this Lease shall be deemed, upon notice by the Landlord given within
30 days of such disaffirmation, disclaimer, or termination to have entered
into a lease with the Landlord, containing the same terms and conditions as
in this Lease, with the exception of the Term of such Lease which shall
expire on the date on which this Lease would have ended save for such
disaffirmation, disclaimer or termination; and
(g) any documents relating to a Transfer or the Landlord's consent
will be prepared by the Landlord or its solicitors and a reasonable
administration charge of at least $250.00 and the greater of
(i) a reasonable document preparation fee of at least $450.00 or
(ii) those legal fees on a solicitor and client baEincurred by the
Landlord will be paid to the Landlord by the Tenant on demand.
12.04 Subsequent Transfers - The Landlord's consent to a Transfer
shall not be deemed to be consent to any subsequent Transfer, whether
or not so stated.
12.05. Profit Rents Upon Transfers - In the event of any Transfer
by the Tenant by virtue of which the Tenant receives a rent in the
form of cash, goods or services from the Transferee which is greater
than the Rent payable hereunder to the Landlord, the Tenant
shall pay any such excess to the Landlord in addition to all
Rent payable under this Lease, and such excess rent shall be
deemed to be further Rent payable hereunder.
12.06 Advertising - The Tenant will not advertise the Leased Premises
or any part thereof as being available for leasing or this Lease as being
available for transfer in any medium and will not cause or
permit any such advertisement, unless the Landlord has permitted the
Tenant to do so in writing and has given written approval of the wording
of such advertisement.
12.07 Grant of Securitv Interest bv Assignee or Sub-tenant - The Tenant
will cause any Transferee and any new Indemnifier of this Lease to grant
a mortgage, charge and security interest to the Landlord in
form corresponding to the Security Interest granted in Section
agreement in form and substance satisfactory to the Landlord
prior to the effective date of the Transfer.
The Tenant shall pay all costs associated with the granting
and perfection of mortgages, charges and security interests
granted pursuant to this Lease upon any Transfer.
ARTICLE 13.00-TRANSFERS BY LANDLORD
13.01 Sale. Conveyance and Assignment - Nothing in this
Lease shall restrict the right of the Landlord convey,
assign, pledge or otherwise deal with the Project, subject
(except as provided in Section only to the rights of the
Tenant under this Lease.
13.02 Effect of Transfer - A sale, conveyance or assignment of the
Project by the Landlord shall operate to release the Landlord from
liability from and; after the effective date thereof in respect of all of
the covenants, terms and conditions of this Lease, express or implied,
except as they may relate to the period prior to the effective date,
and the Tenant shall thereafter look solely to the Landlord's successor
in interest.
13.03 Subordination - Subject to Section 13.04, this Lease is and
shall be subject and subordinate in all respects to any and all
mortgages (including deeds.of trust and mortgage) now or hereafter
placed on the Building or Land and all advances thereunder, past,
present and future and to all renewals, modifications, consolidations,
replacements and extensions thereof. The Tenant agrees to execute
promptly and in any event within 10 days after request therefor an
instrument of subordination as maybe requested.
13.04 Aftomment - The Tenant agrees, Whenever requested by any mortgagee
(herein called the"Purchaser") taking title to the Project by reason of
foreclosure or other proceedings for enforcement of any mortgage or deed
of trust, or by delivery of a deed in lieu of such foreclosure or other
proceeding, to attorn to such Purchaser as a tenant under all of the
terms of this Lease. The Tenant agrees to execute promptly and in any
event within 10 days after a request by any Purchaser an instrument of
attomment as may be required of it.
13.05 Effect of Attomment - Upon attomment pursuant to Section 13.04,
this Lease shall continue in full force and effect as a direct lease
between the Purchaser and the Tenant, upon all of the same terms,
conditions and covenants as are set forth in this Lease except that,
after attomment, the Purchaser andits successors in title shall not be:
(a) liable for any act or omission of the Landlord; or
(b) subject to any offsets or defence which the Tenant might
have against the Landlord; or
(c) bound by any prepayment by the Tenant of more than 1 month's
instalment of Rent unless the prepayment shall have been approved
in writing by the Purchaser or by any predecessor of the Purchaser's
former interest as mortgagee in the Project.
13.06 Repurchase - The Tenant acknowledges and agrees that should
the Landlord sell, convey, assign, pledge or otherwise deal with the
Project, or any interest therein, or intend to deal with the Project,
orEany interest therein, in any manner described herein then the
Landlord may, at its option, if the Landlord has provided the
Tenant with Basic Rent free periods, Rent free periods and/or
other inducements during the Term and/or any renewal of the
Term of this Lease, reimburse the Tenant for the then present
value of any then unexpired Basic Rent free periods or
Rent free periods and/or other inducements provided
to the Tenant under this Lease, in an amount equal to the
discounted cash value thereof determined by applying the
then current yield of 10 year Canadian Government Bonds plus
4%(hereinafter referred to in this Section 13.06 as the
"Discounted Cash Value") to the dollar amount of such
outstanding Basic Rent free periods, Rent free periods and/or
otherinducements and the Tenant agrees that any such
periods or inducements for which it has received such
Discounted Cash Value from the Landlord will no longer exist
or be payable or be of any force or effect from and after
the date on whichsuch Discounted Cash Value is
received by the Tenant from the Landlord. The Tenant agrees
to forthwithexecute any agreement prepared by the Landlord,
the purpose of which agreement is to amend this Lease by
deleting such Basic Rent free periods, Rent free periods and/or
other inducements from the Lease for which the Tenant has
received the Discounted Cash Value
from the Landlord.
ARTICLE 14.00- SURRENDER
14.O0 Possession and Restoration
(1) Upon the expiration or other termination of the Term, the Tenant
shall immediately quit and surrender possession of the Leased
Premises and all Leasehold Improvements, in substantially the
condition in which the Tenant is required to maintain the Leased
Premises, excepting only reasonable wear and tear and damage covered
by Landlord's insurance under Section 9.01, and the Tenant shall
deliver to the Landlord the keys, mechanical or otherwise, and combinations,
any, to the locks in the Leased Premises and entries thereto.
Notwithstanding the foregoing, the Landlord sha! have the right,
at its sole option upon expiration or other termination of the Term,
to require that the Tenant remove or cause to be removed at the
Tenant's cost all or any part of Leasehold Improvements in the Leased
Premises whether or not installed by or on behalf of the Tenant or
installed by or on behalf of a previous tenant or during a previous
term and to restore the Leased Premises and other parts of the Project
affected by the installation or removal thereof to base building standards.
Upon surrendering all right, title,and interest of the Tenant in the
Leased Premises and all Leasehold Improvements located therein shall cease.
2) 90 days (or as soon after such date as is reasonably possible)
prior to the expiration of the Term the Landlord may inspect the Leased
Premises to determine the extent of the work required to restore
the Leased Premises and other parts of the Project affected by any
installation or removal of Leasehold Improvements to base building
standards and upon receipt of the Landlord's estimate of the costs thereof
(the "restoration costs") the Tenant shall provide to the Landlord by
cash or certified cheque that amount being the restoration costs.
14.02 Tenants Trade Fixtures and Personal Proverty - After the expiration
or other termination ofthe Term or in the event of the abandonment of the
Leased Premises by the Tenant, all Leasehold Improvements, trade fixtures,
and personal property remaining in the Leased Premises shall be deemed
conclusively to have been abandoned by the Tenant and may be appropriated,
sold, destroyed or otherwise disposed of by the Landlord without
notice or obligation to compensate the Tenant or to account therefor,
and the Tenant shall pay to the Landlord upon written demand all
of the costs incurred by the Landlord in connection therewith.
14.03 Overholding - If the Tenant remains in the Leased Premises or
any part thereof after the expiration or other termination of the Term:
(a) without the consent of the Landlord, no yearly or other periodic
tenancy shall be created but the Tenant shall be bound by the terms
and provisions of this Lease except any options thereby granted to
the Tenant and except the Basic Rent shall be twice the amount provided
for herein plus the sum of $200 daily and subject to such additional
obligations and conditions as the Landlord may impose by notice
to the Tenant: or
(b) with the consent of the Landlord and agreement as to the Rent
payable, in which case the tenancy shall be month 40-month at the Rent
agreed and otherwise on the terms and conditions of this Lease but
without any option to renew.
The Landlord may recover possession of the Leased Premises during
any period with respect to which the Tenant has prepaid the amount
payable under Subsection i4.03(a).
The Tenant shall promptly indemnify and hold harmless the Landlord
from and against all Claims against the Landlord as a result of
the Tenant remaining in possession of all or any part of the Leased
Premises after the expiry of the Term (including, without limitation,
any compensation to any new tenant or tenants which the Landlord may
elect to pay whether to offset the cost of overtime work or otherwise).
ARTICLE 15.00-GENERAL
15.01 Estoppel Certificates - The Tenant shall whenever requested by the
Landlord, a prospective purchaser or any mortgagee (including any
trustee under a deed of trust and mortgage) promptly, and in any event
within 10 days after request, execute and deliver to the Landlord or
to any party designated by the Landlord a certificate in writing as
to the then status of this Lease, including as to whether it is in
full force and effect, is modified or unmodified,confirming the Rent
payable hereunder and each element hereof and the then state of the
accounts between the Landlord and the Tenant, the existence or
non-existence of defaults, and any other matters pertaining to this
Lease in respect of which the Landlord shall request a certificate,
and provide such other information as may reasonably be required,
including a copy of the Tenants most recent audited financial
statements. The party or parties to whom such certificates are
addressed may rely upon them.
15.02 Entire Agreement - There is no promise, warranty, representation,
undertaking, covenant or understanding by or binding upon the Landlord
except such as. are expressly set forth in this Lease, and this Lease
including the Term Sheet and schedules hereto contains the entire
agreement between the parties hereto.
15.03 No Registration of Leases or Notices - The Tenant shall not register
or apply to register this Lease or any notice of this Lease or any interest
under this Lease and waives any statutory obligation upon the Landlord to
execute and deliver this Lease in registrable form. The Tenant shall,
at its own cost,promptly on request discharge any registration or
filing or notice that contravenes this Section. Notwithstanding the foregoing,
the Landlord may elect to require this Lease or notice of this Lease be
registered.
15.04 Proiect Name and Trademarks - The Tenant shall not refer to the
Project or Building by any name other than that designated from time
to time by the Landlord and the Tenant shall use the name of the Building
for the business address of the Tenant but for no other purpose.
Compliance with this Section shall be at the sole cost and expense
of the Tenant and the Tenant shall have no claim against
the Landlord for any costs or expenses incurred by the Tenant,
whether direct or indirect, in complying with this Section.
15.05 Demolition I Substantial Renovation - Notwithstanding any other
provision of this Lease, the Landlord may terminate this Lease at any
time upon giving to the Tenant not less than 12 months' notice
of such termination if it is the Landlord's intention to demolish,
redevelope or substantially renovate all or part of the Building.
15.06 Relocation - The Landlord shall have the right, at any
time and from time to time before and during the Term and any renewal
of this Lease, to change the location of the Leased Premises from the
location described in this Lease to another location br similar size
and finishes anywhere else in the Building. Provided that the Landlord
shall give the Teh ant reasonable notice of such relocation and the
Landlord shall reimburse the Tenant for all reasonable costs directly
related to such relocation, but not including any indirect costs such
as lost profits during the relocation period or damages for inconvenience.
15.07 "For Lease" Signs - The Landlord shall havethe right during the
last 12 months of the Term to place upon the Leased Premises a notice
of reasonable dimensions stating that the Leased Premises
are "for lease" and the Tenant shall not obscure or remove such
notice or permit the same to be obscured or removed.
15.08 Unavoidable Delavs - If the Landlord or the Tenant
(the "delayed party") shall be delayed,hindered or prevented in
or from the performance of any of its covenants under this Lease
by any cause not within the control of the delayed party as
determined by the Landlord acting reasonably (excluding
lack of finances of the delayed party), the performance of the covenant
shall be excused for the period during which performance is rendered
impossible and the time for performance thereof shall be extended
accordingly, but this shall not excuse the Tenant from the prompt
payment of Rent or performing any of its other obligations
under this Lease.
15.09 Limitation of Resource- N/A
15.10 Notice - Any notice required or contemplated by any
provision bf this Lease shall be given in writing and shall
be sufficiently given if delivered or if sent by telecopy or
similar form of immediate transmission and if to
the Landlord, so given to an executive officer
of the Landlord at the Landlord's head office as
specified in Item 1 of the Term Sheet and to the address
set out in Item 1 of the Term Sheet and if to the Tenant,
so given to the Tenant personally (or to a partner or officer of the
Tenant if the Tenant is a firm or corporation) at the
address specified in Item 2 of the Term Sheet or left at
the Leased Premises (whether or not the Tenant has departed from,
vacated or abandoned the same).Any notice shall be deemed to have
been redeived on the business day following the date of delivery
or sending.The Landlord or the Tenant may from time to time by
notice in writing to the other designate another
address or addresses in Canada as the address to which
notices are to be sent.
If two or more Persons are named as, or bound to perform the obligations
of, the Tenant hereunder,notice given as herein provided to any one of the
Persons constituting the Tenant or so bound shall be deemed to be notice
simultaneously to all Persons constituting the Tenant and to all Persons
so bound. Any notice given to the Indemnifier or the Tenant shall be
deemed to have been given simultaneously to the other of them and to
all Persons bound by their
obligations hereunder.
15.11 Delegation of Authority - Subject to Section 15.13, the managing
agent of the Landlord may acton behalf of the Landlord in any manner
provided for herein.
15.12 Relationship of Parties - Nothing contained in this Lease
shall create any relationship between the parties hereto other than
that of landlord and tenant and, if applicable, indemnifier.
15.13 Governing Law - This Lease shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by,
the laws of the province in which the Project is situate.
15.14 Amendment or Modification - No amendment, modification or
supplement to this Lease shall be valid or binding unless set out in
writing and executed by the Landlord and the Tenant with the same
degree of formality as the execution of this Lease.
15.15 Leaal and Administration Costs - The Tenant shall indemnify the
Landlord against all legal fees on a solicitor and client basis and
disbursements incurred by the Landlord or by its manager or agents
in connection with the negotiation, preparation and execution of any
renewal, amendment, assignment, cancellation, approval or consent in
connection with this Lease or Event of Default arising from this
Lease, including the Landlord's reasonable administration charges.
All such costs and charges shall be paid by the Tenant to the Landlord
forthwith upon demand.
15.16. Construction - All of the provisions of this Lease are to be
construed as covenants and agreements. If any provision of this Lease
is illegal or unenforceable, it shall be considered separate and
severable from the remaining provisions of this Lease which shall remain
in force and be binding as though the provision had never been included.
15.17 Captions and Headings - The captions and headings contained in
this Lease are for convenience of reference only and are not intended
to limit, enlarge or otherwise affect the interpretation
of the Articles, Sections or parts hereof to which they apply.
