Strategic Aerospace and Defence Initiative (SADI) Contribution Agreement Template

Strategic Aerospace & Defence Initiative

Preamble

This template is subject to change and revised versions will be posted as they become available. This document is provided for information only and the Minister reserves the right to omit, modify or add clauses in the course of negotiations with potential recipients.

[Project name]

This agreement made

Between:

HER MAJESTY THE QUEEN IN RIGHT OF CANADA
as represented by the Minister of Innovation, Science and Economic Development Canada

(the "Minister")

And:

[Company name], a corporation duly incorporated under the laws of [Canada or provincial name], having its head office located at [address]

(the "recipient")

Recitals

Whereas

  1. The Strategic Aerospace & Defence Initiative (SADI) is specifically designed to encourage strategic research and development that will result in innovation and excellence in new, or improved products, services and processes in either of the aerospace, defence, space or security (A&D) industries, and to foster collaboration between research institutes, universities, colleges, and the private sector;
  2. Neither the entering into this agreement nor the provision by the Minister of the contribution is contingent upon export performance on the part of the recipient;
  3. The Project is in respect of Industrial Research and/or Pre-Competitive Development; and
  4. The Project involves technologies that:
    • Support the development of next generation A&D related products, services and processes;
    • Build on Canadian strengths in A&D technology development;
    • Enable Canadian companies to participate in major platforms and supply chains; or
    • Assist in the development of A&D industries in order to support Canada in achieving its international obligations.

Now, therefore, in consideration of their respective obligations set out below, the Parties hereto agree as follows:

Article 1 – Deadline for receipt of signed agreement

1.1  This agreement must be signed by the recipient and received by the Minister within thirty (30) days of its signature on behalf of the Minister, failing which it will be null and void.

Article 2 – Interpretation

2.1  The following form an integral part of this agreement:

e.g. Schedule 8 - Environmental Mitigation Measures

2.2  In the event of conflict or inconsistency, the order of precedence amongst the documents forming part of this agreement will be:

2.3  In addition to those terms defined in the recitals and unless otherwise specified, a capitalized term in this agreement has the meaning given to it in section 1 of Schedule 1.

2.4  Unless amended in writing by the Parties, this agreement constitutes the entire agreement between the Parties and supersedes all previous documents, negotiations, arrangements, undertakings and understandings related to its subject matter.

Article 3 – Recipient's Obligations

3.1  The recipient covenants and agrees:

  1. to carry out the Project in a diligent and professional manner using qualified personnel, and complete same on or before [date] ("Project Completion Date");
  2. subsequently unless otherwise agreed to in writing with the Minister, use best efforts to commercialize the Project Intellectual Property;
  3. to ensure that High Value Activities (as defined in Article 8) are conducted exclusively in Canada;
  4. to make all repayments due to the Minister as set out in Schedule 3 to this agreement;
  5. except as otherwise permitted in Article 8, to carry out the Project exclusively in Canada;
  6. to spend an amount representing at least 1% of all Eligible Costs on Collaboration, to carry out such Collaboration commitments in a diligent professional manner and to complete same on or before the Project Completion Date; and
  7. to satisfy and comply with all other terms, conditions and obligations contained in this agreement.

Article 4 – The contribution

4.1  Subject to the terms and conditions of this agreement, the Minister will make a contribution to the recipient in respect of the Project, of the lesser of:

  1. [XX]% of the Eligible Costs; and
  2. $[XXXX].

4.2  The Minister will not contribute to any Eligible Costs incurred by the recipient prior to [date] ("Eligibility Date"). In no event will Eligible Costs incurred prior to the date of this agreement exceed 20% of the total estimated Eligible Costs set out in Form C2 of Schedule 2.

4.3  In the event that the recipient does not spend an amount representing at least 1% of the total Eligible Costs on Collaboration, as required by paragraph 3.1(f) above, the Minister may reduce the contribution by the equivalent dollar amount of the deficiency.

For contributions of $10M or more

4.4  The Minister agrees to allocate funds to the Project as shown in Form C2 of Schedule 2.

For any Government Fiscal Year, the Minister will have no obligations to disburse any amount greater than those shown in Form C2 of Schedule 2.

If, for a given Government Fiscal Year, the recipient claims an amount inferior to the estimated contribution for that year, the Minister will consider any request to reprofile the excess funds to future Government Fiscal Years before the Project Completion Date.

Article 5 – Environmental Assessment

5.1  The recipient represents that the Project is not a "designated project" as defined in the Canadian Environmental Assessment Act, 2012 (CEAA) and is not being carried out on "federal lands" as defined in the CEAA.

5.2  The recipient shall comply with all federal, provincial, territorial, municipal and other applicable laws governing the recipient or the Project, or both, including but not limited to, statutes, regulations, by-laws, rules, ordinances and decrees. This includes legal requirements and regulations relating to environmental protection and the successful implementation of and adherence to any mitigation measures, monitoring or follow-up program that may be prescribed by the Minister or by other federal, provincial, territorial, municipal bodies, and certifies to the Minister that it has done so.

5.3  The recipient will provide the Minister with reasonable access to any Project site for the purpose of ensuring that the terms and conditions of any environmental approval are met, and that any mitigation, monitoring or follow-up measure required has been carried out.

5.4  If as a result of changes to the Project or otherwise, should an assessment be required in accordance with CEAA for the Project, the Minister and the recipient agree that the Minister's obligations under this agreement will be suspended from the moment that the Minister informs the recipient, until (i) a decision statement has been issued to the recipient or, if applicable, the Minister has decided that the Project is not likely to cause significant adverse environmental effects, and (ii) if required, an amendment to this agreement has been signed, setting out any conditions included in the decision statement. The recipient agrees to comply with any such conditions.

Article 6 – Government Funding

6.1  The recipient hereby acknowledges that, except for tax credits (other than investment tax credits), deductions or allowances available under the Federal and Provincial Income Tax Acts, no federal, provincial or municipal government financial funding, other than that described below, has been requested or received by the recipient for the Eligible Costs of the Project.

Federal $ [the maximum amount and source of assistance, if any]

Provincial $ [the maximum amount and source of assistance, if any]

Territorial $ [the maximum amount and source of assistance, if any]

Municipal $ [the maximum amount and source of assistance, if any]

Total  $[Total amount] space to insert amount ($)

6.2  The recipient shall inform the Minister of any change to the amount of federal, provincial, territorial or municipal government funding identified in Article 6.1 (except for tax credits (other than investment tax credits), deductions or allowances available under the Federal and Provincial Income Tax Acts) to be received for the Eligible Costs. Such notice of change must be made promptly in writing, and in any case not later than thirty (30) days following the change. In the event of additional assistance, the Minister will have the right to either reduce the contribution to the extent of any additional funding or require the recipient to repay such additional funding in accordance with section 4.3 of Schedule 1.

Article 7 – Addresses & Notices

7.1  Any notice to the Minister in fulfillment of obligations such as progress claims, annual reporting, and any other documents stipulated under this agreement, will be addressed to:

Industrial Technologies Office
Attn: Senior Director, Operations
Strategic Aerospace & Defence Initiative
8th Floor
235 Queen Street
Ottawa, Ontario K1A 0H5
Fax No: (613) 954-5649

7.2  All correspondence and notices to the recipient will be addressed to:

[Company name]
Attn: [title]
[address]
Fax No:

Article 8 – Special Conditions

Article 9 – Language of agreement

9.1  The Parties hereto confirm that it is their wish that this agreement as well as all other documents relating thereto, including notices, have been and will be drawn up in English only.

Les parties aux présentes confirment que c'est leur volonté que cette convention de même que tous les documents, y compris les avis s'y rattachant, soient rédigés en anglais seulement.

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In witness whereof the Parties hereto have executed this agreement through duly authorized representatives.

HER MAJESTY THE QUEEN IN RIGHT OF CANADA
as represented by the Minister of Innovation, Science and Economic Development Canada

Per:

space to insert name
Industrial Technologies Office
[name], Executive Director

space to insert date
Date

[Company name].

