Exhibit 10.40

 

DEVELOPMENT AGREEMENT

 

THIS AGREEMENT made the 12th day of August, 2008

 

BETWEEN:

 

RITCHIE BROS. PROPERTIES LTD.

6500 River Road

Richmond, British Columbia V6X 4G5

 

(“RB”)

 

AND:

 

THE GREAT-WEST LIFE ASSURANCE COMPANY

c/o Suite 2700, Western Canadian Place

700 9th Avenue SW

Calgary, Alberta T2P 3V4

 

(“Great-West Life”)

 

AND:

 

LONDON LIFE INSURANCE COMPANY

c/o Suite 2700, Western Canadian Place

700 9th Avenue SW

Calgary, Alberta T2P 3V4

 

(“London Life” and together with Great-West Life, the “Owner”)

 

WHEREAS:

 

A.Pursuant to an Assignment and Assumption Agreement dated for reference May 26,
2008 (the “Assignment Agreement”), RB assigned its right to purchase the Lands
(hereinafter defined) pursuant to a Purchase and Sale Agreement dated for
reference October 6, 2006, as amended by a letter dated November 7, 2006, by a
letter dated January 16, 2007 and by a Modification of Purchase and Sale
Agreement dated for reference October 9, 2007 (collectively, the “RB/CLC
Purchase Agreement”), to Great-West Life (as to an undivided 70% interest) and
to London Life (as to an undivided 30% interest);

 

B.The RB/CLC Purchase Agreement contains a repurchase option (the “Repurchase
Option”) in favour of CLC (hereinafter defined) attached as Schedule “C”
thereto;

 

C.In furtherance of the Project (hereinafter defined), RB and the Owner also
entered into an Agreement of Purchase and Sale dated May 13, 2008 (the “RB/Owner
Purchase Agreement”) pursuant to which RB agreed to sell and the Owner agreed to
purchase RB's right, title and interest in and to certain contracts, due
diligence information and intangible rights in connection with the Project;

 

 

 

 

D.The RB/Owner Purchase Agreement provides that RB and the Owner will execute
and deliver a development agreement in conjunction with the Second Closing (as
defined therein) pursuant to which RB will agree, through its designates and
contractors, to be responsible for managing the Development Process (hereinafter
defined) and the completion of the Project;

 

E.RB and the Owner have agreed to enter into this Agreement in furtherance of
their obligation under the RB/Owner Purchase Agreement to execute and deliver a
development agreement in respect of the Development Process and the Project; and

 

F.In furtherance of its obligations hereunder, RB has entered or is about to
enter into a CCDC2 - 1994 Stipulated Price Contract, including supplementary
conditions (collectively the “CCDC2”) with the Contractor (hereinafter defined).

 

THEREFORE in consideration of the premises and the mutual covenants and
agreements hereinafter contained the Parties agree as follows:

 

ARTICLE 1

INTERPRETATION

 

1.1Definitions

 

The terms hereinafter defined shall, for all purposes of this Agreement
including the recitals hereto, have the meanings set out below unless the
context otherwise requires:

 

(a)“Acceptance” means the written confirmation to be issued by the Owner to RB
after the Total Completion that the Project has been Totally Completed;

 

(b)“Applicable Law” means in respect of any Person, all provisions of
constitutions, statutes, rules, regulations, ordinances, by-laws, requirements,
orders, published policies and interpretations of any Authority applicable to
such Person including without limitation environmental and land use requirements
and all orders and decrees of all courts and arbitrators in proceedings or
actions to which the Person in question is a Party or by which such Person is
bound;

 

(c)“Authority” means all federal, provincial and municipal authorities, bodies,
boards, regulatory agencies, councils, tribunals, departments and other
divisions thereof having jurisdiction over the Lands or this Agreement,

 

and “Authorities” will have the meaning that is correlative to the foregoing;

 

(d)“Builders Lien Act” means the Builders Lien Act, R.S.B.C. 1997 (British
Columbia) and amendments thereto;

 

(e)“Building” means the building comprising approximately 164,580 square feet,
more or less, with related infrastructure, structures, works, amenities,
ingress, egress and parking facilities to be constructed on the Lands in
accordance with the Plans and Specifications;

 

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(f)“Business Day” means any day that is not a Saturday, a Sunday or a statutory
holiday in British Columbia;

 

(g)“Certificate of Completion” means the certificate certifying that the Project
has been Totally Completed, which certificate is to be delivered by RB to the
Owner and accepted by the Owner pursuant to section 11.2;

 

(h)“City” means the City of Burnaby;

 

(i)“Claims” means any demand, liability, obligation, debt, cause of action,
suit, proceeding, judgment, award, assessment or re-assessment;

 

G)“CLC” means Canada Lands Company CLC Limited;

 

(k)“Conformance Warranty” means the warranty provided by RB to the Owner for the
duration of the Warranty Period, all pursuant to section 15.1;

 

(I)“Construction Schedule” means the schedule for completing the Project
attached hereto as Schedule “B” as the same may be amended from time to time in
accordance with this Agreement;

 

(m)“Consultant” means any individual, firm, partnership, corporation or other
specialist engaged by RB in connection with the Development Process and/or the
Project including those providing architectural, design, structural, mechanical,
electrical, landscaping, legal, accounting, audit, marketing and other
consulting services;

 

(n)“Contingency Reserve” means the amount specifically designated in the Project
Budget as a contingency reserve;

 

(o)“Contractor” means Ventana Construction Corporation;

 

(p)“Contractor Warranty” means the warranties provided or to be provided by the
Contractor as described at section 15.3;

 

(q)“Contractor Warranty Period” means the warranty period stipulated in the
CCDC2;

 

(r)“control” means the power to direct the management and policies of a person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing;

 

(s)“Costs” means all costs, expenses, damages, Claims, penalties, fines,
charges, obligations and outlays;

 

(t)“Development Process” means the process whereby RB and/or any Consultant or
other representative of RB will obtain all permits in respect of the Project
from the City and manage the development and construction of the Project to
achieve Total Completion in accordance with this Agreement;

 

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(u)“Existing Material Contracts” means the contracts entered into by RB in
respect of the Project which are in existence as of the date of this Agreement
and described in Schedule “C”;

 

(v)“GWLRA” means GWL Realty Advisors Inc.;

 

(w)“Handover” means the handover of the Project to the Owner as contemplated by
this Agreement and the RB/Owner Purchase Agreement and includes the fulfilment
of the conditions required in Articles 10 and 11 hereof;

 

(x)“Handover Date” means 10:00 am (Vancouver time) on the date which is ten (10)
Business Days after the issuance and acceptance of the Certificate of
Completion;

 

(y)“Insolvency” means any of the following:

 

(i)the bankruptcy or insolvency of a Party;

 

(ii)a Party makes an assignment for the benefit of its creditors, is declared
bankrupt, makes a proposal or otherwise takes advantage of provisions for relief
under the Bankruptcy and Insolvency Act R.S.C. 1985, c. B-3, or the Companies
Creditors’1 Arrangement Act R.S.C. 1985, c. c-36;

 

(iii)a receiver, receiver and manager or receiver-manager of all or
substantially all of the assets of a Party is appointed;

 

(iv)an order of execution against all or substantially all of the assets of a
Party or any part thereof remains unsatisfied for a period of twenty (20) days;

 

(v)an order of execution is made against any of the assets of a Party and as a
result of such order, such Party is unable to perform its obligations under this
Agreement; and

 

(vi)an order is made or an effective resolution is passed for winding up of a
Party;

 

(z)“Lands” means the lands and premises comprising approximately 8.25 acres,
more or less, municipally described as 9500 Glenlyon Parkway, Burnaby, British
Columbia and legally described as:

 

PID: 027-488-489

Lot 1 District Lot 165 Group 1 New Westminster District

Plan BCP36073;

 

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(aa)“Lease” means the lease to be entered into contemporaneously with this
Agreement between the Owner, as landlord, and an affiliate of RB, as tenant,
with respect to the Lands and the Building;

 

(bb)“Lien” means a claim of lien(s) or c1aim(s) under the Builders Lien Act or
the Employment Standards Act R.S.B.C. 1996, c. 113 filed against the Lands or
the Project in respect of or arising from any Work;

 

(cc)“Losses” means any losses whatsoever, including Costs, Claims, demands,
liabilities, interest and any and all legal fees and disbursements;

 

(dd)“Material Contracts” means:

 

(i)all contracts and agreements to which RB or an affiliate of RB is a party or
by which RB or an affiliate of RB or any of the Purchased Assets are bound, and
which may impact or otherwise relate to the ownership, maintenance, management,
development, operation, security, parking or servicing of the Lands, the Project
and/or the Purchased Assets;

 

(ii)all contracts and agreements to which RB or an affiliate of RB is a Party
relating to the Development Process including contracts and agreements in
respect of work or improvements referenced in subsection 6. 1(e) and Schedule
“E” of the RB/Owner Purchase Agreement; and

 

(iii)all contracts and agreements to which RB or an affiliate of RB is a party
with any Authority relating to the Lands, the Project and/or the Purchased
Assets;

 

(ee)“Maximum Amount” means $56,900,910.99 plus the aggregate of all Owner Change
Costs;

 

(ft)“Occupancy Permit” means the occupancy permit to be issued in respect of the
Building;

 

(gg)“Outside Completion Date” means, subject only to a Permitted Excuse,
February 15,2010;

 

(hh)“Outside Handover Date” means, subject only to a Permitted Excuse, the date
which is ten (l0) Business Days after the Outside Completion Date;

 

(ii)“Owner Change Costs” has the meaning ascribed thereto in subsection 9.3
(b)(ii);

 

(jj)“Party” means any of RB, Great-West Life or London Life, as the context may
require and “Parties” means all of RB, Great-West Life and London Life;

 

(kk)“Payment Certifier” means Bunting Coady Architects who will be appointed
pursuant to Article 6;

 

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(ll)“Permitted Budget Reallocations” means in respect of the Project Budget,
reallocations made by RB without approval of the Owner which are not in excess
of $25,000 and which, in each case, do not adversely impact or diminish the
quality of the Project;

 

(mm)“Permitted Excuse” means any circumstances beyond the reasonable control of
a Party which prevents or impedes the due performance of this Agreement
including, but not limited to the following matters:

 

(i)war or hostilities;

 

(ii)riot or civil commotion;

 

(iii)earthquake, flood, fire or other natural physical disaster;

 

(iv)strike or lock-out or other industrial action of workers not having any
labour affiliations to the Party claiming a Permitted Excuse;

 

(v)embargo of any Authority not caused by any wrongful act of the affected
Party;

 

provided that the mere shortage of funds, labour, materials or utilities shall
not constitute a Permitted Excuse unless caused by circumstances which are
themselves a Permitted Excuse;

 

(nn)“Person” includes any individual, corporation, partnership, joint venture,
trust, estate, unincorporated association or other entity or any Authority
however designated or constituted;

 

(oo)“Plans and Specifications” means the approved plans and specifications
referenced in Schedule F of the RB/Owner Purchase Agreement as the same may be
amended from time to time in accordance with section 9.3;

 

(pp)“Prime Rate” means the floating annual rate of interest established from
time to time by the main branch in Vancouver, British Columbia of The Royal Bank
of Canada as a reference rate used in determining rates of interest charged by
it for Canadian dollar loans to customers in Canada and designated by The Royal
Bank of Canada as its “prime rate”;

 

