Exhibit 10.6
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made September 17, ▇▇▇▇
▇ ▇ ▇ ▇ ▇ ▇ ▇:
Purchaser, Businessman, of the City of Vancouver in the Province of British
Columbia (hereinafter called the "Owner")
OF THE FIRST PART,
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ON-LINE DISTRIBUTING INC., a corporation formed under the laws of British
Columbia (hereinafter called the "Distributor")
OF THE SECOND PART.
WHEREAS pursuant to an agreement (the "Asset Purchase Agreement") dated as
of the date hereof between Owner and On-Line Film Services Inc. ("On-Line"), an
affiliate of Distributor, Owner purchased all rights, title and interest in and
to a computer software program commercially developed by or for On-Line and
known as "MailCard" and Derivatives related thereto for the Field of Use in the
Ownership Territory, as those terms are defined in the Asset Purchase Agreement,
a detailed description of which program is attached hereto as Schedule "A" (all
such purchased rights, title and interest in MailCard and all such Derivatives
being referred to collectively herein as the "Product");
AND WHEREAS Distributor wishes to purchase from time to time copies of the
Product from Owner for the purpose of distributing same;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
representations and covenants herein, the parties agree as follows:
1. DEFINITIONS
1.1 In this Agreement the following terms shall have the following meanings:
"Annual Minimum" means the following number of Copies for each particular
calendar year specified below (each, a "Specified Year"), which numbers of
Copies are based on the projected Average Sale Price of $17.46; provided,
however, that the number of Copies constituting the Annual Minimum for a
particular Specified Year will vary from the numbers set out below in inverse
proportion to the ratio of (a) the actual Average
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Sale Price for that Specified Year, to (b) where the Specified Year is 1997,
$17.46, and for all other Specified Years the actual Average Sale Price for the
immediately preceding year.
(i) for 1997, 2,939 Copies;
(ii) for 1998, 10,218 Copies less 0.0252 multiplied by the number by which
the number of Copies purchased by Distributor in 1997 exceeds the
Annual Minimum for 1997; and
(iii) for 1999 and each subsequent year until the year in which the Annual
Minimum calculation equals zero, the Annual Minimum for the
immediately preceding year less 0.0252 multiplied by the number by
which the number of Copies purchased by Distributor in the immediately
preceding year exceeds the Annual Minimum for that year.
"Average Sale Price" means the average price of Copies sold by Distributor in a
calendar year, which is determined by dividing (a) total sales revenue
(excluding all sales, use, ad valorem, excise and goods and services taxes) from
sales of such Copies made during such calendar year by (b) the number of such
Copies sold during such calendar year. For greater certainty, sales revenue
shall refer to sales revenue as received by the Distributor, the Sub-Distributor
or any sub-distributor which is related to, associated or affiliated with the
Distributor or the Sub-Distributor, from any other sub-distributor (not related
to or associated or affiliated with the Distributor or the SubDistributor) or
End User, calculated without duplication.
"Bonds" means the Province of British Columbia bonds forming part of the
Guarantee Collateral.
"Copies" shall mean floppy disc copies of the Product including packaging,
printed enclosures and seals.
"Cost of Manufacturing" means the total of the prices charged by Manufacturers
for the production and delivery of all the components of a Copy, including all
sales, use, ad valorem, excise and goods and services taxes thereon.
"Cumulative Minimum" means the sum of:
(a) the aggregate of all the Annual Minimum numbers of Copies throughout the
term of this Agreement; and
(b) 405,545 Copies, which number is based on the projected Average Sale Price
of $17.46; this number will vary in inverse proportion to the ratio of:
(i) the Weighted Average of all Average Sale Prices throughout the term of
this Agreement to the time of calculation to;
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(ii) $17.46,
and for the purpose of this definition the Weighted Average of all the Average
Sale Prices will be determined at such time by ascertaining the sum of the
following amounts for each calendar year or portion thereof (the "Calculation
Period") completed before the time of calculation that is the amount obtained by
multiplying the Average Sale. Price for the Calculation Period by the amount
obtained by dividing the number of Copies sold in the Calculation Period by the
sum of all Copies sold prior to the time of calculation.