Per:

space to insert name

space to insert title
Name & Title

I have the authority to bind the Corporation.

space to insert date
Date

Per:

space to insert name

space to insert title
Name & Title

I have the authority to bind the Corporation.

space to insert date
Date

Schedule 1 - SADI General Conditions

Table of Contents

  1. Definitions
  2. Material Changes
  3. Disposal of Assets
  4. Claims for Payment
  5. Monitoring and Evaluation
  6. Representations, Warranties and Undertakings
  7. Term of Agreement
  8. Default and Recovery
  9. Event of Force Majeure
  10. Notice
  11. Compliance with Laws
  12. Members of Parliament
  13. Annual Appropriations
  14. Confidentiality
  15. Consent of the Minister
  16. No Assignment of Agreement
  17. Compliance with Post-Employment Provisions
  18. Contribution Agreement Only
  19. Binding Agreement
  20. Severability
  21. Applicable Law
  22. Signature in Counterparts
  23. Alternate Dispute Resolution

Schedule 1 - SADI General Conditions

1. Definitions

For the purposes of this Agreement, unless the context indicates otherwise:

"A&D"
means aerospace, defence, space and security.
"Acquisition or Divestiture"
means an acquisition of a business, the sale of a business or a merger or amalgamation, that affects Gross Business Revenue.
"Act"
means the Lobbying Act R.S.C. 1985 c. 44 (4th Supp.), as amended from time to time and its regulations.
"Activity"
means a major task that must take place in order to complete the Project. It has duration, during which time the work of that activity is performed, and may have resources and costs associated with that work as reflected in Form C-1 of Schedule 2.
"Agreement"
consists exclusively of the documents listed in section 2.1 of the Articles of Agreement.
"Affiliated Person"
means an affiliated person as defined in the Income Tax Act R.S.C. 1985 c. 1 (5th Supp), as amended.
"Background Intellectual Property"
means the intellectual property rights developed prior to the beginning of the Project and required for the carrying out of the Project or the exploitation of the Project Intellectual Property.
"Change in Control"
means,
  1. if the Recipient is a public company, a proposed change in the identity of the individual or company that owns 20 per cent or more of the voting rights attached to all outstanding voting securities of the Recipient,
  2. if the Recipient is a private company, a proposed change in the identity of the individuals or companies that owns 50 per cent or more of the outstanding voting securities of the Recipient, and
  3. if the Recipient enters into a binding obligation to sell, sells or otherwise disposes of all or substantially all of its assets;
"Collaboration"
means the Recipient's association with one or more Collaboration Partners for the purpose of research and development related to the Project.
"Collaboration Partner"
means, other than the Recipient, any licensed or accredited academic, post-secondary institution in Canada that is involved in the Collaboration.
"Contractual Benefits to Canada"
means any obligations of the Recipient intended to provide economic or social benefits to the population of Canada, set out in Articles 3 or 8 of the Articles of Agreement;
"Contribution"
means the funding, in Canadian dollars, payable by the Minister under this Agreement.
"Default"
means any of the events specified in Section 8.1 of Schedule 1, the occurrence or failure to occur of which constitutes an Event of Default, or becomes an Event of Default with the passage of time.
"Dispose"
means transferring outside of Canada, using an asset for a purpose other than the Project, selling, leasing or otherwise disposing including, in the case of a prototype or pilot plant, the transfer to commercial production, of any asset, if the costs of the manufacture, purchase or creation of the asset formed part of Eligible Costs, but, in any event shall not include abandoning the asset for legitimate business reasons.
"Eligible Costs"
means the costs incurred and paid by the Recipient in respect of the Project as identified in Schedule 2 and in accordance with Schedule 5, excluding those costs that are specifically mentioned in the Statement of Work as not being supported, if any, or other costs prohibited elsewhere in this Agreement.
"Event of Default"
has the meaning assigned to it in section 8.1.
"Fair Market Value"
means the price that would be agreed to in an open and unrestricted market between knowledgeable and willing parties dealing at arm's length, who are fully informed and not under any compulsion to transact.
"Force Majeure"
means any cause which is unavoidable or beyond the reasonable control of the Recipient, including only war, riot, insurrection, strikes or any act of God or other similar circumstance which is beyond the Recipient's control, and which could not have been reasonably circumvented by the Recipient without incurring unreasonable cost.
"Government Fiscal Year"
means the period from April 1 of one year to March 31 of the following year.
"Industrial Research"
means planned research or critical investigation aimed at discovery of new knowledge, with the objective that such knowledge may be useful in developing new products, processes or services or in bringing about a significant improvement to existing products, processes or services.
"Interest Rate"
means the Bank Rate, as defined in the Interest and Administrative Charges Regulations, in effect on the due date, plus 300 basis points, compounded monthly. The Interest Rate for a given month can be found at:
http://www.tpsgc-pwgsc.gc.ca/recgen/txt/71-eng.html
"ITO"
means the Innovation, Science and Economic Development Canada special operating agency known as the Industrial Technologies Office.
"Master Schedule"
means a summary-level Project schedule that identifies the major Activities and work breakdown structure components and Milestones as reflected in Form A of Schedule 2.
"Material Change"
is a change of any aspect of the Project that the Minister determines to be material, including without limitation, the following:
  1. The Project is not expected to be completed by the Project Completion Date;
  2. the total estimated Eligible Costs mentioned in the Statement of Work are expected to be exceeded by 20% or more;
  3. the Project is carried out at locations other than those mentioned in the Statement of Work;
  4. a Change in Control of the Recipient;
  5. a change in the business of the Recipient resulting in a change to the royalty base which would significantly lower the royalty payments to the Minister, other than a change as a result of an event of Force Majeure; or
  6. the loss of, or changes to, any key personnel identified in Article 8 of the Articles of Agreement.
"Maximum Amount to be Repaid"
has the meaning as set forth in Schedule 3 of the Agreement.
"Milestone"
means a significant point or event in the Project as set forth in Form B of Schedule 2.
"Party" or "Parties"
in the singular form mean the Minister or the Recipient, and both of them in the plural form.
"Pre-Competitive Development"
means the translation of industrial research findings into a plan, blueprint or design for new, modified or improved products, processes or services whether intended for sale or use, including the creation of a first prototype which would not be capable of commercial use, and may further include the conceptual formulation and design of products, processes or services and of initial demonstration or pilot projects, but does not include:
  1. initial demonstration or pilot projects if these could be converted or used for industrial application or commercial exploitation; or
  2. routine or periodic alterations to existing products, production lines, manufacturing processes, services, and other on-going operations even though these alterations may represent improvements.
"Project"
means the project as described in the Statement of Work.
"Project Intellectual Property"
means all technical data, including, without limitation, all designs, specifications, software, data, drawings, plans, reports, patterns, models, prototypes, demonstration units, practices, inventions, methods, applicable special purpose equipment and related technology, processes or other information conceived, produced, developed or reduced to practice by the Recipient and/or any of its Collaboration Partners, their employees, agents or assigns, in carrying out the Project, and all rights therein including, without limitation, patents, copyrights, industrial designs, trade-marks, and any registrations or applications for the same and all other rights of intellectual property therein, including any rights which arise from the above items being treated by the Recipient as trade secrets or confidential information. This does not include Background Intellectual Property as defined in this Agreement.
"Public Office Holder"
means a public office holder as defined in the Act.
"Resulting Products"
means all products, services or processes produced using the Project Intellectual Property or that incorporate any of the Project Intellectual Property.
"Recipient Fiscal Year"
means the period for which the Recipient's accounts in respect of its business or property are made up for purposes of assessment under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended.
"Repayment Phase"
means the period of time from the Project Completion Date to the expiry of this Agreement in accordance with Subsection 7.1.
"Schedule"
means a schedule to the Agreement.
"Similar Goods"
means goods or services that closely resemble the goods being transferred, in respect of their component materials and characteristics, and are capable of performing the same functions as, and of being commercially interchangeable with, the goods being transferred.
"Statement of Work"
refers to the description of the Project contained in Schedule 2 and includes all forms and tables attached thereto.
"Third Parties"
means an individual, an institution, corporation, or other legal entity, which is organized for the profit or benefit of its shareholders or other owners.
"Work Phase"
means the period of time from the Eligibility Date to the Project Completion Date.

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2. Material Changes

2.1 Other than a Change of Control where the Recipient is a public company, no Material Change will be made without the prior written consent of the Minister. Notice of such a Material Change must be delivered promptly to the Minister and in no event later than 30 days prior to the proposed Material Change.

2.2 In the case where the Recipient is a public company, the Recipient shall notify the Minister in writing of any Change of Control no later than thirty (30) days following any Change of Control, and as a result of such Change of Control, the Minister may, at his discretion, terminate the Agreement and may require that the Recipient pay the Minister up to the Maximum Amount to be Repaid.

3. Disposal of Assets

Subject to subsection 2.2, the Recipient shall retain possession and control of all assets, the cost of which has been contributed to by the Minister under the Agreement, and shall not Dispose of the same, without the prior written consent of the Minister, other than in the ordinary course of business where the aggregate book value of such assets for each occurrence is no greater than $25,000.

4. Claims for Payment

4.1 Payment of Claims

The Minister will pay the Contribution to the Recipient in respect of Eligible Costs incurred on the basis of itemized claims submitted in accordance with the procedures set out in Schedule 5.

4.2 Hold-Back Rights

The Minister may withhold ten per cent (10%) of the Contribution.

4.3 Overpayment by Minister

Where for any reason the Minister determines that the amount of the Contribution disbursed exceeds the amount to which the Recipient is entitled, the Recipient shall repay to the Minister, promptly and no later than 30 days from notice from the Minister, the amount of the overpayment together with interest at the Interest Rate from the date of the notice to the day of payment to the Minister in full. Any such amount is a debt due to Her Majesty the Queen in Right of Canada and is recoverable as such.

4.4 Set-off Rights of Minister

Without limiting the scope of the set-off rights provided for under the Financial Administration Act, it is understood that the Minister may set off against the Contribution, any amounts owed by the Recipient to Her Majesty the Queen in Right of Canada under legislation or contribution agreements and the Recipient shall declare to the Minister all amounts outstanding in that regard when making a claim under Schedule 5.