16.18 Interpretation - In this Lease, "herein", "hereor', "hereunder",
"hereafter" and similar expressions refer to this Lease and not to
any particular Article, Section or other portion thereof unless there is
something in the subject matter or context inconsistent therewith.
Wherever necessary or appropriate in this Lease, the plural shall be
interpreted as singular, the masculine gender as feminine or neuter and
vice versa; and when there are two or more parties bound by the Tenant's
covenants herein contained,their obligations shall be joint and several.
If the Tenant is a partnership each Person who is presently
a member of such partnership and each Person who becomes a member
of any successor partnership shall be and continue to be liable
jointly and severally for the performance of the obligations of this
Lease,whether or not such Person ceases to be a member of such
partnership or successor partnership.
15.19 Time of The Essence - Time shall be of the essence hereof and no
extension or variation of this Lease shall operate as a
waiver of this provision.
15.20 Successors and Assigns - Subject to specific provisions
contained in this Lease to the contrary,this Lease shall enure to the
benefit of and be binding upon the successors and assigns of the Landlord
and the heirs, executors and administrators and the permitted successors
and assigns of the Tenant.
15.21 Counterparts - This Lease may be executed in counterparts and the
counterparts together shall constitute an original.
15.22 Further Schedules - Any additional covenants agreements and
conditions forming part of this Lease will be attached
15.23 Independent Leaal Advice - The Tenant and the Indemnifier each
acknowledge that the Landlord hereby advises the Tenant and the
Indemnifier to obtain advice from independent legal counsel prior to
signing this Lease and/or the Indemnity Agreement. The Tenant and
the Indemnifier further acknowledge that any information provided by
the Landlord is not to be construed as legal, tax or any other expert
advice and the Tenant and the Indemnifier are cautioned not to rely on
any such information without seeking legal, tax or other expert advice.
The Landlord and the Tenant understand, acknowledge, and agree that this
Lease has been freely negotiated by both parties and that, in any
dispute or contest over the meaning, interpretation, validity or
enforceability of this Lease or any of its termes Or conditions,
there shall be no inference, presumption or conclusion drawn whatsoever
against either party by virtue of that party having drafted this Lease
or any portion thereof.
15.24 No Offer - The Landlord will not be deemed to have made an
offer to the Tenant by furnishing an unexecuted copy of this Lease
with particulars inserted. Notwithstanding that a Security Deposit or
payment of advance Rent is received by the Landlord when this Lease is
received by the Landlord for execution, no contractual or other right
will exist between the Landlord and the Tenant with respect to the
Leased Premises until the Landlord, the Tenant and the Indemnifier,
if any, have executed and delivered this Lease and any required
Indemnity Agreement.
15.25 Landlord's Security Interest- N/A
15.26 Survival of Covenants and Indemnities - All obligations of the
Tenant which arise during the Term pursuant to this Lease and which have
not been satisfied at the end of the Term and all indemnities of the
Tenant contained in this Lease shall survive the expiration or other
termination of this Lease.
15.27 Excutpatorv Provisions - In all provisions of this Lease
containing a release, indemnity or other exculpatory language
in favour of the Landlord, reference to the Landlord includes
reference also to the Landlord's agents and nominee (if any)
and any Person for whom it is in law responsible and the
directors, officers and eEployees of the Landlord, its agents
and nominee (if any) and any Person for whom it is in law
responsible while acting in the ordinary course of their
employment.
15.28 Brokerage Commissions - The Tenant covenants that no act of the
Tenant has given rise nor shall give rise to any Claims against
the Landlord for any brokerage commission, finders fee or similar
fee in respect of this Lease. The Tenant hereby indemnifies and
agrees to hold the Landlord harmless from any Claims for such
commission or fees with respect to this
Lease except any which were directly contracted for by the Landlord.
15.29 Covenants to be Performed at Landlord's Option - Where any provision
in this Lease gives the Landlord the option of having the Landlord or the
Tenant perform the covenants set out in such provision, the Tenant shall
perform such covenants unless the Tenant is otherwise directed by way of
written notice from the Landlord.
15.30 Radiation - Only if the Landlord believes on reasonable grounds
that radiation is or has been used or created by the Tenant or any
Person permitted by the Tenant to be in the Leased Premises shall
this Section 15.30 apply to the Tenant.
The Tenant agrees, if so requested by the Landlord, to conduct at
its own expense a survey by anaccredited firm of consultants
acceptable to the Landlord to the level of radiation in the Leased
Premises, and if such levels are in excess of those allowable under
Environmental Laws and set by the applicable regulatory authorities
governing radiation, the Tenant agrees, at its own cost and expense
and on terms and conditions approved by the Landlord, to reduce the
level ofEdiation to a level allowable under Environmental Laws
and set by such applicable regulatory authorities:
IN WTNESS WHEREOF the Landlord and the Tenant have executed this
Lease as of the date first set forth above.
LANDLORD:
MORGUARD REAL ESTATE INVESTMENT
by: /s/Dely Rurise
Authorized Signatory
-TENANT
NORTHSTAR ELECTRONICS, INC.
by:/s/ Wislon E. Russell
Title: President
SCHEDULE A:
LEGAL DESCRIPTION OF LAND- Lot one(1), Block 22, District Lot 541,
Group One (1)-New Westminster District
Plan 15029
SCHEDULE B:
DEFINITIONS:
"Basic Rent' means the amount set out in Item 8 of the Term Sheet
payable by the Tenant to theLandlord in respect of each year of the Term.
"Bio-Medical Waste" shall mean and include the following
(a) (i) surgical waste including all materials discarded from surgical
procedures, including but notlimited to, disposable gowns, soiled
dressings, sponges casts, lavage tubes, drainage sets, underpads
and surgical gloves; and
ii) pathological waste including all human tissues and
anatomical parts which emanate from surgery, obstetrical procedures,
autopsy and laboratory; and
(iii) biological waste including blood and blood products, excretions,
exudates, secretions, suctionings and other body fluids including
solidi liquid waste from renal dialysis: and
(iv) isolation waste including all waste emanating from the care
or treatment of a patient on anytype of isolation or precaution
except reverse (protective) isolation; and
(b) "Chemotherapy Waste" (also known as antineoplastic or cytotoxic waste)
means and includesdiscarded items, including but not limited to, masks,
gloves, gowns, empty IV tubing bags, syringes and other contaminated
materials which have been contaminated by chemotherapeutic drugs or
antineoplastic agents; and
(c) any waste defined as bio-medical waste under any
applicable law or regulation.
"Building" means the buildings, structures and improvements from
time to time during the Term erected in, upon or under the
Land municipally identified in Item S of the Term Sheet
and all alterations andadditions thereto
and replacements thereof.
"Claims" means claims, losses, actions, suits, proceedings, causes of
action, demands, damages(direct, indirect, consequential or otherwise),
judgments, executions, liabilities, responsibilities, costs,
charges, payments and expenses including, without limitation,
any professional, consultant and legal fees on a solicitor and
client basis and any associated disbursements.
SCHEDULE C
LANDLORDS WORK
1. Demolition and Construction of a new wall and millwork to existing
Boardroom
2. Steam Clean Existing Carpet
3. Repaint Premises
/s/ Wilson Russel
President- Northstar Electronic, Inc
Tenate
/s/Dely Rurise
Authorized Signatory
Landlord
THIS INDENTURE made at the City of St John's in the Province of
Newfoundland, Canada, as of this 28th day May, 1998.
BETWEEN: Par Holdings LTD., a body corporate, duly
incorporated under the laws of the Province of
Newfoundland (hereinafter called the "Landlord")
AND: Northstar Technical, Inc.,
a body corporate, duly incorporated under the
lawn of the Province of Newfoundland (hereinafter
called "the Tenant")
of the other part
WITNESSETH that in consideration of the rents, covenants and
agreements hereinafter contained the parties hereto covenant
and agree as hereinafter set forth;
ARTICLE I
THE DEMISE PREMISES
1.01 the Landlord hereby demises to the Tenant that portion of the
floor area of the commercial complex of the Landlord known as
The Par Building situate On 685-687 Water Street in the city
of St. John's, Newfoundland and consisting of approximately
2340 square feet as outlined in red on the plan or diagram
hereto annexed as schedule "A" and hereinafter referred to as
"the Demised Premise".
1.02 The Landlord hereby grants to the Tenant in common with others
having the like right, the right of ingress and egress to the
demised premises from Water Street and the right subject to
Article 5.09 herein, to park vehicles on the parking lot of
the commercial complex for the benefit of the Tenant, its
employees, customers and invitees.
ARTICLE II
TERM
2.01 TO HAVE AND TO HOLD the Demised Premises for the term of two
(2) years commencing upon the 1st day or July 1998 and ending
upon the 30th day of June, 2000. The tenant will take occupancy
as soon an the space in ready and will pay as per 3.02
ARTICLE III
RENT
3.01 Rent - The Tenant Covenants and agrees to pay to the Landlord,
without deduction, a basic rental of Twenty Four Thousand
dollars ($24,000.O0) plus H.S.T payable in equal monthly
installments for Two Thousand Three hundred dollars ($2,300.00)
H.S.T included.
3.02 Partial Month Rent - In the event that the commencement date
of This Lease should be a date other than the first of a month,
then the tenant shall pay for that month a proportionate
amount of the basic rent as the remainder of the said month
bears to the whole of the said month and thereafter on the 1st
day of each and every month during the term hereby create.
ARTICLE IV
LANDLORD'S COVENANTS
4.O0 The Landlord hereby for itself, its successors and assigns
hereby covenants with the Tenant, its successors and assigns
as follows:
4.01 That the Tenant paying the rental hereby reserved and
observing and performing the several covenants and
stipulations on its part herein contained shall hold and enjoy
the said demised premises quietly and peaceably during the
said term without any interruption by the landlord or any
person rightfully claiming under or in trust for it.
4.02 That the Landlord will maintain and repair the structure and
exterior of the demised premises other than window, door, and
plate glass and the Tenant's store front and signs.
4.03 Access by Landlord to Repair - The Landlord and all persons
authorized by it 'shall have the right to erect, use and
maintain wiring, mains, pipes, conduits and other means of
distributing services in and throuqh Demised Premises; and
the Landlord and all persons authorized by it shall have the
right from time to time and at all reasonable times to enter
upon the Demised Premises for the purpose of access thereto
for installation, maintenance and repair, and such entry shall
be deemed not to be an interference with the Tenant's
possession under this lease.
ARTICLE IV
TENANT'S COVENANTS
5.00 The tenant, for itself, its successors and assigns and to the
intent that the obligations may continue throughout the term
hereby created, hereby covenants with the Landlord, its
successors and assigns as follows:
5.01 To Pay Rent - The tenant will pay to the Landlord all rentals
provided for in this Lease and all other amounts payable by it
hereunder which shall be considered additional rental, as
herein provided in lawful money of Canada, without any set
off, compensation or deduction.
5.02 Repair - To keep the interior of the Demised Premises, and the
Tenant's interior fixtures and improvements, in good and
tenantable repair and condition and to yield up the same at
the termination of this tenancy in qood and tenantable repair
and condition, reasonable wear and tear only expected, and the
Tenant Covenants to perform such maintenance and to effect
such repairs and replacements and to decorate at its own cost
and expense as and when necessary or reasonably required La do
so by the Landlord: notwithstanding anything contained in
this section, the Landlord shall at the default of the Tenant
have the right, but not the obligation, to elect, in its sole
discretion, to perform or cause repairs, maintenance or
replacements to be undertaken by the Tenant hereunder, and to
charge the Tenant therefore. The Tenant shall have permission
to remove the existing carpet in two rooms and replace with
tiles. The Tenant agrees as per this clause to replace this
carpet at the end of the lease term)
5.03 Taxes: The Tenant shall pay for its telephone and all
business taxes, licences, rates, assessments and other charges
levied or assessed on or in respect of or in relation to the
occupancy by the Tenant or the business carried on by and
assets of the Tenant within the demised premises. In the
event of the Tenant failing to pay for such utilities and/or
for any such taxes, licences, rates, charges or assessments
which it has covenanted to pay and which shall constitute a
lien or charge upon the demised premises or the contents, the
Landlord, if such default is not cured after giving ten (10)
days notice to the Tenant may pay all or any of the same and
all such payments so made shall constitute rental forthwith
payable and interest at the rate specified in paragraph 7.01
herein from the date of each such payment until fully paid;
provided, however, that where there its a bona fide dispute of
the Tenant, forfeiture will not result from non- payment and
the Landlord shall not pay the same until such dispute has
been resolved by nither agreement of the Tenant or by the
decision of a competent authority, which ever is earlier in
date; whereupon such period of ten (10) will commence upon
the date of such agreement or decision.
5.04 Not to Assign - The rights of the Tenant under this Lease
shall not be transferred, assigned or sold and the tenant
shall not sub-let the whole or any part of the Demised
Premises nor grant any concession or license within or with
respect to the Demised Premises to any Party without, in
either case, the prior written consent of the Landlord.
However, such use must in all cases be acceptable to the
Landlord. Notwithstanding any such consent being given or any
such transfer, assignment, sub-lease or grant being made, the
Tenant shall remain responsible jointly and severally with
much transferee, assignee, sub-lease or grantee for the
fulfillment of all the obligations of the Tenant under the
Lease.
5.05 Use of Demised Premises - The Tenant will not time or occupy
the demised premises or any part thereof for any purpose
other than the operation of an office and manufacturing shop,
without first obtaining the previous written consent of the
Landlord which consent shall not be unreasonably or
arbitrarily withheld.
5.06 Painting, Decoration and Alterations - The Tenant may at any
this and from time to time at its own expense paint and
decorate the interior of the demised premises and make such
changes, alterations, additions, and improvements in and to
all the demised premised at will, in the judgment of the
tenant, better adapt the demised premises for the purpose of
its operation provided however that in so doing the Tenant
shall be responsible for the cost of any changes that may have
to be made by the Landlord in heating or air conditioning
system at the building and further that no changes,
alterations, additions or improvements shall be made without
the prior written consent at the Landlord and all changes
alterations, additions or improvements shall comply with all
applicable statutes, regulations, codes or by-laws at any
municipal, provincial or other governmental authority.
5.07 Nuisance - The Tenant shall not use or permit any part of the
demised premises to be used in a manner so as to cause a
nuisance to other tenants of the Landlord, nor to cause or
permit annoying noises, vibrations or offensive odors, and
the Landlord with regard to the portion of the building other
then the herein detained premises shall not use or permit any
part of the premises to be used in a manner so as to cause a
nuisance to the Tenant, nor to cause or permit annoying
noises, vibrations or offensive odors.
5.08 Not to affect the Landlord's Insurance - The Tenant will not
do or permit to be done or omit to do anything on the demised
premises whereby the Landlord's insurance may be rendered void
or voidable or the premium increased and if the Landlord's
insurance rate shall be increased by reason of the activity of
the Tenant, the Tenant shall pay to the Landlord an additional
rental the amount by which the insurance be so increased.
