Document:

ex104.htm

    
      	
              Exhibit
      10.4

            	
              Non-Recourse
      Pledged Account Agreement dated as of October 30, 2009 by Kenneth Brooks,
      David Baird, Frederick Bohlander and Colin Eagen in favor of Silicon
      Valley Bank

            

    

     

     

    NON-RECOURSE
PLEDGED ACCOUNT AGREEMENT

     

     

    This continuing Non-Recourse Pledged
Account Agreement (“Agreement”) is entered into as of October 30, 2009, by
[______________________] (“Pledged Account Provider”), in favor of Silicon
Valley Bank (“Bank”).

     

     

    Recitals

     

     

    A.           Bank
and Braintech, Inc., a Nevada corporation, Braintech Industrial, Inc., a
Delaware corporation, and Braintech Government & Defense, Inc., a Delaware
corporation (individually and collectively, jointly and severally, “Borrower”),
are entering into (a) a certain Loan and Security Agreement (term loan) dated as
of even date herewith (“Term Loan Agreement”) and (b) a certain Loan and
Security Agreement (accounts receivable line of credit) dated as of even date
herewith (“Working Capital Loan Agreement”) (each as may be amended, restated,
or otherwise modified from time to time, collectively, the “Loan Agreements”)
pursuant to which Bank has agreed to make certain advances of money and to
extend certain financial accommodations to Borrower (collectively, the “Loans”),
subject to the terms and conditions set forth therein.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Term Loan Agreement.

     

     

    B.           In
consideration of the agreement of Bank to make the Loans to Borrower under the
Loan Agreements, Pledged Account Provider is willing to enter into this
Agreement.

     

     

    C.           Pledged
Account Provider is a stockholder of Borrower and will obtain substantial direct
and indirect benefit from the Loans made by Bank to Borrower under the Loan
Agreements.

     

     

    Now,
Therefore, to induce Bank to enter into the Loan Agreements, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Pledged Account Provider
hereby represents, warrants, covenants and agrees as follows:

     

    Section
1. Agreement.

     

    1.1 Agreement.  In
consideration of the foregoing, Pledged Account Provider has pledged to Bank a
security interest in the Pledged Account (as defined
hereinafter).  Upon the occurrence and during the continuance of an
Event of Default under the Term Loan Agreement, Bank may exercise any and all of
its rights with respect to the Pledged Account as set forth in that certain
Pledge Agreement executed by Pledged Account Provider in favor of Bank and dated
as of even date herewith (the “Pledge Agreement”).  Until this
Agreement is terminated pursuant to Section 16, Pledged Account Provider agrees
that it shall execute such other documents or agreements and take such action as
Bank shall reasonably request to effect the purposes of this
Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.2 Separate
Obligations.  Pledged Account Provider’s obligations are independent
of Borrower’s obligations and separate actions may be brought against Pledged
Account Provider (whether action is brought against Borrower or whether Borrower
is joined in the action).

     

    Section
2. Representations
and Warranties.

     

     

    Pledged Account Provider hereby
represents and warrants that:

     

    (a) The
execution, delivery and performance by Pledged Account Provider of this
Agreement (i) do not contravene any law or any contractual restriction binding
on or affecting Pledged Account Provider; (ii) do not require any authorization
or approval or other action by, or any notice to or filing with, any
governmental authority or any other Person under any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which Pledged Account Provider
is a party or by which Pledged Account Provider or any of its property is bound,
except such as have been obtained or made; and (iii) do not result in the
imposition or creation of any Lien upon any property of Pledged Account Provider
other than with respect to the underlying Pledged Account.

     

    (b) Pledged
Account Provider is legally competent to execute, deliver and perform this
Agreement.

     

    (c) This
Agreement is a valid and binding obligation of Pledged Account
Provider.

     

    (d) Pledged
Account Provider’s obligations hereunder are not subject to any offset or
defense against Bank or Borrower of any kind.

     

    (e) Pledged
Account Provider covenants, warrants, and represents to Bank that all
representations and warranties contained in this Agreement shall be true at the
time of Pledged Account Provider’s execution of this Agreement, and shall
continue to be true so long as this Agreement remains in effect.