5. Monitoring and Evaluation

5.1 Minister's Right to Audit Accounts and Records

The Recipient shall, at its own expense, maintain and preserve in Canada and make available for audit and examination by the Minister or the Minister's representatives all books, accounts and records held by the recipient, or by agents or contractors of the recipient, relating to this Agreement and of the information necessary to ensure compliance with the terms and conditions of this Agreement, including repayment to the Minister. The Minister will have the right to conduct such additional audits at the Minister's expense as may be considered necessary. Unless otherwise agreed to in writing by the Minister, the Recipient shall maintain and preserve all books, accounts, invoices, receipts and records and all other documentation related to this Agreement for a period of three (3) years from the expiry or termination of this Agreement.

5.2 Auditor General Right's

The Recipient recognizes, acknowledges and accepts that the Auditor General of Canada may, at the Auditor General's cost, after consultation with the Recipient, conduct an inquiry under the authority of subsection 7.1 (1) of the Auditor General Act in relation to any funding agreement (as defined in subsection 42 (4) of the Financial Administration Act) with respect to the use of funds received.

For the purposes of any such inquiry undertaken by the Auditor General, the Recipient shall provide, upon request and in a timely manner, to the Auditor General or anyone acting on behalf of the Auditor General,

  1. all records held by the Recipient, or by agents or contractors of the Recipient, relating to this Agreement and the use of the funds provided under this Agreement; and
  2. such further information and explanations as the Auditor General, or anyone acting on behalf of the Auditor General, may request relating to this Agreement or the use of the funds provided under this Agreement.

5.3 Access to Third Party Records

The Recipient shall, at all times, ensure that its agents, employees, assigns and contractors are obligated to provide to the Minister or the Auditor General or their authorized representatives records and other information that are in possession of those agents, employees, assigns and contractors and that relate to this Agreement or to the use of the Contribution.

The Recipient shall ensure that any licence agreement it enters into for the exploitation of the Project Intellectual Property will contain similar provisions to permit the Minister to audit licensees' accounts and records in respect to the calculation of amounts that may be payable by the Recipient to the Minister under this Agreement.

5.4 Access to Premises

The Recipient shall provide the representatives of the Minister reasonable access to premises to inspect and assess the progress of the Project or any element thereof and supply promptly on request such data as the Minister may reasonably require for statistical or project evaluation purposes.

5.5 Evaluation

The Recipient shall, at its own expense, participate in the preparation of case studies reporting on the outcomes of the Project, to be completed by the Minister or his agents, in order to assist in the Minister's preparation of an overall evaluation of the value and effectiveness of SADI.

5.6 Extension of Obligations and Rights

The obligations and rights set out above in subsections 5.1, 5.2, 5.3, 5.4 and 5.5. of this Schedule 1 will survive for three years following the expiry or termination of this Agreement.

6. Representations, Warranties and Undertakings

6.1 Power and Authority of Recipient

The Recipient represents and warrants that it is duly incorporated under Canadian law and validly existing and in good standing and has the power and authority to carry on its business, to hold property and to enter into this Agreement and undertakes to take all necessary action to maintain itself in good standing, to preserve its legal capacity and to remain incorporated in a Canadian jurisdiction.

6.2 Authorized Signatories

Each Party represents and warrants that the signatories to the Agreement have been duly authorized to execute and deliver the Agreement.

6.3 Binding Obligations

Each Party represents and warrants that the execution, delivery and performance of this Agreement have been duly and validly authorized and that when executed and delivered, the Agreement will constitute a legal, valid and binding obligation enforceable in accordance with its terms.

6.4 No Pending Suits or Actions

The Recipient represents and warrants that it is under no obligation or prohibition, nor is it subject to or threatened by any actions, suits or proceedings that could or would prevent compliance with the Agreement. The Recipient shall inform the Minister forthwith of any such occurrence during the term of the Agreement.

6.5 Project Intellectual Property

6.5.1 Background Intellectual Property

The Recipient represents and warrants that it owns the Background Intellectual Property or holds sufficient rights, licenses and permissions in the same to permit the Project to be carried out and the Project Intellectual Property to be exploited by the Recipient.

6.5.2 Project Intellectual Property

Subject to subsection 6.5.4 the Recipient shall ensure that title to the Project Intellectual Property is to be vested, and unless otherwise agreed to in writing by the Minister, to remain, exclusively with the Recipient.

6.5.3 License of Project Intellectual Property

Subject to subsection 6.5.4, the Recipient agrees not to grant any right or license to, any of the Project Intellectual Property without the prior written consent of the Minister, except:

  1. in respect of an end-user licensee in conjunction with the sale of Resulting Products; and
  2. to a Collaboration Partner for the purposes of Collaboration, provided that, the Recipient shall ensure that the Recipient holds or will hold sufficient rights, licenses and permissions in such Project Intellectual Property to permit the Project to be carried out and the Project Intellectual Property to be exploited by the Recipient.

6.5.4 Collaboration Partner Development

The Recipient may enter into any ownership, rights sharing, and/or licensing arrangements with a Collaboration Partner in respect of any Project Intellectual Property developed by or with the Collaboration Partner, provided that, the Recipient holds or will hold sufficient rights, licenses and permissions in such Project Intellectual Property to permit the Project to be carried out and the Project Intellectual Property to be exploited by the Recipient.

6.5.5 Protection of Project Intellectual Property

The Recipient shall take appropriate steps to protect the Project Intellectual Property, and shall seek normal contractual assurances that any Collaboration Partner take appropriate steps to protect the Project Intellectual Property. The Recipient shall provide information to the Minister in that regard, upon request.

6.6 Compliance with Environmental Protection Requirements

The Recipient shall apply, in relation to the Project, in all material respects, the requirements of all applicable environmental laws, regulations, orders and decrees and of regulatory bodies having jurisdiction over the Recipient or the Project.

6.7 Other Agreements

The Recipient represents and warrants that it has not entered, and undertakes not to enter, without the Minister's written consent, into any agreement that would prevent the full implementation of the Agreement by the Recipient.

6.8 Dividend Restriction

The Recipient shall not make any dividend payments or other shareholder distributions that would prevent it from implementing the Project or satisfying any other of the Recipient's obligations under this Agreement, including, without limitation, the making of repayments to the Minister hereunder.

6.9 Other Financing

The Recipient remains solely responsible for providing or obtaining the funding, in addition to the Contribution, required for the carrying out of the Project and the fulfilment of the Recipient's other obligations under the Agreement.

6.10 Compliance with Lobbying Act

The Recipient warrants and represents:

  1. that it has filed all Lobbying Act returns required to be filed in respect of persons employed by the Recipient who communicate and/or arrange meetings with public office holders as part of their employment duties, and that it will continue to do so;
  2. that it has not contracted with any person to communicate and/or arrange meetings with public office holders for remuneration that is or would be contingent in any way upon the success of such person arranging meetings with public office holders, or upon the approval of the Recipient's application for SADI funding, or upon the amount of SADI funding paid or payable to the Recipient under this Agreement;
  3. that it will not contract with any person to communicate and/or arrange meetings with public office holders for remuneration that is or would be contingent upon the success of such person arranging meetings with public office holders, or upon the amount of SADI funding paid or payable to the Recipient under this Agreement;
  4. all persons who are or have been contracted by the Recipient to communicate and/or arrange meetings with public office holders in respect of the Project or this Agreement are in full compliance with the registration and other requirements of the Lobbying Act; and
  5. it shall at all times ensure that any persons contracted to communicate and/or arrange meetings with public office holders in respect of the Project or this Agreement are in full compliance with the requirements of the Lobbying Act.

6.11 Renewal of Representations

When submitting a claim for payment, as well as when submitting any report in accordance with Schedule 5, the Recipient must provide SADI with an update, in a form satisfactory to the Minister, on all representations, warranties and undertakings made herein.

7. Term of Agreement

7.1 Repayments to the Minister and Contractual Benefits

The Agreement will expire once all Contractual Benefits to Canada have been fulfilled and the total amount to be repaid to the Minister pursuant to Schedule 3 has been repaid, or the Repayment Period set out in Schedule 3 has elapsed, whichever shall first occur.

7.2 Advance Payment

Any advance or accelerated payment by the Recipient of the amounts due to the Minister under Schedule 3 shall not have the effect of shortening the period set in the Articles of Agreement for the fulfilment of the contractual obligations forming part of the Contractual Benefits to Canada, if any.