5.09 Landlord's Examination of the Demised Premises - The Landlord
and any employee, servant or agent of the Landlord shall be
entitled, at any time and from time to time to enter and
examine the state of maintenance, repair, decoration and order
of the demised premises all equipment and fixtures within the
demised premises and any improvements now or hereafter made to
the demised premises and the Landlord may give notice to the
Tenant requiring that the Tenant perform such maintenance or
affect such repairs, replacements or decorations as- may be
found necessary from such examination: the failure of
the Landlord to give such notice shaIl not however, relieve
the Tenant from its obligations to maintain, repair, decorate
and keep the leased premises and appurtenances in good order
as a careful owner would do and to make such replacement as
may be necessary.
5.10 Signs - The Tenant will not erect or permit any advertisements
or signs to be erected on or in the demised premises without
having obtained the prior written consent of the Landlord to
erect such advertisements or signs, which consent which consent
unreasonably or arbitrarily withheld.
5.11 Parking - The Tenant shall have access to the parking lot at
the rear of the complex for the duration of the Leasing
period.
5.12 Tenant to Insure - The Tenant shall take out and keep enforced
during the term property damage and public liability
insurance all in the amounts and with policies in form
satisfactory from time to time to the Landlord, with coverage
in no case to be less than $1,000,000.00. The Tenant agrees
that if the Tenant fails to take out or keep In force such
insurance, the Landlord will have the right to do so and to
pay the premium therefore and in such event the Tenant shall
repay to the Landlord the amount paid as premium, which
payment shall be deemed to be additional rental payable on
the 1st day of the next month following the said payment by
the Landlord. The Tenant shall have an insurable interest in
the Tenant's works and improvements including the store front,
stock in trade, furniture, fixtures and interior improvements
and shall be entitled to take out and keep in force insurance
coverage equal to the full insurable value thereof.
5.13 Merchandise in Common Area -- The Tenant shall not keep.
display or sell any merchandise on or otherwise obstruct or
use any part Of the sidewalk-, parking lot, vestibule area or
other common area and facilities except as permitted in
writing by the Landlord.
5.14 Garbage Debris and Refuse - The Tenant shall not place or
leave or permit to be placed or left in or upon any part of
the commercial complex outside of the demised premises, any
debris or refuse except as allowed by the Landlord at specific
times of pick-up and then deposit it in areas indicated by the
Landlord in proper receptacles provided and placed for that
purpose by the Tenant. The Tenant shall pay for the cost of
any commercial garbage and refuse removal service required in
addition to any provided by the Municipality. At the sole cost
and expense of the Tenant, the demised premises shall be
kept in a clean and sanitary condition In accordance with the
laws of the Municipality and in accordance with all
directions, rule and regulations of the Health Officer, Fire
Marshall, Building Inspector or other proper officers of the
Municipality, other agencies having jurisdiction or the
insurers of the Landlord; in the event that the Tenant fails
to comply with the foregoing provisions, the Landlord may
rectify the situation and collect the expense for such work
from the Tenant in the same manner as arrears of rent.
5.15 Not to Register Lease- The Tenant shall not register the
Lease in the Registry of Deeds for the Province of
Newfoundland or to do anything which would impair the
Landlord's right or ability to encumber the Demised Premises
5.17 No Liens - The Tenant covenants that it will not permit, do,
nor cause anything to be done to the Demised Premises which
would allow any privilege, lien, mortgage, pledge, change or
encurtibrance of any nature whatsoever to be imposed or to
remain upon the Demised premises or the Commercial Complex and
should any privilege, lien, mortgage. pledge, charqe or
encumbrance arise, than the Landlord shall be permitted but
not obliged to pay any such privilege. lien, mortgage, pledge,
charge or encumbrance and any payment so made shall be
additional rent and may be recovered from the Tenant as
arrears of rent.
5.18 Indemnify Landlord - The Tenant covenants to indemnify and
keep indemnified the Landlord from all liabilities, suits,
claims, demands and actions of every nature or kind for which
the Landlord become liable or suffer by reason of any
breach, violation or non-observance or non-performance by the
Tenant, its servants, agents or 1icensees, or any law, by-law
or- regulation or any of the Tenant's covenants herein
contained, or by reason of any injury to, or death occasioned
or suffered by any person or persons or to any property
through any act, neglect or default of the Tenant, its
servants, agents or licensees; such indemnification In respect
of any such breach, violation, or non-perfomance, damage to
property. injury or death occurring during the term of this
Lease, anything herein to the contrary notwithstanding.
5.19 Indemnify Landlord- The Landlord covenants to indemnify and
keep -indemnified the Tenant from all liabilities, suits,
claims, demands and actions of every nature or kind for which
the Tenant may become liable or suffer by reason of any
breach, violation or non-observance or nonperformance by the
Landlord, its servants, agents or licensees, or any law, by-law
or regulation, or any of the Landlords's covenants herein
contained, or by reason or any injury to, or death occasioned
or suffered by any person or persons or to any property
through any act, neglect or default of the Landlord, its
servants, agents or licensees; such indemnification in
respect of any such breach, violation. or non-performance,
damage to property, injury or death occurring during the term
of this Lease or any extension thereof shall survive the
termination of this Lease, anything herein to the contrary
notwithstanding.
ARTICLE VI
DAMAGE OR DESTRUCTION
6.01 If only the demised premises shall be destroyed by fire, or
other cause to such extend that the same shall not be capable
with due diligence of being repaired, restored or rebuilt
within a period of six(6) months after the happening of such
destruction or damage, then the Landlord or Tenant may
terminate this Lease upon thirty (30) days written notice one
to the other, given within thirty (30) day's of the date of
such destruction or damage; and the Tenant shall thereupon
immediately surrender the demised premises to the Landlord and
rent shall be apportioned to the date of such damage or
destruction.
6.02 If in the event the whole or part of the demised premises
shall, during the last two (2) years of the term of this Lease
(and if the term shall have been extended, during the last two
years of the latest extension thereof) be destroyed or damaged
to the extent or fifty per cent (50%) or more of the then
value of the premises, then in either such event the Landlord
or the Tenant may terminate this Lease as of the date of such
destruction or damage by giving notice to the other party
within thirty (30) days thereafter or its election to do so
6.O3 Whether or not the demised premises shall have been destroyed
or damage if the commercial complex shall be destroyed or
damaged by fire or other cause to such an extent that the same
shall not be capable with due diligence of being repaired
restored or rebuilt within a period to twelve (12) months
after the happening of such destruction or damage, then the
Landlord may tenninate this Lease upon written notice given
within thirty (30) days after the happening of such
destruction or damage; and the Tenant shall thereupon
immediately surrender the demised premises to the Landlord and
rent shall be apportioned to date of such termination,
unless the demised premises shall also have been destroyed or
damaged in which event rent shall be apportioned to the date
of such destruction or damage, provided, however, that if the
commercial complex can with due diligence be repaired,
restored or rebuilt within the period of twelve (12) months
after the happening of such destruction or damage, the
Landlord may rebuild the commercial complex; provided further
that if the landlord becomes obligated to rebuild the
commercial complex pursuant to this provision, the Landlord in
lieu of rebuilding the building and improvements, constituting
the commercial complex in the same form that they previously
were, shall be entitled to build a commercial complex in
accordance with any plan chosen by the Landlord provided that
the floor area at the commercial complex to be constructed is
not substantially less than the floor area of the buildings
destroyed or damaged immediately prior to such damage or
destruction.
6.4 If the demised premises are destroyed or damaged by fire or
other cause and notice to terminate this Lease shall not have
been duly given as herein provided, the Landlord shall repair
the demised premises (excluding Tenant's fixtures and leasehold
improvements) with all reaonable speed, and (i) if
the damage is such as to render the demised premises wholly
unfit for occupancy, all rent hereunder shall cease from the
time of the occurrence of the damage untill the completion of
repairs to the demised premises by the Landlord, or (ii) if
the darnaqe is such that the demised premises can be partially
used by the Tenant, the minimum rent (but not percentage or
additional rent) shall abate in the proportion that the part
of the demised premises renderad unfit fur occupancy bears to
the- whole of the demised premises from the time of the
occurance of the damage until the completion of repairs to
the demised premises (excluding Tenant'e fixtures and
leasehold improvements) by the Landlord, and (iii) upon
completion or repairs to the demised premises (excluding
Tenant's fixtures and leasehold improvements) by the Landlord,
all rent under this Lease shall re-comence and the Tenant
shall with all resonable speed and at its own expense
install all necessary Tenant's fixtures to enable the Tenant
to re-open for business.
ARTICLE VII
INTEREST ON ARREARS
7.01 if the Tenant fails to pay to the Landlord when the same is
due and payable, any basic rent, or any other charge under
this Lease such amount or amounts shall bear interest at a
rate of two per cent (2%) per annum in excess of the minimum
lending rate to prime commercial borrowers from time to time
current at the main Branch of the Royal Bank of Canada, St.
John's, Newfoundland, from the date upon which same was due
until actual payment thereof. Nothing herein contained shall
be construed so as to compel the landlord to except
payment of rent in arrears should the Landlord exact to apply
its remedies under Article 8.01 or any other Article of this
Lease in the event of default hereunder by the Tenant.
ARTICLE VIII
DEFAULT
8.01 If the basic rent or any other sums of money payable
hereunder by the Tenant or any part thereof shall at any time
be unpaid for ten (10) days after becoming payable, whether
demanded or not, or if any covenant on the Tenants part
herein contained shall not be performed or observed, or in
case the demised premises are vacated or become vacant or
remain unoccupied for five (5) days or are not used for the
purpose provided in this Lease, or in case the term or any of
the goods fixtures or equipment of the Tenant are taken in
execution or in attachment or if a writ of Execution is issued
against the goods, fixtures; or equipment of the Tenant, or in
case the Tenant becomes bankrupt or insolvent or makes an
assignment for the benefit of its credirors, or becoming
bankrupt or insolvent takes the benefit of any act that may be
in force for bankrupt or insolvent debtors, or makes a
proposal, or if the Tenant shall make a bulk sale of its
goods, fixtures or equipment, then in the happening of any
such case the full amount of the then current months basic
rent and the next three (3) months of basic rent shall
immediately become due and payable and the said term shall
immediately become forfeited and void, and the Landlord may,
without notice or any form of legal process, forthwith re-
enter upon and re-take possession of the demised premises and
remove the Lessee's effects therefrom and such property may be
stored in a public warehouse or elsewhere at the cost of and
for the account of the Tenant, any statute or law to the
contrary notwithstanding, and without prejudice to any claim
for rent or damages which the Lessor may have aqainst the
Tenant or to the right of action of the Tenant in respect of
any antecedent breach of the Tenant'S covenant herein
contained. If at any time an action is brought for recovery
of possession of the demised premises, for the recovery of
rental or any other amount due under the provisions of this
lease, or bocause of a breach by act or omission of any other
covenant herein contained on the part of the Tenant, and a
breach is established, the Tenant shall pay to the Landlord
all expenses incurred therefore.
8.02 Forbearance by Landlord - Any condoning, excusing or
overlooking; by the Landlord of any default, breach or
nonperformance by the Tenant at any time or times in respect
of any payment covenant, agreernent, proviso, or condition
contained in the Lease shall not operate as a waiver of the
Landlord's right in respect of any subsequent and/or
continuing default, breach or nonperformnance, nor so as to
defeat or affect in any way the rights of the landlord herein
in respect of any such subsequent default, breach or
nonperformance.
8.03 Time of the Essence - Time shall be of and continue to be of
the essence of the Lease and of all covenants, agreements.
provisos or conditions contained in the Lease.
8.04 Absconding Tenant- Notwithstanding any of the other
provisions in this Lease, if the Tenant taken or attemts or
threatens to take any action to cease to continuously and
actively operate its business in the demised premises or to
abandon the demised premises or if the Landlord has reasonable
grounds to believe that the Tenant may take or atternpt to take
any action to cease to continuously and actively operate its
business in the demised premises or - to abandon the demised
premises then in addition to any other remedy the Landlord
may have under this Lease or in law or in equity, the Landlord
may accelerate the current month's and the next three (3)
month's basic rent payable under this Lease for the term hereof
and without notice immediately enter upon the demised
premises, seize the Tenant's inventory, fixturss and
improvements and sell all or any portion of the inventory
stock-in-trade, and fixtures by public auction or a private
sale, and apply the proceeds to the accelerated rent and the
other obligations of the Tenant under this Lease.
ARTICLE IX
RENEWAL
9.01 If the Tenant duly and regularly performs each and every of
the covenants, provisos and agreements herein contained on the
part of the Tenant to be paid, done and performed the
Landlord will upon the written request of the Tenant given not
less than six (6) months before the expiration of the term of
this Lease, grant the Tenant a renewal of this lease for a
further term of three years on the same terms and conditions
as herein contained, except for basic rental which shall be
re-negotiated, and escept for this covenant to renew.
ARTICLE X
ASSIGNMENT BY LANDLORD
10.01In the event of sale or lease by the Landlord of the
commercial Complex or a portion thereof contained in the
Demised premises or the assignment by the Landlord or
this Lease or any interest of the landlord hereunder, and
to the extent that such purchaser, Lessee under such
lease, or Assignee has assumed the covenants and
obligations or the Landlord hereunder, the landlord
shall, without further wrirten agreement, be freed and
relieved of liability upon such covenants and
obliqations, the Tenant shall from time to time at the
request or the Landlord certify or acknowledge to any
mortgagee, purchaser, Lsssee or Aseignee as to the status
and validity of this lease and the state of the
Landlord's and Tenant's account hereunder.
ARTICLE XI
MISCELLANEOUS
11.0Outing of Premises by Tenant and Landlord's improvements-
The Tenant covenants that it will leave
the demised premises in good repair, reasonable wear and
-tear, damage by fire, lighting and tempest, act of God
and the Queen's enemies only excepted, and it is
understood and agreed that all work done and materials
supplied by the Tenant shall not be the Tenant's fixtures
but shall become the property of the landlord except for
such fixtures and equipment that can be removed by the
Tenant without damage to the demised premises.
11.02 Notice - Any notice, demand, request or consent required
or contemplate by any provision of this lease shall be
given or made in writing and delivered or mailed by
Registered Mail, in the case of the Landlord to Par
Holdings Ltd., 685 Water street, St. John's,
Newfoundland, and in the case of the Tenant to 687 Water
Street, St. John's, Newfoundland, and any such notice,
denmand, request or consent shall be conclusively deemed
to have been given or made on the day on which such
notice, demand, request or consent is delivered, or, if
mailed, then on the next business day following the date
of the mailing, as the case may be.
ARTICLE XII
INTERPRETATION
12.01 Validity - If a term, covenant or condition of this
Lease. or the application thereof to any person or
circumstances is held to any extent invalid or
unenforceable the remainder of this lease or the
application of the term, covenant, or condition to
persons or circumstances other than those as to which it
is held invalid or unenforceable will not be affected.
12.02 Other Represetation- This lease and the schedules
annexed hereto constitute the entire agreentent between
the Landlord and the Tenant and neither party is bound by
any representation, warranty, promise, agreelnent or
iducement not embodied herein.