"Distribution Territory" means the geographic area described in Exhibit "B"
attached hereto.
"End Users" means purchasers of Copies for personal or commercial use by such
purchasers.
"Guarantee" means the guarantee given on September 17, 1997 to Owner by On-Line
of all of the financial obligations of Distributor hereunder with respect to
payment of the Purchase Price (net of Cost of Manufacturing) of the Annual
Minimum number of Copies, the Cumulative Minimum number of Copies and the Excess
Copies (to the extent the Cumulative Minimum number of Copies have not been
purchased), and of the Instalments, together with the Guarantee Collateral in
respect thereof.
"Guarantee Collateral" means Province of British Columbia bonds in a form
acceptable to the Owner in the face amount of $679,000, maturing on June 9,
2008, bearing interest at six percent (6%) per annum, held in accordance with
the Security and any interest accrued thereon which has not otherwise been paid
to On-Line in accordance with the terms of the Guarantee and the Security.
"Instalment" shall mean, with respect to each Instalment Date occurring in a
particular year, except where otherwise specified herein, the amount equal to
the product obtained by multiplying the Purchase Price (net of Cost of
Manufacturing) for the previous calendar year by one half of the Annual Minimum
in respect of the previous calendar year.
"Instalment Date" shall mean, with respect to each calendar year, the 8th day of
June and December, as applicable.
"Manufacturer" means each third party sub-contractor engaged by Owner to produce
and deliver all components of a Copy.
"Purchase Price" means the price per Copy in a calendar year to be paid by
Distributor to Owner, consisting of the Cost of Manufacturing plus:
(a) until the Cumulative Minimum has been attained, $4.00 per Copy based on a
projected Average Sale Price in that calendar year of $17.46; the $4.00 per
Copy amount will vary in direct proportion to the ratio of (i) the actual
Average Sale Price in each calendar year to (ii) $17.46; and
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(b) after the Cumulative Minimum has been attained, $0.50 per Copy based on a
projected Average Sale Price in that calendar year of $17.46; the $0.50 per
Copy amount will vary in direct proportion to the ratio of (i) the actual
Average Sale Price in such calendar year to (ii) $17.46.
"Security" shall have the same meaning as that term is defined in the Asset
Purchase Agreement.
2. APPOINTMENT OF DISTRIBUTOR
Upon and subject to the terms and conditions of this agreement, Owner
hereby appoints Distributor during the term of this Agreement as the sole and
exclusive distributor of Copies within the Distribution Territory, and
Distributor hereby accepts such appointment.
3. DISTRIBUTOR'S RESPONSIBILITIES
Distributor shall use its best efforts to (a) determine sales and marketing
strategies for Copies, (b) develop and promote sales of, and maximize profits
from, Copies, (c) secure appropriate distribution channels for the distribution
of Copies in the Distribution Territory, (d) maintain commercial acceptability
for Copies and write, update and maintain all user manuals, and (e) enter into
the Sub-Distribution Agreement (as hereinafter defined) with On-Line.
Distributor shall be responsible for preparing sales promotional materials in
order to facilitate advertising of Copies. Distributor agrees to use all
reasonable efforts to comply with all applicable laws (including, without
limitation, laws relating to product packaging and labelling). Distributor
represents, warrants and covenants with Owner that Distributor and the
SubDistributor collectively have, and will continue to have, sufficient
financial and other resources to fulfil its obligations hereunder.
4. APPOINTMENT OF SUB-DISTRIBUTOR
The parties hereto acknowledge and agree that Distributor will appoint
On-Line as subdistributor (the "Sub-Distributor") of Copies pursuant to a
sub-distribution agreement (the "SubDistribution Agreement") to be entered into
between Distributor and On-Line. Distributor hereby agrees that the
Sub-Distribution Agreement shall be subject to and will not conflict with the
terms and conditions hereof, and that there shall be no material amendment to
the SubDistribution Agreement without the prior written consent of Owner, which
consent will not be unreasonably withheld.