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8. Default and Recovery

8.1 Events of Default

The Minister may declare that an Event of Default has occurred if:

  1. a receiver, trustee or custodian for all or part of the assets of the Recipient is appointed;
  2. the Recipient makes an assignment for the benefit of creditors;
  3. the Recipient becomes insolvent;
  4. the Recipient files a voluntary petition for bankruptcy;
  5. the Recipient acquiesces to an involuntary petition for bankruptcy petition;
  6. the Recipient is adjudicated as a bankrupt;
  7. an order is made which is not being contested or appealed by the Recipient or a resolution is passed for the winding-up of the Recipient or it is dissolved;
  8. the Recipient ceases to carry on business;
  9. a representation, warranty or material statement contained herein or in any certificate delivered to the Minister hereunder or in connection therewith is at any time incorrect, false or misleading;
  10. the Recipient neglects or fails to pay to the Minister any amount due in accordance with this Agreement or fulfill any of the contractual obligations forming part of the Contractual Benefits to Canada;
  11. the Recipient fails to comply with the obligations regarding audit and evaluation, as set out in Article 5 of this Schedule 1;
  12. the Recipient defaults in the performance or fulfilment or does not comply with any other obligation, condition or covenant hereunder;
  13. the Recipient ceases to carry on the operations it carries on the date of the Agreement or enters into any unrelated operations which may materially adversely affect the Recipient's repayment capacity; or
  14. the Recipient enters into a letter of intent or binding obligation to sell, sells or otherwise disposes of all or substantially all of its assets without prior consent of the Minister;

Except in the case of a default under 8.1 (a) to (h), the Minister will not declare that an event of default has occurred unless he or she has given written notice to the Recipient of the occurrence which, in the Minister's opinion, constitutes an event of default and the Recipient fails, within 30 days of receipt of the notice, either to correct the condition or event or demonstrates, to the satisfaction of the Minister that it has taken such steps as are necessary to correct the condition.

8.2 Remedies on Default

If the Minister declares that an Event of Default has occurred, the Minister may exercise one or more of the following remedies:

  1. suspend any obligation by the Minister to contribute or continue to contribute to the Eligible Costs including any obligation to pay any amount owing prior to the date of such suspension;
  2. terminate any obligation of the Minister to contribute or continue to contribute to the Eligible Costs, including any obligation to pay any amount owing prior to the date of such termination;
  3. require the Recipient to repay to the Minister all or part of the Contribution paid by the Minister to the Recipient, together with interest from the day of demand at the Interest Rate;
  4. pay the Minister the total of all amounts required to be repaid pursuant to the Agreement or the Maximum Amount to be Repaid, whichever shall be the greater, less the total of all Annual Repayments paid to the Minister together with interest from the day of demand at the Interest Rate;
  5. pay the Minister an amount equal to the Maximum Amount to be Repaid, less the total of all Annual Repayments paid to the Minister by the Recipient, together with interest from the day of demand at the Interest Rate;
  6. terminate the Agreement; or
  7. post a notice on the Innovation, Science and Economic Development Canada website disclosing that the Recipient is in Default under the provisions of this Agreement and describing generally the remedies, if any, that the Minister has accordingly exercised.

In any event, the above remedies will only be used to obtain, in the aggregate, no more than the Maximum Amount to be Repaid.

8.3 No Waiver

The rights and remedies of the Minister under this Agreement shall be cumulative and not exclusive of any right or remedy that he would otherwise have.

The fact that the Minister refrains from exercising a remedy he or she is entitled to exercise under the Agreement will not constitute a waiver of such right and any partial exercise of a right will not prevent the Minister in any way from later exercising any other right or remedy under the Agreement or other applicable law.

9. Event of Force Majeure

The Recipient will not be in Default by reason only of any failure in the performance of the Project in accordance with Schedule 2 if such failure arises without the fault or negligence of the Recipient and is caused by any event of Force Majeure.

10. Notice

10.1 Form and Timing of Notice

The Minister or the Recipient may send any written notice by any pre-paid method, including regular or registered mail, courier or facsimile. Notice will be considered as received upon delivery by the courier, or one day after being sent by facsimile or five (5) calendar days after being mailed.

10.2 Change of Address

A Party may change the address which that Party has stipulated in the Agreement by notifying in writing the other Party of the new address.

10.3 Changes in Regard to Recipient's Business

The Recipient shall, in advance and in writing, and subject to Sections 2 and 3 of this Schedule 1, notify the Minister in the event of Acquisition or Divestiture. In the case where the Recipient is a public company, the Recipient shall notify the Minister in writing of any Acquisition or Divestiture contemporaneously with any press release, or filing of a public regulatory notice in respect of such Acquisition or Divestiture.

11. Compliance with Laws

In implementing the Agreement, the Recipient shall comply with all applicable federal, provincial and municipal laws, including but not limited to statutes, regulations, by-laws, ordinances and decrees.

12. Members of Parliament

The Recipient represents and warrants that no member of the House of Commons will be admitted to any share or part of this Agreement or to any benefit to arise therefrom. No person who is a member of the Senate will, directly or indirectly, be a party to or be concerned in this Agreement.

13. Annual Appropriations

13.1 Parliamentary Allocation

Any payment by the Minister under this Agreement is subject to there being an appropriation for the Government Fiscal Year in which the payment is to be made; and to cancellation or reduction in the event that departmental funding levels are changed by Parliament.

13.2 Lack of Appropriation

If the Minister is prevented from disbursing the full amount of the Contribution due to a lack or reduction of appropriation or departmental funding levels, the Parties agree to review the effects of such a shortfall in the Contribution on the implementation of the Agreement and to adjust, as appropriate, the Payments to the Minister identified in Schedule 3 and the contractual obligations forming part of the Contractual Benefits to Canada.

14. Confidentiality

14.1 Consent Required

Subject to Schedule 4 and the Access to Information Act, each party shall keep confidential and shall not without the consent of all Parties disclose the contents of the Agreement and the documents pertaining thereto, whether provided before or after the Agreement was entered into, or of the transactions contemplated herein.

14.2 International Dispute

The Minister is hereby authorized to disclose any of the information referred to in paragraph 14.1 above where, in the opinion of the Minister, such disclosure is required to an international trade panel for the purposes of the conduct of a dispute in which Canada is a party or a third party intervener. The Minister shall give prior notice to the Recipient of such disclosure.

14.3 Financing, Licensing and Subcontracting

The Minister hereby consents to the Recipient disclosing this Agreement, and any portion or summary thereof, for any of the following purposes:

  1. securing additional financing;
  2. licensing for commercial exploitation; or
  3. confirming to agents, contractors and subcontractors of the Recipient that all agents, contractors and subcontractors must agree to provide the Minister and the Auditor-General with access to their records and premises.

Provided that any person to whom this Agreement, or any portion or summary thereof is disclosed shall execute a non-disclosure agreement prior to such disclosure.

15. Consent of the Minister

Whenever the Agreement provides for the Recipient obtaining the consent or agreement of the Minister, it is understood that such consent or agreement will not be unreasonably withheld and that the Minister may make the issuance of such consent or agreement subject to reasonable conditions.

16. No Assignment of Agreement

The Recipient shall not assign the Agreement or any part thereof without the prior written consent of the Minister. Any attempt by the Recipient to assign this Agreement or any part thereof, without the express written consent of the Minister, is void.

17. Compliance with Post-Employment Provisions

The Recipient confirms that no current or former public servant or Public Office Holder to whom the Values and Ethics Code for the Public Service, the Values and Ethics Code for the Public Sector, the Policy on Conflict of Interest and Post-Employment or the Conflict of Interest Act apply, will derive a direct benefit from this Agreement unless the provision or receipt of such benefits is in compliance with such legislation and codes.

18. Contribution Agreement Only; Indemnification; Limitation of Liability

18.1 Contribution Agreement Only

The Agreement is a contribution agreement only, not a contract for services or a contract of service or employment, and nothing in the Agreement, the Parties relationship or actions is intended to create, or be construed as creating, a partnership, employment or agency relationship between them. The Recipient is not in any way authorized to make a promise, agreement or contract and to incur any liability on behalf of Canada or to represent itself as an agent, employee or partner of the Crown, including in any agreement with a third party, nor shall Canada make a promise, agreement or contract and incur any liability on behalf of the Recipient, and the Recipient shall be solely responsible for any and all payments and deductions required by the applicable laws.

18.2 Indemnification

Except for any claims arising from the gross negligence or gross fault of Canada's employees, officers, agents or servants, the Recipient agrees, at all times, to indemnify and save harmless, Canada and any of its officers, servants, employees or agents from all and against all claims and demands, loss, costs, damages, actions, suits or other proceedings by whomsoever made, brought or prosecuted, in any manner based upon, occasioned by or attributable to the execution of this Agreement or any action taken or things done or maintained by virtue hereof, or the exercise in any manner of rights arising hereunder.

18.3 Limitation of Liability

Notwithstanding anything to the contrary contained herein, Canada shall not be liable for any direct, indirect, special or consequential damages of the Recipient nor for the loss of revenues or profits arising based upon, occasioned by or attributable to the execution of this Agreement, regardless of whether such a liability arises in tort (including negligence), contract, fundamental breach or breach of a fundamental term, misrepresentation, breach or warranty, breach of fiduciary duty, indemnification or otherwise.

19. Binding Agreement

This Agreement is binding on the Parties and their successors and permitted assigns.

20. Severability

Any provision of this Agreement which is prohibited by law or otherwise deemed ineffective will be ineffective only to the extent of such prohibition or ineffectiveness and will be severable without invalidating or otherwise affecting the remaining provisions of the Agreement.