(qq)“Progress Report” means a written report in a form acceptable to the Owner,
acting reasonably, which shall include a comparison of actual expenditures to
those provided for in the Project Budget, and a comparison of forecasted
expenditures to those provided for in the Project Budget, and which comments on
material variances between the budgeted cost of an item and the actual and
projected costs of such item and reports on construction, contractual and legal
matters and any significant occurrences affecting or relating to any part of the
Project;

 

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(rr)“Project” means the construction and completion of the Building on the Lands
in accordance with the Plans and Specifications and in accordance with this
Agreement, together with the improvements to the Lands which are necessarily
ancillary to the Building;

 

(ss)“Project Budget” means the approved budget for the Project attached hereto
as Schedule “A”, as the same may be amended from time to time in accordance with
subsection 9.3(b)(ii) and section 12.1 (including, without limitation, as a
result of any Owner Change Costs);

 

(tt)“Project Costs” means the aggregate of all payments heretofore or hereafter
made and all obligations heretofore or hereafter incurred in connection with the
development, construction and outfitting of the Project;

 

(uu)“Project Documents” means all plans, specifications, drawings, reports
(including geotechnical and environmental soils reports), designs, models,
surveys, programs, agreements with contractors, architects and other consultants
produced or existing in respect of the construction and development of the
Project and the Total Completion;

 

(vv)“Project Warranties” means the warranties and guarantees (if any) given to
or otherwise obtained for, or on behalf of RB and/or the Owner, in connection
with the construction and development of the Project and the Total Completion;

 

(ww)“Purchased Assets” has the meaning ascribed thereto in the RB/Owner Purchase
Agreement;

 

(xx)“Standards” means any and all laws, statutes, regulations, rules, orders,
permits, licences, building codes and specifications (including Canadian
Standards Association standards) applicable to the Work as well as the best
practices followed by manufacturers and trades who are experienced in work in
British Columbia similar to the Work;

 

(yy)“Step-In Rights” means the right of the Owner to complete the Project on the
terms set out in section 13.5;

 

(zz)“Substantial Commencement Date” means the date that is six (6) months after
the closing date in respect of the RB/CLC Purchase Agreement;

 

(aaa)“Substantially Commenced” has the meaning ascribed thereto in the
Repurchase Option;

 

(bbb)“Substantial Completion Date” means the date that is thirty (30) months
after the closing date in respect of the RB/CLC Purchase Agreement;

 

(ccc)“Substantially Completed” has the meaning ascribed thereto in the
Repurchase Option;

 

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(ddd)“Totally Completed” means the total completion of the Project such that:

 

(i)the Work has been totally completed as required by this Agreement and the
Building is ready for use for the purposes for which it was built; and

 

(ii)the final certificate of payment to be issued in accordance with the CCDC2
has been so issued,

 

and “Total Completion” will have the meaning, that is correlative to the
foregoing;

 

(eee)“Warranty Period” means the period of one (1) year from the Handover Date;
and

 

(fff)“Work” means the performance of all construction and commissioning of the
Project, as contemplated in the Plans and Specifications, including all actions
and services necessary to perform such construction and commissioning and the
supply of all materials for the construction and commissioning of the Project
and the Total Completion.

 

1.2Interpretation

 

For all purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires:

 

(a)“this Agreement” means this agreement as it may from time to time be
supplemented or amended by one or more agreements entered into pursuant to the
applicable provisions hereof;

 

(b)any reference in this Agreement to a designated “Article”, “section”,
“subsection” or other subdivision is a reference to the designated Article,
section, subsection or other subdivision of this Agreement;

 

(c)the words “herein”, “hereof' and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
section, subsection or other subdivision of this Agreement;

 

(d)the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define or limit the scope, extent
or intent of this Agreement or any provision hereof;

 

(e)terms used in any Schedule and defined therein have the meanings provided for
therein;

 

(f)any reference to a corporate entity includes and is also a reference to any
corporate entity that is a successor to such entity;

 

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(g)this Agreement and all matters arising hereunder shall be governed by the
laws of British Columbia;

 

(h)any reference to a statute includes and is a reference to such statute and to
the regulations made pursuant thereto, with all amendments made thereto and in
force from time to time, and to any statute or regulations that may be passed
which has the effect of supplementing or superseding such statute or regulation;

 

(i)if any provision of this Agreement or any part hereof is found or determined
to be invalid it shall be severable and severed from this Agreement and the
remainder of this Agreement shall be construed as if such invalid provision or
part had been deleted from this Agreement;

 

(j)the word “including”, when following any general statement, term or matter,
is not to be construed to limit such general statement, term or matter to the
specific items or matters set forth immediately following such word or to
similar items or matters, whether or not nonlimiting language (such as “without
limitation” or “but not limited to” or words of similar import) is used with
reference thereto but rather refers to all other items or matters that could
reasonably fall within the broadest possible scope of such general statement,
term or matter;

 

(k)all of the rights and remedies of either Party under this Agreement and the
other documents referred to herein are intended to be distinct, separate and
cumulative and no such right or remedy herein or therein mentioned is intended
to be in exclusion of or a waiver of any others;

 

(1)any reference to “approval”, “authorization” or “consent” of a Party means
the written approval, authorization or consent of such Party;

 

(m)this Agreement may be executed in any number of original counterparts, all of
which evidence only one agreement and only one of which need be produced for any
purpose, and shall become effective when one or more counterparts have been
signed by each of the Parties hereto and delivered to each of the other Parties
hereto;

 

(n)this Agreement may be executed by the Parties and transmitted by facsimile
and when it is so executed and transmitted this Agreement shall be for all
purposes as effective as if the Parties had delivered an executed original;

 

(o)any reference to currency is to Canadian currency; and

 

(p)words importing the masculine gender include the feminine or neuter gender
and words in the singular include the plural, and vice versa.

 

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ARTICLE 2

ROLE OF RB

 

2.1General Scope of RB's Obligations

 

RB represents that it has the requisite ability and experience to manage the
Development Process in a manner consistent with the standard of project
management that exists and is required for similar commercial construction
projects in the Greater Vancouver area and will, through the Consultants and the
Contractor, be responsible for managing the Development Process and the
completion of the Project in accordance with the terms of this Agreement.

 

2.2Independent Contractor

 

The Parties expressly disclaim any intention to create a partnership or joint
venture and agree that nothing in this Agreement will constitute the Parties as
partners or joint venturers. The Parties further agree not to assert, for any
purpose, that a partnership or joint venture exists between them hereunder. The
services to be performed by RB under this Agreement will be performed by RB as
an independent contractor and, except as otherwise specifically provided herein,
not as agent or in any other way as a representative of the Owner.

 

2.3No Contractual Relationship

 

No contractual relationship shall be deemed to have been created between the
Owner and the Consultants, the Contractor, the subcontractors, or their agents,
employees or any other Person performing any of the Work. The Owner will not be
responsible for or have control or charge over the acts or omissions of RB, the
Consultants, the Contractor, the subcontractors, or their agents, employees or
any other Person performing any of the Work except to the extent that the Owner
exercises the Step-In Rights and elects to take an assignment of RB's interest
in any contracts pursuant to subsection 13.5(c).

 

2.4Reliance

 

RB shall advise the Consultants and the Contractor, in writing, that the Owner
intends to and does rely on their advice and services in the design and
construction of the Project. RB shall promptly provide copies of any responses
to the Owner.

 

ARTICLE 3

ACCESS TO AND USE OF THE LANDS

 

3.1RB's Access

 

From and after the date the Owner completes the purchase of the Lands pursuant
to the RB/CLC Purchase Agreement, RB, as the manager of the Development Process,
and the Contractor, the Consultants and their respective representatives and
agents will have the right and license to enter in or on any portion of the
Lands at all times for the purpose of managing the Development Process and
completing the Project as contemplated in this Agreement.

 

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3.2 RB Access Indemnity

 

RB shall indemnify and hold harmless the Owner from and against any and all
Losses suffered by or asserted against the Owner arising out of the exercise
and/or availability of the access rights set forth in section 3.1.

 

3.3 Owner Access

 

Subject to section 4.3, the Owner and any of its representatives and agents
shall have access at all reasonable times to the Lands area connected to the
Project to carry out such inspections of the Work as the Owner may reasonably
require upon provision of reasonable notice to RB provided that such access
shall not unreasonably interfere with or delay the Work or the Project and
further provided that the Owner shall promptly and fully repair any damage to
the Lands and any improvements thereon, caused by, or attributable to, such
access.

 

ARTICLE 4

CONSTRUCTION OF PROJECT

 

4.1Work

 

RB shall diligently and continuously perform such work and do such things as are
necessary to manage the Development Process and the Total Completion of the
Project in accordance with the Plans and Specifications and the Construction
Schedule. Without limiting the generality of the foregoing, RB shall:

 

(a)retain qualified Persons to provide and perform the Work;

 

(b)obtain all approvals from any Authority having jurisdiction in respect of the
Project and the Work;

 

(c)negotiate with the City and any Authority having jurisdiction in respect of
all matters and things necessary and advisable in order to obtain, and obtain
all approvals, licences and permits for the Project and the Work;

 

(d)complete the Development Process and fully satisfy all conditions and
obligations arising out of the Development Process;

 

(e)cause to be provided all labour, materials, products, equipment, machinery
and services necessary to complete the Work;

 

(f)cause the Project to be constructed and Totally Completed in conformance with
the Plans and Specifications in a good and workmanlike manner;

 

(g)on the Handover Date, deliver to the Owner those deliveries described in
section 11.2 of this Agreement; and

 

(h)subject to Article 6 and Article 13, pay all costs for doing all the things
set out in this section 4.1.

 

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4.2Quality of Materials

 

Unless otherwise specified in the Plans and Specifications, RB shall ensure that
all materials provided shall be new, first class and free of defects and shall
conform to the standards specified in the Plans and Specifications. Materials
which are not specified in the Plans and Specifications shall be of a quality
consistent with similar materials specified therein.

 

4.3Safety

 

Except for the Owner's access pursuant to section 3.3 and except where the Owner
takes possession of the Lands pursuant to the Step-In Rights, RB shall at all
times prior to Handover ensure that the Work and all related operations on the
Lands are performed safely. RB may employ the Contractor to ensure the safe
performance of the Work provided that RB shall remain liable to the Owner and
such employment of the Contractor will not prejudice the Owner's recourse
against RB in respect of safety related liabilities. Notwithstanding any other
provision in this Agreement, the Owner, and any person attending on the Lands on
behalf of or at the request of the Owner shall immediately comply with any
direction of RB and/or the Contractor with respect to safety.

 

4.4No Amendment to Construction Schedule without the Owner Approval

 

No material change to the Construction Schedule will be permitted without the
approval of the Owner other than as a result of a Permitted Excuse.

 

4.5Construction Schedule

 

RB shall cause:

 

(a)the Building to be Substantially Commenced by the Substantial Commencement
Date;

 

(b)subject to any extensions pursuant to section 2.4 of the Repurchase Option
(the cost in respect thereof to be borne by RB), the Building to be
Substantially Completed by the Substantial Completion Date;

 

(c)the Project to be Totally Completed by the Outside Completion Date;

 

(d)Handover to occur no later than the Outside Handover Date.