12.03 Subordination - This Lease is subject and subordinate to
all mortgages or deeds of trust which may now or at any
time hereafter affect the Demised Premises in whole or in
part or the commercial complex in whole or in part and
whether or not any such mortgages or deeds of trust shall
effect only the Demised Premises or the coramercial
complex or shall be blanket mortgages or deeds of trust
affecting other premises as well, and the Tenant
covenants and agrees at any time upon notice from the
Landlord to attorn to and become a tenant or mortgagee or
trustee under any such terms and conditions as are herein
set forth. This lease shall also be subject and
subordinate to all renewals, modifications,
consolidations, replacements and extensions of any such
mortgages or deeds of trust. In confirmation of such
subordination and agreement to attorn, the Tenant shall
execute promptly upon request by the Landlord any
certificates and instruments which may from time to time
be requested to give affect thereto.
12.04 This Lease sha11 enure to the benefit of and be binding
upon the respective successors and assigns of each at the
parties hereto and where and context so requires or
permits the necessary grammatical changes shall be made
accordingly.
ARTICLE XIII
ARBITRATION
13.01 If any dispnte or question shall arise between the
landlord and the Tenant touching this Agreement or
anything, herein contained, or the construction hereof or
the rights, duties or liabilities in relation to the
Demised premises, the matter in difference shall be
submitted to a single Arbitrator if the parties can agree
on one and in the event that they cannot so agree then
each party shall appoint one Arbitrator and the two so
appointed shall select a third Arbitrator who shall be
the chairman and the matter shall then proceed to
arbitration in accordance with the provisions of The
Judicature Act relating to arbetration or such other
legislation as any be airbotituted thereof and the
decision of the Arbitrator or Arbitrators shall be final
and binding upon the parties.
IN WITNESS WHEREOF the parties hereto have properly executed these
presents the day and year first before written.
SINGED SEALED AND DELIVERED
in the presence of:
/S/ Roma Kelly /S/ Dave Ingelburg
/S/ Dr. Dormheimer /S/ Wilson Russell
CONSENT OF ACCOUNTANTS
We consent to the inclusion of all financial
data prepared by our firm
in this registration statement on Form SB-1 (File
No.333-90031
December 13, 1999 /s/ SULLIVAN, LEWIS AND WHITE
June 17, 1999
DISCLOSURE STATEMENT
SCIENTIFIC TECHNOLOGIES, INC.
Suite 1455, 409 Granville Street, Vancouver, British Columbia,
Canada V6C 1T2 Tel. (604) 685-0364
DATE OF DISCLOSURE STATEMENT: June 15, 1999
TYPE OF SECURITIES OFFERED: Shares of Common Stock of the Company
NUMBER OF SECURITIES OFFERED: Up to 1,000,000 Shares of Common Stock
(the "Shares")
Offering Price Underwriter Discount and
Commissions Proceeds to Company
Per Share $1.00 NIL
$1.00
Total (If all shares sold) $1,000,000 NIL
$1,000,000
The securities offered are offered on a best efforts basis. The Shares
are offered by the Company without the benefit of an underwriter.
Sales of Common Stock will commence on the date of this Disclosure
Statement and will terminate on February 28, 2000. There is no minimum
number of Shares to be sold.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"), AND ARE PROPOSED TO BE ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT. UPON ANY SALE,
SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S,
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE ACT.
INVESTMENT IN THE COMMON STOCK OFFERED BY THE COMPANY INVOLVES A HIGH
DEGREE OF RISK. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. PROSPECTIVE INVESTORS SHOULD
RETAIN THEIR OWN PROFESSIONAL ADVISORS TO REVIEW AND EVALUATE THE
FINANCIAL, ECONOMIC, TAX AND OTHER CONSEQUENCES OF THIS INVESTMENT.
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN
AFFORD TO LOSE THEIR INVESTMENT IN ITS ENTIRETY.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON
THE MERITS OF THIS OFFERING OR GIVEN ITS APPROVAL TO ANY SECURITIES
OFFERED OR TO THE TERMS OF THE OFFERING. THE UNITED STATES SECURITIES
COMMISSION HAS NOT PASSED UPON THE ACCURACY OR COMPLETENESS OF THIS
DISCLOSURE STATEMENT. THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES
OFFERED HEREUNDER ARE EXEMPT FROM REGISTRATION.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY 3
RISK FACTORS 5
PLAN OF DISTRIBUTION 10
USE OF PROCEEDS 13
DILUTION 14
DESCRIPTION OF BUSINESS 15
DESCRIPTION OF PROPERTY 20
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES 20
REMUNERATION OF DIRECTORS AND OFFICERS 22
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN SECURITY OWNERS 23
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS 24
SECURITIES BEING OFFERED 25
LITIGATION 27
FINANCIAL STATEMENTS 27
EXHIBITS 28
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this
Disclosure Statement and the exhibits hereto. Prospective investors
are urged to read this Disclosure Statement in its entirety.
The Company
Scientific Technologies, Inc., the "Company", is a Delaware corporation
incorporated on May 11, 1998.
The Offering
Securities Being Offered Up to 1,000,000 shares of Common Stock of
the Company at a price of $1.00 US per share; See "DESCRIPTION OF
SHARES."
Purchase Price $1.00 US per Share. See "TERMS OF THE
OFFERING."
Regulation S: The Shares are being offered pursuant to
Regulation S of the United States Securities Act of 1933 to persons who
are not "U.S. Persons". See "PLAN OF DISTRIBUTION".
Registration Rights: The Company has agreed to register the
Shares with the United States Securities and Exchange Commission in
order to qualify the resale of the Shares in the United States. The
Company will file the required registration statement within a
reasonable time of acceptance of the Subscription. See "PLAN OF
DISTRIBUTION".
Securities Issued: As of the date of this Document, there are
7,404,481 shares of Common Stock issued and outstanding. Upon the
completion of this offering, there will be 8,404,481 shares of Common
Stock issued and outstanding if the offered Shares are fully sold. See
"PRINCIPAL STOCKHOLDERS" and "PLAN OF DISTRIBUTION."
Use of Proceeds: The proceeds to the Company from the sale
of the Shares will be approximately $1,000,000, assuming all Shares are
sold. See "USE OF PROCEEDS."
Dilution: Investors in this offering will experience
substantial dilution. Dilution represents the difference between the
offering price and the net tangible book value per share after the offering.
Additional dilution may result from future offerings or from the exercise
of future options pursuant to any stock option plan or warrants that may
be established by the Company. See "DILUTION".
Risk Factors: The securities offered hereby involve a high
degree of risk and should not be purchased by anyone who cannot afford the
loss of their entire investment. Prospective investors should carefully
review and consider the factors set forth in the following section of this
Document entitled "RISK FACTORS," as well as the other information
set-forth herein, before subscribing for any of the Shares offered hereby.
<PAGE>
RISK FACTORS
An investment in the Shares offered herein is highly speculative and
subject to a high degree of risk. Only those persons who can bear the
risk of the entire loss of their investment should participate. Any
investor should carefully consider the risks described below and the other
information in this Disclosure Statement and any other filings the Company
may make with the United States Securities and Exchange Commission
(the "SEC") in the future before investing in the Company's common stock.
The risks described below are not the only ones affecting the Company.
Additional risks that the Company is not aware of or that the Company
currently believes are immaterial may become important factors that affect
its business. If any of the following risks occur, or if others occur,
the Company's business, operating results and financial condition could
be seriously harmed. The trading price of its common stock could decline
due to any of these risks, and any investor may lose all or part of his
or her investment.
Risk Factors: An investment in the Common Stock involves many substantial
risk factors, including those associated generally with a new venture and
a high technology undertaking which does not have a developed marketing
structure into a tested market. Although management itself feels that
there is substantial demand for its product at its proposed price, that
assumption is yet to be tested in full operation. The Company itself
has a limited operating history.
Risk Factors Related to the Company's Business
Status of Venture: The Company, formed in 1998, has had no significant
operations or business assets, and is yet in its early, development stage.
In January, 1999 it purchased all of the shares of Northstar Technical
Inc. ("Northstar") as described below.
No Operating History: The Company has been in actual operation under its
current management for a relatively short time. It faces all of the risks
inherent in a new business and those risks specifically inherent in the
development and operation of a new business. The likelihood of the
Company's success must be considered in light of the problems, expense,
difficulties and delays frequently encountered in connection with a new
business, including,but not limited to, uncertainty as to the ability to
develop a market for a new product in a new area. The Company is not
expected to generate any significant revenues until it completes a further
offering of its securities. The purchase of the securities offered hereby
must be regarded as the placing of funds at risk in a new or "start-up"
venture with all of the unforeseen costs, expenses, problems and
difficulties to which such ventures are subject.
Management Risks Inherent in High-Technology Businesses: New ventures,
particularly those involved in high technology, have substantial
inherent risks. These risks are in three general areas: technical,
mechanical and human. Notwithstanding any pre-production planning, any
new products can incur unexpected problems in full scale production, all
of which cannot always be foreseen or accurately predicted. Designs can
become unworkable, for unpredicted reasons. Quality control and component
sourcing failures are to be expected from time to time. Any operation,
including the one contemplated here, is substantially dependent upon the
capabilities and performance of both management and sales personnel.
Mistakes in judgement or performance can be costly and, in instances,
disabling. Therefore, management skill, experience, character and
reliability are of premium importance.
Production Risks in High-Technology Ventures: The high-technology
product line requires the Company to deal with suppliers and subcontractors
supplying highly specialized parts, operating highly sophisticated and
narrow tolerance equipment and performing highly technical calculations
and tasks. Components must be custom designed and manufactured, which is
not only complicated and expensive, but can require a number of months to
accomplish. Slight mistakes in either the design or manufacturing can
result in unsatisfactory parts which may not be correctable. Since this
operation uses the talents of various professions, mistakes from very
slight oversights or miscommunications can occur, resulting not only in
costly delays and lost orders but in disagreements regarding liability
and, in any event, extended delays in production.
Conflicts of Interest in Economic and Cost Data: The only production
cost studies and market analysis which are relied upon in this Confidential
Private Placement Offering Memorandum were prepared and performed by
personnel of the Company. Those persons will derive substantial personal
benefits from the start-up of the Company, part of which income will
result whether or not the Company ever achieves sufficient income to
reach economic equilibrium enabling it to make dividend distributions to
shareholders.
Nature of Market Appeal: Although Management believes that the product
will have sustained market demand over an extended period into the future,
it is possible that current indications of commercial demand are limited
to current market conditions only. It is possible that demand may be
directed to other similar or competing products, because of technical
developments or preferences or simply because of overwhelming commercial
promotion, within a short period of time, thereby limiting the commercial
viability of the product either prior to or shortly after the Company
reaches an initial level of economic profitability. Unexpected negative
publicity, even if not relating directly to the Company or its own products
and even if unwarranted, can devastate a market. Such unusual fortuities
can never be predicted.
<PAGE>
Risk Factors Relating to Market Protection
Market Competition: The fishing trawl monitoring business is
dominated by a number of larger competitors who are well established
in the market place, have experienced and talented management, are well
financed and have well recognized trade names related to their product
lines. Although the Company believes Northstar's product line has
certain distinctive characteristics which will allow it to penetrate
the existing market and acquire a sufficient market share in its special
niche to be profitable, there is no assurance that existing companies will
not aggressively compete by introducing new products substantially similar
to the Company's and at a price below that at which the Company can compete.
Should this occur, the Company may not be able to survive for a sufficient
time to reach viability.
Inherently Limited Nature of Patent Protection: The Company knows of
several products directly competing with Northstar's NETMIND technology
described inthis Disclosure Statement and it is conceivable that new
similar products are now being or will be produced and distributed by
one or more other entities. As some security from competition within
the market place, the Company is relying on the protection which it
hopes to realize under the United States and foreign patent laws.
It is even conceivable that certain patent copyright
claims superior to the Company's currently unfiled are either pending
or planned, either within the U.S. or other foreign countries, which
could significantly impact the Company's rights to the use of all, or
important aspects, of the NETMIND technology. It is further
conceptually possible that similar devices could be designed which,
although not identical and therefore not infringing upon the Company's
proprietary right, could function adequately to be distributed into
the same market. Moreover, it is even possible that an unpatented or
uncopyrighted but prior existing device or design may exist which simply
has never been made public and therefore not known to Management or the
industry in general. Such a device could be introduced into the market
without infringing upon the Company's current rights. If any such
competing non-infringing devices are produced and distributed, the
Company's profit potential could be seriously limited.
Patent Protection is Not Self Enforcing: The Company plans to file
copyright claims within the United States and countries where major
markets exist. However, even apart from a superior right to the
Company's claim to exclusive design and concept rights, if one or
more competitors should yet produce and distribute a product apparently
within the protection of one or more of those claims, the cost of
enforcing the Company's claim could fall on the Company itself.
The costs can be substantial and ultimately could be beyond the
financial resources of the Company. Even if it is not, the legal
costs required in protecting that claim could seriously debilitate
the Company's other operations. This is an inherent problem in relying
upon patent claims for market protection. Thus, even though the patent
may be valid, investors should be aware that it is not self-enforcing.
Cautions on Copyright Protection: If any of those copyright claims are
challenged in a future lawsuit by one or more competitors, it is possible,
although not probable, that a court could yet find one or more of those
claims invalid, or at least too broad. The courts, and not the granting
agencies are generally the final arbiters on such matters. If challenged,
the court through its own interpretation of the laws and facts may either
determine the patent to be completely invalid or the claim to be
considerably narrower than defined in the patent documents issued by
the patent offices.
Dependence Upon Key Personnel: At least in the near term, the
Company is dependent upon its executive officers and certain key
employees and consultants, the loss of any one of whom could have a
material adverse effect on the Company. The Company has not obtained
key man life insurance on the lives of its key personnel except for a
policy of CDN $250,000 on Wilson Russell payable to Northstar Technical
Inc. At the present time, the Company has not entered into consulting
and employment agreements with each of its key employees. Alternatively,
the primary means of maintaining their relationship with the Company's
pursuit is their substantial equity interest. The continued success of
the Company will also be dependent upon its ability to attract and retain
highly qualified personnel in the sales area. There can be no assurance
that the Company will be able to recruit and retain such personnel.
Risks Related to the Management Structure of the Company
Limitation on Liability of Management: Management will have no
liability to the Company for any mistakes or errors of judgement
or for any act or omission believed to be within the scope of
authority conferred by the Company's articles unless such acts or
omissions were performed or omitted fraudulently or in bad faith,
constituted gross negligence or were a violation of a director's or
officer's fiduciary obligations to the Company. The Company has
agreed to indemnify the officers and directors against all loss or
damage even if caused by an officer's or director's simple negligence
unless such loss or damage was caused by that officer's or director's
fraud, bad faith, gross negligence or breach of fiduciary obligation.
