EXCLUSIVE CHANNEL PARTNER AGREEMENT

EXCLUSIVE CHANNEL PARTNER AGREEMENT

FOR THE LICENSING OF BRAINTECH'S

VISION GUIDED ROBOTICS TECHNOLOGIES

AND

SOFTWARE PRODUCTS

PARTIES:

1. BRAINTECH CANADA INC.

2. ABB INC.

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THIS MASTER AGREEMENT effective January 1st, 2005

BETWEEN:           BRAINTECH CANADA INC., a corporation duly organized and existing under the laws of British Columbia, Canada, with its principal office at 102-930 West 1st Street, North Vancouver, British Columbia, Canada V7P 3N4: (604) 9886440, fax (604) 986-6131 (hereinafter referred to as "Braintech" )

AND:       ABB Robot Automation, a division of ABB Inc. ("ABB"), having a place of business at 1250 Brown Rd. Auburn Hills, MI. 48326-1507: (248) 391-8505, fax: (248) 391-8532 (hereinafter referred to as "LICENSEE " ).

RECITALS:

A. BRAINTECH has expertise in the software solutions development for vision guided robotic systems, including the technology and methods required to analyze and classify digital representations of images and visual patterns;

B. BRAINTECH has developed valuable proprietary technology for use in the development of vision guided robotic systems, including the eVF Development Studio, SC3D guidance technology, and other software programs as declared in Exhibit 4 - "Trademarks;

C. LICENSEE has expertise in the area of flexible automation equipment manufacturing and system integration;

D. LICENSEE has developed a valuable network of business contacts and clients;

E. BRAINTECH and LICENSEE believe that their respective technologies and expertise can be combined in industrial applications, which can employ the expertise and technology of both BRAINTECH and LICENSEE ;

F. Braintech and LICENSEE now wish to enter into this Agreement. The purpose being to establish a comprehensive agreement giving certain rights to LICENSEE , under terms and conditions as hereinafter specified by the agreement and its attached exhibits

AGREEMENT

1. DEFINITIONS AND INTERPRETATION

When used herein, the terms below have the meaning as specified below, unless the context requires otherwise:

1.1 "ABB robot" means all models of industrial robots manufactured by ABB Inc.

1.2 "Agreement" means this agreement, including all of the exhibits, and any variation hereto agreed in writing between the Parties;

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1.3 "Workspace Developer" means the organization licensed by Braintech to develop VGR Workspaces using the Braintech Software;

1.4 "Braintech Software" means eVF, Software Technology and Third Party Software Technology as computer programs specified in Exhibit 1 of Master Agreement in machine-readable object code form and any Improvements thereto. The Braintech Software does not include source code;

1.5 "Channel Partner" means a group or company acting as representative of Braintech directly or indirectly to the End-User;

1.6 "Component" means a reusable software program that is available for use within eVF;

1.7 "End-User" means any company that purchases the Products for use as part of their manufacturing process;

1.8 "Engineering Services" means work performed by Braintech using the Braintech Software and hardware to develop a VGR Workspace or part of a VGR Workspace;

1.9 "eVisionFactory and/or eVF" means the software system developed and owned by Braintech which is used to develop, run and support VGR Workspaces;

1.10 "Extended Markets" means all manufacturing markets world-wide;

1.11 "Extended Territory" means all countries world-wide;

1.12 "Improvements" means any application specific software developments which are based upon or originate from the Braintech Software, or which are developed utilizing knowledge and experience gained from the use of the Braintech Software, whether made or developed by Braintech, and which are used or for use in the Products;

1.13 "Intellectual Property" or "IP" means all patents, utility models, designs, trademarks, copyrights and other intellectual property rights (or applications pending therefore);

1.14 "License Owner" means Braintech;

1.15 "List Price" means the published price for the Braintech Software;

1.16 "Market" means the automotive market and includes the manufacturing in whole or part of cars, trucks, and buses. This also includes tier suppliers of all levels. It does not include other manufacturing markets or other markets such as medical or Government Sectors including military, law enforcement, space etc.