21. Applicable Law

This Agreement will be interpreted in accordance with the laws and regulations of Canada and of the province in which the Recipient's head office is located. The word "law" used herein has the same meaning as in the Interpretation Act, R.S.C., 1985, c. I-21.

22. Signature in Counterparts

This Agreement may be signed in counterparts and such counterparts may be delivered by facsimile or by other acceptable electronic transmission, each of which when taken together, will constitute an original Agreement.

23. Alternate Dispute Resolution

If a dispute arises concerning the application or interpretation of this Agreement, the Parties will attempt to resolve the matter through good faith negotiation, and may, if necessary and the Parties consent in writing, resolve the matter through mediation by a mutually acceptable mediator or arbitration in accordance with the Commercial Arbitration Code set out in the schedule to the Commercial Arbitration Act (Canada), and all regulations made pursuant to that Act.

Schedule 2 - The Project

The Project is described in the Statement of Work and attached forms and tables.

The following information is provided for visual reference only. To access these forms in an alternate format, please contact us.

Statement of Work (SOW)

[Project name]

  1. Main Objective
    • 1.1 Anticipated Outcomes and Benefits
      • 1.1.1 Innovation
      • 1.1.2 Competitiveness
      • 1.1.3 Collaboration
      • 1.1.4 Other benefits
  2. Major Activities
  3. Project Collaboration Objectives

    The Project will include collaboration with licensed or accredited academic, post-secondary institutions in Canada in order to support the execution of the SOW, Section 2. Throughout the project, the Recipeint will provide visibility into the executed collaborations as required at Schedule 5, Item A, 1(vi). Examples of potential collaborations are listed below:


Form A — Master Schedule (Gantt Chart)

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Form B — Milestones

Form B — Milestones
Project Phases and Major Milestone Groups Start End
 
 
 
 

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Form C1 — Eligible Costs Breakdown

Form C1 — Eligible Costs Breakdown
Description of Activity AreaFootnote 1 Estimated Eligible Costs
($000)
Direct Costs
($000)
Indirect Costs (Overhead)Footnote 2 Total
Direct Labour Costs Direct Materials Subcontracts and Consultants Other Direct Costs Equipment
1.
2.
Total eligible costs

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Form C2 — Cost Breakdown By Fiscal Year

Form C2 — Cost Breakdown By Fiscal Year
Fiscal Year
(Ending March 31)
Total Estimated Eligible Costs
($000)
SADI Contribution to the Project
($000)
 
 
 
 
Total

Form D — Project Location and Costs

Form D — Project Location and Costs
Project Location Work Performed Estimated % of
Total Eligible Costs
 
 
Total Eligible Costs All Activities 100%

Schedule 3 - Repayments to the Minister (Conditional)

(If repayments are conditional)

1. Definitions

For the purposes of Schedule 3 of this Agreement, unless the context or the Agreement indicates otherwise:

"Adjustment Factor"
means the multiplier applied to the Repayment Rate for purposes of calculating the amount of each Annual Repayment Due, determined in accordance with the provisions of paragraph 2.1 of this Schedule.
"Annual Repayment Due"
means the annual repayment payable by the Recipient to the Minister as set out in section 2 of this Schedule.
"Benchmark Year GBR"
means the GBR for the Recipient Fiscal Year which immediately follows the Project Completion Date.
"Gross business revenues" or "GBR"
means revenue in the currency reported in the audited consolidated financial statements of the Recipient, as determined in accordance with generally accepted accounting principles applied on a consistent basis.
"Maximum Amount to be Repaid"
means [XX] time the actual amount paid by the Minister to the Recipient under this Agreement.
"Repayment Period"
means the period of time determined in accordance with paragraph 2.2 of this Schedule.
"Repayment Rate"
means that percentage rate calculated as follows, without conversion of the Recipient's revenues into Canadian dollars in the event that the Recipient's revenues are reported in a foreign currency:

ITO Contribution amount ( Benchmark Year GBR amount × Years to Repay )
"Years to Repay"
means [xxxx]([XX]) years.

2. Repayments

The Recipient shall pay the Annual Repayment Due during each year of the Repayment Period in accordance with the following:

2.1 Repayment Calculation

The Annual Repayment Due shall be calculated annually based on the Repayment Rate and year-over-year change in GBR by application of the Adjustment Factor as outlined below.

Repayment Calculation
Annual Growth in Royalty Base Adjustment
Factor
Repayments
less than 0% 0 No repayments due
0% to less than or equal to [X]% 1 Nominal repayment, no adjustment
greater than [X]% to less than
or equal to [Y]%
[a] Royalty increased by [AA]%
greater than [Y]% to less than
or equal to [Z]%
[b] Royalty increased by [BB]%
greater than [Z]% [c] Royalty increased by [CC]%

The Annual Repayment Due shall be payable in Canadian dollars (CAD).

In the event that the Recipient's revenues are reported in a currency other than Canadian dollars, the Annual Repayment Due shall be calculated as if the amount of the Recipient's reported revenues were a Canadian dollar amount, and there shall be no adjustment made on account of the relative value of the Canadian and non-Canadian currencies.

The Annual Repayment due shall be calculated as follows:

Recipient's Fiscal Year GBR × Repayment Rate × Adjustment Factor

Example:

ITO Contribution = 1.5 million CAD
Benchmark Year GBR = 10 million USD
Years to Repay = 15 years

Repayment Rate = ITO contribution (CAD) ( Benchmark Year GBR (USD) × Years to Repay ) = 1.5 million CAD ( 10 million USD × 15 ) = 1.0 %

Current Year Sales = 12 million USD
Prior Year Sales = 11 million USD

Annual year-over-year Sales Growth = ( Current Year Sales Prior Year Sales ) 1 = ( 12 million USD 11 million USD ) 1 = 9.1 %

Assume a 9.1% growth rate generates an adjustment factor of 1.5

Repayment Due (in CAD) = Current Year GBR × Adjustment Factor × Repayment Rate = 12 million USD × 1.5 × 1.0 % = 180,000 CAD

2.2 Repayment Period

The Repayment Period will begin one (1) year following the fiscal year end in which the Project is completed and will continue for the Years to Repay. The Recipient shall be entitled to prepay any Annual Repayment Due under this Agreement, or portion thereof, at any time.

2.3 Repayment Statements and Payments

Notwithstanding any other provisions contained in this Agreement or its Schedules, the Recipient shall provide the Minister with a statement of GBR audited by a third party for the purposes of establishing the Benchmark Year GBR, and thereafter shall provide audited statements of GBR annually within four (4) months following the end of each Recipient Fiscal Year. The annual statement of GBR shall include the Recipient's company name and SADI Agreement number.

The first Annual Repayment Due shall be payable within four (4) months following the end of the first Recipient Fiscal Year in which the Repayment Period starts. Subsequent Annual Repayment Due shall be paid within four (4) months following the end of the Recipient Fiscal Year in which the repayment accrues for the Years to Repay, or until such time as the Maximum Amount to be Repaid is reached, whichever occurs earlier.

The Annual Repayment Due shall be paid by cheque issued to the order of the Receiver General of Canada, and shall be sent to:

Innovation, Science and Economic Development Canada
2nd Floor
235 Queen Street
Ottawa, Ontario
K1A 0H5

Attn: Director, Repayments & Recoveries Directorate (RRD).

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2.4 Acquisitions and Divestitures

2.4.1 Acquisitions

  1. Benchmark Repayment Rate Adjustment: In the event that an acquisition occurs at any time during the Benchmark Year, the Repayment Rate shall be calculated as if the acquisition had taken place on the first day of the Benchmark Year notwithstanding the definition of Repayment Rate set out in Section 1:

    Formula:

    Repayment Rate = ITO contribution ( Benchmark Year GBR × Years to Repay ) .

    Where:

    Benchmark Year GBR = Recipient GBR during the benchmark year + Acquired Company GBR during the benchmark year (not otherwise reported in Recipient GBR) .

    Example:

    Recipient GBR in benchmark year = 1,000,000
    Acquired Company GBR in benchmark year = 500,000

    Benchmark Year GBR = 1,000,000 + 500,000 = 1,500,000

    ITO Contribution = 225,000
    Years to Repay = 15

    Repayment Rate = 225,000 ( 1,500,000 × 15 ) = 1.0 %

  2. Repayment Rate Adjustment Subsequent to the Benchmark Year:  In the event that an acquisition affects the GBR of the Recipient and occurs after the Benchmark Year, the Repayment Rate will be changed so that the impact of the event upon the Annual Repayment Due will be neutral. The changed Repayment Rate becomes the Repayment Rate for the year of the event and future periods, unless there is a subsequent acquisition or divestiture affecting the GBR of the Recipient.

    In simple terms, for example, if the company doubles in size as the result of the acquisition, the Repayment Rate is cut in half.

    Formula:

    Modified Repayment Rate = Repayment Rate × ( Prior Year GBR of Recipient ) ( Prior Year GBR of Recipient + Prior Year GBR of Acquired Company ) .