     

    (f) Pledged
Account Provider shall maintain a money market account containing at least
[____________________________ Dollars ($__________.00)] at all times (the
“Pledged Account”), which Pledged Account shall be pledged to Bank to secure
Pledged Account Provider’s obligations to Bank under the Pledge
Agreement.  Notwithstanding the foregoing, Bank acknowledges and
agrees that the amount required to be maintained in the Pledged Account may
proportionately decline as the Term Advances are paid off, as long as the amount
in the Pledged Account continues to represent the same proportionate amount of
the Term Advances as it did as of the date of this Agreement (for purposes of
this provision, the amount of Term Advances on the date of this Agreement shall
be deemed to be Two Million Two Hundred Thousand Dollars
($2,200,000.00)).

     

    Section
3. General
Waivers.  Pledged Account Provider waives:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a) Any right
to require Bank to (i) proceed against Borrower or any other person;
(ii) proceed against or exhaust any security or (iii) pursue any other
remedy.  Bank may exercise or not exercise any right or remedy it has
against Borrower or any security it holds (including the right to foreclose by
judicial or nonjudicial sale) without affecting Pledged Account Provider’s
liability hereunder.

     

    (b) Any
defenses from disability or other defense of Borrower.

     

    (c) Any
setoff, defense or counterclaim against Bank.

     

    (d) Any
defense from the absence, impairment or loss of any right of subrogation against
Borrower.  Until Borrower’s obligations to Bank have been paid,
Pledged Account Provider has no right of subrogation against
Borrower.

     

    (e) Any right
to enforce any remedy that Bank has against Borrower.

     

    (f) Any
rights to participate in any security held by Bank.

     

    (g) Any
demands for performance, notices of nonperformance or of new or additional
indebtedness incurred by Borrower to Bank.  Pledged Account Provider
is responsible for being and keeping itself informed of Borrower’s financial
condition.

     

    (h) The
benefit of any act or omission by Bank which directly or indirectly results in
or aids the discharge of Borrower from any of the Obligations by operation of
law or otherwise.

     

    Section
4. Real Property Security
Waiver.  Pledged Account Provider acknowledges that, to the
extent Pledged Account Provider has or may have rights of subrogation against
Borrower for claims arising out of this Agreement, those rights may be impaired
or destroyed if Bank elects to proceed against any real property security of
Borrower by non-judicial foreclosure.  That impairment or destruction
could, under certain judicial cases and based on equitable principles of
estoppel, give rise to a defense by Pledged Account Provider against its
obligations under this Agreement.  Pledged Account Provider waives
that defense and any others arising from Bank’s election to pursue non-judicial
foreclosure.  Pledged Account Provider waives the benefits, if any, of
any statutory or common law rule that may permit a subordinating creditor to
assert any defenses of a surety, or that may give the subordinating creditor the
right to require a senior creditor to marshal assets, and Pledged Account
Provider agrees that it shall not assert any such defenses or
rights.

     

    Section
5. No Waiver;
Amendments.  No failure on the part of Bank to exercise, no
delay in exercising and no course of dealing with respect to, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.  The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.  This
Agreement may not be amended or modified except by written agreement between
Pledged Account Provider and Bank, and no consent or waiver hereunder shall be
valid unless in writing and signed by Bank.

     

    Section
6. Compromise and
Settlement.  Subject to Section 16, no compromise, settlement,
release, renewal, extension, indulgence, change in, waiver or modification of
any of the Obligations or the release or discharge of Borrower from the
performance of any of the Obligations shall release or discharge Pledged Account
Provider from this Agreement or the performance of the obligations
hereunder.  For the avoidance of doubt, Pledged Account Provider shall
have no further obligation or liability to Bank under this Agreement or the
Pledge Agreement once this Agreement is terminated pursuant to Section
16.

     

    Section
7. Notice.  Any notice
or other communication herein required or permitted to be given shall be in
writing and may be delivered in person or sent by facsimile transmission,
overnight courier, or by United States mail, registered or certified, return
receipt requested, postage prepaid and addressed as follows:

     

     

    If to Pledged
Account:                         
Kenneth Brooks

    Provider                                                  
Braintech, Inc.

      LC/Pledged Account Provider
Committee
                                                                           
1750 Tysons Boulevard, Suite
350
                                                                           
McLean, VA 22102

      Facsimile No.:
703-637-9772

     

     

    

     

     

    With a
copy
to:                                       Thomas
E. McCabe

                                                                       EVP,
General Counsel &
Secretary
                                                                                  
Braintech,
Inc.