1.17 "Party" means a party to this Agreement;

1.18 "Products" means the complete system integrated with hardware components such as, but not limited to; a robot, an industrial PC, frame grabber, camera and/or lighting units; which use and embody the Braintech Software whether or not they also incorporate Independent Technology and whether or not the Braintech Software forms only part of the Products;

1.19 "Science Services" means the work and services performed by Braintech to develop new algorithms or Improvements to existing algorithms and techniques that will be used to develop a VGR Workspace or part of a VGR Workspace;

1.20 "Services" means the technical support and services set forth in Article 10.1 hereof consisting of Engineering Services and/or Science Services;

1.21 "Software Technology" means Components developed and owned by Braintech and are available for use within eVF;

1.22 "Territory" means North America including United States of America, Canada and Mexico; and European Economic Union Countries;

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1.23 "Term" means the period of one year from the date of this Agreement, subject to conditions and extensions as provided for in Article 14 of this Agreement;

1.24 "Third Party Software Technology" means Components developed and owned by organizations other than Braintech and are available for use within eVF;

1.25 "Trademarks" means all trade names and trademarks (or applications pending therefore) relating to the Braintech Software owned or controlled by Braintech as of the date hereof or issued to or otherwise acquired by Braintech thereafter which are listed in EXHIBIT 4, attached hereto and made an integral part hereof;

1.26 "VGR" means Vision Guided Robotics and is used to describe the type of business that this Agreement covers;

1.27 "VGR Workspace" means a software program developed with eVF which is used to; get a digital image; analyze the image for object identification, inspection and its spatial coordinates; and communicate instructions to a robot or other factory automation equipment.

2. GRANT OF LICENSES

2.1 Braintech hereby grants to LICENSEE , an exclusive Channel Partner license, with the right to license to End-Users, under the Braintech Software, including improvements, to make, have made, use, sell, or otherwise distribute the Products in every country in the Territory for the Markets defined;

2.2 Braintech hereby grants to LICENSEE , an non-exclusive Channel Partner license, with the right to license to End-Users, under the Braintech Software, including improvements, to make, have made, use, sell, or otherwise distribute the Products in every country in the Extended Territory for the Extended Markets defined;

2.3 Exclusive Channel Partner license means that Braintech will not license or sell the Braintech Software to other potential Channel Partners including robot manufacturers, and automotive systems integrators in the Territory for the Markets defined;

2.4 Braintech retains the right to sell Braintech Software direct to the End-User, which includes automakers such as Ford, Chrysler, GM, Nissan, Honda, Toyota, etc., and tier suppliers such as Delphi, Magna, Visteon, etc.;

2.5 When the End-User orders direct from Braintech, Braintech will contract LICENSEE for integration and support services subject to the End-Users acceptance;

2.6 LICENSEE's standard integration and support services fees are setout in EXHIBIT 9;

2.7 Braintech hereby grants to LICENSEE a non-exclusive license to develop VGR Workspaces and integrate such VGR Workspaces onto the appropriate hardware in the Territory for the Markets defined in EXHIBIT 7.

2.8 Braintech hereby grants to LICENSEE a non-exclusive right to sub-license their Channel Partners to sell, install and support Braintech Software in every country in the Extended Territory for the Extended Markets defined as per terms and conditions defined in EXHIBIT 10 - Sub-License Agreement.

3. REGISTRATION

3.1 LICENSEE is granted a license and shall be entitled to use for the purposes of marketing, sales demonstration, quality assurance, testing and support any of Braintech's Trademarks, Software Technology and/or eVF as the case may be in the Territory during the term of this Agreement.