5. SALE AND DELIVERY OF COPIES
5.1 Distributor shall purchase from Owner and Owner shall sell to Distributor at
the Purchase Price for distribution directly or indirectly to End Users each
year the Annual Minimum number of Copies plus sufficient additional Copies so
that, by the end of the term of this Agreement, Distributor shall have purchased
from Owner and Owner shall have sold to Distributor not less than the Cumulative
Minimum number of Copies. Distributor shall purchase from Owner and Owner shall
sell to Distributor such additional Copies as Distributor may require from time
to time for distribution to End Users.
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5.2 Unless otherwise agreed by Owner and Distributor, Owner shall cause each
Manufacturer engaged by Owner to deliver on a C. 0. D. basis as described in
paragraph 6. 1 (b) all Copies or components thereof purchased hereunder by
Distributor to Distributor at the offices of Distributor identified in section
19 hereof for the delivery of notices.
5.3 Owner hereby authorizes Distributor to deliver, for and on behalf of Owner,
purchase orders on a C.O.D. basis to Manufacturers placing orders for components
and elements relating to Copies to be purchased by Distributor hereunder,
provided that Distributor is then able and willing to pay to such Manufacturer
on a C. 0. D. basis as described in paragraph 6. 1 (b), the Cost of
Manufacturing portion of the Purchase Price therefor. Distributor shall
forthwith deliver to Owner a copy of each such purchase order.
5.4 The Distributor acknowledges and agrees that all Manufacturers to be engaged
by the Owner to produce all components of a Copy will not be located in British
Columbia. Unless agreed to by the Owner, delivery of Copies will be made only to
locations outside of British Columbia.
6. TERMS OF PAYMENT OF PURCHASE PRICE
6.1 The consideration for all Copies purchased by Distributor from Owner in 1997
and in each subsequent calendar year shall be paid by Distributor in cash in an
amount equal to:
(a) the aggregate Purchase Price, net of the aggregate Cost of
Manufacturing, as determined hereunder, which shall be paid to Owner
within thirty (30) days after the end of 1997 and each such subsequent
calendar year; and
(b) the aggregate Cost of Manufacturing portion of the Purchase Price,
which shall be paid by Distributor directly to Manufacturers on
receipt by Distributor of copies of their respective invoices.
In the event that in any calendar year, Distributor orders more Copies than the
Annual Minimum for that year (herein called the "Excess Copies"), Distributor
shall, until such time as the Cumulative Minimum number of Copies shall have
been purchased, pay for that portion of the Purchase Price due under section
6.1(a) for such Excess Copies (the "Excess Copies Price") within thirty days
after the end of the year by a combination of:
i) delivery to the Owner of a written irrevocable direction in the form
attached as Schedule C hereto (the "Direction") from On-Line authorizing
the Owner to apply towards payment of the Excess Copies Price Guarantee
Collateral having a principal value equal to the portion of the Excess
Copies Price proposed to be paid in that manner, which amount shall be as
close to 42 % of the Excess Copies Price as possible taking into account
the denominations of the principal amount of the Bonds or other Guarantee
Collateral but which shall not, in any event, exceed 42% of the Excess
Copies Price; and
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(ii) cash for the balance of such portion of the Purchase Price which shall not,
in any event, be less than 5 8 % of the Excess Copies Price;
which combination of cash, Direction and delivery of the Bonds or other
Guarantee Collateral shall be accepted by Owner as full payment and satisfaction
of Distributor's obligation to Owner with respect to payment for Excess Copies
under this section 6. 1 (a) and in such circumstances the Owner and any assignee
of the Owner shall be deemed to have consented to the release of such Guarantee
Collateral from that Securities Pledge Agreement entered into between the Owner
and On-Line on September 17, 1997. Distributor covenants with Owner that it
will, and will cause On-Line to, do all things necessary to facilitate the
transfer of Guarantee Collateral to Owner.
After the Cumulative Minimum number of Copies shall have been purchased, the
Distributor shall pay the Excess Copies Price for any Excess Copies by Cash.
6.2 (a) On each Instalment Date Distributor shall pay an Instalment to Owner or
its nominee as an advance against the payment of the portion of the
Purchase Price due under section 6. 1 (a) hereof.
(b) If the sum of the Instalments paid by Distributor to Owner during a
particular calendar year exceeds the amount calculated and due pursuant to
section 6. 1 (a) for such year, then the excess shall be refunded within 30
days following the end of the year by the Owner to the Distributor.
