1
**** CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED.
EXHIBIT 10.2
THIS AGREEMENT made as of the 1st day of July, 1999.
BETWEEN:
CKNW/CFMI, A DIVISION OF WIC RADIO LTD. a company having its
business offices at 0000-000 Xxxx Xxxxxxx Xxxxxx Xxxxxxxxx,
X.X.
("CKNW/CFMI")
AND
BLUE ZONE ENTERTAINMENT, INC., a company having its registered
office at 00 Xxxxx Xxxxxx, Xxxxxxxxx, X.X. X0X 0X0
("BZE")
A. BZE specializes in strategic interactive development, web site
design and other internet services.
B. CKNW/CFMI specializes in radio production and promotion.
C. CKNW/CFMI have developed individual Web Sites but desire such
Web Sites to be re-designed, enhanced, hosted and maintained
by Blue Zone
C. The parties desire to enter into this Agreement on the terms
and conditions hereinafter set forth.
NOW THEREFORE THIS AGREEMENT WITNESSES that it is agreed by
and among the parties hereto as follows:
ARTICLE 1
DEFINITIONS
1.1 In this Agreement, the following expressions shall have the
following meanings:
a) "CKNW" means CKNW, a division of WIC RADIO Ltd.;
b) "ROCK101" means ROCK101/CFMI, a division of WIC RADIO
Ltd.;
c) "BZE" means Blue Zone Entertainment, Inc.;
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d) "AGREEMENT" means this agreement, including any
written amendments hereafter made to this agreement;
e) "WEB SITES" means CKNW and ROCK101's internet world
wide Web Sites, with the Universal Resource Locator
addresses xxx.XXXX.xxx and xxx.XXXX000.xxx.
ARTICLE 2
ENGAGEMENT OF BZE
2.1 CKNW/CFMI hereby engages BZE to design, maintain and operate
the Web Sites on the terms and conditions set forth herein.
2.2 The parties acknowledge that all remuneration provided herein,
including monthly fees, commissions and net revenue
distributions are for the period commencing July 1, 1999.
2.3 CKNW/CFMI shall:
a) pay an initial production fee of $**** (plus
applicable taxes) to towards a $**** development
budget to BZE for its know-how and effort in creating
the Web Sites, 100% of such fee to be payable upon
execution of this contract as a deposit prior to
commencing production of the Web Sites, and the
balance ($****) to be provided in the form of
commercial air-time during the first 12 months of the
contract, in accordance with Article 8.3.
b) pay BZE a monthly fee starting July 1, 1999 of $****
(plus applicable taxes) to be applied toward the
monthly maintenance of the Web Sites.
c) provide, during the life of this agreement but
without transfer of any ownership, all equipment,
software, connectivity, hosting fees and out of
pocket expenses which CKNW/CFMI and BZE mutually
agree are necessary for BZE's activities relating to
the ongoing maintenance of the Web Sites;
d) collect and distribute Web Sites revenue in
accordance with Article 3; and
e) provide BZE full access to CKNW/CFMI's news, sports
and other proprietary content (and, where
permissible, content purchased by CKNW/CFMI, with a
cost allocation against revenue to cover royalties,
mutually agreed upon by CKNW/CFMI and BZE) for use
only on the Web Sites, subject always to CKNW/CFMI's
right and discretion to exclude any content which,
for any reason, it does not wish to appear on the Web
Sites.
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED WITH THE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE
24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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f) make its best efforts to sell advertising on the Web
Sites and pursue other interactive media and internet
business for the benefit of the Web Sites and
CKNW/CFMI and BZE;
g) provide BZE with a license to publish and broadcast
CKNW/CFMI content online.
h) provide BZE with contra air-time to offset BZE
development costs in accordance with Article 8.
i) Invite and include a representative of BZE in all
internal strategic meetings pertaining to the
development and commercialization of the Web Sites
including meetings facilitated by CKNW/CFMI with 3rd
parties.
2.4 BZE shall:
a) re-design, maintain, and operate, the Web Sites at a
leading level of aesthetic and technical quality and
content;
b) act as an advertising representative for the Web
Sites and make its best efforts to sell advertising
on the Web Sites and associated streaming media feeds
and to pursue other interactive media and internet
business for the benefit of the Web Sites and
CKNW/CFMI;
c) provide exclusive site hosting and streaming media
hosting for the CKNW/CFMI Web Sites.
d) provide exclusive ad management, whether facilitated
by BZE or a third party and content sales support for
the Web Sites.
e) remain in good corporate standing and provide, at its
own expense, all know-how, management and personnel
necessary to carry out BZE's obligations herein.