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4. PRICES

4.1 The prices for all the Braintech Software sold by Braintech to LICENSEE hereunder shall, unless otherwise agreed upon, be quoted in US Dollars (US$);

4.2 The List Price for the Braintech Software purchased hereunder shall be as is set out in the price list attached hereto as EXHIBIT 1 and made an integral part hereof;

4.3 The prices for maintenance, training, support, and engineering fees are set out in EXHIBIT 2 attached hereto and made an integral part hereof;

4.4 The prices set out in Exhibit 1 and Exhibit 2 are fixed for the term of one year. Braintech will provide Licensee with price changes 90 days before end of term. Braintech will provide Licensee with immediate notice of additions and 30 days notice of deletions of products from the price list.

5. DISCOUNTS

5.1 LICENSEE will receive a discount as set out In EXHIBIT 3, attached hereto and made an integral part hereof.

6. PAYMENT

6.1 All payments for the Braintech Software and Services sold by Braintech to LICENSEE hereunder shall, unless otherwise agreed upon, be made by means of remittance to Braintech's designated bank account by WIRE TRANSFER in the following manner :

To wire funds to our Braintech Canada Inc. US dollar account, the following numbers are required:

Transit No.   00010
Institution No. 003
Account No.     4019980
ABA No.   ROYCCAT2
The bank address is:
Royal Bank of Canada
Royal Centre - Main Branch
1025 West Georgia Street
Vancouver, BC, Canada
V6E 3N9

6.2 LICENSEE shall pay to Braintech the full amount of the price for the Braintech Software and/or Services purchased by LICENSEE pursuant to an individual purchase contract entered into between LICENSEE and Braintech pursuant to Article 8.

7. DELIVERY

7.1 Braintech agrees to make all delivery of the Braintech Software hereunder at the earliest available date after each individual purchase contract is entered into between Braintech and LICENSEE pursuant to ARTICLE 8 hereof, and in any case Braintech shall make delivery strictly in accordance with the terms and conditions stipulated in each such individual purchase contract;

7.2 Braintech shall make all arrangements for any export licenses or permits which may be required in a timely manner to enable LICENSEE to make shipments in accordance with LICENSEE'S shipping schedule set forth in each individual purchase contract;

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7.3 LICENSEE shall acknowledge a Run-Time license as part of the proposal/order acknowledgement process.

8. INDIVIDUAL CONTRACTS

8.1 The detailed terms and conditions of each individual purchase by LICENSEE from Braintech of the Braintech Software hereunder shall be mutually agreed upon at the time of each such purchase and confirmed by both parties in a "Confirmation of Purchase Contract" to be issued by LICENSEE and countersigned and returned by Braintech. (Note: For greater clarity, Braintech agrees to provide special terms, including pricing, and discounts, on a per merit basis as agreed upon by both parties necessary to meet market conditions.);

8.2 Each such individual purchase contract between Braintech and LICENSEE shall be deemed to incorporate all of the terms and conditions hereof to the extent that they may be applicable and are not inconsistent with the terms and conditions of said individual purchase contract; provided, however, that the terms and conditions of this Agreement shall, in the event of a conflict, have precedence over those on the reverse side of the "Confirmation of Purchase Contract".

9. TECHNICAL SERVICES

9.1 Braintech shall provide LICENSEE free of charge with all technical information used for: the purpose of VGR Workspace Development; manufacture of the Products; training and support in its possession relating to the Braintech Software. In addition, Braintech shall, from time to time, make available to LICENSEE free of charge any and all new technical information of the Braintech Software, technical literature and the like necessary or useful in connection with the VGR Workspace Development and manufacture of the Products and effective use of the Braintech Software;

9.2 In the case where the LICENSEE is developing a VGR Workspace, LICENSEE may require Braintech to provide Engineering Services and/or Science Services. In all cases, LICENSEE must provide Braintech with such information, as LICENSEE may in its reasonable discretion deem necessary in order to enable Braintech to provide Services to LICENSEE hereunder.

Such information may include:

9.2.1   Project Specifications
9.2.2   Sample Part(s) and/or
9.2.3   Sample Devices and/or
9.2.4   ABB robot software and/or
9.2.5   Sample Robots(s);

9.3 In the event LICENSEE requires Braintech Engineering Services to help develop a VGR Workspace all such services will be charged out according to the terms and conditions set forth in Exhibit 2 - Services;

9.4 In the event LICENSEE requires Braintech Science Services to help develop a VGR Workspace all such services will be charged out according to the terms and conditions set forth in Exhibit 2 - Services.