(c) If the sum of the Instalments, paid by Distributor to Owner during a
particular calendar year is less than the amount calculated and due
pursuant to section 6. 1 (a) for such year, then the difference shall be
paid within 30 days following the end of such year by Distributor to Owner
or its nominee in accordance with section 6.1 hereof.
(d) Notwithstanding the definition of Instalment in section 1.1
hereinabove, the amount of the Instalment due on December 8, 1997 shall be
$9,182, on June 8, 1998 shall be $20,436 and on December 8, 1998 shall be
$20,436.
7. NON-COMTETITION
Distributor shall not, and shall obtain the written agreement of any other
sub-distributors appointed hereunder that they shall not, market in any manner,
develop or sell any products which are competitive with the Product in the
Distribution Territory for the Field of Use.
8. REPORTING
Distributor shall furnish to Owner semi-annual reports containing a
statement in reasonable detail setting forth all gross receipts from
Distributor's, the Sub-Distributor's and any other sub-distributor's sales of
Copies within the Distribution Territory, the number of Copies sold and the
Average Sale Price thereof. The report shall be provided by Distributor not
later than July 30 and January 30 of each year with the first such report due
January 30, 1998. Each report to be delivered on July 30 each year may be in
summary form. If Distributor, Sub
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Distributor or any sub-distributor have no sales during such period, Distributor
shall so state in such report.
9. OBLIGATION TO PROTECT COPYRIGHT AND TRADEMARKS
Distributor hereby acknowledges and will require the Sub-Distributor to
acknowledge that Owner owns the Product at all times including all intellectual
property rights and copyrights associated therewith. Copies shall be sold to
Distributor on condition that Distributor shall at all times protect the
interest of Owner in the Product. Owner shall have the right to review all
standard form contracts to be entered into between Distributor, the
Sub-Distributor and the End User and to require such changes as Owner may
reasonably request so as to protect the ownership interests of Owner in the
Product.
Owner shall have the right to take any action it deems necessary to protect
its intellectual property rights in the Product, including filing lawsuits in
the event of infringement and filing for copyright and trademark registrations.
If Owner fails to take any action regarding any alleged infringement of the
rights of Owner in the Product, Distributor may, at its own expense, take such
action after having obtained the written consent of Owner, which consent shall
not be unreasonably withheld.
10. APPOINTMENT OF ADDITIONAL SUB-DISTRIBUTORS
Distributor and On-Line shall have the right to appoint additional
sub-distributors only as set forth in the Sub-Distribution Agreement, provided
that any such sub-distributors shall distribute Copies subject to and in
accordance with the terms of written sub-distribution agreements which terms
shall not be inconsistent with the terms of this Agreement including, without
limitation, the provisions of sections 7 and 9.
11. USE OF INDEPENDENT CONTRACTORS
Distributor shall, at its expense and to the extent permitted in the
Sub-Distribution Agreement, have the right to use independent contractors to
perform such work as in its opinion may be convenient or necessary for the
maintenance, marketing, promoting and distribution of Copies, including computer
programmers, technicians? systems consultants, marketing consultants and
business consultants.
12. BUSINESS PLAN
Distributor agrees to provide Owner with an annual business plan and
marketing budget (the "Business Plan") by the 31st day of January in each year.
In respect of the year ended December 31, 1997, the Business Plan will be the
business plan previously submitted to Owner (the "Initial Business Plan"). Each
Business Plan shall set forth, among other things, the anticipated sales of
Copies (broken down by product category) including -the prices at which such
Copies and services shall be sold or provided by Distributor or any
sub-distributor to End-Users (the "List Prices"). Each Business Plan (other than
the Initial Business'Plan) shall specifically indicate and describe changes from
the previous Business Plan including, - without- limiting the generality of the
foregoing, planned or anticipated changes in the price of Copies and a
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comparison of the results achieved in the year just completed with the results
that had been anticipated for that year in the Business Plan for that year.
Within 30 days of receipt of a Business Plan, Owner, acting reasonably, may
suggest revisions to the Business Plan and Distributor will use its reasonable
best efforts to accommodate such suggested revisions. At the request of Owner,
acting reasonably, a representative of management for Distributor will attend at
Owner's offices to discuss the Business Plan.