<PAGE>
Risks Inherent in Business Investment
No Assurance of Profitability of Operation: Notwithstanding the business
plan and projections made by the Company, there can be no assurance that
the Company will be able to operate the commercial operation successfully
and in fact, may ultimately fail. Even if the commercial operation itself
is successful, there is no assurance that any specific level of
profitability will be achieved by Management.
Application of Revenues: Although earnings sufficient to allow the
possible payment of stock dividends may in the future develop, there
is no assurance that earnings sufficient to pay such dividends will
ever be achieved. Even if achieved, there is no assurance that such
funds will not be applied by Management to other purposes. For instance,
Management could apply those funds to payment of other debt which either
now exists or may be incurred in the future, capital expansion or
improvements, the creation of reserves, the payment of compensation or
any other of a variety of business purposes. The decision of what
portion of earnings is to be distributed in payment of dividends and
what portion is to be retained for any of those other purposes is
inherently within the discretion of Management.
Dilutionary Possibilities: A Board of Directors has the inherent right
under applicable law, for whatever value the Board deems adequate, to the
limit of shares authorized by the Articles, to issue additional shares,
and all Common Stock shareholders, regardless of when the stock is issued,
thereafter generally rank equally in all aspects of that class of stock,
regardless of when issued. A majority of shareholders can vote to amend
the Articles of Incorporation to authorize the issuance of additional
preferred shares. The Board of Directors likewise has the inherent right,
limited only by applicable law, provisions of the Articles of Incorporation
and existing resolutions, to expand the number of shares in a series,
createnew series and to establish preferences and all other terms and
conditions in regard to such newly created series. Those terms and
conditions may include preferences on an equal or prior rank to existing
series and to all Common Stock. Those shares may be issued on such terms
and for such consideration as the Board then deems reasonable and such
stock shall then rank equally in all aspects of the series and on the
preferences and conditions so provided, regardless of when issued. Any
of those actions can not only dilute the Common Shareholders but the
relative position of the holders of any series of any preferred class.
Current shareholders have no rights to prohibit such issuances nor
inherent "preemptive" rights to purchase any such stock when offered.
RISKS RELATING TO THE NATURE OF THE OFFERING
Arbitrary Offering Price: The offering price of the Common Stock was
arbitrarily determined by the Management and is not based on any specific
recognized criteria of value or other practices. Quite specifically, it
should be recognized that it is impossible to determine at what price if
anything, those shares would sell. See "Terms of Offering", and
"Conflicts of Interest".
Dilution of Proceeds from Common Stock: The Common Stock offered
hereunder is being sold at US$1.00 per share. Subscribers under this
offering will suffer an immediate dilution of their rights and
contribution, as compared to the current shareholders of the Company.
See "Terms of Offering" and "Financial Statements". While Management
feels that the value of its technology and the business plan discussed
herein justifies the subscription price, there is no assurance that
this venture will succeed, thereby confirming that projection of
disproportionate value.
GENERAL CAUTION: For all of the aforesaid reasons, and others set
forth herein, the very nature of the Company, its management structure
and the securities being offered here, each involve a notable risk.
Any person considering an investment in the securities offered hereby
should be aware of these and other risk factors as set forth in this
Disclosure Statement. No person should invest in these securities if
that person anticipates a need for immediate return on his investment.
These securities should only be purchased by persons who can afford to
absorb a total loss of their investment and, at the very least, have no
need for immediate return on that investment.
PLAN OF DISTRIBUTION
Securities Offered
The Offering consists of the offering of up to 1,000,000 shares of
Common Stock of the Company, par value $0.0001 per share (each a
"Share") at a price of $1.00 US per Share (the "Offering").
Sales of Common Stock to the public will commence on the date of this
Disclosure Statement and will terminate on February 28, 2000, unless
extended by the board of directors of the Company. There is no minimum
number of Shares to be sold.
Capital Structure: The Company is authorized to issue a total of
100,000,000 shares of Common Stock and 20,000,000 shares of Preferred
Stock, all of a par value of $0.0001 per share. At the present time,
the Company has issued and outstanding a total of 7,404,481 shares of
that Common Stock. If this Offering is fully subscribed, a maximum of
1,000,000 further shares will be issued in return for those subscriptions.
This will bring the total shares outstanding, at the closing of this
Offering to 8,404,481 shares.
<PAGE>
Regulation S
The Offering is being made pursuant to Regulation S of the United States
Securities Act of 1933 (the "Act"). The Offering is made to persons who
are not "U.S. Persons" as defined by Regulation S of the Act. A "U.S.
Person" is defined by Regulation S of the Act to be any person who is:
a. any natural person resident in the United States;
b. any partnership or corporation organized or incorporated under the
laws of the United States;
c. any estate of which any executor or administrator is a U.S. person;
d. any trust of which any trustee is a U.S. person;
e. any agency or branch of a foreign entity located in the United States;
f. any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary organized,
incorporate, or (if an individual) resident in the United States;
and
g. any partnership or corporation if:
(1) organized or incorporated under the laws of any foreign
jurisdiction; and
(1) formed by a U.S. person principally for the purpose of investing
in securities not registered under the Act, unless it is organized
or incorporated, and owned, by accredited investors [as defined in
Section 230.501(a) of the Act] who are not natural persons,
estates or trusts.
By execution of the Subscription Agreement, each subscriber for shares
(a "Subscriber") will represent to the Company that the Subscriber is
not a U.S. Person and will agree with the Company as follows as a
condition of the Company selling Shares to any Subscriber:
(A) The Subscriber will resell the Shares only in accordance with
the provisions of Regulation S of the Act pursuant to registration
under the Act, or pursuant to an available exemption from registration
pursuant to the Act;
(B) The Subscriber will not engage in hedging transactions with
regard to the Shares unless in compliance with the Act;
(C) The Subscriber will acknowledge and agree that all certificates
representing the Shares will be endorsed with the following legend in
accordance with Regulation S of the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN
ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT.
SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S,
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT"
(A) The Company will refuse to register any transfer of the Shares
not made in accordance with the provisions of Regulation S of the Act,
pursuant to registration under the Act, or pursuant to an available
exemption from registration.
Registration Rights
The Company will prepare and file a registration statement with the
United States Securities and Exchange Commission (the "SEC") pursuant
to the Act on a Form SB-1, or other appropriate registration statement,
as required to qualify the Shares purchased by each Subscriber for resale
in the United States (the "Registration Statement"). The Company will
undertake to file the Form SB-1 with the SEC within a reasonable time
following the completion of the Offering of the Shares. The Company will
use its best efforts to ensure effectiveness of the Registration Statement
within a reasonable period of time following filing of the Registration
Statement.
Local Securities Laws
The Offering and any subscription for Shares is subject to compliance with
the securities laws and other applicable laws of the jurisdiction in which
any Subscriber for the Offering is resident. Each Subscriber will deliver
to the Company all other documentation, agreements, representations and
requisite government forms required by the lawyers for the Company, in
addition to the Subscription Agreement, as required to comply with all
securities laws and other applicable laws of the jurisdiction of the
Subscriber. The Company will not grant any registration or other
qualification rights to any Subscriber, other than the agreement of
the Company to register the Shares with the SEC, as discussed above.
Best Efforts Basis
The Shares are being offered by the Company on a "best efforts". There is
no minimum number of Shares to be sold pursuant to this Offering. The
Company may immediately use proceeds obtained from this Offering. All
proceeds received by the Company from subscribers for the Shares offered
hereby will be available to the Company immediately.
<PAGE>
SUBSCRIPTION AGREEMENT
Subscription for the Shares shall be made pursuant to a subscription
agreement (the "Subscription Agreement") in the form attached to this
Disclosure Statement. The Subscription Agreement contains, among other
things, customary representations and warranties by the Company, covenants
of the Company reflecting the information set forth herein,
representations by the investors and appropriate conditions to closing.
Underwriter
The Shares are being offered by the Company to the public without the
benefit of an underwriter.
Discounts and Commissions
The sales of the Shares being offered by the Company will be carried out
by the Company. The Company will not discount the price of the Shares or
pay a commission to any dealer in connection with the sale of the Shares.
USE OF PROCEEDS
Use of Proceeds: It is estimated that the Company will use the maximum
funds of $1,000,000 in the manner set forth below:
Production (Marine Electronics) $ 150,000
Production (Contract Manufacturing) 200,000
Marketing (Marine Electronics) 200,000
Business Development (Contract Manufacturing) 200,000
Operating Capital 250,000
=========
$1,000,000
The actual expenditures of the proceeds of the Offering may differ
substantially from the estimated use of proceeds. The actual expenditures
of the proceeds of the Offering will be according to the expenditures
deemed by the Company and its board of directors to be in the best
interests of advancing the business of the Company. The actual
expenditures will also vary from the estimated use of proceeds if
less than all of the Shares are sold.
The Company anticipates that the net proceeds from the Offering will be
sufficient to meet its financial requirements for only a short period of
time. The Company, therefore, will require substantial additional capital
to fund its contemplated business plan in the near future.
The Company anticipates expenses associated with the Offering, including
legal, accounting and stock transfer agent expenses, will be approximately
$10,000 US. The Company anticipates expenses associated with the
registration of the Shares issued pursuant to the Offering, including
legal and accounting expenses, will be approximately $30,000 US.
DILUTION
"Net tangible book value" is the amount that results from subtracting the
total liabilities and intangible assets of an entity from its total assets.
"Dilution" is the difference between the offering price of a security such
as the Shares, and its net tangible book value per Share immediately after
the Offering, giving effect to the receipt of net proceeds in the Offering.
As of the date of this Disclosure Statement, the net tangible book value of
the Company was $156,848 or approximately $0.021 per share. Giving effect to
the sale by the Company of all offered Shares at the Offering price, the pro
forma net tangible book value of the Company would be approximately $156,848,
or approximately $0.138 per Share, which would represent an immediate
increase in net tangible book value of approximately $0.117 per Share to
present shareholders and an immediate dilution of approximately $0.362
per Share, or approximately 86.2% to new investors.
The following table illustrates the pro forma per Share dilution assuming
the maximum Shares offered are sold.
ASSUMING MAXIMUM SHARES SOLD
Offering Price (before deduction of Offering expenses) $1.000 per share
Net tangible book value before Offering $0.021 per share
Net tangible book value after Offering $0.138 per share
Dilution to new investors $0.862 per share
Dilution as a percentage 86.2%2
<PAGE>
DESCRIPTION OF BUSINESS
CORPORATE BACKGROUND
Corporate Organization
History: The Company is a corporation organized under the laws of the
State of Delaware on May 11, 1998.
History and Current Status: The Company was originally incorporated for
the purpose of high technology development and manufacturing of
underwater communications systems and contract manufacturing.
Corporate Facilities: The Company maintains its principal corporate
offices at #1455 - 409 Granville Street, Vancouver, British Columbia,
Canada V6C 1T2.
Introduction: The Company acquired all of the issued and outstanding
common shares in Northstar Technical Inc. ("Northstar") in January,
1999. Northstar is a high technology development and manufacturing
company with two main business activities. One is underwater
communications systems, the other is contract manufacturing.
Northstar's objectives are to become a leader in marine electronics
and a major regional contract manufacturer. As a result of the
acquisition, Northstar became a subsidiary of the Company.
Northstar - Corporate Information: Northstar is a corporation
incorporated under the laws of Newfoundland on July 5, 1989 and
extra-provincially registered in British Columbia on April 1, 1997.
The registered and records offices of Northstar are located at 10
Fort William Place, P.O. Box 5939, St. John's, Newfoundland, A1C
5X4 (Telephone: (709) 722-8735, Facsimile: (709) 722-1763).
Northstar's head office is located at Suite 1455, 409 Granville
Street, Vancouver, British Columbia, Canada, V6C 1T2 (Telephone:
(604) 685-0364, Facsimile: (604) 689-8337).
Northstar - General Development and History: Northstar was
founded in 1989 by Dr. Wilson Russell as a technology development
and manufacturing company. Northstar acquired the initial
technology for the NETMIND system from the receiver of National
Petroleum and Marine Consultants Limited and Altair Marine Systems
Limited for the sum of CDN$1.00, which two companies had spent an
aggregate CDN$1,740,000 on the partial development of the technology.
Northstar has since spent over CDN $3,500,000 to complete the
development and commercialization of the NETMIND system and establish
a production operation. The basic technology was commercialized in
August 1996 when the first industrial system was produced. The
plant has since manufactured over thirty complete systems.
The customers of the NETMIND system include the National Oceanics
and Atmospheric Administration (NOAA) in the United States, the United
States Department of the Interior and Fishery Products International
(FPI) in Canada.
In 1995, Northstar signed a Teaming Agreement with Loral Librascope
("Loral") (now Lockheed Martin) of Glendale, California pursuant to
which, if Loral were successful in a proposal to the Canadian Navy,
Northstar would assemble and test multi-function work stations
(submarine control consoles). In 1997, Lockheed Martin entered
into a contract with NTI pursuant to which NTI assisted
Lockheed Martin with the production of the first prototype console
on their premises. NTI is attempting to secure a sole source
contract to manufacture control consoles for the Upholder submarines
which Canada recently purchased from the United Kingdom.
Background Technology: Northstar has developed a core technology
for underwater communications which has applications in the fishery,
offshore oil and gas, defence, marine transportation, oceanographic
and environmental industries. The basic engines are underwater sensors
which take measurements and transmit the information back to a receiver
on board a ship or oil rig.
Each sensor is equipped with one or more acoustic transducers depending
on its function. Analog and digital signal processing and power
management functions are performed by the sensor electronics.
The telemetered data are received by a hull mounted, hydrodynamically
shaped hydrophone. The received signals are amplified at the hydrophone
for transmission via cable to the deck unit processor/display, a small
cabinet mounted at a convenient location on the bridge. The processor
portion of the deck unit decodes the signals and converts them into
engineering units for display on a high resolution colour monitor.
The NETMIND System: The first application of Northstar's core
technology is the NETMIND system for the world's commercial fishing
industry.
NETMIND monitors the performance of a trawl and is both a conservation
tool and an efficiency tool. It consists of a group of electronic
sensors that transmit measurements from the net through the water to
a receiver on the ship. The information is displayed on a computer
screen and the captain can tell what activities are occurring in the
net. He then knows how to adjust the height and width of the net
opening, how much fish are in the opening and when the net is full
and ready to be pulled in. Fishermen call NETMIND their 'eyes
beneath the sea'.
The Market: NETMIND was introduced to the marketplace in 1996 and sales
have been made in North America and Europe. The targeted customers have
been strategic in that they are industry leaders and government agencies.
Three different agencies of the US Government have purchased systems and
have given very positive feedback. International customers are interested
in NETMIND for its price and technical advantages.
To date, Northstar has barely penetrated the potential market which is
estimated to be about 25,000 vessels worldwide. Upon the successful
close of this offering, sales in the first year are estimated to be
about 100 NETMIND systems.
Competition: The NETMIND system has two known main competitors, Furuno
in Japan and Scanmar in Norway. It is believed that NETMIND has price
and technical advantages over each. Technically, NETMIND has longer
sensor battery life, longer operating distance, and better maintenance
and repair features. See "Risk Factors".