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10. SALES AND MARKETING ACTIVITIES

10.1 LICENSEE has certain rights to market Braintech Software Technology as part of the Products per the Sales and Marketing Agreement attached hereto as Exhibit 6.

11. REPRESENTATION AND WARRANTY

11.1 Braintech hereby represents and warrants that:

(a) Braintech owns its Proprietary Information as defined in Article 13 below, Trademarks, eVF or Software Technology, free and clear of any agreement and Braintech is free to grant a license to use the same to LICENSEE as contemplated herein;

(b) Proprietary information of Braintech, Trademarks, eVF or Software Technology constitutes the best available industrial property rights and technical information in the possession or under the control of Braintech;

(c) Braintech is not restricted or prohibited from granting the license to use its Proprietary Information, Trademarks, eVF and/or Software Technology as contemplated herein, or from disclosing such Proprietary Information by any applicable law, regulation or order or by the terms of any other agreement to which Braintech is a party or by which it is bound;

11.2 Braintech warrants that the Braintech Software shall be free of defect in design and workmanship. However, for greater clarity, such warranty does not apply to output, results, errors, or abnormal terminations or delays caused in whole or in part by (a) any functionality of software or products, including databases, not created by or licensed for use by Braintech, whether or not such products or software are embedded in or form part of the Software Technology; (b) use of the Software Technology in combination with any other product not provided by Braintech; (c) any modification of the Software Technology made by a party other than Braintech or authorized by Braintech; (d) any data provided to the Software Technology by non-Braintech products which does not adequately specify date data; or (e) LICENSEE'S failure to use the Software Technology in accordance with the Support Materials to be provided by Braintech;

11.3 Braintech warrants that the Braintech Software sold and delivered to LICENSEE hereunder shall have been produced in accordance with the then presently available best technical knowledge and for a period of twelve (12) months after LICENSEE'S delivery of the Products to its licensee or any other LICENSEE channel partner shall be free from all defects in software. In addition, and not by way of limitation of the foregoing, the Braintech Software shall conform to any specifications mutually agreed upon between the parties;

11.4 In the event that, within the warranty period set forth in the foregoing Article 11.3, the Braintech Software or part thereof is found to be defective or not in conformity with the agreed specifications, Braintech shall, within thirty (30) days after receipt of the claim therefore from LICENSEE , repair or replace, at LICENSEE's sole option, such defective or non-conforming Technology or part thereof free of charge;

11.5 All transportation and other costs incurred in connection with the return of any defective or non-conforming part of the Braintech Software or part thereof and the reshipment of such repaired Technology or part thereof or replacement therefore pursuant to the foregoing Article 11.4 shall be borne by Braintech.

11.6 Braintech shall indemnify and hold LICENSEE harmless from and against any loss, damage, cost, expense, claim or liability which may be incurred by or asserted against the LICENSEE as a result of any breach of the warranty contained in this Article 11.

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12. NON-TRANSFER OF SECRETS

12.1 Source Code, flow diagrams and algorithms deemed secret by Braintech are excluded and will not be shared with LICENSEE.

13. INDUSTRIAL PROPERTY RIGHTS

13.1 Braintech warrants that all Third Party Software Technology made available as components of eVF has been properly licensed from the licensors of all such Software Technology and that LICENSEE has the right to use and to include, and continue to use and include, such Third Party Software Technology as part of the Products at no charge (other than those expressly set forth in this Agreement). All such Third Party Software is listed in Exhibit 5;

13.2 Braintech warrants that no part of its Proprietary Information, Trademarks, and Technology infringes any Intellectual Property including, but not limited to, patent, utility model, design, trade name, trademark and copyright belonging to any third party inside or outside the Territory;