    Example:

    Repayment Rate = 1%
    Prior Year GBR of Recipient = 1,000,000
    Prior Year GBR of Acquired Company = 500,000

    Modified Repayment Rate = 1% × ( 1,000,000 ) ( 1,000,000 + 500,000 ) = 0.67%

  3. Annual Growth Rate Calculation for determination of Adjustment Factor: For the purpose of calculating annual growth rates in the Acquisition Year (year of acquisition) and Subsequent Year (year directly following year of acquisition), the Recipient's GBR in the Prior Year (year directly preceding year of acquisition) and Acquisition Year will be restated as if the acquisition was effective from the beginning of each year.

    Formula:

    Annual Growth Rate Acquisition Year = ( Acquisition Year GBR Prior Year GBR ) 1

    Annual Growth Rate Subsequent Year = ( Subsequent Year GBR Acquisition Year GBR ) 1

    Where:

    Prior Year GBR = Prior Year GBR of Recipient + Prior Year GBR of Acquired Company

    Acquisition Year GBR = Acquisition Year GBR of Recipient + Acquisition Year GBR of Acquired Company (not otherwise reported in Recipient GBR)

    Example:

    Modified Repayment Rate = 0.67%

    Prior Year GBR of Recipient = 1,000,000
    Prior Year GBR of Acquired Company = 500,000
    Prior Year GBR = 1,500,000

    Acquisition Year GBR of Recipient = 1,200,000
    Acquisition Year GBR of Acquired Company (not otherwise reported in Recipient GBR) = 600,000
    Acquisition Year GBR = 1,800,000

    Subsequent Year GBR = 1,900,000

    Annual Growth Rate Acquisition Year = ( 1,800,000 1,500,000 ) 1 = 20%

    Annual Growth Rate Subsequent Year = ( 1,900,000 1,800,000 ) 1 = 5.6%

2.4.2 Divestitures

  1. Benchmark Repayment Rate Adjustment: In the event that a divestiture occurs at any time during the Benchmark Year, the Repayment Rate shall be calculated as if the divestiture had taken place on the first day of the Benchmark Year notwithstanding the definition of Repayment Rate set out in Section 1:

    Formula:

    Repayment Rate = ITO contribution ( Benchmark Year GBR × Years to Repay ) .

    Where:

    Benchmark Year GBR = Recipient GBR during the benchmark year Divested GBR during the benchmark year .

    Example:

    Recipient GBR in Benchmark Year = 1,000,000
    Divested GBR in Benchmark Year = 500,000
    Benchmark Year GBR = 1,000,000 500,000 = 500,000

    ITO Contribution = 225,000
    Years to Repay = 15

    Repayment Rate = 225,000 ( 500,000 × 15 ) = 3.0 %

  2. Repayment Rate Adjustment Subsequent to the Benchmark Year: In the event that a divestiture affects the GBR of the Recipient and occurs after the Benchmark Year, the Repayment Rate will be changed so that the impact of the event upon the Annual Repayment Due will be neutral. The changed Repayment Rate becomes the Repayment Rate for the year of the event and future periods, unless there is a subsequent acquisition or divestiture affecting the GBR of the Recipient.

    In simple terms, for example, if the company becomes half its size as the result of the divestiture, the Repayment Rate is doubled.

    Formula:

    Modified Repayment Rate = Repayment Rate × ( Prior Year GBR of Recipient ) ( Prior Year GBR of Recipient Prior Year Divested GBR ) .

    Where:

    Prior Year Divested GBR = Revenues in the prior year from operations which have been discontinued as the result of the divestiture .

    Example:

    Repayment Rate = 1%
    Prior Year GBR of Recipient = 1,000,000
    Prior Year Divested GBR = 500,000

    Modified Repayment Rate = 1% × ( 1,000,000 ) ( 1,000,000 500,000 ) = 2%

  3. Annual Growth Rate Calculation for determination of Adjustment Factor:  For the purpose of calculating annual growth rates in the Divestiture Year (year of divestiture) and Subsequent Year (year directly following year of divestiture), the Recipient's GBR in the Prior Year (year directly preceding year of divestiture) and Divestiture Year will be restated as if the divestiture was effective from the beginning of each year.

    Formula:

    Annual Growth Rate Divestiture Year = ( Divestiture Year GBR Prior Year GBR ) 1

    Annual Growth Rate Subsequent Year = ( Subsequent Year GBR Prior Year GBR ) 1

    Where:

    Prior Year GBR = Prior Year GBR of Recipient Prior Year Divested GBR

    Divestiture Year GBR = Divestiture Year GBR of Recipient Divestiture Year Divested GBR

    Prior Year Divested GBR = Revenues in the Prior Year from operations which have been discontinued as the result of the divestiture .

    Divestiture Year Divested GBR = Revenues in the Divestiture Year from operations which have been discontinued as the result of the divestiture .

    Example:

    Modified Repayment Rate = 2%

    Prior Year GBR of Recipient = 1,000,000
    Prior Year Divested GBR = 500,000
    Prior Year GBR = 500,000

    Divestiture Year GBR of Recipient = 560,000
    Divestiture Year Divested GBR = 10,000
    Divestiture Year GBR = 550,000

    Subsequent Year GBR = 558,000

    Annual Growth Rate Divestiture Year = ( 550,000 500,000 ) 1 = 10%

    Annual Growth Rate Subsequent Year = ( 558,000 550,000 ) 1 = 1.5%

2.5 Late Payments

Interest shall be payable on any portion of the Annual Repayment Due remaining unpaid, calculated and payable at the Interest Rate, from the date upon which the Annual Repayment Due is due, until payment in full has been received by the Minister. Interest shall be payable in accordance with the foregoing notwithstanding any other remedies available to the Minister in the event of Default by the Recipient under this Agreement. Whenever any payment date under this section falls on a Saturday, Sunday or statutory holiday, payment will be due on the next day following which is not a Saturday, Sunday or statutory holiday.

Schedule 3 - Repayments to the Minister (Unconditional)

1. Definitions

For the purposes of Schedule 3 of this Agreement, unless the context or the Agreement indicates otherwise:

(If repayments are unconditional)

"Annual Repayment Due"
means the annual repayment payable by the Recipient to the Minister as set out in section 2 of this Schedule.
"Maximum Amount to be Repaid"
means [xx] time the actual amount paid by the Minister to the Recipient under this Agreement.
"Repayment Period"
means the period of time determined in accordance with paragraph 2.2 of this Schedule.
"Years to Repay"
means [xxxx] ([XX]) years.

2. Repayments

The Recipient shall pay the Annual Repayment Due during each year of the Repayment Period in accordance with the following:

2.1

Annual Repayment
Year Annual Repayment Due
(expressed as a
percentage of the
Maximum Amount
to be Repaid)
Annual Repayment Due
(expressed in [$M]
and based on the
full Contribution
being disbursed)
Repayment Due Date
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Total 100%

2.2 Repayment Period

The Repayment Period will begin one (1) year following the fiscal year end in which the Project is completed and will continue for the Years to Repay. The Recipient shall be entitled to prepay any Annual Repayment Due under this Agreement, or portion thereof, at any time.

2.3 Repayment Payments

The Recipient will pay to the Minister the Maximum Amount to be Repaid, by way of Annual Repayment Due of [negotiated terms] during the Repayment Period, as set out in Table 2.1. (Note: Table 2.1 presumes that the total amount disbursed by the Minister under this Agreement is equal to $[contribution amount]).

The first Annual Repayment Due shall be payable within four (4) months following the end of the Recipient's Fiscal Year in which the Repayment Period starts. Subsequent Annual Repayment Due shall be paid within four (4) months following the end of the Recipient's Fiscal Year for the Years to Repay or until such time as the Maximum Amount to be Repaid is reached, whichever occurs earlier.

The Annual Repayment Due shall be paid by cheque issued to the order of the Receiver General of Canada, and shall be sent to:

Innovation, Science and Economic Development Canada
235 Queen Street
Ottawa, Ontario
K1A 0H5

Attn: Director, Repayments & Recoveries Directorate.

2.4 Late Payments

Interest shall be payable on any portion of the Annual Repayment Due remaining unpaid, calculated and payable at the Interest Rate, from the date upon which the Annual Repayment Due is due, until payment in full has been received by the Minister. Interest shall be payable in accordance with the foregoing notwithstanding any other remedies available to the Minister in the event of Default by the Recipient under this Agreement.

Whenever any payment date under this section falls on a Saturday, Sunday or statutory holiday, payment will be due on the next day following which is not a Saturday, Sunday or statutory holiday.

>Schedule 4 - Communications Obligations

The Recipient agrees to abide by and be subject to the provisions set out below.

Section A: Recipient's Release of Information Related to the Project at time of Announcement of Project Funding

  1. The Minister will inform the Recipient of the date on which the first public announcement is to be made and the Recipient shall not disclose the existence of this Agreement until such date.
  2. The Recipient shall invite representatives of ITO to be present at any official announcement organized by the Recipient and shall inform the public of ITO's support in the Project.
  3. For information purposes, in planning a public announcement, the Recipient shall contact the ITO to obtain advice on Government of Canada protocol guidelines for public ceremonies.
  4. Nothing in this Schedule shall be interpreted as preventing the fulfillment by the Recipient of its reporting obligations under applicable securities laws.