13. TERM
This agreement shall become effective upon its execution by the parties
hereto and, unless terminated earlier in accordance with the provisions of
paragraph 14 hereof, shall remain in effect until December 28, 2007. Provided
that the Cumulative Minimum number of Copies have been purchased by Distributor
in accordance herewith, Distributor shall have the right to renew this Agreement
for a further 10 years upon the terms and conditions in existence at the end of
the term of this Agreement, such right of renewal to be exercised by giving
Owner at least 60 days' prior written notice.
14. EARLY TERMINATION
Owner may terminate this agreement upon 30 days' prior written notice to
Distributor in the event that:
14.1 Distributor or On-Line is declared bankrupt or becomes an insolvent
person, makes an assignment for the benefit of its creditors or attempts to
avail itself of any applicable statute relating to insolvent debtors;
14.2 Distributor or On-Line takes steps to wind-up, dissolve or liquidate,
except for internal corporate reorganizations, mergers or shareholder
reorganizations, or otherwise ceases to function as a going concern or is
prevented from performing its duties hereunder for a period greater than 30
days;
14.3 a trustee, receiver, receiver and manager or other custodian (interim
or permanent) of any of the assets of Distributor or On-Line is appointed
by private instrument or by court order or if any execution, sequestration,
or other analogous process of any court becomes enforceable against
Distributor or OnLine or the assets of either or if distress or process is
made against the assets or any part thereof of Distributor or On-Line,
unless within 30 days of such occurrence such process has been discharged;
14.4 Distributor or On-Line ceases to carry on the business carried on by
it pursuant to this Agreement at the date hereof for a period of one year;
or
14.5 Distributor does not comply with section 8 hereof within the time
prescribed therein for reasons other than events or occurrences beyond the
reasonable control of the Distributor which have not been caused by
Distributors' negligence and which Distributor was unable to prevent or
provide against by the exercise of reasonable diligence (including, for
example, an act of God, war, insurrection,
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industrial disturbance, government restraint or unusually severe weather)
provided that no termination shall occur as the result of such failure if
such failure is cured before the 30th day following the date of
notification by Owner to Distributor of the failure to comply with section
8 hereof.
14.6 Distributor fails to pay the Excess Copies Price within 30 days after
the end of a calendar year in circumstances where the Distributor has
ordered asfd paid for the Cumulative Minimum number of Copies, provided
that no termination shall occur as the result of such failure if such
failure is cured before the 30th day following the date of notification by
Owner to Distributor of such failure.
14.7 Distributor fails to pay the portion of the Excess Copies Price that
is payable in cash within 30 days after the end of a calendar year,
provided that no termination shall occur as the result of such failure if
such failure is cured before the 30th day following the date of
notification by Owner to Distributor of such failure.
Upon any such early termination: (a) the Purchase Price for the Cumulative
Minimum number of Copies and any Excess Copies calculated at such time less the
total of the Purchase Price paid by Distributor to Owner for Copies and
Instalments received in respect of the calendar year in which such event occurs
prior to such time shall be paid by Distributor to Owner forthwith; (b)
Distributor shall, if directed by Owner, assign all of its rights under the
Sub-Distribution Agreement to Owner and shall execute and deliver such further
and other assurances and do or cause to be done all such acts and things as may
be necessary to give effect to such assignment; and (c) Owner shall have the
right to assume or to direct any affiliate of Owner to assume any of the
obligations of Distributor under the Sub-Distribution Agreement.
15. FAILURE TO MEEET MEWvfUMS
15.1 If Distributor does not otherwise order and pay for at least the applicable
Annual Minimum number of Copies within 30 days of the end of any calendar year
(such end date called the "Annual Due Date") during the term of this Agreement,
then Distributor shall automatically be deemed to have ordered such Copies on
the Annual Due Date and payment for same shall be effected by Owner applying
Guarantee Collateral equal in value to the amount of the Purchase Price
(excluding Cost of Manufacturing) which remains unpaid provided that in such
instance Owner shall first apply any interest monies forming part of the
Guarantee Collateral to such payment before applying any of the Bonds to such
payment.