13.3 Braintech shall defend any legal action or other proceeding brought against LICENSEE , insofar as such legal action or other proceeding is based upon a claim that the Proprietary Information, Trademarks, Technology, or any part thereof, delivered to LICENSEE hereunder infringes any patent, utility model, design, trade name or trademark, copyright or other Intellectual Property belonging to any third party inside or outside the Territory. LICENSEE shall notify Braintech of the institution of any such legal action or other proceeding, and shall provide Braintech with such assistance and cooperation in the defense of such legal action or other proceeding as Braintech may reasonably request. Braintech shall have sole control over any such legal action or other proceeding and shall indemnify and hold LICENSEE harmless from and against all damages and costs awarded therein against LICENSEE;

13.4 In the event that the Proprietary Information, Trademarks, Technology, or any portion thereof, is held to infringe any Intellectual Property belonging to any third party inside or outside the Territory and the use thereof is enjoined by a court of competent jurisdiction, Braintech shall, at LICENSEE's sole option, either procure for LICENSEE the right to continue using such Proprietary Information, Trademarks, Technology, replace such Proprietary Information, Trademarks, Technology with a non-infringing one or modify such Proprietary Information, Trademarks, Technology so that it becomes non-infringing.

14. TERM

14.1 Unless earlier terminated, this Agreement shall continue for an initial period ending December 31, 2006;

14.2 After the expiry of the initial period, this Agreement will be extended, upon the mutual consent of the parties, for another period of one (1) year if a minimum number of 200 runtime eVF licenses are purchased by End-Users through the LICENSEE or Braintech as a result of a collaborative effort between Braintech and the LICENSEE during the initial period, and will continue to be extended on an annual basis for up to three (3) years total if a minimum number of eVF runtime licenses, calculated by multiplying the previous years actual total of eVF runtimes by 120% are purchased by End-Users through the LICENSEE or by mutual consent of both parties during each year this Agreement is in effect.

15. TERMINATION

15.1 Either Party may forthwith terminate this Agreement by notice to such effect to the other Party if the other Party commits a material breach of any term or condition contained in this Agreement (including the case in which any of Braintech's representations and warranties contained in Article 11 hereof proves to have been incorrect or materially misleading when made) and, if such breach is capable of remedy, fails to remedy or begins to remedy the same within thirty (30) days after notice from the Party not in breach setting out the nature of such breach and demanding that the same be remedied;

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15.2 Either Party may forthwith terminate this Agreement by notice to such effect to the other Party if bankruptcy, insolvency or reorganization proceedings, or other proceedings analogous in nature or effect, are instituted by or against the other Party, the other Party is dissolved or liquidated, whether voluntarily or involuntarily, a receiver or trustee is appointed for all or a substantial part of the assets of the other party or the other Party makes an assignment for the benefit of creditors;

15.3 LISCENEE may terminate this Agreement by notice to such effect to Braintech if the price changes per article 4.4 are greater than 5%;

15.4 No termination of this Agreement, for whatever reason, shall affect any right or obligation of either party, which has accrued prior to the date of such termination;

15.5 In the event Braintech sells or desires to sell its business, in whole or in part, LICENSEE shall have the right in its sole discretion to immediately terminate this agreement.

16. WAIVER AND VARIATION

16.1 A provision of or a right created under this Agreement may not be waived except in writing signed by the party granting the waiver and the Parties' rights and obligations under this Agreement may not be varied except in writing signed by the Parties. Waiver of any one breach of a term of this Agreement is not to be construed as a waiver of any subsequent breach of that term or of any other term.