2.7 Nothing in this Agreement shall be construed as transferring
or diminishing ownership of any interest in any assets,
including intellectual property rights, or altering the
ownership structure of CKNW/CFMI or BZE in any way, or to
entitle BZE to any interest whatsoever in CKNW/CFMI's
broadcasting business or entitle CKNW/CFMI to any interest
whatsoever in BZE's interactive business
2.8 This Agreement will commence on August 1, 1999 and terminate
on the earlier of:
a) an agreement in writing of the parties to terminate;
b) three years from the date hereof, unless renewed or
extended by written agreement of the parties after
making good faith efforts to negotiate a renewal or
extension hereof;
c) for any reason, upon 6 months' notice from CKNW/CFMI
to BZE or from BZE to CKNW/CFMI;
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d) in the event of default in accordance with Article 6.
2.9 In the event of termination for any reason other than default
by BZE, CKNW/CFMI agrees to provide BZE with a positive letter
of reference.
2.10 The parties agree that during the term of this Agreement their
relationship is exclusive, meaning CKNW/CFMI shall not employ
any other third party to maintain, design, host or alter
CKNW/CFMI's Web Sites CKNW/CFMI or stream/host CKNW/CFMI's
media feeds online. Blue Zone will not engage directly or
indirectly in website design services for - radio stations
based in British Columbia, without the prior written consent
of CKNW/CFMI, such consent not to be unreasonably withheld.
2.11 The parties acknowledge that CKNW/CFMI are the sole owners of
the domain names xxx.xxxx.xxx and xxx.xxxx000.xxx and all
content originally provided by CKNW/CFMI including text,
graphics, pictures, sounds or moving images placed on the Web
Sites, and digitized or coded by BZE for placement on the Web
Sites. With respect to all code developed and owned by BZE
which is required to run the Web Sites, BZE hereby grants an
irrevocable and non-transferable, non-exclusive license to
CKNW/CFMI to retain and use such code. On the event of default
by CKNW/CFMI per Article 6.1, there will be immediate
termination of license. All trademarks and logos of BZE, which
may be used on the Web Sites from time to time are owned by
BZE, but will be included in back ups of the Web Sites.
2.12 All code, graphics, audio and video on the Web Sites must be
backed up at least once every quarter and once after every
major change. A copy of this tested backup will be presented
to CKNW/CFMI within ten working days of its creation. This
code cannot be altered, re-purposed, sold, shared, distributed
or transmitted in any way without the prior written consent of
BZE, unless this agreement has been terminated per Article
2.8.
ARTICLE 3
ACCOUNTING AND DISTRIBUTION OF REVENUE
3.1 Web Sites revenue shall consist of the fees paid by
advertisers who pay for a presence on the Web Sites and
exclusively placed within associated streaming media feeds,
e-commerce, content sales and additional revenue sources which
the parties may agree in writing to include. Such revenue,
after deduction of Web Site expenses which shall, hereunder,
be charged against Web Sites revenue, are referred to herein
as "Net Web Site Revenue".
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3.2 The parties acknowledge CKNW/CFMI and BZE are each making
certain proprietary assets or goodwill available to assist
business. It is intended that net revenue which is
attributable principally to a proprietary asset or goodwill of
one party shall be divided ****%/****% in favour of that
party. More particularly, the parties agree:
3.3 Advertising revenue, meaning revenue from advertisers who pay
for a presence on the Web Sites, shall be distributed, after
payment of related expenses which shall not exceed ****%
of net revenue unless both parties agree to such costs, ****%
to CKNW/CFMI and ****% to BZE.
3.4 In determining what expenses shall be charged against Web
Sites revenue for the determination of Net Web Site Revenue,
both CKNW/CFMI and BZE will assign job numbers to each
category of expense, allocate hourly and monetary costs
against such categories in an accurate and timely fashion, and
such allocations will be reviewed and approved by CKNW/CFMI
and BZE prior to any distributions.