>Section B: Release of Information Related to the Project Throughout the Duration of the Agreement

The following sub-articles apply to public announcements concerning the Project throughout the term of the Agreement:

  1. The Recipient hereby consents to public announcements, including, without limitation, the posting from time to time on the Innovation, Science and Economic Development Canada or ITO web site, by or on behalf of the Minister of any of the following information:
    1. Name of the Recipient;
    2. Amount of the Contribution, a description of the Project, the location of the Project and identification of the anticipated Project results and public policy benefits thereof;
    3. Payments payable or paid by the Recipient to the Minister; and
    4. Information resulting from any enforcement of Schedule 1, Section 8.2 (g).
  2. The Recipient shall inform ITO officials of any public announcement, publications or presentation in regard to the Project (e.g., award ceremonies, conferences, news releases, etc) and shall use statements approved by the ITO Communication Official when these include information regarding the participation of SADI.
  3. The Minister will release information on the Agreement under the rules and procedures of the Access to Information Act and Privacy Act and through the Public Accounts of Canada.

Schedule 5 - Claims & Cost Principles


A — Claims

  1. Provided the Recipient is not in Default, the Minister will pay the Contribution, in respect of Eligible Costs, on the basis of claims that will:
    1. (a) be submitted on a [quarterly or monthly] basis ("Claim Period"), except for the first claim which will cover a longer period going back to [date];
    2. be submitted on SADI claim forms, within forty-five (45) days of the end of each Claim Period; and sent to the address specified in Article 7.1 of the Articles of Agreement;
    3. be accompanied with details of all costs being claimed, which will be substantiated by such documents as may be required by the Minister and presented in accordance with the structure, Activities and the Milestones contained in the Statement of Work;
    4. be certified, in a form satisfactory to the Minister, by the chief financial officer of the Recipient or other person satisfactory to the Minister;
    5. include a deduction for Eligible Costs included in a previous claim but which have not been paid by the Recipient within ninety (90) days of such claim; and,
    6. be accompanied by a report containing:
      1. the Recipient's revised projections of the Project cash flows for the current Government Fiscal Year.
      2. such other information as the Minister may request from time to time;
      3. an identification of any planned or completed transfer to commercial production, transfer outside of Canada, sale, lease or other disposal of Special Purpose Equipment (as defined in Schedule 7);
      4. an update to the list of current holdings of Special Purpose Equipment (Special Purpose Equipment Form in Schedule 7) if any modifications have been made since the last claim;
      5. an itemized list of foreign sub-contracting costs, if any;
      6. an itemized list of collaboration costs.
    7. (g) be accompanied by the representations noted in Schedule 1, Section 6.11 Renewal of Representations and a certification that there are no Defaults under any of the provisions of the Agreement (and no state of facts exist which, with the giving of notice or the passing of time, or both, would constitute an Event of Default).
  2. In regard to paragraph 1(e) above, the Minister may request at any time that the Recipient provide satisfactory evidence to demonstrate that Eligible Costs have been paid.
  3. The Recipient shall submit with the final claim an itemized statement certified by the Recipient's chief financial officer attesting to the Eligible Costs for the Project under the Agreement having been incurred and paid.

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B — SADI Project Cost Principles>

1. General Principle

The Eligible Costs of the Project must be the sum of the applicable direct and indirect costs which, in the opinion of the Minister, are or must be reasonably and properly incurred and/or allocated, in the performance of the Project. These costs must be determined in accordance with the Recipient's cost accounting practices as accepted by the Minister and applied consistently over time.

2. Reasonable Costs

A cost is reasonable if the nature and amount do not exceed what would be incurred by an ordinary prudent person in the conduct of a competitive business.

In determining the reasonableness of a particular cost, consideration will be given to:

  1. whether the cost is of a type generally recognized as normal and necessary for the conduct of the Recipient's business or performance of the Project;
  2. the restraints and requirements by such factors as generally accepted sound business practices, arm's length bargaining, federal, provincial and local laws and regulations, and Agreement terms;
  3. the action that prudent business persons would take in the circumstances, considering their responsibilities to the owners of the business, their employees, customers, the Government and public at large;
  4. significant deviations from the established practices of the Recipient which may unjustifiably increase the Eligible Costs; and
  5. the specifications, delivery schedule and quality requirements of the particular Project as they affect costs.

2.1 Affiliated Persons

In the case of Eligible Costs incurred with an Affiliated Person, the amount of the costs incurred must be adjusted as follows:

  1. The cost of those goods or services must not exceed their Fair Market Value;
  2. If there is no Fair Market Value for the applicable goods or services, the Fair Market Value of Similar Goods must be used;
  3. If there is no Similar Good, Cost Plus Method (as defined below) must be used to determine the cost.

The Cost Plus Method means the sum of applicable direct and indirect costs, as described below in sections 4 and section 5, all as determined and measured consistently in accordance with generally accepted accounting principles, that were reasonably incurred or allocated in the performance of the Statement of Work plus Profit, as determined below.

Once the sum of those direct and indirect costs is determined ("Total Cost"), profit ("Profit") is calculated at five percent (5%) of the Total Cost.

Accordingly, the Cost Plus Method is equal to Total Cost plus Profit of 5%.

3. Methodology to Determine the Direct and Overhead Costs

The Eligible Costs of the Project are those direct and indirect (overhead) costs, which, in the opinion of the Minister, are reasonably and properly incurred and allocated, to the performance of the Project.

Indirect (overhead) costs shall be calculated at a fixed rate of 75% of Direct Labour Costs.

4. Direct Costs

There are three categories of direct costs:

  1. Direct Materials Cost meaning the cost of materials which can be specifically identified and measured as having been used or to be used in the performance of the Project and which are so identified and measured consistently by the Recipient's cost accounting practices as accepted by the Minister.
    1. These materials may include, in addition to materials purchased solely for the performance of the Project and processed by the Recipient, or obtained from subcontractors, any other materials issued from the Recipient's general stocks.
    2. Materials purchased solely for the performance of the Project or subcontracts must be charged to the Project at the net laid down cost to the Recipient, before any discounts for prompt payment.
    3. Materials issued from the Recipient's general stocks must be charged to the Project in accordance with the method as used consistently by the Recipient in pricing material inventories.
  2. Direct Labour Costs meaning the costs of the portion of gross wages or salaries incurred for activities which can be specifically identified and measured as having been incurred or to be incurred in the performance of the Project and which are so identified and measured consistently by the Recipient's cost accounting practices as accepted by the Minister.
  3. Other Direct Costs meaning those applicable costs, not falling within the categories of Direct Material Costs or Direct Labour Costs, but which can be specifically identified and measured as having been incurred or to be incurred in the performance of the Project activities and which are so identified and measured consistently by the Recipient's cost accounting practices as accepted by the Minister.

5. Indirect Costs (Overhead)

Indirect Costs (overhead) meaning those costs which, though necessarily having been incurred during the period of the performance of the Project activities for the conduct of the Recipient's business in general, cannot be identified and measured as directly applicable to the performance of the Project.

These Indirect Costs may include, but are not necessarily restricted to, such items as:

  1. indirect materials and supplies (For supplies of similar low-value, high-usage items the costs of which meet the above definition of Direct Material Costs but for which it is economically expensive to account for these costs in the manner prescribed for direct costs, then they may be considered to be indirect costs for the purposes of the Project);
  2. indirect labour;
  3. fringe benefits (the Recipient's contribution only);
  4. public services expenses: expenses of a general nature such as power, heat, light, operation and maintenance of general assets and facilities;
  5. fixed/period charges: recurring charges such as property taxes, rentals and reasonable provision for depreciation costs; and
  6. general and administrative expenses: including remuneration of executive and corporate officers, office wages and salaries and expenses such as stationery, office supplies, postage and other necessary administration and management expenses.

6. >Non-Eligible Costs

Despite that the following costs may have been or may be reasonably and properly incurred by the Recipient in the performance of the Project, they are considered non-eligible costs to the Project:

  1. allowance for interest on invested capital, bonds, debentures, bank or other loans together with related bond discounts and finance charges;
  2. legal, accounting and consulting fees in connection with financial reorganization, security issues, capital stock issues, obtaining of licenses and prosecution of claims against the Minister;
  3. losses on investments, bad debts and expenses for the collection charges;
  4. losses on other projects or contracts;
  5. federal and provincial income taxes, goods and services taxes, excess profit taxes or surtaxes and/or special expenses in connection with those taxes;
  6. provisions for contingencies;
  7. premiums for life insurance on the lives of officers and/or directors where proceeds accrue to the Recipient;
  8. amortization of unrealized appreciation of assets;
  9. depreciation of assets paid for by the Minister;
  10. fines and penalties;
  11. expenses and depreciation of excess facilities;
  12. unreasonable compensation for officers and employees;
  13. product development or improvement expenses not associated with the work being performed under the Project;
  14. advertising, except reasonable advertising of an industrial or institutional character placed in trade, technical or professional journals for the dissemination of information for the industry or institution;
  15. entertainment expenses;
  16. donations except those to charities registered under the Income Tax Act;;
  17. dues and other memberships other than regular trade and professional associations;
  18. fees, extraordinary or abnormal for professional advice in regard to technical, administrative or accounting matters, unless approval from the Minister is obtained; and
  19. any cost relating to land or buildings; and
  20. selling and marketing expenses associated with the products or services or both being developed under the Agreement.