17. RELATIONSHIP OF PARTIES

17.1 The relationship between the Parties is limited to the relationship created under the terms of this Agreement.

17.2 This Agreement is solely for the purposes set in this Agreement and not for any other purpose and nothing contained in this Agreement shall be deemed or construed as constituting either party as an agent or legal representative of the other party for any purpose whatsoever, or as conferring upon either party any right or authority to assume or create any obligation or responsibility, express or implied, orally or in writing, on behalf of or in the name of the other party or to bind the other party in any manner whatsoever;

17.3 Subject to Article 17.1 and 17 nothing contained in this Agreement will be construed as a limitation of the powers or rights of a Party to otherwise carry on its separate business for its sole benefit;

17.4 No Party will attempt to bind or impose any obligation upon the other Party or incur any joint liability without the mutual consent of that other Party except as set out in this Agreement;

17.5 Nothing contained herein is intended nor shall be interpreted to provide or create any third party beneficiary rights of whatever kind in any third party in any circumstance whatsoever.

18. GOVERNING LAW AND DISPUTE RESOLUTION

18.1 The Parties hereby agree that this Agreement is governed by the laws of the State of Michigan of the United States of America, without reference to the conflict of laws principles;

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18.2 All disputes in connection with this Agreement are to be finally settle by binding arbitration in the State of Michigan of the United States of America, in accordance with the then existing Rules of Conciliation and Arbitration of the International Chamber of Commerce by three (3) arbitrators to be selected in accordance with said Rules. Awards rendered therein shall be final and binding upon the parties hereto.

19. ENTIRE AGREEMENT

19.1 This Agreement constitutes the entire agreement between the Parties hereto and wholly cancels, terminates and supersedes all previous negotiations, agreements and commitments, whether formal or informal, oral or written, with respect to the subject matter hereof.

20. FORCE MAJEURE

20.1 If at any time owing to any circumstances beyond a Party's control ( "Force Majeure" ) including but not limited to fire, explosion, war (whether declared or undeclared), civil commotion, strikes or any form of governmental intervention, a Party is prevented from fulfilling its obligations under this Agreement that Party will be entitled to give to the other written notice thereof (the "Force Majeure Notice" ) setting out as fully as possible the circumstances alleged to constitute the Force Majeure;

20.2 The Party giving the Force Majeure Notice will then be entitled to suspend the operation of this Agreement to the extent of its relevant inability to perform during a period equal to the duration of the event of Force Majeure specific in any such notice;

20.3 In the event of a Party giving a Force Majeure Notice the Parties must, at the request of either of them, meet and properly confer in good faith in an endeavor to reach a mutually acceptable solution with a view to alleviating any hardship or unfairness caused to any Party as a result of the event of Force Majeure;

20.4 Every Force Majeure Notice will be withdrawn by the Party giving it as soon as possible but in any event within forty-eight hours after the event of Force Majeure specified in the Force Majeure Notice has ceased to exist;

20.5 In the event that such Force Majeure continues for more that 6 calendar months then any Party may, by notice in writing to the other, require that the Parties commence negotiations with a view to arranging the termination of this Agreement;

21. NOTICES

21.1 Any notice, communication or other documents authorized or required to be given or served pursuant to this Agreement (in this clause referred to as a "Communication" ) must, unless otherwise specifically provided by this Agreement, be in writing addressed as appropriate to the relevant Party at it's address set out in this Article or to such other address as may be notified in writing by that Party to the other party from time to time as it's address for service and must be signed by an authorized representative of the party giving or serving the Communication. All Communications with Braintech shall be in the English language;

21.2 A Communication must be delivered by hand or sent by prepaid certified mail requiring acknowledgment of delivery or by international courier delivery or (where appropriate reception facilities are available) sent by facsimile transmission or personal e-mail;

21.3 A Communication referred to in Article 21.2 which is delivered or received in full by facsimile transmission before 2:00 p.m. on a business day in the place in which it is delivered shall be deemed to be received on that day, and in any case other than hand delivery or facsimile transmission will be deemed to be received on the business day in the place of delivery next following the day of delivery or receipt;

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21.4 A Communication which is sent by certified mail or courier delivery will be deemed to have been received on the date of delivery;

21.5 Article 21.2 and 21.3 (insofar as they relate to facsimile transmission) do not operate where the transmission by facsimile is not fully intelligible. Transmission will be deemed to have been fully intelligible unless retransmission is requested within ten (10) w