15.2 If Distributor does not pay an Instalment on or before the relevant
Instalment Date, then such Instalment shall be deemed to have been paid on the
Instalment Date by the Owner applying Guarantee Collateral equal in value to the
amount of the Instalment which remains unpaid provided that in such instance the
Owner shall only apply interest monies forming part of the Guarantee Collateral
to such payment.
15.3 If Distributor does not order and pay for the Cumulative Minimum number of
Copies within 30 days of the earlier of the end of the term of this Agreement or
December 28, 2007 (the "Cumulative Due Date") (whether arising upon early
termination or otherwise), then Distributor shall be deemed to have ordered such
number of copies on the Cumulative Due Date
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and payment for same shall be effected by Owner applying Guarantee Collateral
equal in value to the amount of the Purchase Price (excluding Cost of
Manufacturing) for the Cumulative Minimum number of Copies which remains unpaid.
15.4 If Distributor does not pay the Excess Copies Price within 30 days of the
end of any calendar ear during the term of this Agreement, then, in
circumstances where the Distributor has not as yet ordered and paid for the
Cumulative Minimum number of Copies under this Agreement, payment under Section
6. 1(i) shall be effected by Owner applying Guarantee Collateral equal in face
value or principal amount to the amount of such portion of the unpaid Excess
Copies Price. Owner shall be entitled to enforce payment of the balance of the
Excess Copies Price in accordance with remedies and rights otherwise available
to him from time to time.
15.5 Deemed payment by the Distributor in the manner provided in sections 15.1,
15.2, 15.3 or 15.4 shall be accepted by Owner in full payment and satisfaction
of Distributor's obligations to Owner in respect of such payments to the extent
of the amount of Guarantee Collateral so applied.
15.6 Failure of Distributor to pay an Instalment on or before the relevant
Instalment Date shall not result in the termination of this Agreement or the
loss of the exclusive distribution rights by Distributor.
16. APPOINTMENT OF ADDITIONAL SUB-DISTRIBUTORS
Owner shall not have the right to appoint additional distributors in
respect of the Product during the tenn of this Agreement in the Distribution
Territory.
17. RIGHT TO INSPECT
Owner may at any time, at its own expense, inspect and audit Distributor's
financial and other records solely in respect of activities contemplated hereby.
Such inspection shall be made at Distributor's offices, unless otherwise agreed
by Distributor. A maximum of one such inspection may be made annually.
18. DISCLAIMER
EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH HEREIN, OWNER MAKES NO FURTHER
REPRESENTATIONS OR WARRANTIES, EITHER EXPRESSED OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, ANY CONDITION OR WARRANTY OF
MERCHANTABLE QUALITY OF COPIES OR THEIR FITNESS FOR ANY PARTICULAR PURPOSE AND
THOSE ARISING BY STATUTE OR OTHERWISE IN LAW OR FROM A COURSE OF DEALING OR
USAGE OF TRADE. IN NO EVENT WILL OWNER BE LIABLE FOR (i) DAMAGES CAUSED BY
DISTRIBUTOR'S OR ANY SUB-DISTRIBUTOR'S FAILURE TO PERFORM ITS COVENANTS AND
RESPONSIBILITIES TO THIRD PARTIES, BY REASON OF OWNER'S NEGLIGENCE OR OTHERWISE;
(ii) DAMAGES CAUSED BY REPAIRS OR ALTERATIONS DONE BY DISTRIBUTOR OR ANY
SUB-DISTRIBUTOR WITHOUT
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OWNER'S WRITTEN APPROVAL; (iii) DAMAGES DUE TO DETERIORATION DURING PERIODS OF
STORAGE BY DISTRIBUTOR, SUB-DISTRIBUTORS OR END USERS; (iv) LOST DATA; OR (v)
ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES. DISTRIBUTOR SHALL INDEMNIFY
OWNER AGAINST ALL SUCH CLAIMS ASSERTED BY THIRD PARTIES AS A RESULT OF
DISTRIBUTOR'S OR ANY SUB-DISTRIBUTOR'S ACTS OR OMISSIONS. DISTRIBUTOR WILL
CO-OPERATE WITH OWNER AND UNDERTAKE NECESSARY ACTION (INCLUDING ACTION WITH
RESPECT TO SUBDISTRIBUTORS, IF APPROPRIATE) REQUIRED BY APPLICABLE LAWS AND
REGULATIONS TO ENSURE THAT OWNER'S LIMITS OF RESPONSIBILITY AS SET FORTH ABOVE
ARE VALID AND ENFORCEABLE AGAINST WHOMEVER THEY ARE APPLICABLE. DISTRIBUTOR WILL
IMMEDIATELY INFORM OWNER AS SOON AS DISTRIBUTOR BECOMES AWARE OF LIABILITY
CLAIMS BY A THIRD PARTY WITH RESPECT TO COPIES. OWNER'S LIABILITY FOR DAMAGES TO
DISTRIBUTOR FOR ANY CAUSE, REGARDLESS OF THE FORM OF ACTION, SHALL NOT EXCEED
THE AGGREGATE PRICE PAID FOR COPIES UNDER THIS AGREEMENT WHICH CAUSED THE
DAMAGES OR ARE THE SUBJECT OF THE CLAIM.