 

ARTICLES

REPRESENTATIONS AND WARRANTIES

 

5.1Representations and Warranties of RB

 

RB represents and warrants as provided below which representations and
warranties will remain true and correct as of the Handover Date with the
knowledge and intent that the Owner will rely thereon in entering into and
completing this Agreement:

 

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(a)RB has the power and capacity to enter into this Agreement and will have
obtained (and provided satisfactory evidence to the Owner upon the Owner's
request), all necessary corporate authorizations or approvals for entering into
this Agreement and carrying out all the transactions contemplated hereby;

 

(b)to the best of RB's knowledge, there are no actions, suits or proceedings
pending against or affecting RB which if decided adversely could materially
affect the ability of RB to perform its obligations hereunder;

 

(c)the entering into of this Agreement will not result in a violation or breach
of, or a default under, the constating documents of RB or in the material
violation or breach of, or any material default under, any of the terms and
provisions of any indenture or other agreement, written or oral, to which RB may
be a party or by which RB is bound and which could limit RB's ability to fully
satisfy and meet all of its obligations under this Agreement;

 

(d)RB has made no untrue statements or representations in connection with this
Agreement, and all items delivered to the Owner on or before the Handover Date
are, or will be, true and correct copies of what they purport to be. Said items
have not, and will not have, been amended or modified, except as disclosed in
writing to the Owner;

 

(e)no improvements on the Lands will encroach on lands adjoining the Lands;

 

(f)sewer, water, electricity, gas, telephone and cable television service in
quantities sufficient to accommodate the Building and the uses contemplated
hereunder is, or will be by Handover, available to the Lands and the Project;
and

 

(g)all streets and roads necessary for access to or for full utilization of the
Building, the Lands or the Project and any part thereof as contemplated by the
Plans and Specifications have been, or will be by Handover, completed, dedicated
and accepted all as required by the appropriate Authorities.

 

5.2Representations and Warranties of the Owner

 

Great-West Life and London Life hereby separately represent and warrant to and
in favour of RB as specifically provided below which representations and
warranties will remain true and correct as of the Handover Date with the
knowledge and intention that RB will rely thereon in entering into and
completing this Agreement, that:

 

(a)with respect to Great-West Life only:

 

(i)Great-West Life has the power and capacity to enter into this Agreement and
complete the transactions contemplated hereby and all corporate authorizations
required in order to complete the transactions contemplated hereby have or will
have been obtained and (on RB's request) satisfactorily evidenced to RB;

 

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(ii)to the best of Great-West Life's knowledge, there are no actions, suits or
proceedings pending against or affecting Great-West Life which if decided
adversely could materially affect the ability of Great-West Life to perform its
obligations hereunder; and

 

(iii)the entering into of this Agreement and the transactions contemplated
hereby will not result in the violation of any of the terms and provisions of
the constating documents of Great-West Life or to the best of its knowledge of
any indenture or other agreement, written or oral, to which Great-West Life may
be a party or by which it is bound;

 

(b)with respect to London Life only:

 

(i)London Life has the power and capacity to enter into this Agreement and
complete the transactions contemplated hereby and all corporate authorizations
required in order to complete the transactions contemplated hereby have or will
have been obtained and (on RB's request) satisfactorily evidenced to RB;

 

(ii)to the best of London Life's knowledge, there are no actions, suits or
proceedings pending against or affecting London Life which if decided adversely
could materially affect the ability of London Life to perform its obligations
hereunder; and

 

(iii)the entering into of this Agreement and the transactions contemplated
hereby will not result in the violation of any of the terms and provisions of
the constating documents of London Life or to the best of its knowledge of any
indenture or other agreement, written or oral, to which London Life may be a
party or by which it is bound.

 

5.3Survival of Representations and Warranties

 

The representations and warranties contained in Article 5 of this Agreement will
survive the Handover Date and will continue in full force and effect for the
benefit of the respective Party for a period of one (I) year thereafter, after
which time such representations and warranties will be of no further force or
effect, except in respect of claims made by any Party where written notice of
such claim was provided to the other Party during the one (1) year period. After
the expiration of the one (1) year period of time referred to above, the Parties
will be released from all liabilities in respect of the said representations and
warranties, except with respect to any claim made on or before the expiry of the
one (I) year period whereby written notice of such claim is provided to the
Party alleged to be in default.

 

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ARTICLE 6

PAYMENT CERTIFIER AND PROGRESS CLAIMS

 

6.1Appointment of Payment Certifier

 

Prior to the “Closing Date” as defined in the RB/Owner Purchase Agreement, the
Parties shall appoint Bunting Coady Architects as the Payment Certifier for all
purposes under this Agreement and for the purposes of the Builders Lien Act. RB
shall also engage Bunting Coady Architects as the “payment certifier” in the
contract between RB and the Contractor for the purposes of that contract and for
the purposes of the Builders Lien Act. For the purposes of this Agreement, the
Payment Certifier shall:

 

(a)determine the percentage of the Project that has been constructed in
accordance with the Plans and Specifications provided that the Payment Certifier
will be instructed to certify payment only for the Work that has been performed
in accordance with the Plans and Specifications;

 

(b)determine the amount payable to RB in respect of the Project Costs, provided
that if the Work has been performed as a result of changes to the Plans and
Specifications, the Payment Certifier will be instructed to certify payment only
for the Work that has been performed in accordance with changes made to the
Plans and Specifications in accordance with section 9.3; and

 

(c)issue a certificate for the determinations referred to in subsections 6.1 (a)
and (b) above as contemplated in section 6.2.

 

6.2Applications for Payment

 

Save and except for the payment of the Project Costs which exceed the Maximum
Amount as contemplated in section 6.10, applications for payment on account of
the Project Costs shall be made once a month as the Work progresses. In
connection with each application for payment, within ten (10) days of a request
by RB for an inspection, the Payment Certifier, the Owner and the Consultants
shall perform, or cause to be performed an inspection of the Work. After such
inspection, the Payment Certifier will issue a certificate:

 

(a)certifying the extent to which the Work described in the application for
payment has been completed;

 

(b)certifying the amount payable to RB in respect of any Owner Change Costs;

 

(c)identifying any part of the Work that has been performed but is not compliant
with the Plans and Specifications; and

 

(d)assigning an estimated cost of correcting and repairing any such non
compliant part of the Work referred to in subsection 6.2(c).

 

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6.3Payment of Progress Claims

 

Save and except for the payment of the Project Costs which exceed the Maximum
Amount as contemplated in section 6.10, and subject to the provisions of this
Agreement, the Owner shall make progress payments to RB on account of the
Project Costs in the amount certified by the Payment Certifier (less an amount
equal to 150% of the amount assigned by the Payment Certifier in subsection
6.2(d)) together with all applicable taxes within twenty (20) days of the
Payment Certifier's certificate issued pursuant to section 6.2. Where the Owner
does not agree with the Payment Certifier's certification under section 6.2, the
Owner shall, nevertheless, make the progress payment in accordance with this
section 6.3. Such payment is made without prejudice to the Owner's right to
dispute the amount certified or the amount held back provided that the Owner has
given notice to RB that it disputes the said progress payment at the time of
making the payment.

 

6.4RB Obligations for Liens

 

(a)The Parties acknowledge and agree that:

 

(i)in providing and performing the Development Process under this Agreement,
RBI’s function is intended to be supervisory and it is not intended that RB, in
any material way, will perform work on the Project using its own forces or
subcontractors or will supply materials for the Project;

 

(ii)RB is not a “contractor” as that term is defined in the Builders Lien Act
and RB hereby irrevocably waives any and all right to a lien, or to claim a
lien, against all or any part of the Project or against all or any part of any
holdback retained by any person pursuant to section 4 of the Builders Lien Act;
and

 

(iii)as a Person having an estate or interest in the Lands on which the Project
is located and, in any event, as the Owner's agent for that purpose, RB will
comply with the obligations required of the “Owner” as that term is used in the
Builders Lien Act and, without limiting the foregoing, shall maintain a holdback
vis a vis the Contractor as required by section 4 thereof.

 

(b)RB shall:

 

(i)advise the Owner of any Lien filed against the Lands and the Project or
notice of intention by any person to claim a Lien immediately upon becoming
aware of same;

 

(ii)ensure that the Lands and the Project remain free and clear of Liens;
PROVIDED this obligation shall not apply to Liens filed as a result of a default
in payment by the Owner as required by this Agreement or as a result of a
default by the Owner of its obligations under the Builders Lien Act; and

 

 16 

 

 

(iii)indemnify and hold harmless the Owner from and against the amount of any
Lien and from and against any or all Losses (including trust claims) that may be
brought or made against the Owner or incurred by the Owner under or arising out
of the Builders Lien Act in connection with any Lien filed or any actions
commenced against the Owner under or arising out of the Builders Lien Act;
PROVIDED this indemnity shall not apply to Liens filed as a result of a default
in payment by the Owner as required under this Agreement or as a result of a
default by the Owner of its obligations under the Builders Lien Act.

 

6.5Discharge of Liens

 

The Parties agree that:

 

(a)if a Lien is filed against the Lands or any other part of the Project by any
Person, RB shall, upon RB's notification thereof and in any event upon the
Owner's request, cause the said Lien to be released or discharged from the Lands
or Project within forty five (45) days from the date of such notification or
request;

 

(b)if such Lien is not removed within such forty five (45) day period, then in
addition to all other rights and remedies available to the Owner, the Owner may,
with no obligation to do so, hold back from RB an amount equal to 300% of the
value of all Liens that have not been so released or discharged from amounts due
to RB until such time as RB has provided satisfactory evidence that such Liens
have been released or discharged;

 

(c)the Owner shall forthwith release the said holdback with respect to any Lien,
immediately upon RB providing satisfactory evidence confirming that the Lien has
been released or discharged; and

 

(d)the Owner shall, in each case and within a reasonable period of time
following the written request by RB to the Owner, execute and deliver such
documents and instruments as may be reasonably required to support any
application or proceeding required to be made or taken by RB to release or
discharge any Lien. Notwithstanding the foregoing, the responsibility to
discharge any and all Liens vests solely with RB and this subsection 6.5(d) does
not impute any responsibility to the Owner in respect of the discharge of such
Liens.

 

6.6RB's Request for Payment

 

RB's requests for payments pursuant to section 6.2 constitute representations to
the Owner that the amounts requested have been verified, are accurate, are
properly due and payable, and that all pre-requisites or conditions for payment
of those amounts have been properly performed or satisfied, as the case may be.
RB acknowledges that the Owner will be relying upon all such representations.

 

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6.7Reimbursement of Existing Project Costs

 

Upon execution and delivery of this Agreement (or shortly thereafter), RB will
deliver to the Owner a statement setting out the Project Costs expended to such
date together with any available supporting documentation and the Owner will
reimburse RB for all such Project Costs within fifteen (15) Business Days of
receiving such statement and supporting documentation.

 

6.8Owner Responsible for Payment of Project Costs up to Maximum Amount

 

The Owner will be responsible for payment of the Project Costs up to the Maximum
Amount in the time and manner contemplated in this Article 6.

 

6.9Rent Payable Under Lease to be Adjusted

 

The Parties acknowledge and agree that the “Base Rental Rates” (as defined in
the RB/Owner Purchase Agreement) payable under the Lease will be adjusted in the
event that the “Project Costs” (as defined in the RB/Owner Purchase Agreement)
are less than or greater than the “Project Budget Amount” (as defined in the
RB/Owner Purchase Agreement) in the manner set out in section 15.2 of the
RB/Owner Purchase Agreement.

 

6.10RB Responsible for Payment of Project Costs over Maximum Amount

 

RB will be responsible for the payment of the Project Costs which exceed the
Maximum Amount as and when such Project Costs become due.

 

6.11Costs Excluded from Project Budget

 

Notwithstanding anything in this Agreement to the contrary, the Owner
acknowledges and agrees that no costs or expenses incurred by the Owner or its
advisors, contractors or consultants (including, without limitation, GWLRA) will
be included in the Project Budget or will be paid by RB as a Project Cost or
otherwise.