3.5 BZE will be entitled to a commission of ****% of the money
paid to CKNW/CFMI for any Web Sites advertisements sold by BZE
after July 1, 1999, to be paid at the time of net revenue
distributions, and such commissions shall be charged as an
expense against Gross Web Sites revenue
3.51 CKNW/CFMI will be entitled to a commission of ****% of the
money paid to CKNW/CFMI for any Web Sites advertisements sold
by CKNW/CFMI after July 1, 1999, to be paid at the time of net
revenue distributions, and such commissions shall be charged
as an expense against Gross Web Sites revenue
3.6 Subject only to a reasonable holdback agreeable to the parties
for anticipated expenses, CKNW/CFMI shall distribute all Net
Web Sites Revenue at the end of each quarter, or so soon
thereafter as the approval process under Article 3.3 permits,
for the accounting period beginning July 1, 1999.
3.7 CKNW/CFMI shall prepare and distribute financial reports
within 60 days after each quarter.
3.8 If any financial report shows that in the period covered by
such report a party has retained or been paid an amount which
exceeds or is less than its entitlement for such period then
that party shall forthwith repay such excess or be paid such
deficiency.
ARTICLE 4
LIABILITY AND INSURANCE
4.1 Each party covenants and agrees with the others to indemnify
and save harmless the others from any and all liability,
obligations, claims or losses
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED WITH THE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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resulting from any liability arising from content it alone has
created, from its unauthorized acts and from its failure to
comply with its obligations hereunder.
4.2 BZE will carry:
a) a Comprehensive General Liability policy with all normal
extensions including, but not limited to, products, completed
operations, broad form property damage, non-owned automobile,
personal injury, contingent employers' liability, and a cross
liability clause with a limit of not less than $2,000,000.
b) an errors and omissions liability policy with a limit of
not less than $2,000,000 and this policy will include a cross
liability clause. Coverage will include protection in respect
of libel and slander and defamation of character.
4.3 The policies outlined in (a) and (b) above will include
CKNW/CFMI, a division of WIC Radio Ltd. as an additional
insured. A certificate of insurance evidencing (a) and a
complete copy of (b) will be provided. All coverages must be
in a form acceptable to and approved by our insurance advisor.
4.4 BZE shall indemnify and save harmless CKNW/CFMI from any
deductible, insured's contribution or uninsured claims or
liabilities arising from the activities of BZE except as
described in article 4.5.
4.5 Notwithstanding Article 4.4, CKNW/CFMI shall bear its own
liability for damages or other claims incurred:
a) as a result of the willful act or omission or the
gross negligence of CKNW/CFMI or its employee(s);
b) in connection with or in the course of the
performance or purported performance by a party of
any work or service related to BZE's operations
carried out solely by CKNW/CFMI or its employees; or
c) arising from any content produced by CKNW/CFMI and
merely reproduced (with necessary formatting and
coding by BZE) on the Web Sites.
4.5 Notwithstanding Article 4.4, BZE shall bear its own liability
for damages or other claims incurred:
a) as a result of the willful act or omission or the
gross negligence of BZE or its employee(s);
b) in connection with or in the course of the
performance or purported performance by a party of
any work or service related to BZE's operations
carried out solely by BZE or its employees; or
c) arising from any content produced by BZE alone.
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ARTICLE 5
DECISION MAKING AND INSPECTION OF BOOKS
5.1 Except as expressly provided herein, all decisions regarding
the maintenance, design, content, and alterations to the Web
Sites, and all decisions regarding the pursuit and conduct of
other business by BZE shall be subject to CKNW/CFMI's ongoing
approval, in CKNW/CFMI's discretion, not to be reasonably
withheld.
5.2 A designated representative from each of CKNW/CFMI and BZE
shall meet monthly or on such further occasions as any one of
them requests, to review any issues pertaining to the Web
Sites or this Agreement.
5.3 CKNW/CFMI shall keep complete and accurate books of account,
accounting and banking records, corporate documents and
records, and any other records necessary to the proper
operation of the Web Sites. Such records will be kept in
accordance with generally accepted accounting and business
procedures, and in full accordance with all requirements of
law. BZE shall have the right at all reasonable times (but at
its own expense) to examine and make copies of or extracts
from all such documents and books. Such right may be exercised
through any agent or employee of BZE designated by it or by an
independent chartered accountant or lawyer designated by BZE.