                                                                      
1750
Tysons Boulevard, Suite 350

                                                                       McLean,
VA 22102

                                                                       Fax:           (703)
637-9772

     

     

    

     

    If to
Bank:                                                
Silicon Valley Bank

       8020 Towers Crescent
Drive, Suite 475

       Vienna, Virginia
22182

      
Attn:           Ms.
Heather Parker

                                                                                      
Fax:           (703)
356-7643

    

    

     

    With a
copy
to:                                       Riemer
& Braunstein,
LLP
                                                                                  
Three
Center
Plaza
                                                                                   Boston,
Massachusetts  02108
                                                                                  
Attn:           David
A. Ephraim, Esquire
                           Fax:           (617)
880-3456

     

     

    

     

     

    or at
such other address as may be substituted by notice given as herein
provided.  Every notice, demand, request, consent, approval,
declaration or other communication hereunder shall be deemed to have been duly
given or served on the date on which personally delivered or sent by facsimile
transmission or three (3) Business Days after the same shall have been deposited
in the United States mail.  If sent by overnight courier service, the
date of delivery shall be deemed to be the next Business Day after deposited
with such service.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
8. Entire
Agreement.  This Agreement constitutes and contains the entire
agreement of the parties and supersedes any and all prior and contemporaneous
agreements, negotiations, correspondence, understandings and communications
between Pledged Account Provider and Bank, whether written or oral, respecting
the subject matter hereof.

     

    Section
9. Severability.  If
any provision of this Agreement is held to be unenforceable under applicable law
for any reason, it shall be adjusted, if possible, rather than voided in order
to achieve the intent of Pledged Account Provider and Bank to the extent
possible.  In any event, all other provisions of this Agreement shall
be deemed valid and enforceable to the full extent possible under applicable
law.

     

    Section
10. Subordination of
Indebtedness.  Issues of subordination are addressed in the
Subordination Agreement dated as of even date herewith between Pledged Account
Provider and Bank, as acknowledged by Borrower.

     

    Section
11. Business
Debt.  Pledged Account Provider hereby represents and agrees
that none of the Obligations and none of Pledged Account Provider’s obligations
hereunder are consumer debt, or were or shall be incurred by Borrower or Pledged
Account Provider, respectively, primarily for personal, family or household
purposes.  Pledged Account Provider further agrees and represents that
the Obligations are and shall be incurred by Borrower, and the obligations of
Pledged Account Provider hereunder are and shall be incurred by Pledged Account
Provider, for business and commercial purposes only.

     

    Section
12. Assignment; Governing Law.  This
Agreement shall be binding upon and inure to the benefit of Pledged Account
Provider and Bank and their respective successors and assigns, except that
Pledged Account Provider shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of Bank, which may be
granted or withheld in Bank’s sole discretion.  Any such purported
assignment by Pledged Account Provider without Bank’s written consent shall be
void.  This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts without regard to
principles thereof regarding conflict of laws.

     

    SECTION
13. JURISDICTION. Pledged
Account Provider hereby irrevocably agrees that any legal action or proceeding
with respect to this Agreement or any of the agreements, documents or
instruments delivered in connection herewith may be brought in the state and
federal courts located in the Commonwealth of Massachusetts as Bank may elect
(PROVIDED THAT PLEDGED ACCOUNT PROVIDER ACKNOWLEDGES THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COMMONWEALTH
OFMASSACHUSETTS), and, by execution and delivery hereof, Pledged Account
Provider accepts and consents to, generally and unconditionally, the
jurisdiction of the aforesaid courts and agrees that such jurisdiction shall be
exclusive, unless waived by Bank in writing, with respect to any action or
proceeding brought by Pledged Account Provider against Bank.  Nothing
herein shall limit the right of Bank to bring proceedings against Pledged
Account Provider in the courts of any other jurisdiction.  Pledged
Account Provider hereby waives, to the full extent permitted by law, any right
to stay or to dismiss any action or proceeding brought before said courts on the
basis of forum non conveniens.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECTION
14. WAIVER OF JURY
TRIAL.  EACH OF BANK AND PLEDGED ACCOUNT PROVIDER HEREBY
WAIVES, TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND ANY RELATED INSTRUMENTS, AS APPLICABLE, BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
14.

     

    SECTION
15. PLEDGED
ACCOUNT.  Pledged Account Provider hereby
acknowledges and agrees that upon the occurrence and during the continuance of
an Event of Default, Bank may exercise any and all of its rights and remedies
with respect to the Pledged Account.