 

6.12Indemnity from the Owner re: Payment of Project Costs

 

The Parties acknowledge that RB is a party to the Material Contracts and, as a
result, is contractually responsible for the payment of the Project Costs
incurred thereunder. Consequently, provided RB is not in default hereunder, the
Owner agrees to indemnify and hold RB harmless from and against any or all
Losses that may be brought or made against RB or incurred by RB in connection
with or arising out any breach by the Owner of its obligation to fund the
Project Costs in the manner set forth in this Article 6.

 

ARTICLE 7

INSURANCE

 

7.1Insurance For Consultants

 

RB, without cost to the Owner, shall provide and maintain, or cause to be
provided and maintained, professional liability insurance for all Consultants
providing professional services for the Project with an aggregate limit of
$2,000,000 within any policy period with a deductible of not more than $25,000
payable by the insured. This policy shall be maintained continuously from the
commencement of the Work until twelve (12) months after the Handover Date.

 

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7.2Insurance During Construction and Policy Conditions

 

RB shall ensure that:

 

(a)the named insureds under the insurance coverage provided or to be provided by
the Contractor as required under the CCDC2 (collectively, the “insurance
policies”) includes the Owner;

 

(b)the insurance policies provide for at least thirty (30) days written notice
prior to cancellation, material change or an amendment restricting the coverage
in respect of such insurance policies;

 

(c)the insurance policies are per occurrence policies written with insurers
licensed to underwrite insurance in the province of British Columbia, having a
Bests financial rating of at least B+ VII;

 

(d)the insurance policies shall be primary in respect to all obligations assumed
by the carrier pursuant to the CCDC2 and this Agreement; and

 

(e)coverage and limits referred to in the CCDC2 shall not in any way limit the
liability of RB to the Owner under this Agreement.

 

7.3Copies of Certificates

 

In conjunction with the “Second Closing” (as defined in the RB/Owner Purchase
Agreement), RB shall provide to the Owner written certificates of insurance
evidencing the insurance coverage required to be maintained pursuant to sections
7.1 and 7.2.

 

7.4Workers' Compensation

 

RB shall require full compliance with the Workers' Compensation Act R.S.B.C.
1996, c. 492 by the Contractor and its subcontractors and other persons with
whom RB may make any contract for the performance of any part of the Work. RB
shall indemnify the Owner against all Losses incurred by the Owner which may
arise as a consequence of any failure by RB, the Contractor or any subcontractor
or other person for whom RB is responsible to fully comply with the said Act.

 

7.5Evidence of Workers Compensation Insurance

 

If requested by the Owner, either prior to commencing the Work or at any time
during the performance of the Work, RB will provide evidence of the Contractor's
compliance with workers compensation legislation applicable to the Project.

 

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ARTICLE 8

MEETINGS AND INSPECTIONS AND COMMUNICATIONS

 

8.1Regular Meetings and Inspections

 

RB will require the Consultants and the Contractor to schedule and hold site
inspections and construction meetings on a regular basis. RB will keep the Owner
involved in respect of the Development Process and will provide the Owner with
the opportunity to attend any such scheduled site inspections and construction
meetings, unless, in the reasonable opinion of RB, attendance by the Owner at
any such site inspection or construction meeting would interfere with the
activities and work of RB or any of the Consultants or the Contractor.

 

8.2Reporting Requirements

 

RB will keep the Owner informed on a regular basis of the progress of the
Development Process and all material matters that affect or may affect the
Project, including engaging in meetings with the Owner and preparing such
reports as may reasonably be requested by the Owner and which are of a nature
generally requested or expected of owners of similar projects. RB shall provide
to the Owner copies of any special inspection and material testing reports and
progress reports that are available to RB. Without limiting the foregoing, in
addition to any other reports to be provided hereunder, RB shall provide
Progress Reports to the Owner on the progress of construction not less
frequently than on a monthly basis.

 

8.3Right to Participate

 

Unless and until the Owner exercises its Step-In Rights hereunder, the Owner
shall not, in respect of the Work, initiate any communication or negotiation
with any Authority. Provided that the Owner has not exercised its Step-In Rights
hereunder, if any Authority contacts the Owner in RB's absence regarding the
Work, the Owner will direct such Authority to RB without discussing the Work
with the Authority.

 

8.4Communications

 

RB will respond in good faith to the Owner within a reasonable period of time
following a written request by the Owner for information relating to the
Development Process.

 

ARTICLE 9

PLANS AND SPECIFICATIONS AND MATERIAL CONTRACTS

 

9.1Approval of Plans and Specifications

 

The Owner confirms that it has reviewed in detail the Plans and Specifications
and approves of the same.

 

9.2Ownership of Project Documents

 

The Project Documents, whether in existence as of the date hereof or hereafter
developed, are and shall remain the property of RB until the Handover Date, at
which time RB will assign all of its right, title and interest in and to the
Project Documents to the Owner as contemplated in section 11.2.

 

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9.3Changes in Plans

 

(a)RB will be entitled to make the following changes to the Plans and
Specifications from time to time:

 

(i)any changes which are required by law;

 

(ii)any changes deemed appropriate by RB, provided that such changes do not, in
the reasonable opinion of RB, result in an increase in the Project Costs or in
the Project being of a lesser quality or standard than if constructed in strict
adherence to the Plans and Specifications;

 

(iii)any changes to the tenant improvements to be constructed in the Building;
and

 

(iv)any changes not contemplated in subsections 9.3(a)(i), 9.3(a)(ii) or
9.3(a)(iii), provided that RB has first received the Owner's written approval in
respect thereof in accordance with the procedure set forth in subsection 9.3(c).

 

(b)The Owner will be entitled to make changes to the Plans and Specifications
from time to time, provided that:

 

(i)the Owner has first received RB's written approval in respect thereof in
accordance with the procedure set forth in subsection 9.3(d); and

 

(ii)the Project Budget and the Maximum Amount will be increased by an amount
equal to the increase in the Project Costs that is attributable to such changes
(any such increase in Project Costs is referred to herein as the “Owner Change
Costs”).

 

(c)For purposes of subsection 9.3(a)(iv), the Parties agree that the procedure
for making RB initiated changes to the Plans and Specifications is as follows:

 

(i)RB will request in writing the Owner's approval of the changes that RB
proposes to make, which request will be accompanied by copies of such amended
plans, specifications and designs as may be reasonably necessary to fully
describe and illustrate such proposed changes;

 

(ii)within ten (10) days after the receipt by the Owner of such request for
approval from RB, the Owner may either approve or reject such changes by
providing written notice of its decision to RB, provided that any rejection
notice must state the reason or reasons behind the Owner's decision to reject
such changes (which reasons, for greater certainty, must be reasonable);

 

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(iii)if RB receives a rejection notice from the Owner pursuant to subsection
9.3(c)(ii) and does not agree with the reasonableness of the reason or reasons
for rejecting such changes as stated therein, the disagreement will be
determined in accordance with the procedure set forth in Article 17; and

 

(iv)if the Owner does not provide any written notice to RB approving or
rejecting any such changes within the ten (10) day period stipulated in
subsection 9.3(c)(ii), the Owner will be deemed to have approved of such
changes.

 

Any changes made pursuant to this subsection 9.3(c) will be deemed to have been
approved and endorsed by the affiliate of RB who is the tenant under the Lease
and any such changes will not entitle such affiliate to refuse acceptance of the
Premises under the Lease.

 

(d)For purposes of subsection 9.3(b)(i), the Parties agree that the procedure
for making Owner initiated changes to the Plans and Specifications is as
follows:

 

(i)the Owner will request in writing RB's approval of the changes that the Owner
proposes to make, which request will be accompanied by copies of such amended
plans, specifications and designs as may be reasonably necessary to fully
describe and illustrate such proposed changes;

 

(ii)within ten (10) days after the receipt by RB of such request for approval
from the Owner, RB may either approve or reject such changes by providing
written notice of its decision to the Owner, provided that any rejection notice
must state the reason or reasons behind RB's decision to reject such changes
(which reasons, for greater certainty, must be reasonable);

 

(iii)if the Owner receives a rejection notice from RB pursuant to subsection
9.3(d)(ii) and does not agree with the reasonableness of the reason or reasons
for rejecting such changes as stated therein, the disagreement will be
determined in accordance with the procedure set forth in Article 17; and

 

(iv)if RB does not provide any written notice to the Owner approving or
rejecting any such changes within the ten (10) day period stipulated in
subsection 9.3(d)(ii), RB will be deemed to have approved of such changes.

 

For purposes of subsection 9.3(d)(ii), the Owner acknowledges and agrees that RB
will be entitled to withhold written approval in respect of any proposed change
to the Plans and Specifications if RB reasonably believes that such change will
result in the Project being of a lesser quality or standard than if constructed
in strict adherence to the Plans and Specifications or that such change will
result in the Building or the Lands being less functional or less efficient
having regard to the proposed use thereof by the affiliate of RB pursuant to the
Lease than if constructed in strict adherence to the Plans and Specifications or
that such change will delay the Total Completion of the Project.

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9.4Prohibited Changes

 

RB shall not be required to make any changes to the Work that materially and
adversely affect the Project.

 

9.5Approval of Existing Material Contracts

 

The Owner confirms that it has reviewed in detail the Existing Material
Contracts and approves of the same.

 

9.6Termination or Modification of Material Contracts

 

(a)RB may terminate, cancel, alter, amend or modify any Existing Material
Contract without the prior written consent of the Owner in the event that such
termination, cancellation, alteration, amendment or modification does not
materially affect the scope or quality of the Project as contemplated in the
Plans and Specifications, the budgeted cost of the Project as contemplated in
the Project Budget or the timing of completion of the Project as contemplated in
the Construction Schedule, provided that:

 

(i)RB first provides written notice to the Owner of its desire to effect such
termination, cancellation, alteration, amendment or modification; and

 

(ii)the Owner is given the opportunity, within five (5) days of receiving the
such written notice from RB, to make written representations to RB with respect
to any concerns that the Owner may have with respect to such termination,
cancellation, alteration, amendment or modification of such Existing Material
Contract (which RB agrees, in good faith, to take into consideration when making
its decision as to whether or not to proceed with any such termination,
cancellation, alteration, amendment or modification of such Existing Material
Contract).

 

(b)RB will not terminate, cancel, alter, amend or modify any Existing Material
Contract without the prior written consent of the Owner if such termination,
cancellation, alteration, amendment or modification would materially affect the
scope of the Project as contemplated in the Plans and Specifications, the
budgeted cost of the Project as contemplated in the Project Budget or the timing
of completion of the Project as contemplated in the Construction Schedule.

 

9.7Additional Material Contracts

 

(a)RB may enter into any additional Material Contract from time to time without
the prior written consent of the Owner in the event that such additional
Material Contract does not result in a material change to the scope or quality
of the Project as contemplated in the Plans and Specifications, the budgeted
cost of the Project as contemplated in the Project Budget or the timing of
completion of the Project as contemplated in the Construction Schedule, provided
that:

 

 23 

 

 

(i)RB first provides written notice to the Owner of its desire to enter into
such additional Material Contract; and

 

(ii)the Owner is given the opportunity, within five (5) days of receiving such
written notice from RB, to make written representations to RB with respect to
any concerns that the Owner may have with respect to such additional Material
Contract (which RB agrees, in good faith, to take into consideration when making
its decision as to whether or not to proceed with any such additional Material
Contract).