ARTICLE 6
DEFAULT
6.1 In this Article, the following expressions shall have the
following meanings:
a) "Default" means:
i) failure to promptly and honestly honour any financial
obligation herein;
ii) any action or omission which causes the Web Sites to
cease to exist;
iii) any assignment for the benefit of creditors,
appointment of a trustee or receiver of any assets,
or institution of any bankruptcy proceedings which is
acquiesced in or is not dismissed within ninety days
of the bringing of such action;
iv) the dissolution, winding-up or termination of a
party; or
iiv) a breach of any other provision of this Agreement of
which the party is advised by notice in writing from
another party, which failure continues for fourteen
days after the said notice. The party who is in
receipt of such a notice may request that the
validity of the notice be determined by a single
arbitrator appointed pursuant to the provisions of
the Commercial Arbitration Act (B.C.). The costs of
the arbitrator so appointed shall be borne by the
party requesting arbitration, and if it is
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determined that the notice is invalid, the requesting
party shall be repaid the cost of the arbitration by
the party who issues the notice.
6.2 In the event of a Default by any party, a non-defaulting party
may do any one or more of the following:
a) terminate this agreement immediately without giving
up any claim for damages arising from the default;
b) pursue any remedy available to it in law, equity or
by statute, it being acknowledged by each party that
specific performance, injunctive relief (mandatory or
otherwise) or other equitable relief may be the only
adequate remedy for a default;
c) take all steps and make all payments as may
reasonably be required to cure the default, in which
event all payments, costs and expenses incurred
therefore shall be payable by the defaulting party to
the non-defaulting party on demand;
d) waive the default provided, however, that any waiver
of a particular default shall not operate as a waiver
of any subsequent or continuing default and shall not
bind the other non-defaulting party.
ARTICLE 7
PROMOTION OF BZE
7.1 CKNW/CFMI will promote BZE without charge in the following
ways:
a) CKNW/CFMI shall permit BZE to include reasonable
promotional logos, hyperlinks and design credits, on
each and every page of the Web Sites.
b) After termination of this Agreement, CKNW/CFMI shall
ensure that an acknowledgment of BZE's design of the
Web Sites appears at the bottom of the main page of
the Web Sites for a period of five years after
termination, or until the majority of the Web Sites,
including the front end design and back-end
programming/database is redesigned by someone else,
whichever happens first.
c) CKNW/CFMI will actively promote the Web Site content,
services, features and the URL(s) with on-air
promotional spots. Each of the CKNW/CFMI stations
will broadcast these promotions on a regular basis to
assist in attracting traffic to the Web Site.
CKNW/CFMI will give BZE a design credit within those
promotional broadcasts. These credits will include a
BZE mention and a "SITE DESIGNED BY BLUE ZONE" or
alternative credit to be determined by BZE within all
such promotional broadcasts. CKNW/CFMI will include a
credit and reasonable promotion of BZE on all
promotional ads CKNW/CFMI broadcasts or prints for
the Web Site;
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d) CKNW/CFMI will make good faith efforts to ensure its
sales and other staff refers all requests it receives
for internet ad designs, web design or other services
of an interactive media or internet nature to BZE.
ARTICLE 8
CONTRA
8.1 The parties agree that the value of the Web Sites at launch
(Fall 1999) is **** Dollars ($****) per Web Site for a total
value of **** Dollars ($****). This total development cost
represents approximately **** hours at BZE's book rate of
$**** per hour. This development budget to BZE for its
know-how and effort in creating the Web Sites, minus the
initial deposit will place a value of $**** on the Web Sites
at public launch. CKNW/CFMI will provide to BZE commercial
air-time of equal value ($****) during the first 12 months of
the contract, in accordance with Article 8.3.
8.2 After the public launch of the Web Sites, the parties will
collectively assign a monthly value for ongoing interactive
development by BZE beyond that covered by the basic
maintenance fee, and provide BZE with additional contra
commercial air time of equal value.
8.3 Blue Zone will have the right to choose which station(s) and
times to place such commercial air time, and have full
creative control over such commercials. CKNW/CFMI has the
right to approve the suitability for broadcast of all
creative. Such approval will not be unreasonably withheld. All
commercials will be booked on a pre-emptible basis, subject to
air time availability. BZE agrees to pay CKNW/CFMI for all out
of pocket costs incurred in producing these commercial
announcements. The commercials are intended for the sole use
of BZE to advertise its products or services, and are not to
be used either directly or indirectly for any other product or
service.