Technology Protection: Since commercializing NETMIND in 1996, Northstar
has made many enhancements to the system. These activities have
resulted in an optimum design for which a patent application is
intended. The technology is difficult to replicate because of its
sophistication and, regardless of patent protection, it is expected
it would take several years for a new player to catch up to the present
system. In the meantime, Northstar is developing new innovative NETMIND
products which should ensure a competitive edge.
Future Opportunities: Northstar's second technology application will
likely be for the multi-billion dollar offshore oil and gas industry.
One potential product is for the remote control of subsea wellheads.
This is especially important as the industry goes into deeper and
deeper water to find and produce petroleum.
Further business opportunities are envisaged for the defense, marine
transportation, oceanographic and environmental industries. The
possibilities include towed arrays for seismic exploration, towed
arrays for submarines, docking systems for large ocean going ships,
positioning systems for oil and gas drilling platforms, acoustic
measurements of ocean currents, and diver to diver communications for
the recreational diving industry. Northstar would look to strategic
alliances with other companies and government agencies to reduce
technological risks and open doors to new markets.
Contract Manufacturing: Northstar's second business division focuses
on manufacturing systems for the defense, transportation and
communications industries in strategic alliance with major
international contractors. Several years ago, Northstar signed a
Teaming Agreement with LORAL LIBRASCOPE, in Glendale, California
for the manufacture of control consoles for submarines. This was
followed by the first start-up contract with LOCKHEED MARTIN which
was signed in April 1997. Northstar is attempting to secure a
contract to manufacture consoles for Canadian Navy submarines. It
is expected that other work for Canadian patrol frigates, destroyers
and maritime helicopters will follow on from the submarine contracts.
Northstar expects to establish good relationships with other major
defense and communications contractors in Canada and the United States
and significant contract opportunities are expected through them.
Historical Financial Information: Northstar has spent over
CDN$1,850,000to complete the development and commercialization
of the NETMIND system. Northstar has received CDN$458,309 in
Scientific Research and Experimental Development refunds from
Revenue Canada. Funding support from the major shareholder and
private investors total approximately CDN$1,565,500 in the form of
share purchases or loans. The federal government of Canada has
provided support totaling approximately CDN$600,000 in the form of
research grants and interest-free loans through the National
Research Council and the Atlantic Canada Opportunities Agency.
Northstar's wholesale revenues were CDN$272,631 for year ending
March 31, 1998 and CDN$252,565 for nine months ending December
31, 1998. The gross profit for the year ending March 31, 1998 was
48% and was 48% for the nine months ending December 31, 1998.
Expenses totaled CDN$388,000 for the year ended March 31, 1999 and
CDN$356,000 for the nine months ended December 31, 1998. Dividends
of CDN$42,282 were paid on Northstar's preference shares in 1998.
These shares have been fully redeemed or converted to common shares.
Northstar's assets as of December 31, 1998 totaled CDN$1,112,490 and
its current liabilities totaled CDN$374,425. Long-term debt of
CDN$711,774 consists of government interest-free loans and a loan
of CDN$240,000 payable to Pathfinder Enterprises Inc., a company
controlled by a shareholder of Scientific, with monthly interest
payments only to July 2002, secured by a floating charge debenture.
There are shareholder loans of CDN$258,709 with no fixed terms of
repayment. Northstar has an accumulated deficit of CDN$854,871 as
of December 31, 1998.
Projected Revenues: Northstar anticipates sales of approximately
CDN$5 million in the first year upon completion of the Offering.
Depending on the financial, production and management resources,
there is potential for CDN$20 million in revenues in the second
year, with greater potential in the third year.
Management: Northstar's management is comprised of a small team
of individuals experienced in the development, manufacture and
sale of ocean industry technologies.
Dr. Wilson Russell, Chairman and Chief Executive Officer, has
25 years experience in the field and has established himself as
an international consultant in ocean industry, oil and gas, and
high technology. Dr. Russell is also a director of the Company.
See "Management" for detailed information regarding Dr. Russell.
Dr. David Buttle is Northstar's Technical Director and one of
the world's leaders in developing and manufacturing ocean
instrumentation for the defense industry. In 1977, Dr. Buttle
founded Marine Acoustics which designed and manufactured sonar
transducers for OEM use and subsea computers for the control of
subsea rock drills. In 1985, Marine Acoustics was reorganized as
Marine Acoustics Ltd. Marine Acoustics Ltd. produces numerous
sonar systems, including exercise mine acoustic telemetry systems,
which are used by the British, United States, Australian, Belgian,
Canadian and Egyptian Navies. Dr. Buttle supervised the design of
the NETMIND system and advises Northstar on production and value
engineering.
Mr. Brian Gamberg, P.Eng., Senior Electronics Engineer, has over
20 years experience developing marine systems, computer and
communications systems and in project management. He has been
involved in the design, development and implementation of both
hardware and software elements of tracking radar systems,
geophysical sounding systems, distributed computing systems,
Geographical Information Systems and embedded instrumentation
systems. Mr. Gamberg is responsible for the development of new
NETMIND technologies and other underwater communication products.
Mr. James Hall is an Electronics Technologist and Northstar's
Production Manager. Mr. Hall is responsible for all production
activities including inventory control, electronic and mechanical
production, testing, quality control and shipping.
Ms. Philomena Kavanagh has extensive experience in office management
and has worked for companies such as Coopers Lybrand, A.H. Murray Ltd.
and Atlantic Specialties Ltd. Ms. Kavanagh is responsible for all
of Northstar's financial and product shipment administration.
Plant, Equipment and Operations: The manufacturing plant is
located in St. John's, Newfoundland. The plant is approximately
3,000 square feet in area and is comprised of an electronics shop,
a mechanical engineering shop, a molding room, a component inventory
area, a finished goods area, research and development offices and
administrative offices. The plant possesses equipment typical of an
electronics manufacturing operation, i.e., oscilloscopes, soldering
stations, computers, flume hood, molding equipment, drill press and
specialty testing and assembly tools. The inventory system is
computerized, with a rigorous quality program in place which covers
incoming components, assembly testing and finished goods testing.
Northstar uses the program TANGO for its computer aided design (CAD)
activities. Lockheed Martin Federal Systems in Manassas, Virginia
has supplied to Northstar proprietary hardware and software for the
testing of submarine control consoles.
Northstar uses outsourcing as much as possible to keep overhead and
staffing levels low. For example, most of the mechanical assemblies
for the NETMIND system are supplied by a local mechanical shop, which
assemblies are then incorporated into the molding of the plastic
housings which are produced in-house.
Northstar currently has ten full-time employees and three part-time
engineering consultants.
<PAGE>
EMPLOYEES
As of June 15, 1999, the Company had ten employees and three
part-time engineering consultants.
None of the Company's employees is represented by a labour union,
and the Company considers its employee relations to be good.
Competition for qualified personnel in the Company's industry
is intense, particularly for software development and other
technical staff. The Company believes that its future success
will depend in part on its continued ability to attract, hire
and retain qualified personnel.
DESCRIPTION OF PROPERTY
The primary business activities of the Company are carried on at
leased premises located at Suite 1455, 409 Granville Street,
Vancouver, British Columbia, Canada V6C 1T2. The premises are
comprised of 1,000 square feet and is leased for a term of two
years expiring on September 30, 1999. Northstar Technical Inc.
leases premises at 687 Water Street, St. John's, Newfoundland,
Canada A1C 6J9. The premises are comprised of 3,000 square feet
and is leased for a term of two years expiring on June 30, 2000.
The Company does not lease or own any other property.
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers
and directors of the Company, their present positions with the
Company, and their biographical information.
Each director will serve until the next annual meeting of
shareholders, and thereafter if re-elected.
Name of Director Age
Dr. Wilson Russell 53
Mr. Frank Power 56
Mr. Lee Meyer 54
Name of Officer Office
Dr. Wilson Russell 53 President
Mr. Frank Power 56 Vice-President
As a Delaware corporation, the final responsibility for the
management of the affairs of the Company rests with the Board
of Directors. That Board currently consists of three directors.
Those directors are elected at the annual meeting of the
shareholders and serve for an annual term or until they resign
or are replaced. Those directors meet or otherwise consult with
one another on a regular basis to review the affairs of the Company
and to adopt or confirm any resolutions which are necessary to
grant contractual and other authority to the administrative
officers. The directors may, and probably will, designate an
executive committee to which they will grant limited authority
to make certain ministerial decisions on behalf of the board
between meetings of the full board. The affairs of the Company
are administered by its executive officers. Those officers are
designated by the Board of Directors to whom those officers are
responsible. The executive officers are generally elected by the
directors on an annual basis and serve throughout that term or
until such earlier time as they resign or are replaced. The
directors may, and in the case of this Company will designate
themselves as senior executive officers of the Company. The
Company's day to day actions will occur through the actions of
those executive officers acting on behalf of the Company.
Throughout this Offering Memorandum the term "Management"
shall be interpreted as the current directors and officers
of the Company designated in the following section.
The following sets forth information as to the principal
occupation and business experience for at least the past
five years of each of those directors and officers.
Dr. Wilson Russell: Dr. Russell received a Masters Degrees
in Engineering and in Physics from Memorial University of
Newfoundland and a Doctorate in Engineering Physics from the
University of Aix-Marseille in France. Dr. Russell's numerous
positions include: geophysicist with Pan American Petroleum
(AMOCO) in Calgary, Alberta (1968); professor and researcher at
Memorial University (1968 to 1977); Director of Engineering at
NORDCO Ltd. (1977 to 1980); and Associate Director of the
Newfoundland Petroleum Directorate. After starting his own
consulting and technology development firm in 1983, Dr. Russell
has also managed the preparation of the developmentplan for the
$6 billion Hibernia development which was submitted to the
government for approval of the project; invented, developed and
commercialized the Hydroball current profiling system, a unique
phased array ocean current profiling system which won the silver
medal at the Canada Awards for Business Excellence in 1986; and
developed a fiber optic modem for TRW in the United States. Dr.
Russell founded NewTech Instruments Ltd. in partnership with a
subsidiary of Bell Canada and was the first Chairman of the Board
of Directors of Seabright Corporation. Dr. Russell has also
acted as a consultant for the Canadian federal government, the
provincial governments of Newfoundland and British Columbia, the
Canadian Consul in Boston, Massachusetts, Mobil Oil, the Defense
Research Establishment Pacific and the French Navy. Dr. Russell
founded Northstar in 1989 and serves as Chairman and Chief
Executive Officer. He is also a director and President of Cabot
Management Ltd. and, until recently, was a director of the
University of Victoria's Innovation and Development Corporation.
Mr. Frank Power: Mr. Power, a business management consultant,
has managed and administered several public companies for the past
15 years. Since 1984, Mr. Power has provided services including
strategic planning, management, administration, design, and
construction of major mining projects both nationally and
internationally. He has owned and operated several consulting
companies which have been providing comprehensive services in the
industrial and high-technology fields as well as the mining field.
His expertise also includes reactivating public companies, project
acquisitions, public and private funding, as well as developing and
taking existing private companies public. He is equally skilled to
function in the public markets both in Canada and the United States.
Mr. Power is President and Owner of Pow Con Management since 1981 and
Premier Enterprises Ltd. since 1994. These companies manage,
administrate and finance reporting companies. He served as President
and Director of several Vancouver reporting companies and publicly
listed companies since 1986 to present. Since 1992, Mr. Power has
served as President of World Organics Inc., listed on the Vancouver
Stock Exchange. From 1996 to 1997, Mr. Power served as President
and Director of Accuimage Diagnostics and he is also past President
of Security Industries, Inc. These companies are traded on the OTC
Bulletin Board.
Mr. Lee Meyer: Mr. Meyer, since completing his Business
Administration degree from Arizona State University, has held
positions including Managing Director of Omni International;
Vice-President and Director of World Organics, Inc., a reporting
company; Secretary and Treasurer of Tec Industries Corp., a specialty
equipment rental agency; and owner and President of Stretchcoat, a
national manufacturer and marketer of specialty products. Mr. Meyer
has also represented major principals selling products nationally.
Management Compensation: The Company has agreed to pay Mr. Frank
Power, Director and Vice President, a past consulting fee of $27,000
and current monthly fees of $2,000 and to pay Wilson Russell, Director
and President, a bonus of $100,000 payable when the Company is able
to pay.
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth certain information as to the Company's
three highest paid officers and directors for the period from the
commencement of Scientific's Business to June 15, 1999. No other
compensation was paid to any such officer or director other than the
cash compensation set forth below.
Summary Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Individual or Capacities in which Aggregate
Identity of Group Remuneration was Received Remuneration
Dr. Wilson Russell Director and President $16,300
Mr. Frank Power Director and Vice President $ 2,000
Mr. Lee Meyer Director NIL
_______
Officers and Directors Directors and Officers $18,300
of the Company as a Group
</TABLE>
The compensation paid to directors and officers to June 15, 1999 is
believed by the Company to be below market compensation rates for the
services provided by the directors and officers, having regard to the
experience and qualifications of the directors and officers. The
Company anticipates compensation being increased to market rates upon
the Company achieving sufficient revenues and/or financings to pay such
increased compensation.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY OWNERS
The following table sets forth, as of September 15, 1999, the beneficial
ownership of the Company's Common Stock by each officer and director of
the Company, by each person known by the Company to beneficially own more
than 10% of the Company's Common Stock outstanding and by the officers and
directors of the Company as a group. Except as otherwise indicated, all
shares are owned directly.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name and address Number of Shares Percentage of
Title of class of beneficial owner of Common Stock Common Stock(1)
Common Stock Frank Power 990,000 13.30%
Common Stock Wilson Russell 164,883 2.23%
Common Stock Lee Meyer 100,000 1.35%
Common Stock Ladner Enterprises 1,397,900(2) 18.88%
Common Stock Monaco Ventures 1,000,000(3) 13.51%
Common Stock All Officers and Directors 4,352,783 58.79%
as a Group (3 persons)
</TABLE>
(1) Based on 7,404,481 shares of Common Stock of the Company issued
and outstanding
on June 15, 1999.
(2) [DISCLOSE BENEFICIAL OWNERSHIP AND CONTROL OF STOCK IN NAME OF
LADNER ENTERPRISES]
(3) [DISCLOSE BENEFICIAL OWNERSHIP AND CONTROL OF STOCK IN NAME OF
MONACO VENTURES]
The following directors and officers of the Company have been granted
options to purchase shares of the Company's common stock as follows:
Optionee Position Options Option Price Per Share
Wilson Russell Director 250,000 $0.50
Frank Power Director 100,000 $0.50
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
There are no material contracts entered into by the Company within the
two years preceding the date hereof which are still in effect, except
as follows:
Completion of previous offering: The Company completed an offering of
363,000 shares on January 26, 1999. The proceeds of the offering were
US$363,000. The purchasers of the shares were all non US residents.
Acquisition of Northstar: The Company acquired Northstar in January,
1999 pursuant to an agreement dated July 31, 1998. The Company purchased
all of the issued and outstanding shares of Northstar in exchange for
4,901,481 shares of the Company's Common
Stock which were issued from treasury.