     

    Section
16. TERMINATION.  This
Agreement shall terminate upon the earlier to occur of (a) both (i) payment in
full of all Term Advances and any other amounts due to Bank under the Term Loan
Agreement (but specifically excluding any amounts due in connection with the
Working Capital Loan Agreement or any other agreement) and (ii) termination of
the Term Loan Agreement, or (b) March 2, 2013.

     

    SECTION
17. NON-RECOURSE
AGREEMENT.  NOTWITHSTANDING THE FOREGOING, OR ANYTHING TO THE
CONTRARY CONTAINED IN THIS AGREEMENT, IT IS EXPRESSLY ACKNOWLEDGED AND AGREED
THAT THE LIABILITY OF THE PLEDGED ACCOUNT PROVIDER HEREUNDER AT ALL TIMES SHALL
BE LIMITED TO THE COLLATERAL (AS DEFINED IN THE PLEDGE AGREEMENT).  IN
FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, IF AN EVENT OF DEFAULT SHALL
OCCUR AND BE CONTINUING UNDER THE TERM LOAN AGREEMENT, AND/OR THERE IS A DEFAULT
OR ANY BREACH OF ANY PROVISION HEREUNDER, BANK'S SOLE RECOURSE AGAINST THE
PLEDGED ACCOUNT PROVIDER SHALL BE THE COLLATERAL REFERENCED
HEREUNDER.

     

     

    PLEDGED
ACCOUNT PROVIDER

     

     

    

     

     

    _____________________________

     

     

    [______________________________]ex105.htm

    
      	
              Exhibit
      10.5

            	
              Subordination
      Agreement dated as of October 30, 2009 between Rick Weidinger, Kenneth
      Brooks, David Baird, Frederick Bohlander, Colin Eagen and Silicon Valley
      Bank

            

    

     

    SUBORDINATION
AGREEMENT

     

    This
Subordination Agreement (the “Agreement”) is made as of October 30, 2009, by and
between Rick Weidinger,
Kenneth Brooks, David Baird, Frederick Bohlander and Colin Eagen (collectively,
“Creditor”), and SILICON VALLEY
BANK, a California corporation, with its principal place of business at
3003 Tasman Drive, Santa Clara, California 95054 and with a loan production
office located at 8020 Tower Crescent Drive, Suite 475, Vienna, Virginia 22182
(“Bank”).

     

    Recitals

     

    A. BRAINTECH, INC., a Nevada
corporation, BRAINTECH
INDUSTRIAL, INC., a Delaware corporation, and BRAINTECH GOVERNMENT & DEFENSE,
INC., a Delaware corporation (jointly and severally, individually and
collectively, “Borrower”) have requested and/or obtained certain loans or other
credit accommodations from Bank to Borrower under (a) a certain Loan and
Security Agreement (term loan) between Borrower and Bank dated as of even date
herewith (the “Term Loan Agreement”), and (b) a certain Loan and Security
Agreement (accounts receivable line of credit) between Borrower and Bank dated
as of even date herewith (“Working Capital Loan Agreement”) (as each may be
amended, restated, or otherwise modified from time to time, collectively, the
“Loan Agreements”), which are or may be from time to time secured by assets and
property of Borrower.

     

    B. Creditor
has extended loans or other credit accommodations to Borrower, and/or may extend
loans or other credit accommodations to Borrower from time to time.

     