 

(b)RB will not enter into any additional Material Contract without the prior
written consent of the Owner if such additional Material Contract would
materially affect the scope or quality of the Project as contemplated in the
Plans and Specifications, the budgeted cost of the Project as contemplated in
the Project Budget or the timing of completion of the Project as contemplated in
the Construction Schedule.

 

ARTICLE 10

ACCEPTANCE PROCEDURES

 

10.1Application for Acceptance

 

RB shall notify the Owner not less than sixty (60) days prior to the anticipated
date of RB's application for Acceptance for purposes of the Handover. RB shall
notify the Owner not less than thirty (30) days prior to the actual date of RB's
application for Acceptance. If, at the expiration of the thirty (30) day notice
period, RB has not made application for Acceptance, the Owner shall have no
claim against RB based on such thirty (30) day notice being inaccurate save and
except where such delay constitutes a breach under section 4.5. When RB
considers that the Project is ready for Acceptance, RB shall apply to the Owner
for Acceptance. At the time of RB's application to the Owner for Acceptance, RB
shall provide to the Owner copies of all permits obtained to date, the Project
Documents and the Project Warranties.

 

10.2Final Inspection of Project

 

Within ten (10) days following RB's application for Acceptance, the Owner (and
its consultants and representatives), RB, the Contractor and the Consultants
shall perform a joint inspection of the Project. At the said inspection, the
Owner through its consultants and representatives shall identify, or cause to be
identified any defects or deficiencies in the Project that are apparent on
reasonable inspection. The Owner, its consultants and representatives shall not
be required to identify any latent defects or deficiencies or any other defects
or deficiencies that are not apparent on reasonable inspection. The inspection
by the Owner, its consultants or representatives will not release RB from its
obligations under this Agreement (including the Conformance Warranty) or the
Contractor from its obligations under the CCDC2 (including the Contractor
Warranty) regardless of whether such defects and deficiencies are identified or
not.

 

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10.3List of Defects and Deficiencies

 

Upon completing the inspection referred to in section 10.2, the Owner, within
ten (10) Business Days of such inspection, shall prepare a list of all defects
and deficiencies remaining to be corrected or repaired, and the Payment
Certifier shall at that time assign an estimated cost of correcting and
repairing each defect and deficiency. For greater certainty the said estimate
shall be of the actual cost of correcting and repairing the defects and
deficiencies and shall not be doubled or otherwise arbitrarily increased by the
Payment Certifier.

 

10.4Deficiency Holdback

 

The Owner may hold back from any amounts due or coming due to RB an amount equal
to 150% of the Payment Certifier's estimated cost of correcting and repairing
the defects and deficiencies as determined pursuant to section 10.3 of this
Agreement until the said defects and deficiencies have been corrected and
repaired. The Owner shall, upon the periodic application of RB, release the
amounts held back on account of defects and deficiencies as such defects and
deficiencies are corrected and repaired and certified by the Payment Certifier
as corrected and repaired.

 

10.5Correcting Deficiencies

 

RB shall:

 

(a)diligently work to correct all the defects and deficiencies identified in the
list referred to in section 10.3 as expeditiously as possible, and in any event
within thirty (30) days of such list being prepared (or, only in the case of any
defect or deficiency that is incapable of being corrected within such thirty
(30) day period, the period in which to correct such defect or deficiency will
be such greater period of time as may be reasonably necessary to correct such
defect or deficiency on a diligent and expeditious basis); and

 

(b)not adversely affect the Owner's ownership and operation of the Project while
correcting such defects and deficiencies.

 

If RB fails to correct such defects and deficiencies within the time period
referred to in subsection 10.5(a) or in the manner referred to in subsection
10.5(b), the Owner may, at its option, do whatever it deems appropriate to
correct such defects or deficiencies and may use the monies held back pursuant
to section 10.4 to do so. If the Owner corrects such defects or deficiencies,
any actual reasonable expenses incurred by the Owner which are not paid for
using the monies held back pursuant to section 10.4 will be charged back to RB.
RB shall reimburse the Owner for such reasonable expenses within thirty (30)
days of the Owner invoicing RB. RB acknowledges as agent for and on behalf of
the tenant under the Lease, such tenant being an affiliate of RB, that such
tenant shall have no right to claim any abatement in respect of any monies that
are due and payable to the Owner under the Lease, in any circumstance where any
defects and deficiencies have not been corrected at the time the tenant takes
possession of the Lands and Building under the Lease.

 

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10.6Notice of Acceptance

 

Subject always to section 10.7, and provided that all defects and deficiencies
have been corrected in accordance with section 10.5, the Owner, within ten (10)
Business Days following the completion of such corrective action, shall issue
the Acceptance.

 

10.7Discharge of Liens

 

RB shall discharge or cause to be discharged any Liens and the Owner shall have
no obligation to provide Acceptance until such Liens have been discharged. At
the Owner's option, the Owner may, without prejudice to any other right or
remedy it may have at law or in equity, take such steps or proceedings to make
payment into court to procure the release of any Lien:

 

(a)at any time where the claimant in respect of such Lien has commenced an
action in accordance with the Builders Lien Act; or

 

(b)upon the Owner's termination of this Agreement; or

 

(c)upon RB's application for Acceptance.

 

All such payments and costs incurred by the Owner shall be reimbursed by RB to
the Owner. In conjunction with the “Second Closing” as defined in the RB/Owner
Purchase Agreement, RB will post a notice of interest under the Builders Lien
Act naming the Owner as “owner” for the purposes thereof.

 

10.8Handover and Acceptance Procedure

 

Notwithstanding the provisions of the RB/Owner Purchase Agreement and this
Agreement:

 

(a)Handover will not occur unless and until:

 

(i)the Owner issues the Acceptance;

 

(ii)the deliveries referred to in section 11.2 of this Agreement have been
executed and delivered;

 

(iii)possession of the Project has been delivered to the Owner;

 

(b)Acceptance required under section 10.1 and the delivery requirements in
section 11.2 are for the sole benefit of the Owner and in the event that such
requirements (or any part thereof) are not fully satisfied, the Owner may
nevertheless elect subject to subsection 10.8(c) to complete Handover;

 

(c)any election by the Owner under subsection 10.8(b) will not release RB from
any obligation under this Agreement to complete or satisfy the requirement or
any claim that the Owner may have against RB for having failed to fully perform
and satisfy its obligations under this Agreement and without limitation:

 

 26 

 

 

(i)RB shall forthwith complete or satisfy any requirements that were not fully
satisfied; and

 

(ii)the Owner may forthwith commence legal proceedings to enforce its rights and
remedies whether at law or in equity.

 

ARTICLE 11

HANDOVER OF PROJECT

 

11.1Handover

 

The Handover shall commence at 10:00am on the Handover Date. The Handover shall
take place at the offices of Stikeman Elliott, Barristers and Solicitors,
1700-666 Burrard Street, Vancouver, British Columbia, V6C 2X8, or at such other
place as the Parties may mutually agree.

 

11.2RB Deliveries to Owner

 

On or before the Handover Date, RB will deliver or cause to be delivered to the
Owner's solicitors the following, all in form and substance satisfactory and
acceptable to the Owner acting reasonably (except only in respect of the
Certificate of Completion which the Owner may refuse to accept if the Project
has not been Totally Completed as provided in this Agreement), all duly executed
by, or on behalf of RB where its execution is required:

 

(a)Certificate of Completion;

 

(b)Project Documents;

 

(c)Project Warranties (including assignments if applicable);

 

(d)a certificate dated the Handover Date of a senior officer of RB having
knowledge of the facts certifying that to the knowledge of such officer after
due enquiry:

 

(i)the execution and delivery of, and completion of all transactions
contemplated by, this Agreement have been duly authorized by all appropriate
resolutions or other corporate actions;

 

(ii)the representations and warranties of RB as set out in this Agreement are
true and accurate as of the Handover Date;

 

(iii)the covenants and agreements to be observed or performed on or before the
Handover Date by RB pursuant to the terms of this Agreement have been duly
observed and performed with particulars of any exceptions which exceptions have
been approved by the Owner acting reasonably; and

 

(iv)such other matters as may reasonably be requested by the Owner;

 

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(e)an assignment of any licenses or permits held by RB in conjunction with the
Project, to the extent that such licences are assignable, such assignment to
take effect on the Handover Date;

 

(f)an assignment of all of RB's right, title and interest in and to the Project
Documents, to the extent that such Project Documents are assignable, such
assignment to take effect on the Handover Date;

 

(g)an assignment of all of RB's right, title and interest in and to all Material
Contracts that were not previously assigned to the Owner pursuant to the
RB/Owner Purchase Agreement, to the extent that such Material Contracts are
assignable, such assignment to take effect on the Handover Date;

 

(h)an assignment of all of RB's right, title and interest in and to all existing
Project Warranties to the extent that such Project Warranties are assignable,
such assignment to take effect on the Handover Date;

 

(i)complete and accurate as-built drawings and specifications with respect to
the Project as Totally Completed (including all drawings for the mechanical,
electrical and structural systems of the Project);

 

(j)the Occupancy Permit and all professional engineering certificates; and

 

(k)such other documents and assurances as may be reasonably required by the
Owner to give full effect to the intent and meaning of this Agreement.

 

11.3Preparation of Handover Documents

 

The Handover Documents contemplated in section 11.2 will be prepared by RB's
solicitors (to the extent that preparation is required) and delivered to the
Owner's solicitors for review and approval at least four (4) Business Days
before the Handover Date.

 

11.4Project Cost Reconciliation

 

In conjunction with the Handover and the due completion of the Project in
accordance with this Agreement, RB's solicitors will prepare a draft form of
Project Cost reconciliation which will summarize in reasonable and sufficient
detail all moneys received by RB from the Owner, all sums to be withheld (if
any) from RB by the Owner and all additional moneys (if any) payable by the
Owner to RB or by RB to the Owner under this Agreement and under subsection
15.2(b) of the RB/Owner Purchase Agreement. The Parties will work cooperatively
and in good faith to settle the final form of the Project Cost reconciliation on
or prior to the Handover Date. For greater certainty, but without limitation,
the Project Cost reconciliation will include adjustments for the costs
attributable to the Owner in respect of any Owner Change Costs and any holdbacks
required to be maintained pursuant to this Agreement after the Handover Date.

 

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ARTICLE 12

FINANCIAL CONTROLS AND BOOKS AND RECORDS

 

12.1Financial Controls

 

RB will establish and implement appropriate administrative and financial
controls for the construction of the Project and shall perform its duties,
responsibilities and obligations under this Agreement in accordance with the
Project Budget. No deviation from the Project Budget is permitted without the
written approval of the Owner, other than Permitted Budget Reallocations.
Notwithstanding the foregoing, the Owner acknowledges and agrees that RB may
allocate the Contingency Reserve set out in the Project Budget as RB determines
in its sole discretion.

 

12.2Books and Records

 

RB will keep proper and separate records and books of account with respect to
the Project and the operation thereof in accordance with sound accounting
principles and will permit the Owner or any Person duly authorized by it, at the
Owner's own expense, to have access to examine the books and records pertaining
to the construction of the Project at all times during regular business hours.

 

12.3Preservation of Records

 

RB shall keep and preserve during the term of this Agreement and for a period of
at least three years after the termination of this Agreement, complete and true
records of all books and records kept by it pursuant to this Agreement together
with such supporting vouchers, receipts, duplicate receipts, banking records and
other instruments as may be required to properly audit and check such records,
and such records shall be kept in a manner consistent with good and proper
accounting procedures.