19. NOTICES
The addresses for delivery of notices to each party are as follows: to the
Owner:
Purchaser
Vancouver, B. C.
V6K 1G7 to Distributor:
On-Line Distributing Inc.
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: Mr. Aerock Fox
Telecopy No.: (▇▇▇)▇▇▇-▇▇▇▇
Unless otherwise expressly provided in this Agreement, any notice, request,
direction, consent, waiver, extension, agreement or other communication that is
or may be given or made hereunder shall be in writing and either personally
delivered to the addressee or to a responsible officer of the addressee or sent
by courier or facsimile transmission. The parties hereto may change their
respective address for notice given in the manner aforesaid. Any notice given by
facsimile transmission shall be deemed to have been received on the next
business day after transmission. Any notice given by personal delivery shall be
deemed to have been received on the business day on which it is delivered and
left with the recipient or a responsible officer of the recipient at the
recipient's address for notice.
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20. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the
laws of British Columbia without regard to conflict of laws provisions, and a
non-exclusive venue for any action or proceeding shall be in Vancouver, British
Columbia. The parties hereto agree to be subject to the non-exclusive
jurisdiction of such British Columbia courts as to the enforcement of the
provisions of this Distribution Agreement. The prevailing party in any action
brought to enforce the provisions of this Distribution Agreement shall be
entitled to recover its reasonable attorneys fees and costs.
21. RELATIONSHIP OF PARTIES
Nothing in this agreement shall constitute any of the parties the partner
or join t venturer or agent of another and the relationship of Distributor to
Owner shall be that of an independent contractor only.
22. ASSIGNMENT
22.1 Distributor may not assign this Agreement or any of its interests herein
without the written consent of Owner, such consent not to be unreasonably
withheld; provided, however, that any amalgamation, other than one which does
not result in a change of control of Distributor, shall be considered an
assignment for the purposes of this Section 22.1.
22.2 Owner may assign this Agreement to any person who purchases the Product
from Owner and agrees to be bound by the obligations of Owner hereunder and
under the Asset Purchase Agreement without the consent of Distributor.
23. CURRENCY
All dollar amounts noted herein are represented in Canadian currency.
24. SEVERABILITY
If any provision of this Agreement is determined to be invalid or
unenforceable in whole or in part, such invalidity or unenforceability will
attach only to such provision or part thereof and the remaining part of such
provision and all other provisions hereof will continue in full force and
effect.
25. BENEFIT OF AGREEMENT
This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators and other legal
representatives, successors and assigns.
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26. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and cancels and supersedes any prior
understandings and agreements between the parties hereto with respect thereto.
27. AMENDNIENTS
No amendments to this agreement will be valid or binding unless set forth
in writing and duly executed by both of the parties hereto.
28. WAIVER
No waiver of any breach of any provision of this agreement will be
effective or binding unless made in writing and signed by the party purporting
to give the same and, unless otherwise provided in writing in the written
waiver, will be limited to the specific breach waived.