Copies of the foregoing contracts and any reports referred to in this
Disclosure Statement may be inspected at the head office of the Company
at Suite 1455, 405 Granville Street, Vancouver, British Columbia, Canada
V6C 1T2, during normal business hours while the Offering contemplated
hereunder is in progress to and including the closing date.
Except for the acquisition of Northstar, none of the following persons
has any direct or indirect material interest in any transaction to which
the Company is a party since the incorporation of the Company in May, 1998
or in any proposed transaction to which the Company is proposed to be a
party:
(A) any director or officer of the Company;
(B) any proposed nominee for election as a director of the Company;
(C) any person who beneficially owns, directly or indirectly,
shares carrying more than 10% of the voting rights attached to the
Company's Common Stock; or
(D) any relative or spouse of any of the foregoing persons, or
any relative of such spouse, who has the same house as such person or
who is a director or officer of any parent or subsidiary of the Company.
<PAGE>
SECURITIES BEING OFFERED
The securities being offered are the shares of the Company's common
stock, par value $0.0001 per share. Under the Company's Articles of
Incorporation, the total number of shares of all classes of stock
that the Company shall have authority to issue is 100,000,000 shares
of common stock, par value $0.0001 per share (the " Common Stock")
and 20,000,000 shares of preferred stock, par value $0.001 per share
(the "Preferred Stock"). As of September 15, 1999, a total of
7,404,481 shares of Common Stock are issued and outstanding. No shares
of Preferred Stock are issued or outstanding. All issued and outstanding
shares of the Common Stock are fully paid and non-assessable.
Common Stock
Holders of Common Stock have the right to cast one vote for each share
held of record on all matters submitted to a vote of holders of Common
Stock, including the election of directors. Holders of Common Stock do
not have cumulative voting rights in the election of directors.
Holders of a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in person or by proxy,
are necessary to constitute a quorum at any meeting of the Company's
stockholders, and the vote by the holders of a majority of such
outstanding shares is required to effect certain fundamental corporate
changes such as liquidation, merger or amendment of the Company's
Articles of Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by the
Board of Directors, from funds legally available therefor. In the
event of the liquidation, dissolution or winding up of the affairs
of the Company, all assets and funds of the Company remaining after
the payment of all debts and other liabilities shall be distributed,
pro rata, among the holders of the Common Stock. Holders of Common
Stock are not entitled to pre-emptive or subscription or conversion
rights, and there are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and
non-assessable.
Transfer Agent
Signature Stock Transfer of Dallas, Texas is the transfer agent for
the Shares.
Share Purchase Warrants
None.
Options
The directors of the Company approved an incentive stock option plan
(the "Stock Option Plan"). The directors have approved the following
grants of options pursuant to the Stock Option Plan.
(a) an aggregate of 500,000 options to purchase shares of Common
Stock at a price of $0.50 per share to the Company's officers and
directors.
(a) an aggregate of 275,000 options to purchase shares of Common
Stock at a price of $0.50 per share to the Company's employees.
(a) an aggregate of 15,000 options to purchase shares of Common
Stock at a price of $0.75 per share to the Company's consultants.
All options are subject to a vesting schedule with one-third vesting
on grant, one-third on the first anniversary of the date of grant and
one-third on the second anniversary of the date of grant.
Convertible Securities
Pathfinder Enterprises Inc. has the option to convert a $240,000 CDN
loan to Northstar Technical Inc. to common shares at $0.90 US per
share in the first year and $1.25 US per share in the second year
commencing March 11, 1999.
LITIGATION
The Company is a defendant in a lawsuit commenced against the Company
by the Company's former master distributor. The former distributor has
alleged that the Company has interfered with the ability of the former
distributor to sell products. The Company has filed a counterclaim for
monies owing by the former distributor to the Company. An adverse
outcome to the lawsuit could have a material adverse impact on the
Company.
<PAGE>
FINANCIAL STATEMENTS
The Company's unaudited Financial Statements, as described below,
are attached hereto.
A. Unaudited financial statements for the period ending
January 31, 1999, including:
(a) Consolidated Balance Sheet;
(b) Consolidated Statement of Operations and Deficit;
(c) Consolidated Statement of Shareholders' Equity;
(d) Consolidated Statement of Cash Flows;
(e) Notes to Consolidated Financial Statements.
(f) Financial Statements
The Company's audited financial statements for the eight month period
ended December 31, 1998, together with the auditor's report, are
appended to this Offering Memorandum. The financial statements are
non-consolidated statements for the Company. INVESTORS ARE URGED TO
CAREFULLY REVIEW SUCH FINANCIAL STATEMENTS AND THE FOOTNOTES TO THOSE
FINANCIAL STATEMENTS.
Certain Financial Matters: This statement reflects the position of
the Company on December 31,1998, which is prior to the completion of
the $US 363,000 placement and prior to the purchase of Northstar and
prior to the funding under this Offering. Therefore, such statements
reflect substantially no assets other than cash but do demonstrate
that the Company likewise has few liabilities. Accordingly, the book
value of Common Shares outstanding at the date of their statement are
at this time, negligible. The statement further reflects no income,
other than deposits. Its earnings per share are negative.
Management's Discussion of Financial Statements: The Balance Sheet
and financial statements are audited and are prepared in accordance
with generally accepted accounting principles of the United States.
Specifically, those figures do not, and are not intended to, reflect the
current net fair market value of the Company's assets. That value can
only be estimated, based upon the potential sales and prospective net
income which will be generated from the Company's present and future
technology. Because of the various matters which inherently must occur
in the future, the outcome cannot be precisely determined and is
therefore necessarily a matter of opinion. Management believes that
technology, combined with management's ability to successfully
commercialize the applications through its developed products, to be
substantial. It is that opinion, and not the current financial statement,
upon which the price of the Common Stock is being offered under this
Offering.
The following additional attachments are attached to this Disclosure
Statement:
Attachment Description
No. 1 Subscription Agreement
SUBSCRIPTION AGREEMENT
Scientific Technologies, Inc.
(Company has since changed its name to Northstar Electronics, Inc.)
See Exhibits
SUBSCRIPTION AGREEMENT made as of this 25 day of June, 1999 between
Scientific Technologies, Inc., a Delaware corporation with an office
at 1455-409 Granville Street, Vancouver, British Columbia V6C 1T2
("the Company") and the undersigned ("the Subscriber").
WHEREAS:
A. The company desires to issue a maximum of 1,000,000 shares of common
stock of the Company at a price of $1.00 US per share ("the Offering")
pursuant to Regulation
S of the United States Securities Act of 1933 ("the Act").
B. The Subscriber desires to acquire the number of shares of the
Offering set forth on the
signature page here of ("the Shares") on the terms and subject to the
conditions of this
Subscription Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
1. SUBSCRIPTION FOR SHARES
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the
Company such number of Shares as is set forth upon the signature
page hereof at a price equal to $1.00US per share. Upon execution,
the subscription by the Subscriber will be irrevocable.
1.2 The purchase price is payable by the Subscriber contemporaneously
with the execution and delivery of this Subscription Agreement.
1.3. Upon execution by the Company, the Company agrees to sell such
Shares to the Subscriber for said purchase price subject to the Company's
right to sell to the Subscriber such lesser number of Shares as it may,
in its sole discretion, deem necessary or desirable.
1.4 Any acceptance by the Company by the Subscriber is conditional upon
compliance with all securities laws and other applicable laws of the
jurisdiction in which the Subscribers resident. Each Subscriber will
deliver to the Company all other documentation, agreements,
representations and requisite government forms required by the
lawyers for the Company as required to comply with all securities
laws and other applicable laws of the jurisdiction of the subscriber.
The Company will not grant any registration or other qualification
rights to any Subscriber, other than the agreement of the Company to
register the shares with the United States Securities and Exchange
Commission ("the SEC") as set forth in Section 2 of this Agreement.
2. REGISTRATION STATEMENT
2.1 The company agrees that within a reasonable time of execution of
this Agreement by the Company that the Company will prepare and file a
registration statement with the SEC pursuant to the Act on a Form SB-1,
or other appropriate registration statement, as required to qualify the
resale of shares in the United States (the 'Registration Statement.')
The Company will use its best efforts to ensure effectiveness of the
Registration Statement within a reasonable period of time following
filing of the Registration Statement.
3. REGULATION S AGREEMENTS OF THE SUBSCRIBER
3.1 The Subscriber agrees only to resell the shares only in accordance
with the provisions of Regulation S of the act pursuant to registration
under the Act, or pursuant to an available exemption from registration
pursuant to the Act.
3.2 The Subscriber agrees not to engage in heading transactions with
regards to the shares unless in compliance with the Act.
3.3 The Subscriber acknowledges and agrees that all certificates
representing the Shares will be endorsed with the following legend in
accordance with Regulation S of the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933(THE"ACT"), AND HAVE
BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S PROMULGATED
UNDER THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE
OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT."
3.4 The Subscriber and the Company agree that the Company will refuse
to register any transfer of the Shares not made in accordance with the
provisions of regulation S of the Act, pursuant to registration under
the Act, or pursuant to an available exemption from registration.
4. REPRESENTATIONS AND WARRANTIES BY THE SUBSCRIBER
4.1 The Subscriber represents and warrants the Company and acknowledges
that the company is relying upon the Subscriber's representations and
warranties in agreeing to sell the Shares to the Subscriber.
(A) The Subscriber is not a "U.S. Person" as defined by Regulation S of
the Act and is not acquiring the Shares for the account or benefit of a
U.S. person. A U.S. Person is defined by Regulation S of the Act to be
any person who is:
(i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated under the
laws of the United States;
(iii) any estate of which any executor or administrator is a U.S. person;
(iv) any trust of which any trustee is a U.S. person;
(v) any agency or branch of a foreign entity located in the United States;
(vi) any non-discretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary organized, incorporate, or
(if an individual) resident in the United States; and
(vii) any partnership or corporation if:
1. Organized or incorporated under the laws of any foreign jurisdiction; and
2. Formed by a U.S. person principally for the purpose of investing in
securities not registered under the Act, unless it is organized or
incorporated, and owned, by accredited investors {as defined in Section
230.501(a) of the Act} who are not natural persons, estates or trusts.
(B) The Subscriber recognizes that the purchase of Shares involves a high
degree of risk in that the Company has only recently commenced its proposed
business and may require sub- stantial funds in addition to the proceeds of
this private placement;
(C) an investment in the Company is highly speculative and only investors
who can afford the loss of their investment should consider investing in
the Company and the Shares;
(D) the Subscriber has been delivered the Company's disclosure statement and
its unaudited financial statements for the period ending December 31, 1998
and has had full opportunity to review the disclosure document and financial
statements with the Subscriber's legal and financial advisors prior to
execution of this Subscription Agreement;
(E) the Subscriber has such knowledge and experience in finance, securities,
investments, including investment in non-listed and non-registered securities,
and other business matters so as to be able to protect its interests in
connection with this transaction.
(F) the Subscriber acknowledges that a limited market for the Shares
presently exists and accordingly the Subscriber may not be able to liquidate
its investment.
(G) the Subscriber hereby acknowledges that this offering of Shares has not
been reviewed by the SEC and the Shares are being issued by the Company
pursuant to an exemption from
registration provided by Regulation S pursuant to the Act.
(H) the Subscriber is acquiring the Shares as principal for the Subscribers
own benefit;
(I) the Subscriber is not aware of any advertisement of the Shares;
(J) Subscriber is acquiring the Shares subscribed to hereunder as an
investment for Subscriber's own account, not as a nominee or agent, and
not with a view towards
the resale or distribution of any part thereof, and Subscriber has no present
intention of selling, granting any participation in, or otherwise distributing
the same;
(K) Subscriber does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to
such person, or to any third person, with respect to any of the shares
sold hereby;
(L) Subscriber has full power and authority to enter into this Agreement
which constitutes a valid and legally binding obligation, enforceable in
accordance with its terms;
(M) Subscriber can bear the economic risk of this investment, and was not
organized for the purpose of acquiring the Shares;
(N) The Subscriber has satisfied himself or herself as to the full
observance of the laws of his or her jurisdiction in connection with
any invitation to subscribe for the Shares and/or any use of this Agreement,
including (i) the legal requirements within his/her jurisdiction for the
purchase of the Shares, (ii)any foreign exchange restrictions applicable
to such purchase, (iii)any governmental or other consents that may need to
be obtained, and (iv) the income tax and other tax consequences, if any,
that may be relevant to the purchase, holding, redemption sale, or transfer
of the Shares.
5. REPRESENTATIONS BY THE COMPANY
5.1 The Company represents and warrants to the Subscriber that:
(A) The Company is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and has the corporate
power to conduct the business which it conducts and proposes to conduct.
(B) Upon issue, the Shares will be duly and validly issued, fully-paid and
non-assessable common shares in the Capital of the Company.
6. TERMS OF SUBSCRIPTION
6.1 Pending acceptance of this subscription by the Company, all funds paid
hereunder shall be deposited by the Company and immediately available to the
Company for the purposes set forth in the disclosure statement. In the
event subscription is not accepted, the subscription funds, will constitute
a non-interest bearing demand loan of the Subscriber to the Company.
6.2 The Subscriber hereby authorizes and directs the Company to deliver the
Securities to be issued to such Subscriber pursuant to this Subscription
Agreement to the Subscriber's address indicated herein.
NORTHSTAR TECHNICAL INC.
NETMIND Year 2000 Compliance Statement
All hardware components of the NETMIND system have been verified to
contain no date related processing, and thus are considered to be
year 2000 compliant. Version 1.23 of the display and control
software has been tested and verified to be year 2000 compliant
when installed in a system with other component products that are
year 2000 compliant. NETMIND owners should check with their
computer manufacturer, and operating system and application
software vendors to ensure that their systems are year 2000
compatible.
LEGAL DISCLAIMER
Northstar Technical Inc. has made every effort to ensure
the accuracy of our product testing. However, because each target
environment is different from NTI's testing environment, it is the
responsibility of the system owner to validate the Year 2000
readiness of these products in the target environment. Therefore,
information about the Year 2000 status of NETMIND products is
provided "as is" without warranties of any kind and is subject to
change without notice. NTI makes no representation or warranty
respecting the accuracy or reliability of information about non-NTI
products.
U.S.A. The information provided here constitutes a Year 2000
Readiness Disclosure for purposes of the Year 2000 Information
and Readiness Disclosure Act.
U.K. This product complies with the definition of Year 2000
Conformity Requirements specified in Disc PD2000-1 of the British
Standards Institute.
March 12, 1999
Northstar Technical Inc.
Y2K Contingency Plan
December 2, 1999
Introduction
All date sensitive equipment at Northstar has been
verified to be Y2K compliant. Equipment,
including computers, has been replaced where
necessary to ensure Y2K compliance.
One month's supply of finished product inventory has been
stocked to provide continued sales in the event of
an interrruption in production.