 

ARTICLE 13

DEFAULT

 

13.1Default by the Owner

 

The Owner will be in default under this Agreement if the Owner:

 

(a)fails to pay any amount which the Owner is liable to pay to RB hereunder at
the time any such amount is due and payable hereunder; or

 

(b)fails to perform its duties in a reasonably prudent, diligent and efficient
manner and does not cure such failure to perform within fifteen (15) days of
notice from RB specifying the nature of the alleged failure to perform (or, if
such default is capable of being cured but not within such fifteen (15) day
period and the Owner has promptly commenced taking action to cure such default
within such fifteen (15) day period and diligently and in good faith continues
taking such action, an additional period of forty five (45) days).

 

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13.2Remedies of RB Upon Default by the Owner

 

(a)If the Owner fails to pay any amount which the Owner is liable to pay to RB
hereunder at the time any such amount is due and payable hereunder:

 

(i)RB may set-off 100% of such amount against any amount or amounts payable to
the Owner pursuant to this Agreement from time to time;

 

(ii)the tenant under the Lease, such tenant being an affiliate of RB, may deduct
100% of such amount from any amount or amounts payable to the Owner from time to
time pursuant to the Lease (the Owner acknowledges and agrees that RB has
obtained this right of deduction as agent for and on behalf of such affiliate of
RB and that such affiliate may rely upon this subsection 13.2(a)(ii)
notwithstanding that it is a not a party to this Agreement); or

 

(iii)RB may allow the payment to be made at a later date on the condition that
the Owner pays, in addition to the amount due, interest thereon at the Prime
Rate plus 3.00% per annum, compounded monthly, not in advance, from the date the
payment was due to the date payment is received by RB,

 

in any case without prejudice to any other right or remedy RB may have hereunder
or at law or equity or otherwise.

 

(b)In addition to any other rights or remedies RB may have under this Agreement
or at law or equity or otherwise (including the right to claim any direct or
indirect consequential or economic damages as a result of any failure by the
Owner to perform or satisfy any of its obligations under this Agreement), RB
will have the right upon the occurrence and during the continuance of any
default by the Owner under subsection 13.I(b) (but only after the time for
curing the default has expired) at its option to cure on the Owner’s behalf any
such default by the Owner under this Agreement and to be reimbursed upon demand
by RB for all amounts expended by RB to the Owner in so doing. All such amounts
shall bear interest at the Prime Rate plus 3.00% per annum, compounded monthly,
not in advance, from the date the demand for reimbursement was made to the date
payment is received by RB.

 

13.3Default by RB

 

RB will be in default under this Agreement if RB:

 

(a)fails to pay any amount which RB is liable to pay to the Owner hereunder at
the time any such amount is due and payable hereunder;

 

(b)fails to perform its duties in a reasonably prudent, diligent and efficient
manner and does not cure such failure to perform within fifteen (15) days of
notice from the Owner specifying the nature of the alleged failure to perform
(or, if such default is capable of being cured but not within such fifteen (15)
day period and RB has promptly commenced taking action to cure such default
within such fifteen (15) day period and diligently and in good faith continues
taking such action, an additional period of forty five (45) days); or

 

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(c)subject only to Article 14, fails to cause:

 

(i)the Building to be Substantially Commenced by the Substantial Commencement
Date;

 

(ii)the Building to be Substantially Completed by the Substantial Completion
Date;

 

(iii)the Project to be Totally Completed by the Outside Completion Date; or

 

(iv)Handover to occur by the Outside Handover Date.

 

13.4Remedies of the Owner upon Default by RB

 

(a)If RB fails to pay any amount which RB is liable to pay to the Owner
hereunder at the time any such amount is due and payable hereunder the Owner
may:

 

(i)set-off 100% of such amount against any amount or amounts payable by the
Owner to RB pursuant to this Agreement from time to time; or

 

(ii)allow the payment to be made at a later date on the condition that RB pays,
in addition to the amount due, interest thereon at the Prime Rate plus 3.00% per
annum, compounded monthly, not in advance, from the date the payment was due to
the date payment is received by the Owner.

 

(b)In addition to any other rights or remedies the Owner may have under this
Agreement or at law or equity or otherwise (including the right to claim any
direct or indirect consequential or economic damages as a result of any failure
by RB to perform or satisfy any of its obligations under this Agreement):

 

(i)upon the occurrence and during the continuance of any default by RB under
subsection 13.3(b) (but only after the time for curing the default has expired)
the Owner may:

 

(A)cure on RB’s behalf any such default by RB under this Agreement and to be
reimbursed upon demand by the Owner to RB for all amounts expended by the Owner
in so doing. All such amounts shall bear interest at the Prime Rate plus 3.00%
per annum, compounded monthly, not in advance, from the date the demand for
reimbursement was made to the date payment is received by the Owner; or

 

(B)terminate this Agreement upon written notice to RB.

 

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(ii)upon the occurrence and during the continuance of any default by RB under
subsection 13.3(c)(i), the Owner may terminate this Agreement at any time after
the Substantial Commencement Date upon written notice to RB;

 

(iii)unless RB has obtained and fully funded such extension(s) of the
Substantial Completion Date under section 2.4 of the Repurchase Option as may be
required to avoid a default under subsection 13.3(c)(ii), upon the occurrence
and during the continuance of any default by RB under subsection 1303(c)(ii),
the Owner may terminate this Agreement at any time after the Substantial
Completion Date upon written notice to RB;

 

(iv)upon the occurrence and during the continuance of any default by RB under
subsection 13.3(c)(iii), the Owner may terminate this Agreement at any time
after the Outside Completion Date upon written notice to RB;

 

(v)upon the occurrence and during the continuance of any default by RB under
subsection 13.3(c)(iv), the Owner may terminate this Agreement at any time after
the Outside Handover Date upon written notice to RB;

 

(c)In addition to any other rights or remedies the Owner may have under this
Agreement or at law or equity or otherwise, the Owner will have the right to
exercise the Step-In Rights upon the occurrence and during the continuance of
any default by RB under subsection 13.3(b) (but only after the time for curing
the default has expired) or upon the occurrence and during the continuance of
any default under subsections 13.3(c)(i) to 13.3(c)(iv);

 

(d)If the Owner elects to terminate this Agreement pursuant to this section
13.4, for greater certainty, any obligation on the part of RB in respect of
monies payable by RB to the Owner pursuant to this Agreement including the
liquidated damages under subsection 13.6(a) will survive termination of this
Agreement.

 

13.5Step-In Rights

 

The Owner shall be entitled to exercise the Step-In Rights only in the
circumstances as provided in subsections 13.4(c) and 13.10. If the Owner elects
to exercise the Step-In Rights then:

 

(a)the Owner shall forthwith deliver notice in writing to RB of the Owner’s
intention to exercise the Step-In Rights;

 

(b)the Owner may take possession of the Lands and the Project and, in such
event, shall thereafter take necessary and commercially reasonable steps to
complete the Project in accordance with the Plans and Specifications;

 

(c)the Owner may take an assignment of and RB shall upon the Owner’s request
assign to the Owner RB’s interests in any of the contracts, including but not
limited to Material Contracts, that RB has entered into to carry out the Work
and design for the Project or part thereof;

 

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(d)the Owner may take an assignment of and RB shall upon the Owner’s request
assign to the Owner any of RB’s easements, rights, licenses, rights of access
and/or occupancy referred to in section13.8;

 

(e)the Owner may take an assignment of, and RB, upon the Owner’s request, shall
assign to the Owner, any approvals, licences and permits for the Project and/or
the Work issued by any Authority;

 

(t)the Owner may withhold all further payments to RB until the Work and Project
is complete;

 

(g)all amounts paid or incurred by the Owner in accordance with the Project
Budget to carry out RB’s obligations under this Agreement and the RB/Owner
Purchase Agreement or to complete the Project or the Work in accordance with the
Plans and Specifications (collectively “Completion Expenses”) shall be offset
against the Maximum Amount or part thereof due and payable from time to time to
RB until the Owner has been completely reimbursed therefore; and

 

(h)from the date the Owner provides notice to RB in accordance with subsection
13.5(a) and thereafter and only to the extent the Owner has exercised its
further rights under this section 13.5, RB will be released from its obligations
under sections 10.1, 10.2, 10.5, 10.7, 11.2, 11.3 and 11.4.

 

Following completion of the Project and the Work by the Owner, the Owner shall
pay to RB any balance of the Maximum Amount remaining to be paid by the Owner
under this Agreement less the Completion Expenses and less any amounts which the
Owner is entitled at such time to holdback under this Agreement. If the
Completion Expenses exceed the unpaid balance of the Maximum Amount, the Owner
shall be entitled to claim from RB and RB shall forthwith pay the Owner the
amount by which such actual Completion Expenses exceed the unpaid balance of the
Maximum Amount.

 

13.6Consequences of Failure to Achieve the Outside Handover Date

 

If the Handover does not occur by the Outside Handover Date:

 

(a)RB shall pay to the Owner as liquidated damages, all monies that would
otherwise be due and owing to the Owner under the Lease, as and when such monies
are due and payable under the Lease commencing from the Outside Handover Date
and continuing until the receipt by the Landlord (as defined in the Lease) of
the first installment of Rent (as defined in the Lease) (the “Cut-Off Date”).
Should RB’s obligation to pay the Owner such liquidated damages be found to be
unenforceable:

 

(i)the Owner shall be entitled to pursue against RB all remedies at law or in
equity whether or not they are specified in this Agreement, under law or in
equity (including any right to recover any type of damages whether direct or
indirect, consequential or otherwise and further including for greater certainty
loss of profits); and

 

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(ii)the Owner’s exercise of one remedy shall not preclude the exercise of other
remedies for such default and all remedies available to the Owner may be
exercised cumulatively and in any order; or

 

(b)RB acknowledges and agrees for greater certainty that:

 

(i)the liquidated damages payable pursuant to subsection l3.6(a) shall continue
to be payable by RB to the Owner until the Cut-Off Date, and such obligation
shall continue in effect from the Outside Handover Date until the Cut-Off Date
notwithstanding any termination of this Agreement by the Owner pursuant to any
of subsection 13A(b)(i)(B), (ii), (iii), (iv) or (v);

 

(ii)RB shall continue to be bound by and shall perform and satisfy its
obligations under this Agreement if the Owner does not terminate this Agreement
pursuant to subsection 13.4(f) or exercise the Step-In Rights pursuant to
section 13.5; and

 

(iii)RB shall be bound by and shall comply with its obligations in respect of
the Step-In Rights if the Owner exercises the Step-In Rights in accordance with
section 13.5.

 

13.7Assignability of Development Contracts and Permits

 

RB shall ensure that every contract, agreement or arrangement RB enters into to
carry out the Work pertains only to the Project. RB shall ensure that no
contract, agreement or arrangement RB enters into to carry out the Work shall
form part of another contract, agreement or arrangement dealing with the Project
or any other project or matter. RB shall ensure that no contract or agreement
entered into by RB to carry out the Work and design for the Project prohibits
assignment thereof to the Owner, without the further consent of the other
parties to the contract or agreement or any other Person to the extent necessary
to enable the Owner to fully exercise, enforce and enjoy its Step-In Rights.

 

13.8Assignability of Access Rights

 

RB shall ensure that all easements, rights, licenses, rights of access and/or
occupation over any lands, improvements or property which easements, rights,
licenses, rights of access and/or occupancy are necessary for the purpose of
carrying out the Work are assignable in whole or in part, without the consent of
any other Person, to the Owner to the extent necessary to enable the Owner to
fully exercise, enforce and enjoy its Step-In Rights.