    C. In order
to induce Bank to extend credit to Borrower and, at any time or from time to
time, at Bank’s option, to make such further loans, extensions of credit, or
other accommodations to or for the account of Borrower, or to purchase or extend
credit upon any instrument or writing in respect of which Borrower may be liable
in any capacity, or to grant such renewals or extension of any such loan,
extension of credit, purchase, or other accommodation as Bank may deem
advisable, Creditor is willing to subordinate:  (i) all of Borrower’s
indebtedness to Creditor (including, without limitation, principal, premium (if
any), interest, fees, charges, expenses, costs, professional fees and expenses,
and reimbursement obligations), whether presently existing or arising in the
future (the “Subordinated Debt”) to all of Borrower’s indebtedness and
obligations to Bank; and (ii) all of Creditor’s security interests, if any, to
all of Bank’s security interests in the Borrower’s property. Notwithstanding the
foregoing, the term “Subordinated Debt” shall not include (i) Borrower’s
obligation to issue common stock of Borrower to Creditor as compensation for
providing the Letter of Credit or Pledged Account (as each such term is defined
in the Term Loan Agreement); (ii) subject to an aggregate annual limit of
$100,000, Borrower’s obligation to reimburse Creditor for all initial and
ongoing expenses incurred by Creditor relating to the establishment, amendment
and/or maintenance of the Letter of Credit or Pledged Account (as each such term
is defined in the Term Loan Agreement); (iii) during calendar year 2009 only and
subject to an aggregate annual limit for 2009 of $100,000, Borrower’s obligation
to reimburse Creditor for all expenses incurred by Creditor relating to
Creditor’s previous letter of credit (the “RBC LC”) provided in support of
Borrower’s previous loan from the Royal Bank of Canada (the “RBC Loan”); (iv)
Borrower’s obligation to pay any standard compensation to Creditor for service
as a member of Borrower’s Board of Directors and/or any committee thereof; (v)
Borrower’s obligation to pay any compensation provided to Rick Weidinger
(“Weidinger”) pursuant to the Employment and Retention Agreement dated as of
January 1, 2009 or pursuant to any successor agreement approved by Borrower’s
Board of Directors or a committee thereof; (vi) Borrower’s obligation to pay
Weidinger amounts due under the following promissory notes issued to him by
Borrower for deferral of amounts due to him: (A) the Promissory Note ($90,300
Cash Bonus plus interest) issued September 21, 2009, (B) the Promissory Note
(Deferred Salary plus interest) issued September 21, 2009 which applies to
deferrals of Salary, bonus, expense reimbursements, stock repurchase payments,
legal fee reimbursements, subject to an aggregate amount outstanding of up to
$1,250,000, and (C) the Promissory Note ($30,000 Stock Repurchase plus interest)
issued September 25, 2009; (vii) Borrower’s obligation to indemnify and advance
or reimburse customary expenses to directors, officers, employees and agents in
their capacities as such; or (viii) amounts owed by Borrower to Creditor as a
result of payment of the RBC Loan with funds drawn from the RBC
LC.  Notwithstanding the exclusions from Subordinated Debt set forth
in the immediately preceding sentence, any security interest or lien that
Creditor has in any property of Borrower in respect of any obligations of
Borrower to Creditor (whether in respect of Subordinated Debt, the obligations
set forth in the immediately preceding sentence, or otherwise) will be
subordinated to any security interest or lien in favor of Bank pursuant to the
terms of this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    NOW,
THEREFORE, THE PARTIES AGREE AS FOLLOWS:

     

    1. Creditor
subordinates to Bank any security interest or lien that Creditor may have in any
property of Borrower.  Notwithstanding the respective dates of
attachment or perfection of the security interest of Creditor and the security
interest of Bank, the security interest of Bank in the Collateral (the
“Collateral”), as defined in the Loan Agreements, shall at all times be senior
to the security interest of Creditor.  Notwithstanding anything to the
contrary in this Agreement, Bank shall not, without Creditor’s prior written
consent, either (a) extend the term for repayment of the Term Advances (as
defined in the Term Loan Agreement) beyond the date that is forty (40) months
from the date of this Agreement, or (b) increase the Facility Amount (as defined
in the Working Capital Loan Agreement).

     

    2. All
Subordinated Debt is subordinated in right of payment to all obligations of
Borrower to Bank now existing or hereafter arising, together with all costs of
collecting such obligations (including attorneys’ fees), including, without
limitation, all interest accruing after the commencement by or against Borrower
of any bankruptcy, reorganization or similar proceeding, and all obligations
under the Loan Agreements (the “Senior Debt”).

     

    3. Creditor
will not demand or receive from Borrower (and Borrower will not pay to Creditor)
all or any part of the Subordinated Debt, by way of payment, prepayment, setoff,
lawsuit or otherwise, nor will Creditor exercise any remedy with respect to the
Collateral, nor will Creditor accelerate the Subordinated Debt, or commence, or
cause to commence, prosecute or participate in any administrative, legal or
equitable action against Borrower, until such time as (i) the Senior Debt is
fully paid in cash, (ii) Bank has no commitment or obligation to lend any
further funds to Borrower, and (iii) all financing agreements between Bank and
Borrower are terminated.  Nothing in this Section 3 shall prohibit
Creditor from converting all or any part of the Subordinated Debt into equity
securities of Borrower which do not have any call, put or other conversion
features that would obligate Borrower to pay any money or deliver any other
securities or consideration to the holder.