Notwithstanding section 6(b) above, legal, accounting and consulting fees in connection with the obtaining of patents and statutory protection of other elements of the Intellectual Property are Eligible Costs.

7. Special Purpose Equipment

The Recipient shall identify all Special Purpose Equipment in accordance with Schedule 7.

For Eligible Costs in respect to Special Purpose Equipment, see Schedule 7 entitled Special Purpose Equipment.

Schedule 6 - Reporting Requirements

  1. Work Phase
  2. Repayment Phase
  3. Throughout the Life Cycle of the Project

1. Work Phase

1.1 Project Kick-off Meeting

The Recipient shall host a kick-off meeting approximately one month following the signing of the Agreement to introduce the key personnel involved with the Project and to discuss the Agreement, its expected outcomes and benefits, the Recipient's plan for the Project and the Project status.

1.2 Progress Report

Within forty-five (45) days of the end of each Claim Period, the Recipient is required to provide a report on the progress of the Project (a "Progress Report"), which is in addition to the report required by Section A of Schedule 5. The Progress Report shall include information in support of the Recipient's claim submission.

The Progress Report shall include:

  1. A description of the Activities and Collaboration performed and Milestones reached during the Claim Period in comparison to those outlined in the Statement of Work.
  2. An updated Master Schedule with a discussion of any significant schedule variances.
  3. A discussion of any significant variations in the previously estimated Project cost and estimated cost breakdown by Government Fiscal Year.
  4. An update on the major risks, issues and mitigation measures and the potential impact on the Project.

1.3 Final Progress Report:

Within forty-five (45) days after the Project Completion Date, the Recipient will provide a summary report on the Project. The progress report for this final Claim Period shall provide a summary for the entire Project, addressing the following areas:

1.4 Attestation Letter

Within forty-five (45) days after the Project Completion Date, the Recipient is required to provide an attestation letter to certify that all expenses have been paid and that all eligible expenses are in compliance with the Agreement.

1.5 Project Management Reviews

The Parties shall conduct a project management review ("Project Management Review") in the frequency and form as deemed necessary by ITO.

Project Management Reviews are meetings between the Recipient and ITO to review progress as documented in the Progress Reports and shall include at least one site visit a year. Project Management Reviews that occur more than once a year can take the form of a teleconference call or a meeting at the ITO facilities.

At least two (2) weeks prior to the date set for the visit, a mutually agreeable agenda for the meeting shall be set which will include a review of any significant changes in the company structure and management team, financial strength and a review of the Progress Report. The Recipient shall also present its future R&D plans, the market overview for the products, services and processes generated, and its forecasted repayments and repayment risks.

1.6 Payable At Year End (PAYE) Set-up form

No later than 7 calendar days prior to the end of the Government Fiscal Year, the Recipient is required to provide an estimate of the Contribution amount that will be required prior to the end of the Government Fiscal Year so that funds for that fiscal year can be set-aside for the Recipient's upcoming claim(s) for that year.

1.7 Work Phase Close-Out Meeting

The Parties shall schedule a Work Phase close-out meeting between the Parties following the Project Completion Date to review the completion of all tasks and to transition the Project to the Repayment Phase. This meeting will include a presentation of the Recipient's organization structure, management team, the Project's technical achievements including any success stories, the benefits generated (e.g. jobs, innovation, intellectual property, competitiveness, environment, manufacturing in Canada, investment in Canada, collaboration achieved), the Recipient's future R&D plans, a review of the latest financial forecast, the market overview for the products and processes generated and the Recipient's forecasted repayments.

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2. Repayment Phase

2.1 Repayment Forecasts

The Recipient shall provide a forecast of its expected Annual Repayments Due. In January, the forecasts are to be provided for the current Recipient's Fiscal Year and for the upcoming Recipient Fiscal Year. Updated forecasts are to be provided in April and again in August.

2.2 Repayment Status Meeting

The Parties shall schedule a repayment status meeting at least once annually. At least two (2) weeks prior to the date set for the meeting, a mutually agreeable agenda for the meeting shall be set and include the repayments achieved to date, the overall estimate of total repayment phase benefits expected to be achieved and an explanation of any repayment schedule or performance variation.

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3. Throughout the Life Cycle of the Project

The Recipient will cooperate in periodic requests to participate in program evaluations, case studies or other efforts undertaken by the Minister or his agents, to assess the overall value and effectiveness of SADI. Such efforts may be used to communicate publicly the results and benefits of SADI.

The Recipient shall provide the Minister with a copy of its audited annual financial statements or where audited financial statements are not available, other financial statements certified by the Recipient's Chief Financial Officer (CFO) or another alternative acceptable to the Minister, within four (4) months of the Recipient's Fiscal Year end.

3.1 Annual Performance Benefits Report (APBR)

On an annual basis, by April 30, Recipients are required to complete the APBR form, using the supplied template, to provide information regarding the status and achievement of Project performance benefits. The form will be sent to Recipients by December 30 each year.

Schedule 7 - Special Purpose Equipment

1. Definition

"Special Purpose Equipment" means
  1. equipment, including ancillary systems, instrumentation, or special test equipment that is purchased, leased, manufactured or otherwise acquired for the purposes of the Project, the item cost of which exceeds $250,000, excluding jigs, tools, dies and fixtures; and
  2. prototypes that are designed and built by the Recipient to demonstrate the technology to be commercialized.

2. Disposal and Repayment of Special Purpose Equipment

  1. Disposal

    Except in the situation described in section (c) below, if the Recipient disposes any Special Purpose Equipment, the Minister will require the Recipient to repay the greater of an amount equal to that of

    1. multiplying the proceeds of disposition of the Special Purpose Equipment by the ratio of the total amount of the Contribution paid by the Minister to the total amount paid by the Recipient for supported Eligible Costs; and
    2. multiplying the Fair Market Value of the Special Purpose Equipment on the date of the transfer to commercial production, transfer outside of Canada, sale, lease or other disposition by the ratio of the total amount of the Contribution paid by the Minister to the total amount paid by the Recipient for Eligible Costs.

    The Recipient shall make such repayment within 30 days of the transfer to commercial production, transfer outside of Canada, sale, lease, or other disposition of the Special Purpose Equipment.

  2. Reduction in Amounts Repayable

    Any repayments made in respect of Special Purpose Equipment pursuant to subsection 2(a) shall be credited to and applied against the total amount which the Recipient is required to repay to the Minister pursuant to Schedule 3 hereof.

  3. Exception to Repayment on Special Purpose Equipment

    If the estimated cost as set out in the Statement of Work of all of the items of Special Purpose Equipment, other than prototypes, is 30% or less of the total estimated Eligible Costs, the Recipient will not be obligated to pay the Minister for those items which are transferred by the Recipient to commercial production in Canada.

This exception shall not reduce the Maximum Amount to be Repaid pursuant to Schedule 3 of this Agreement.

3. Costing Principles

  1. To be an Eligible Cost, the Special Purpose Equipment must be necessary for the performance of the Project, be described in sufficient detail herein so as to be readily identifiable, and the relevant cost be specified in the Special Purpose Equipment form attached.
  2. If the Special Purpose Equipment is to be modified or integrated by the Recipient during the Project, the costs related thereto will be eligible only if specifically identified in the Statement of Work in Schedule 2.
  3. Eligible Costs for Special Purpose Equipment will be the net laid down cost to the Recipient, after deducting trade discounts and cash discounts for prompt payment.
  4. Where applicable, periodic payments under a capital lease are Eligible Costs, to a maximum equal to the price of the Special Purpose Equipment, if it were purchased at the commencement of the lease period; all interest and carrying charges are to be excluded. For operating leases, the Eligible Cost is the actual lease payments incurred during the performance of the Project.
  5. Labour and material costs required in the modification or adaptation of the Special Purpose Equipment, for the purposes of the Project, are Eligible costs.
  6. Unless such is otherwise allowed in the Statement of Work, costs of construction or alteration of plant facilities to accommodate the Special Purpose Equipment or any other item of machinery and equipment, and any profit, fees, general and administrative overhead expenses related thereto, are not eligible.

4. Reporting

In accordance with Schedule 5 (Claim Reports), the Recipient shall report to the Minister, using the Special Purpose Equipment form attached, on all activities associated with Special Purpose Equipment.

The Recipient also agrees to monitor the location and use of all the Special Purpose Equipment that will eventually appear on the list.

Special Purpose Equipment Form

Recipient:

This list is to include all items of Special Purpose Equipment (SPE) purchased by the Recipient for the purposes of carrying out the Project.

The Recipient agrees to provide an up-to-date copy of this list with any claim that modifies its content, as specified in Schedule 5.

List of Equipment
1 2 3 4
Item No. Description,
Serial Number and Model Number
Qty Cost of the Item(s) to Recipient (Cdn $)
1
2
3
4
5
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