 

13.9Insolvency of the Owner

 

In the event of the Owner’s Insolvency, RB in addition to and not in
substitution of any rights or remedies which it may have at law or in equity:

 

(a)may terminate this Agreement by written notice to the Owner stating that this
Agreement is terminated effective as and from the date of delivery of such
notice;

 

 34 

 

 

(b)shall have the exclusive and royalty free licence to occupy the Lands in
order to complete the construction of the Project to the extent necessary to
allow the Project to proceed to completion, or, in RB’s sole discretion, to
otherwise utilize the Lands for the time period identified in the Construction
Schedule and such reasonable period thereafter to enable RB to perform any other
design, development and construction on the Lands to mitigate the loss suffered
by RB as a result of the Owner’s Insolvency; and

 

(c)shall be entitled to recover from the Owner, following completion of the
Project any unpaid balance of the Maximum Amount provided that in no
circumstances shall the Owner be liable to pay more than any unpaid balance of
the Maximum Amount;

 

and in any event, RB may claim any direct or indirect, consequential or economic
damages as a result of any failure by the Owner to perform or satisfy any of its
obligations under this Agreement or the RB/Owner Purchase Agreement. RB’ s
exercise of any one remedy as a result of the Owner’s Insolvency shall not
preclude the exercise of any other remedies in respect thereof and all remedies
available to RB may be exercised cumulatively.

 

13.10Insolvency of RB

 

In the event of RB’s Insolvency and in addition to and not in substitution of
any rights or remedies which the Owner may have at law or in equity, the Owner
shall by written notice given to RB (effective from the date of delivery of such
notice) have the right to:

 

(a)to terminate this Agreement by giving written notice to RB; or

 

(b)elect to exercise Step-In Rights;

 

and in any event and regardless of whether the Owner makes an election under
subsection 13.10(a) or (b), the Owner may claim any direct or indirect,
consequential or economic damages as a result of any failure by RB to perform or
satisfy any of its obligations under this Agreement or the RB/Owner Purchase
Agreement. The Owner’s exercise of any one remedy as a result of RB’s Insolvency
shall not preclude the exercise of any other remedies in respect thereof and all
remedies available to the Owner may be exercised cumulatively.

 

13.11Interest

 

Any unpaid amounts due to either Party under this Agreement shall accrue
interest before as well as after maturity, default and judgement on the
outstanding daily balance at the Prime Rate plus 3% per annum. Interest shall be
calculated and compounded daily. Each Party’s liability to pay interest under
this section 13.11 and each Party’s right to enforce its rights under this
section 13.11 to recover such interest from the other Party are not limited by
any other provision of this Agreement.

 

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ARTICLE 14

PERMITTED EXCUSE

 

14.1Effect of Permitted Excuse

 

If and to the extent either Party is prevented from or delayed in performing any
of its obligations under this Agreement as a result of a Permitted Excuse, then
it shall as soon as reasonably possible, but in any event within ten (10) days
of the date such Party has actual knowledge of the circumstances giving rise to
Permitted Excuse notify the other Party of the circumstances constituting the
Permitted Excuse and of the performance of the obligation which is thereby
delayed or prevented. Upon receipt by the other Party of such notice, the Party
giving the notice and the Party receiving the notice shall be excused from the
performance or punctual performance, as the case may be, of such obligation and
any related obligation, as the case may be, for so long as the circumstances
giving rise to the prevention or delay persist and any period under this
Agreement for the performance of such obligation shall be automatically extended
for a corresponding period of time. For greater certainty, the Party not so
prevented or delayed shall not be entitled to any compensation as a result of
the occurrence of a Permitted Excuse and the extension of any period for the
performance of any obligation under this Agreement as a result thereof, nor
shall the occurrence of a Permitted Excuse have any effect upon the Project
Budget and/or Maximum Amount.

 

14.2Reasonable Steps to Remedy

 

The Party affected shall take all reasonable steps to mitigate the effect of the
Permitted Excuse, shall notify the other Party on a regular basis of its efforts
to overcome the Permitted Excuse and shall resume performance of its obligations
under this Agreement as soon as possible.

 

14.3Notification of Permitted Excuse Ceasing

 

The Party relying on an event of Permitted Excuse shall immediately notify the
other Party in writing when such event has ceased or when it is no longer
relying thereon. For the purposes hereof, an event of Permitted Excuse shall
cease when it ceases in fact or when notice in accordance with this section 14.3
has been given, whichever shall first occur.

 

ARTICLE 15

CONSTRUCTION WARRANTY

 

15.1Conformance Warranty

 

RB warrants to the Owner during the Warranty Period that on the Handover Date:

 

(a)the Project will conform in all material respects to the Plans and
Specifications and will be compliant with all legal, municipal and other
requirements imposed by any Authority in respect of the Project; and

 

(b)RB with have managed the development and construction of the Project in
accordance with this Agreement.

 

 36 

 

 

Notwithstanding the foregoing, the Owner acknowledges and agrees that RB will be
released under this Conformance Warranty in the event that:

 

(c)a claim made by the Owner is satisfied within a reasonable period of time by
the Contractor Warranty, by any insurance policy maintained by the Contractor,
or by any professional liability insurance policy maintained by any of the
Consultants; or

 

(d)the Owner exercises the Step-In-Rights, but such release will only be
operative to the extent that Work is completed by or under the management or
direction of the Owner.

 

The Owner further acknowledges and agrees that such Conformance Warranty shall
not apply to any subsequent purchasers and transferees of the Project who are
not the Owner’s successors or permitted assigns.

 

15.2Notice Required

 

If, during the Warranty Period, the Owner identifies that the Project or any
part thereof does not conform to the Plans and Specifications or is not
compliant with any legal, municipal or other requirement imposed by any
Authority in respect of the Project, then the Owner will promptly give RB notice
in writing of such non-conformance or non-compliance and RB shall promptly
correct or cause to be corrected, at no cost to the Owner, such identified
non-conformance or non-compliance so that the Project conforms with the Plans
and Specifications and the legal, municipal and other requirements imposed by
any Authority in respect of the Project.

 

15.3Contractor Warranty

 

RB shall cause the Contractor to provide the following warranties:

 

(a)the Contractor shall correct promptly and at the Contractor’s expense:

 

(i)any work that is not in conformance with the Plans and Specifications;

 

(ii)any defect or deficiency in the Work which appear prior to or during the
Contractor Warranty Period;

 

(b)the Contractor shall correct and pay for damage resulting from defects and
deficiencies and the corrections made under the requirements of subsection
15.3(a) above;

 

(c)the Contractor Warranty is assignable, at no cost and without condition, to
the Owner;

 

(d)the Contractor shall, at no cost to the Owner and without condition, obtain
and assign to the Owner any warranties, including any extended manufacturers’
warranties for any materials and specifically including, without limitation, a
warranty for:

 

 37 

 

 

(i)the roof of the Project, for 10 years; and

 

(ii)the sealed glazing units, for 10 years.

 

(e)the Owner shall promptly give the Contractor notice in writing of observed
defects and deficiencies that occur during the applicable Contractor Warranty
Period.

 

15.4Extent of Warranty

 

The Conformance Warranty is the only warranty of RB against defects and
deficiencies in the Work or conformance of the Project to the Plans and
Specifications and no other warranties from RB against defects and deficiencies
in the Work or conformance of the Project to the Plans and Specifications,
statutory or otherwise are, or will be, implied. Except for the Contractor
Warranty, there is no other warranty against defects and deficiencies and for
conformance of the Project to the Plans and Specifications which RB is obligated
to cause the Contractor to grant to or obtain for the Owner.

 

15.5Assignment and Assistance

 

RB shall assign or cause to be assigned to the Owner the Contractor Warranty and
assist the Owner in enforcing the Contractor Warranty against the Contractor.

 

ARTICLE 16

INDEMNITY

 

16.1Indemnification in Favour of the Owner

 

RB shall indemnify and save the Owner harmless from any Losses suffered by,
imposed upon or asserted against the Owner as a result of, in respect of,
connected with or arising out of, under or pursuant to:

 

(a)any failure of RB to perform and fulfil any covenant of RB as provided for
hereunder; or

 

(b)any breach or inaccuracy of any representation or warranty given by RB
contained in this Agreement,

 

to the extent that such Losses have not been caused by the Owner’s negligent act
or omission.

 

16.2Indemnification in Favour of RB

 

The Owner shall indemnify and save RB harmless of and from any Losses suffered
by, imposed upon or asserted against RB as a result of, in respect of, connected
with or arising out of, under or pursuant to:

 

(a)any failure by the Owner to perform and fulfil any covenant of the Owner
under this Agreement; or

 

 38 

 

 

(b)any breach or inaccuracy of any representation or warranty given by the Owner
contained in this Agreement,

 

to the extent that such Losses have not been caused by RB’s negligent act or
omission.

 

16.3Indemnification Proceedings

 

Any Party seeking indemnification under this Part (the “indemnified Party”)
shall forthwith notify the Party against whom a claim for indemnification is
sought hereunder (the “indemnifying Party”) in writing, which notice shall
specify, in reasonable detail, the nature and estimated amount of the claim. If
a claim by a third Party is made against an indemnified Party, and if the
indemnified Party intends to seek indemnity with respect thereto under this
section 16.3, the indemnified Party shall promptly (and in any case within
thirty (30) days of such claim being made) notify the indemnifying Party of such
with reasonable particulars. The indemnifying Party shall have thirty (30) days
after receipt of such notice to undertake conduct and control, through counsel
of its own choosing and at its expense, the settlement or defence thereof, and
the indemnified Party shall cooperate with it in connection therewith; except
that with respect to settlements entered into by the indemnifying Party:

 

(a)the consent of the indemnified Party shall be required if the settlement
provides for equitable relief against the indemnified Party, which consent shall
not be unreasonably withheld or delayed;

 

(b)the indemnifying Party shall obtain a release of the indemnified Party.

 

If the indemnifying Party undertakes, conducts and controls the settlement or
defence of such claim:

 

(c)the indemnifying Party shall diligently and in the best interest of the
indemnified Party, defend such claim on behalf of the indemnified Party and
permit the indemnified Party to participate in such settlement or defence
through counsel chosen by the indemnified Party, provided that the fees and
expenses of such counsel shall be borne by the indemnified Party;

 

(d)the indemnifying Party shall promptly reimburse the indemnified Party for the
full amount of any Loss resulting from any Claim and all related expenses (other
than the fees and expenses of counsel as aforesaid) incurred by the indemnified
Party. The indemnified Party shall not pay or settle any claim so long as the
indemnifying Party is contesting any such claim in good faith on a timely basis.
Notwithstanding the two immediately preceding sentences, the indemnified Party
shall have the right to pay or settle any such claim, provided that in such
event it shall waive any right to indemnity therefor by the indemnifying Party;

 

(e)with respect to third Party claims, if the indemnifying Party does not notify
the indemnified Party within thirty (30) days after the receipt of the
indemnified Party’s notice of a claim of indemnity hereunder that it elects to
undertake the defence thereof, the indemnified Party shall have the right, but
not the obligation, to contest, settle or compromise the claim in the exercise
of its reasonable judgement at the expense of the indemnifying Party. In such
event, the indemnifying Party shall have no right to contest or challenge the
indemnified Party’s decision, if any, to contest, settle or compromise such
third Party claim;

 

 39 

 

 

(f)in the event of any claim by a third Party against the indemnified Party, the
defence of which is being undertaken and controlled by the indemnifying Party,
the indemnified Party will use all reasonable efforts to make available to the
indemnifying Party those employees whose assistance, testimony or presence is
necessary to assist the indemnifying Party in evaluating and in defending any
such claims; provided that the indemnifying Party shall be responsible for the
reasonable expense associated with any employees made available by the
indemnified Party hereunder;

 

(g)with respect to third Party claims, the indemnified Party shall make
available to the indemnifying Party or its representatives on a timely basis all
relevant documents, records and other materials in the possession of the
indemnified Party, at the expense of the indemnifying Party, reasonably required
by the indemnifying Party for its use in defending any claim and shall otherwise
cooperate on a timely basis with the indemnifying Party in the defence of such
claim;

 

(h)if indemnifying Party fails to act utilizing the utmost of good faith
protecting interest of the indemnified Party or otherwise does not diligently or
competently defend such claim then the indemnified Party may by notice in
writing to indemnifying Party terminate indemnifying Party’s right to undertake,
conduct and contract such claim and, inter alia, take full control thereof,
appoint new counsel and obtain its own professional advice, all at the cost and
expense of indemnifying Party;

 

(i)indemnifying Party shall keep the indemnified Party informed of all material
steps concerning the defence of any Claim and provide the indemnified Party with
all such information in connection with such defence as indemnified Party may
reasonably request.