     

    4. Until
such time as (i) the Senior Debt is fully paid in cash, (ii) Bank has no
commitment or obligation to lend any further funds to Borrower, and (iii) all
financing agreements between Bank and Borrower are terminated, Creditor shall
promptly deliver to Bank in the form received (except for endorsement or
assignment by Creditor where required by Bank) for application to the Senior
Debt any payment, distribution, security or proceeds received by Creditor with
respect to the Subordinated Debt other than in accordance with this
Agreement.

     

    5. In the
event of Borrower’s insolvency, reorganization or any case or proceeding under
any bankruptcy or insolvency law or laws relating to the relief of debtors,
these provisions shall remain in full force and effect, and Bank’s claims
against Borrower and the estate of Borrower shall be paid in full before any
payment is made to Creditor.

     

    6. Until the
Senior Debt is fully paid in cash and Bank’s arrangements to lend any funds to
Borrower have been terminated, Creditor irrevocably appoints Bank as Creditor’s
attorney-in-fact, and grants to Bank a power of attorney with full power of
substitution, in the name of Creditor or in the name of Bank, for the use and
benefit of Bank, without notice to Creditor, to perform at Bank’s option the
following acts in any bankruptcy, insolvency or similar proceeding involving
Borrower:

     

    (i) To file
the appropriate claim or claims in respect of the Subordinated Debt on behalf of
Creditor if Creditor does not do so prior to 30 days before the expiration of
the time to file claims in such proceeding and if Bank elects, in its sole
discretion, to file such claim or claims; and

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (ii) To accept
or reject any plan of reorganization or arrangement on behalf of Creditor and to
otherwise vote Creditor’s claims in respect of any Subordinated Debt in any
manner that Bank deems appropriate for the enforcement of its rights
hereunder.

     

    7. Creditor
shall immediately affix a legend to the instruments evidencing the Subordinated
Debt stating that the instruments are subject to the terms of this
Agreement.  By the execution of this Agreement, Creditor hereby
authorizes Bank to amend any financing statements filed by Creditor against
Borrower as follows: “In accordance with a certain Subordination Agreement by
and among the Secured Party, the Debtor and Silicon Valley Bank, the Secured
Party has subordinated any security interest or lien that Secured Party may have
in any property of the Debtor to the security interest of Silicon Valley Bank in
all assets of the Debtor, notwithstanding the respective dates of attachment or
perfection of the security interest of the Secured Party and Silicon Valley
Bank.”

     

    8. No
amendment of the documents evidencing or relating to the Subordinated Debt shall
directly or indirectly modify the provisions of this Agreement in any manner
which would reasonably be expected to terminate or impair the subordination of
the Subordinated Debt or the subordination of the security interest or lien that
Creditor may have in any property of Borrower.  By way of example,
such instruments shall not be amended to (i) increase the rate of interest with
respect to the Subordinated Debt, or (ii) accelerate the payment of the
principal or interest or any other portion of the Subordinated
Debt.  Bank shall have the sole and exclusive right to restrict or
permit, or approve or disapprove, the sale, transfer or other disposition of
Collateral except in accordance with the terms of the Senior Debt. In the event
of and during the continuation of an Event of Default (as defined in the Loan
Agreements), upon written notice from Bank to Creditor of Bank's agreement to
release its lien on all or any portion of the Collateral in connection with the
sale, transfer or other disposition thereof by Bank (or by Borrower with consent
of Bank), Creditor shall be deemed to have also, automatically and
simultaneously, released its lien on such Collateral, and Creditor shall upon
written request by Bank, immediately take such action as shall be necessary or
appropriate to evidence and confirm such release.  All proceeds
resulting from any such sale, transfer or other disposition shall be applied
first to the Senior Debt until payment in full thereof, with the balance, if
any, to the Subordinated Debt, or to any other entitled party.  If
Creditor fails to release its lien as required hereunder, Creditor hereby
appoints Bank as attorney in fact for Creditor with full power of substitution
to release Creditor's liens as provided hereunder.  Such power of
attorney being coupled with an interest shall be irrevocable.

     

    9. All
necessary action on the part of the Creditor, its officers, directors, partners,
members and shareholders, as applicable, necessary for the authorization of this
Agreement and the performance of all obligations of the Creditor hereunder has
been taken.  This Agreement constitutes the legal, valid and binding
obligation of Creditor, enforceable against Creditor in accordance with its
terms.  The execution, delivery and performance of and compliance with
this Agreement by Creditor will not violate any material applicable law, rule or
regulation.