One month's supply of raw material has been
stocked to provide continued production in
the event of an interruption in material supply.
Long lead, single source, and transportation restricted
components have been stocked to a three month production
level.
Production Facilities
The NETMIND production facility is located in St. John's,
Nfld. In the event of the complete loss of the production facility,
it is estimated that the facility could be implemented at a new site
in approximately 1 month, using existing personnel, and assuming the
availability of standard commercial equipment and materials. Details
are supplied in the attached Northstar Technical Inc. Disaster
Recovery Plan.
Customers
The NETMIND system is a trawl management
system, designed for use on ocean going vessels.
Therefore, all NETMIND customers have stable platforms,
with independent services (electricity, water,
communications, and transportation).
Approximately 50% of NETMIND customers are located
on the East Coast of Canada. Many of these
customers have their systems installed and
serviced in St. John's Harbour (1 mile from the production
facility). Therefore, it is expected that Y2K problems
will have little impact on NETMIND customers. A finished
inventory equivalent to one month's production has been
stocked to provide continued sales in the event
of an interruption in production.
Suppliers
The majority of materials used in the manufacture of the
NETMIND system are available from multiple commercial suppliers.
(See the Disaster Recovery Plan for details). A 6 month supply of
all components with long lead times, single source suppliers, or
transportation limitations has been ordered, and will be in
inventory before December 31, 1999.
Services
Newfoundland Power and Newfoundland and Labrador Hydro
provide electricity in the St. John's region.
Y2K plans can be viewed at
http://www.nlh.nf.ca/y2k/y2kframe.htm and
http://www.nfpower.nf.ca/year2000/articles.asp .
In the event of the failure of the electrical
system, Northstar can forego production by selling existing
inventory for one month with no appreciable impact. If an
extended period of power outage occurs, Northstar's modest power
requirements for production could be met using a commercially
available 5KW, single phase generator. The risk of such an event
does not warrant the investment in such a power backup system.
NewTel Systems provides telephone service in the St. John's
area. The state of NewTel's Y2K plans can be viewed at
http://www.newtel.com/y2000/y2kinfo.htm. In the event of the
failure of the land telephone system, Northstar has arranged for
access to 4 Cell Phones for the first month of the year 2000. For
contact with suppliers, the fallback position would be to Internet
communications using a cable modem, and finally to Canada Post.
For contact with customers, the fallback for most customers would
be using Ship to Shore radio, or direct VHF radio.
Cable Atlantic provides Internet services for Northstar.
Cable Atlantic's Y2K plans can be viewed at
http://www.cableatlantic.nf.ca/about/pg4.htm/.
In the event of failure of the cable system, the
fallback internet service provider will be NewTel systems.
Complete loss of internet services for extended periods will
not seriously impact Northstar's manufacturing or sales operations.
The master copy of all web pages is kept on a
local computer system, and is archived daily.
In the event of the failure of Cable Atlantic to provide
satisfactory web page hosting, hosting will be performed on
an in-hous linux based server.
Municipal services are provided by the City of St. John's.
The municipal Y2K compliance statement can be viewed at
http://www.city.st-johns.nf.ca/. In the event of closure of the
Northstar production facility due to lack of Municipal resources,
a closure of up to 1 month can be accomodated with little effect
by relying on sales from stocked inventory.
Transportation for supplies and products is accomplished
by air (St. Johns international airport; 3 miles), highway
(Trans Canada Highway, 1 mile), and sea
(St. John's harbour, 1 mile).In the event of failure of
transportation systems, Northstar can continue production for
up to one month using stocked inventory. With a complete failure
of all transportation systems, customer deliveries would be
limited to those customers (approx 50% of the current customer base)
able to deliver their ships to St. John's harbour for
installation/repair.
Northstar Technical Inc.
Disaster Recovery Plan
December 2, 1999
Table of Contents
1 Netmind Division 1
1.1 Information 1
1.2 Software 2
1.2.1 In-House Software 2
1.2.2 Commercial Software 2
1.3 Hardware 3
1.3.1 In-House Hardware 3
1.3.2 Commercial Hardware 3
1.4 Inventory 4
1.4.1 Subcontracted Components 4
1.4.1.1 Mechanical Housings,Etc. 4
1.4.1.2 Crystals 4
1.4.1.3 Hydrophones 4
1.4.1.4 Printed Circuit Boards 4
1.4.2 Commercial Components 4
1.5 Production Facility 4
1.5.1 Administration, Sales and Marketing 5
1.5.2 Inventory 6
1.5.3 Electronic Production 7
1.5.4 Mechanical Production 8
1.5.5 Engineering 9
2 Contract Manufacturing Division 9
2.1 Information 9
2.2 Software 9
2.3 Hardware 10
2.4 Inventory 10
1 Netmind Division
The Netmind Division of NorthStar Technical
manufactures the NETMIND trawl management system. The
systems and materials required for production are described
below. In the event of the complete loss of the production
facility, it is estimated that the facility could
be re-established in new quarters in approximately
one month, using existing personnel. Production could
begin immediately on completion of the facility, with
the first systems completed one month after the start of production.
This document provides details of the systems
necessary for the production of the NETMIND system.
1.0 Information
The information required to manufacture the NETMIND system
is stored in a computer compatible format. The following
classifications have been specifically identified:
1.Manufacturing Procedures
2.Quality Control Manual
3.Policies and Procedures Manual
4.Marketing Materials
5.Price Lists
6.Customer Records
7.Manufacturing records
8.Mechanical Drawings
9.Electrical Schematics
10.PCB Layouts
11.User Manuals
12.Technical Manuals
13.Inventory Information
14.Supplier Records
15.Accounting Records
16.Sales/Marketing contact Records
The master copies of all of the above items are stored
on the computer system, and are archived and stored at
a remote site on a daily basis.
1.1 Software
1.1.0 In-House Software
This category includes all software which has been
developed at Northstar. The most critical piece of
software is the NETMIND software which is sold as an
integral component of the netmind system. In addition
to the NETMIND software, various administrative and
production tools have been locally developed. All of
the in-house software source code is stored in a Revision
Control library. This allows the storage and retrieval of
multiple versions of the software at any point in time.
In addition, the full library is archived daily as described above.
1.1.1 Commercial Software
Backup copies of all commercial software are
maintained at several offsite locations. Although the
commercial software could be repurchased in the event of
loss, the maintenance of backup copies ensures the availability
of the software irregardless of the state of the software
manufacturer or vendor. In the event of a failure of the
Microsoft windows platform, most of the functionality would
be available under the Linux operating system as indicated
below. All computers at Northstar have been verified as
Linux-ready.The following commercial software packages
are used by Northstar:
Software Package
Linux replacement
Microsoft Windows 95/98
Linux
Red Hat Linux
Linux
StarOffice version 5.1A
Star Office, Linux version
Microsoft Office 9X
Star Office, Linux version
Microsoft Visual C++ version 1.52
Gnu C++
Microsoft Visual Basic version 4.0
none
Netscape Communicator
Star Office, Linux version
Accpac Plus Accounting System
Accpac Plus, DOSEMU
Tango Schematic
Tango Schematic, DOSEMU
Tango PCB
Tango PCB, DOSEMU
Edwin Schematic Capture/Layout
No direct replacement
WinTek HC11 cross compiler
WinTek, DOSEMU
TLIB version Control System
TLIB, DOSEMU
AutoCad
No direct replacement
Lotus SmartSuite 95
Star Office, Linux version
Corel Draw
Star Office, Linux version
Business Pro Business Plan Software
No direct replacement
Maximizer Contact Management Software
Star Office, Linux version
AGAMA Inventory Control system
No direct replacement
1.2 Hardware
1.2.0 In-House Hardware
Hardware which has been developed in house
to aid in the NETMIND production process includes the following:
1.Vacuum Chambers
2.Molds
3.Fume Hoods
4.Jigs
All of these items are straightforward to reproduce
using standard tools and components with the exception
of the Molds. Extra molds have been manufactured,
and are stored off site.
1.2.1 Commercial Hardware
Commercial Hardware which is used in the
production of the NETMIND system
includes the following:
1.Vacuum Pump
2.Component cleaner
3.Precision scales
4.Sand blaster
5.Compressor
6.Oscilloscopes
7.Frequency Counter
8.Function Generator
9.Prom Burner
10.MicroController Development System
11.Computers
All of the above items are available from
multiple commercial suppliers at short notice.
1.3 Inventory
The inventory required to manufacture the
NETMIND system consists primarily of commercially
available components. Many highly specialized
components (precision inductors, transformers,etc.)
are manufactured in-house from commercially available
supplies(standard ferrites, magnet wire). Other
components are manufactured under subcontract to
other manufacturers.
1.3.0 Subcontracted Components
1.3.0.0 Mechanical Housings,Etc.
The mechanical components of the NETMIND system
are fabricated to specifications provided by Northstar
Technical to a local Machine Shop. Several Machine
Shops with the capabilities necessary have been
identified in the local area. No specialized equipment
is required by the subcontractor to manufacture these
items
1.3.0.1 Crystals
The NETMIND sensors require the use of high
stability, high precision crystals at non-standard
frequencies. The crystals are currently manufactured
by a British company to specifications supplied by
Northstar. Several additional crystal manufacturers have
been identified who have the capabilities of producing
the crystals to the required specifications.
1.3.0.2 Hydrophones
The hydrophones used in the Netmind system
are currently manufactured by a British company
to specifications supplied by Northstar. Northstar is
in the process of purchasing the design rights to the
hydrophones with the intention of manufacturing the
hydrophones in-house in the near future.
1.3.0.3 Printed Circuit Boards
Printed Circuit Boards are currently manufactured in
Canada by a PCB production facility. Several other
PCB manufacturers have been identified who would be
capable of producing the same quality circuit boards.
1.3.1 Commercial Components
The majority of the components required to
manufacture the NETMIND system are commercially
available from many manufacturers/suppliers. The
inventory system currently in use at Northstar
identifies multiple suppliers for each component.
1.4 Production Facility
The production facilities the NETMIND system can be
constructed in any standard Office/light manufacturing
environment.
1.4.0 Administration, Sales and Marketing
Administration, sales and marketing facilities require
standard office space of approximately 1500 sq ft, with
standard office facilities. The following office equipment
is required:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Equipment Quantity Supplier Specifications
fax Machine 1 any Plain Paper
Copier 1 Any Flat bed, feeder
Printer 1 HP Laser, 10ppm, networked
Telephone System 1 Northern Telecom 4 lines in, 16 key set capacity
Accounting Computer 1 HP,IBM,DELL Low end office, Windows98
Office Server Computer 1 HP,IBM,DELL Minimum server, Windows98
Marketing Computer 1 HP,IBM,DELL Portable,Windows98
Internet Server Computer 1 HP,IBM,DELL Low end office,Linux
Office Desks 3 any
BookCases 3
Filing Cabinets 3
Chairs 3
Telephone Keyset 3 Compatible with Telephone system
1.4.1 Inventory
The inventory area requires 600 sq ft of storage space, 200
sq. ft. of shipping space, and 200 sq ft of office space.
Equipment Quantity Supplier Specifications
Computer 1 HP,IBM,DELL Low end Office, Windows98
Printer 1 HP Ink Jet, networked
Office Desk 1
Filing Cabinet 1
Chair 1
Heavy Duty Shelving 5 tier 300 sq ft
Bookcase 2
Telephone Keyset 1 Compatible with telephone system
1.4.2 Electronic Production
The electronic production area requires 1000 sq ft of
space with anti-static flooring, and an external
ventilation system.
Equipment Quantity Supplier Specifications
Administrative Computer 1 HP,IBM,DELL Low end Office
Manual Printer 1 HP Color, double sided capability
Test Computer 2 HP,IBM,DELL Low end Office
Field Test Computer 1 HP,IBM,DELL Portable
Electronic Workbench 5 8 ft. with shelf,
anti-static surface,
outlets, light
Oscilloscope 3 HP,Tektronix 100MHz, storage, 2 probes
Function Generator 3 HP, Tektronix, Global Specialities
Frequency resolution 1 Hz
Soldering Station 4
Eprom Eraser 2
Eprom Burner 2
Reference Hydrophone 1
Exhaust System 4
External Exhaust 1 Motorola Hand Tools
Office Desk 3
Bookcase 3
Filing Cabinet 1
Telephone Keyset 1
</TABLE>
1.4.3 Mechanical Production
The mechanical production area requires
800 sq ft of space with a smooth, resiliant floor
(Asphalt or vinyl tile), external ventilation, and
precise temperature and humidity control.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Equipment Quantity Supplier Specifications
Computer 1 IBM,HP,DELL High End Office, 17" monitor
Workbench 3
Heavy Duty Vise 1
Grinder 1
Drill Press 1
Sandblaster 1
Compressor 1
Vacuum Chambers 2
Vacuum Pump 1
Fume Hood 1
Air Conditioner 1
Component Cleaner 1
Precision Weight
Scales 1
Clamps many
Hand Tools
Dehumidifier 1
Office Desk 2
Filing Cabinet 1
BookCase 1 Shelving 200 Sq Ft
Heavy Duty-
Compatible with Telephone System
</TABLE>
1.4.4 Engineering
The Engineering area requires 500 sq ft of space with
anti-static flooring, and an external ventilation system.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Equipment Quantity Supplier Specifications
Development computer 1 IBM,HP High end Office, 17" monitor
Drawing Printer 1 HP Color, Inkjet, 11X17
Bench Oscilloscope 1 HP,Tektronix 100 Mhz, Storage
Portable Oscilloscope 1 Tektronix,Fluke 200 Mhz, battery operated
Function Generator 1 Global Specialties HP
1 Hz resolution
Power Supply 1 HP,BK Precision Lab Supply
Soldering Station 1
Test Computer 1 IBM,HP,DELL Low end office
Network Server 1 IBM,HP,DELL High end server, Linux
Office Desk 2
Filing Cabinet 2
Bookshelf 3
Admin Computer 1 IBM,HP,DELL Low end office
Field Test Computer 1 IBM,HP,DELL Portable
Prom Programmer 1 Motorola MicroController
Development System
Spectrum Analyzer 1 Motorola
Hand Tools 10
Telephone Keyset 2 Compatible with Telephone system
</TABLE>
Contract Manufacturing Division
2.0 Information
The majority of the documentation of the Contract
Manufacturing Division is stored on the computer system, and
is archived on a daily basis.
2.1 Software
At present, only commercially available software is used
in the Contract Manufacturing Division, and off-site backups are
maintained of all such software
2.2 Hardware
Several pieces of special purpose
test equipment are maintained at the plant site for the
testing of military consoles.This equipment is not commercially
available, and in the event of loss, would have to be replaced
by the supplier/owner (Lockheed Martin);
2.3 Inventory
No inventory is currently in stock for the contract
manufacturing division. In general, the inventory
for this division will consist of specialized components,
many custom manufactured by single source suppliers.
However, the inventory will be held for very
short periods of time, and will be used completely
in the manufacture of the contracted systems. It is
not anticipated that there will be any stock items
in the Inventory.