 

If the indemnifying Party does not undertake, conduct or control the settlement
or defence of such Claim, the indemnifying Party shall, without limiting the
generality of sections 16.1 and 16.2, reimburse the indemnified Party for all
costs of defending, undertaking, conducting or controlling such settlement or
defence of such Claim.

 

ARTICLE 17

SETTLEMENT OF DISPUTES

 

17.1Best Endeavours to Settle Dispute

 

In the event of any dispute, Claim, question or difference arising out of or
relating to this Agreement or any breach hereof, the Parties will use their best
endeavours to settle such dispute, Claim, question or difference. To this
effect, they will consult and negotiate with each other, in good faith and
understanding of their mutual interests, to reach a just and equitable solution
satisfactory to all Parties.

 

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17.2Arbitration

 

Except as is expressly provided in this Agreement, if the Parties do not reach a
solution pursuant to section 17.1 within a reasonable period of time, then upon
written notice by a Party to the other, the dispute, Claim, question or
difference will be finally settled by arbitration in accordance with the
provisions of the Commercial Arbitration Act (British Columbia) as amended from
time to time and any legislation enacted in substitution therefore or in pari
materia therewith, based upon the following:

 

(a)the arbitration tribunal will consist of one arbitrator appointed by mutual
agreement of the Parties, or in the event of failure to agree, within ten (10)
Business Days after the date of delivery of the written notice, the Parties will
each appoint a nominee who together will appoint a single arbitrator, failing
which any Party may apply to a judge of the Supreme Court of British Columbia to
appoint an arbitrator. The arbitrator will be qualified by education and
training to pass upon the particular matter to be decided, including, without
limitation, knowledge of the construction industry;

 

(b)the arbitrator will be instructed that time is of the essence in proceeding
with the determination of any dispute, Claim, question or difference and, in any
event, the arbitration award must be rendered within thirty (30) days of the
submission of such dispute to arbitration;

 

(c)in the arbitration award, the arbitrator may award any remedy for any breach
of this Agreement that might have been awarded by the Supreme Court of British
Columbia except where the remedy for such breach has been expressly limited by
this Agreement;

 

(d)the arbitration will take place in Vancouver, British Columbia;

 

(e)the arbitration award will be given in writing and will be final and binding
on the Parties, not subject to any appeal, and will deal with the question of
costs or arbitration and all matters related thereto; and

 

(f)judgement upon the award rendered may be entered in any court having
jurisdiction, or, application may be made to such court for a judicial
recognition of the award or an order of enforcement thereof, as the case may be.

 

ARTICLE 18

MISCELLANEOUS

 

18.1Common Covenant

 

Neither the Owner nor RB will take any action, or omit to take any action, that
may reasonably be expected to adversely affect or interfere with the other’s
rights or ability to fulfil its obligations under this Agreement or the RB/Owner
Purchase Agreement. RB and the Owner shall diligently and in good faith carry
out all of their respective obligations under this Agreement and the RB/Owner
Purchase Agreement.

 

 41 

 

 

18.2Authority of GWLRA

 

The Owner acknowledges and agrees that:

 

(a)GWLRA, as agent of the Owner, has the full power and authority to take any
act or proceeding, make any decision or execute and deliver any instrument,
deed, agreement or document for and on behalf of the Owner as GWLRA, in its sole
judgement, may deem necessary, proper or desirable to carry out the obligations
of the Owner under this Agreement including, without limitation, executing and
delivering to RB any consent or approval required hereunder.

 

(b)RB is entitled to:

 

(i)deal with and report exclusively to GWLRA in connection with any and all
matters resulting from or arising out of this Agreement (including, without
limitation, to deliver to GWLRA any documentation that RB is required to deliver
hereunder to the Owner); and

 

(ii)rely conclusively upon the power and authority of GWLRA as set forth in
subsection 18.2(a) and will not be required to enquire into the authority of
GWLRA to take any act or proceeding, make any decision or execute and deliver
any instrument, deed, agreement or document on behalf of the Owner.

 

18.3Several

 

The Parties agree that any representations, warranties and covenants of
Great-West Life and London Life under this Agreement, as the case may be, will
be construed to be several, not joint, and enforceable by RB against Great-West
Life and London Life as to the “Respective Interests” of Great-West Life and
London Life, as such term is defined in the RB/Owner Purchase Agreement.

 

18.4Consents and Approvals

 

Whenever in this Agreement RB or the Owner is required to give its consent to or
approve an action, document, plan, budget or matter then, subject to the terms
and conditions of this Agreement, RB or the Owner, as the case may be, shall act
in good faith and shall not unreasonably withhold or unduly delay such consent
or approval.

 

18.5Notice of Change

 

RB agrees to promptly notify the Owner of any actual or anticipated material
change in the Construction Schedule of which RB becomes aware, actual or
anticipated material increases in the Project Budget of which RB becomes aware,
any material breaches or defaults under this Agreement or the Material Contracts
of which RB becomes aware, and any other circumstances of which RB becomes aware
which may materially impact the construction of the Project in accordance, in
all material respects, with the applicable Plans and Specifications, Project
Budget, Material Contracts and Construction Schedule.

 

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18.6Time

 

Time shall be of the essence of this Agreement.

 

18.7Further Assurances

 

Each Party hereto shall, at all times hereafter, execute and deliver, at the
request of the other, all such further documents, deeds and instruments, do or
cause to be done all such further acts and things, and give all such further
assurances, as may be necessary to give full effect to the intent and meaning of
this Agreement.

 

18.8Compliance with Laws

 

RB shall ensure compliance with all Applicable Laws in the performance of its
obligations under this Agreement.

 

18.9Entire Agreement

 

There is no representation, warranty, condition or agreement or any collateral
representation, warranty, condition or agreement applicable to, binding upon or
enforceable against any Party other than those expressed in this Agreement and
any agreement in writing made pursuant to or in furtherance of this Agreement.

 

18.10Waiver

 

No consent or waiver, express or implied, by any Party to or of any breach or
default by another Party in the performance by another Party of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any
other breach or default in the performance by such Party hereunder; failure on
the part of any Party hereto to complain of any act or failure to act of another
Party hereto or to declare such other Party in default, irrespective of how long
such act shall continue, shall not constitute a waiver by such Party of its
rights hereunder.

 

18.11Notices

 

Any demand or notice which may be required for the purposes of this Agreement
shall be in writing and shall be deemed to have been well and sufficiently given
and received if delivered, faxed or if mailed at any post office under prepaid
registered cover addressed as follows:

 

 43 

 

 

to RB:

 

Ritchie Bros. Properties Ltd.

6500 River Road

Richmond, B.C. V6X 4G5

 

Attention: Darren Watt

Facsimile No.: (604) 273-9339

 

with a copy to:

 

McCarthy Tetravlt LLP

1300 – 777 Dunsmuir Street

Vancouver, B.C. V7Y 1K2

 

Attention: Glenn Leung

Facsimile No.: (604) 622-5608

 

to the Owner:

 

The Great-West Life Assurance Company and

London Life Insurance Company

c/o GWL Realty Advisors Inc.

Suite 3000 - 650 West Georgia Street

Vancouver, B.C. V6B 4N7

 

Attention: Geoff Heu

Facsimile No.: (604) 683-3264

 

with a copy to:

 

Stikeman Elliott LLP

1700 – 666 Burrard Street

Vancouver, B.C. V6C 2X8

 

Attention: Ross MacDonald

Facsimile No.: (604) 681-1825

 

or at such other address as the Parties shall specify in writing to the other
from time to time. The time of giving and receiving any such notice shall be, if
delivered or faxed, when delivered or faxed or, if mailed as aforesaid, on the
third business day after the day of mailing. In the event of any disruption of
mail services, all notices shall be delivered or faxed rather than mailed.

 

18.12No Assignment

 

This Agreement shall not be assigned by RB or the Owner, as the case may be,
without the prior written consent of the other Party other than conditional
assignments by way of security if required by a lender, which may be executed by
either Party without the consent of the other

Party.

 

 44 

 

 

18.13Enurement

 

This Agreement shall enure to the benefit of and be binding upon the Owner and
its successors and assigns and upon RB and its successors and assigns.

 

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the
date first above written.

 

  THE GREAT WEST LIFE ASSURANCE COMPANY       /s/ Donald J. Harrison   Name:
Donald J. Harrison     Senior Vice President, Asset Management       /s/ Jeff
Fleming   Name:  Jeff Fleming     Vice President, Investments

 

  LONDON LIFE INSURANCE COMPANY       /s/ Donald J. Harrison   Name: Donald J.
Harrison     Senior Vice President, Asset Management       /s/ Jeff Fleming  
Name:  Jeff Fleming     Vice President, Investments

 

  RITCHIE BROS. PROPERTIES LTD.       /s/ Darren Watt   Name: Darren Watt

 

 45 

 

 

SCHEDULE “A”

 

PROJECT BUDGET

 

[tex10-40pg46.jpg]  

 

 A-1 

 

 

[tex10-40pg47.jpg] 

 

 A-2 

 

 

SCHEDULE “B”  

CONSTRUCTION SCHEDULE

 

[tex10-40pg48.jpg] 

 

 B-1 

 

 

[tex10-40pg49.jpg] 

 

 B-2 

 

 

[tex10-40pg50.jpg] 

 

 B-3 

 

 

SCHEDULE“C”

 

EXISTING MATERIAL CONTRACTS

 

Supplier   Contract Issue Date   Service           Cornerstone Planning Group  
October 10,2006   Preliminary Programming for Architectural RFP - Assigned
Contract       Butler Sundvick   May 8, 2007   Preliminary Site Survey -
Assigned Contract         Bunting Coady Architects   January 19, 2007   Prime
Consulting Services for the Design and Contract Administration Hanscomb Ltd.  
March 7, 2008   Quantity Surveyor Peer Review Trow Associates Inc.   December
11, 2007   Geotechnical Consulting PGL Environmental Consultants Ltd.   November
30, 2007   Design of Methane Extraction System CES Engineering   February 6,
2008   Commissioning Agent Trow Associates Inc.   January 3, 2008   Building
Envelope Consulting MHPM Project Managers Inc.   December 10, 2007   Project
Management Services Ventana Construction   April 28, 2008   Piling Trow
Associates Inc.   October 10, 2006   Geotechnical Feasibility Study Ventana
Construction   June 27, 2007   Pre·construction Services Ventana Construction  
September 17, 2007   Site Preparation and Test Pile Contract

 

 C-1