ARTICLE 9
ACKNOWLEDGMENTS UPON TERMINATION
9.1 Upon termination of this Agreement, CKNW/CFMI shall perform a
final distribution in accordance with the terms hereof, and
thereafter BZE shall not be entitled to any further payments,
remuneration or share of revenue. In that event, all equipment
and software purchased by CKNW/CFMI, together with incidental
documentation, as well as all copyright to Web Sites content,
and all design, HTML, Web page and database coding, is owned
by CKNW/CFMI and shall be relinquished to CKNW/CFMI forthwith.
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED WITH THE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE
24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
10
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9.2 BZE is the sole owner of all of its proprietary, patented and
copyrighted technology, equipment, chattels or software
created by BZE, and all such items shall be relinquished to
BZE forthwith except code which is subject to the license
granted under Article 2 herein.
ARTICLE 10
ARBITRATION
10.1 All disputes or differences whatsoever which shall at any time
hereafter (whether during the continuance in effect of this
Agreement or upon or after its discharge or termination) arise
between the parties concerning this Agreement, its
construction or effect or as to the rights, duties and
liabilities of the parties hereto, under or by virtue of this
Agreement, or otherwise, as to any other matter in any way
connected with or arising out of or in relation to the subject
matter of this Agreement shall be referred to arbitration
pursuant to the provisions of the Commercial Arbitration Act
(B.C.).
ARTICLE 11
NOTICES
11.1 Any notice or demand or other document required or permitted
to be given under the terms of this Agreement shall be
sufficiently given to the party to whom it is addressed if
delivered or forwarded by registered mail or facsimile to the
parties hereto at the addresses set forth below.
a) CKNW/CFMI: _________________________________________
b) BZE: _______________________________________________
or to such other address as either party or parties may
furnish to the other from time to time. Every such notice
shall be deemed to have been received and given at the time
when, in the ordinary course of transmission, it would have
been delivered at the address to which it was sent.
ARTICLE 12
INTERPRETATION
12.1 The headings to the paragraphs of this Agreement are inserted
for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
12.2 Where the context of this Agreement requires, all pronouns and
any variations thereof shall be deemed to refer to the
masculine, feminine or neuter, or singular or plural, as the
identity of the person, persons, entity or entities may
require.
12.3 In the event that any provision of this Agreement or any part
thereof is invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions shall
not in any way be affected thereby.
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ARTICLE
RELATIONSHIP
The parties agree and acknowledge that their relationship is an
Interactive Partnership designed to commercialize the Web Sites and
generate revenue. Nothing contained in this agreement shall be deemed
or construed to constitute a relationship or partnership, joint
venture, or agency relationship between BZE and CKNW/CFMI.
BZE has the right to represent the Web Sites in accordance with Article
2.4.
Each party represents that it is and shall be during the currency of
this Agreement a "resident of Canada" within the meaning of the Income
Tax Act (Canada).
ARTICLE
MISCELLANEOUS
1.1 The parties shall execute and deliver such further documents, and do
such further acts and things as may be required to implement the intent
and provisions of this Agreement and shall not act unreasonably or
arbitrarily in respect of any matter hereunder.
14.2 Time shall be of the essence of each of the provisions of this
Agreement.
14.3 This Agreement may be executed by the parties hereto in any number of
counterparts with the same effect as if the parties hereto had all
signed the same document. All counterparts of this Agreement shall be
construed together and constitute one instrument.
14.4 The termination of this Agreement will not affect the rights or
obligations of any party arising pursuant hereto prior to the date of
termination.
14.5 No party shall assign this Agreement or any part of it to any other
person without the written consent of the remaining parties hereto.
14.6 This Agreement shall ensure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
14.7 This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the
Province of British Columbia and laws of Canada applicable therein
excluding any conflicts of law, rule or principle which might refer
such construction to the laws of another jurisdiction.
14.8 Each of the Owners acknowledges that it has obtained such independent
legal advice with respect to this Agreement and the matters
contemplated thereby as it determined appropriate or necessary.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement to
take effect as of July 1, 1999
Authorized Signatory of )
CKNW/CFMI, a division of WIC RADIO LTD. )
)
)
)
)
/s/ )
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Authorized Signatory )
)
/s/ )
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Authorized Signatory )
The Corporate Seal of )
BLUE ZONE ENTERTAINMENT, INC. )
was hereunto affixed in the )
presence of: )
)
)
/s/ Xxxxx Xxxxxx )
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Authorized Signatory ) c/s
)
/s/ Xxxxx Xxxxxxxx )
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Authorized Signatory