     

    10. If, at
any time after payment in full of the Senior Debt any payments of the Senior
Debt must be disgorged by Bank for any reason (including, without limitation,
the bankruptcy of Borrower), this Agreement and the relative rights and
priorities set forth herein shall be reinstated as to all such disgorged
payments as though such payments had not been made and Creditor shall
immediately pay over to Bank all payments received with respect to the
Subordinated Debt to the extent that such payments would have been prohibited
hereunder.  At any time and from time to time, without notice to
Creditor, Bank may take such actions as may be permitted under applicable
agreements with Borrower with respect to the Senior Debt as Bank, in its sole
discretion, may deem appropriate, including, without limitation, the following
actions to the extent that they may be permitted under the applicable agreements
with Borrower: terminating advances to Borrower, increasing the principal
amount, extending the time of payment, increasing applicable interest rates,
renewing, compromising or otherwise amending the terms of any documents
affecting the Senior Debt and any collateral securing the Senior Debt, and
enforcing or failing to enforce any rights against Borrower or any other
person.  No such action or inaction shall impair or otherwise affect
Bank’s rights hereunder.  Creditor waives the benefits, if any, of any
statutory or common law rule that may permit a subordinating creditor to assert
any defenses of a surety or guarantor, or that may give the subordinating
creditor the right to require a senior creditor to marshal assets, and Creditor
agrees that it shall not assert any such defenses or rights.

     

    11. This
Agreement shall bind any successors or assignees of Creditor and shall benefit
any successors or assigns of Bank.  This Agreement shall remain
effective until the first to occur of (a) termination in writing by Bank, or (b)
such time as when (i) the Senior Debt is fully paid in cash, (ii) Bank has no
commitment or obligation to lend any further funds to Borrower, and (iii) all
financing agreements between Bank and Borrower are terminated. This Agreement is
solely for the benefit of Creditor and Bank and not for the benefit of Borrower
or any other party.  Creditor further agrees that if Borrower is in
the process of refinancing any portion of the Senior Debt with a new lender, and
if Bank makes a request of Creditor, Creditor shall agree to enter into a new
subordination agreement with the new lender on substantially the terms and
conditions of this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    12. Creditor
hereby agrees to execute such documents and/or take such further action as Bank
may at any time or times reasonably request in order to carry out the provisions
and intent of this Agreement, including, without limitation, ratifications and
confirmations of this Agreement from time to time hereafter, as and when
requested by Bank.

     

    13. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one
instrument.

     

    14. This
Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without giving effect to conflicts of laws
principles.  Creditor and Bank submit to the exclusive jurisdiction of
the state and federal courts located in Boston, Massachusetts, in any action,
suit, or proceeding of any kind, against it which arises out of or by reason of
this Agreement; provided, however, that if for any reason Bank cannot avail
itself of the Courts of the Commonwealth of Massachusetts, Creditor accepts
jurisdiction of the Courts and venue in Santa Clara County,
California.  CREDITOR AND BANK WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.

     

    15. This
Agreement represents the entire agreement with respect to the subject matter
hereof, and supersedes all prior negotiations, agreements and
commitments.  Creditor is not relying on any representations by Bank
or Borrower in entering into this Agreement, and Creditor has kept and will
continue to keep itself fully apprised of the financial and other condition of
Borrower.  This Agreement may be amended only by written instrument
signed by Creditor and Bank.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.

     

    “Creditor”                                                                           “Bank”

     

    SILICON VALLEY BANK

    ____________________________________________              

    Rick
Weidinger                                    
By:________________________________________

     

    Title:_______________________________________

    ____________________________________________   
Kenneth
Brooks

     

    ____________________________________________     
David
Baird

     

    ____________________________________________                                                                                                                                                              
Frederick Bohlander

     

    ____________________________________________            
Colin
Eagen

     

    

     

    The
undersigned approves of the terms of this Agreement.

     

    “Borrower”

     

    BRAINTECH,
INC.

     

    By:_________________________________________

     

    Title:________________________________________

     

    

     

    BRAINTECH
INDUSTRIAL, INC.

     

    By:_________________________________________

     

    Title:________________________________________

     

    

     

    BRAINTECH
GOVERNMENT & DEFENSE, INC.

     

    By:_________________________________________

     

    Title:________________________________________

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