29. ARBITRATION PROCEDURE
The parties shall attempt to settle all disputes arising out of this
Agreement through consultation and negotiation in good faith and in a spirit of
mutual co-operation. If those attempts to resolve a dispute within a reasonable
time, then such dispute shall be referred to and finally resolved by binding
arbitration. The place of any arbitration conducted hereunder shall be
Vancouver, British Columbia. The number of arbitrators shall be one. Distributor
and Owner shall use their reasonable best efforts to agree promptly, in light of
the time periods provided in paragraph 6 hereof, on the appointment of the
arbitrator, failing which Distributor and Owner shall arrange jointly for an
arbitrator to be appointed by The British Columb*
International Commercial Arbitration Centre. Any arbitration hereunder shall be
conducted in accordance with the laws of the Province of British Columbia and
Canada applicable therein. The costs of any arbitration hereunder shall be borne
equally by the parties hereto.
30. EXECUTION
This Agreement may be executed in counterparts and delivered by facsimile
copy by any one of the parties. Each executed counterpart shall be deemed to be
an original and such counterparts shall together constitute one and the same
agreement.
IN W`ITNESS WHEREOF the parties hereto have executed this agreement.
------------------------
PURCHASER
ON-LINE DISTRIBUTING INC.
Per:
---------------------
Authorized Signatory
SCHEDULES
A. Program Description and Field of Use
B. Distribution Territory
C. Direction
SCHEDULE "A"
PROGRAM DESCRIPTION AND FIELD OF USE
The MailCard is an applications software computer program. It -consists of
copyrightable sequences of computer instructions that enable its customers to
effectively access their personal mail boxes by way of an application program
that resides on a floppy disk, thereby allowing the user to access his or her
e-mail from any location with a PC or Windows PC computer and a modem and IDP.
The Program is an integrated and sophisticated product that focuses on providing
e-mail services to a wide range of users, including those who do not own a
computer or have IDP service. The Program may be customized to accommodate niche
markets. The Program is capable of running from either a floppy disk or a hard
drive. It is self contained and self running, having configuration information
(i.e. the "ini" files) stored within the application to allow it to be moved
easily between computers. The Program consists of approximately 15,000 lines of
Pascal computer code.
The Field of Use is:
i) Mail Card use by individuals and companies in the TV and motion picture
industry worldwide;
ii) MailCard use by individuals and companies in the trucking industry
worldwide;
iii) MailCard use by individuals and companies that are clients of companies in
the financial services industry worldwide;
iv) MailCard use by individuals and companies that are customers of companies
in the convenience store and chain retail store industry worldwide;
v) MailCard use by individuals and companies in the field of education,
including schools and universities, worldwide;
vi) MailCard use by members of the general public for general non-industry
specific uses, accessing e-mail through public access facilities to be
found at financial institutions, convenience stores, chain retail stores,
markets, gas stations, restaurants, cyber cafes, etc.; and
vii) MailCard use provided by large and medium size corporations for their
employees, customers or clients.
SCHEDULE"B",
DISTRIBUTION TERRITORY
Canada: Quebec
USA: North Dakota, South Dakota, Nebraska, Minnesota, Iowa, Wisconsin,
Michigan, Montana, Ohio, Illinois, Indiana, Nevada, Arizona,
Utah, Wyoming, Colorado, New Mexico, Oregon, Idaho, Washington,
Alaska and Hawaii.
Australasia, other than Australia and New Zealand
SCHEDULE "C"
IRREVOCABLE DIRECTION
TO:
You are hereby irrevocably authorized and directed to release bonds having a
face value of $ (the "Bonds") from the Securities Pledge Agreement entered
into between the undersigned and you dated September 17, 1997 and to apply the
Bonds to your account, or an account designated by you, in full satisfaction of
the obligations of On-Line Distr ibuting Inc. existing as of the date hereof to
otherwise pay to you a portion of the Excess Copies Price in an amount equal to
the cash equivalent of the face value of the Bonds pursuant to the Distribution
Agreement dated September 17, 1997 between On-Line Distributing Inc. and you.
DATED at Vancouver, British Columbia, this day of 19
ON-LINE FILM SERVICES INC.
Per: (C/S)
Authorized Signatory
