THIS AGREEMENT made as of the 1" day of May, 1998
BETWEEN:
ALPHA CORPORATION,
a corporation incorporated under the laws of the Province of Ontario
(hereinafter called the "Corporation")
OF THE FIRST PART
and MICHAEL P. KRAFT & ASSOCIATES INC.
a corporation incorporated under the
laws of the Province of Ontario
(hereinafter called the "Consultant")
OF THE SECOND PART
RECITALS
WHEREAS:
(a) The Corporation carries on the business of pre-selling or licensing book,
video andother complementary products and any other business or businesses
that may be from time to time approved by the board of directors of the
Corporation (hereinafter called the "Business");
(b) The Corporation wishes to engage the services of Consultant to provide
administration management services and marketing consulting to the
Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of other good and
valuable consideration and the covenants, agreements and payments herein set
forth and provided for, it is agreed by and between the parties hereto as
follows:
1 INTERPRETATION
1.01 For the purposes of this Agreement, including the recitals and any
amendment hereto, the following words and phrases shall have the following
meanings:
(a) "Agreement" means this agreement and schedules hereto-,
(b) "Business" has the meaning ascribed thereto in paragraph (a) of the
recitals to this
Agreement;
(c) "Consulting Fee" shall have the meaning ascribed thereto in Section 3.01
(a);
(d) "Sales Commissions" shall have the meaning ascribed thereto in Section
3.02.
1.02 For the purpose of this Agreement, all references to "Dollars" or "$" shall
mean Canadian funds, unless otherwise specified.
ENGAGEMENT AND DUTIES OF CONSULTANT
Representations of Consultant
2.01 Consultant represents and warrants to the Corporation that he has the
required skills and expertise to perform the services as set forth and described
in this Agreement. In particular, Consultant represents that he will be able to
undertake the administration management and sales &marketing for the products of
the Business.
Engagement of Consultant
2.02 Subject to the terms and conditions of this Agreement, the Corporation
hereby engages Consultant as an independent contractor and Consultant hereby
accepts the engagement during the term of this Agreement to provide the services
which may be required by the Corporation with respect to the administration
management and sales & marketing for the products of the Business.
Term of Engagement
2.03 The engagement of Consultant hereunder shall be for an initial period of
eight (8) months, commencing from the 1st day of May 1998 and ending on the last
day of December 1998 and, unless such engagement shall be terminated as
hereinafter provided, thereafter from year to year unless and until terminated
as hereinafter provided.
Covenants of Consultant
2.04 Consultant hereby covenants and agrees that:
(a) Consultant shall carry out his obligations to the Corporation hereunder;
(b) Consultant shall devote such time and attention to the performance of his
duties hereunder in order to carry out the obligations on the part of Consultant
to be observed and performed hereunder. The Corporation acknowledges that
Consultant is not limited or affected, notwithstanding any provision hereof, in
his ability to carry on other consulting services for his other clients, and
consequently, Consultant will devote only so much of his time to the Corporation
as in his judgment is reasonably required.
(c) Consultant shall use his best efforts to promote the Business; and
(d) Consultant will, at his sole discretion, during the continuance of this
Agreement so long as the board of directors of the Corporation may so desire,
serve as an officer of the Corporation without additional remuneration.
Diligent Performance of Duties
2.05 Consultant shall duly and diligently perform all the reasonable duties to
be performed pursuant to this Agreement during the term of this Agreement and
any renewal hereof as it relates to the consulting services to be provided by
Consultant hereunder.
Review and Control of Consulting Services
2.06 The Consultant shall meet with the board of directors of the Corporation on
a regular basis and at least quarterly to discuss and review all consulting
services to be conducted by the Consultant pursuant to this agreement and the
Corporation agrees that the Consultant will have complete control over the
services to be rendered under this Agreement .
3.0 COMPENSATION OF CONSULTANT
Fixed Annual Remuneration
3.01 The Corporation shall pay Consultant shall at the monthly rate of $3,000.00
plus GST(if applicable) payable, in arrears, in two equal installments on the
15th and last day of each month, commencing the 15' day of May, 1998 and
allocated on the account of:
(a) A fixed non-recoverable fee (the "Consulting Fee") of $3000.00 per
month (payable on The 15 th and last day of each month) for management
services. Additionally, Michael Kraft would be entitled to the full 50%
Sales Commission less Administration & Operating Fee and Monthly Expenses
(see Schedule B). Further, Michael Kraft and Stan Starkman would be
entitled to share the 50% Sales Commission for all International Sales less
Administration & Operating Fee and Monthly Expenses (see Schedule B).
3.02 In addition to the Consulting Fees provided hereunder, Consultant shall be
entitled during the continuation of this Agreement and commencing with the
period beginning May 1st 1998 to receive a sales commission ("Sales Commission")
plus GST (if applicable) according to Schedule "B" annexed hereto, for confirmed
purchase orders accepted by the Corporation from and after May 1st 1998.
Payment on Termination
3.03 The parties hereto acknowledge and agree that upon the expiration of this
Agreement or its earlier termination pursuant to the terms hereof Consultant
shall be entitled to receive the fixed remuneration and Sales Commission owing
to him to the effective date of termination. Such fixed remuneration and Sales
Commission shall paid by the Corporation to Consultant within 30 days from the
effective date of termination.
Reimbursement of Certain Expenses
3.04 Consultant shall be reimbursed by the Corporation for all travel &
entertainment and other expenses actually and properly incurred in connection
with the Corporation. The Corporation must pre-authorize travel and hotel costs
(which will be booked by the Corporation). For all such expenses, Consultant
shall furnish to the Corporation monthly expense statements and vouchers by no
later than the 1 5th day of the following month and the Corporation shall
reimburse such expenses within seven (7) business days from receipt.
Automobile
3.05 The Corporation agrees that it will provide Consultant with a reasonable
automobile allowance to commensurate with Consultant's position with the
Corporation.
Success Fees
3.06 Consultant shall receive a success fee from 2%-2.5% of the aggregate amount
arranged for project debt and equity financing upon completion of such financing
and payable within 5 business days from receipt of such funds by the
Corporation.
4.00 NON -DISCLOSURE AND NON-COMPETITION
Confidential Information
4.01 Consultant shall not, either during the continuance of this Agreement or at
any time thereafter use for its own benefit or in any manner adverse to the
interest of the Corporation or its subsidiaries or disclose or make available to
others for any reason or purpose whatsoever any Confidential or disclose or make
available to others for any reason or purpose whatsoever any Confidential
Information (as defined below).
"Confidential Information" is defined to be information disclosed to the Vendor
or know by him as a consequence of or through its relationship with the
Corporation or any subsidiary or division thereof, not generally known in the
Corporation's industry, about the Corporation's customers, advertising methods,
public relations methods, business methods, organization, procedures or finance,
including without limitation information of or relating to advertising programs,
designs, contracts, arrangements, research, trade secrets, information regarding
trade marks or other intellectual property rights, customer lists, product and
service lines, marketing data and any related or technical, corporate or trade
information; Confidential Information shall be deemed not to include any
information known publicly or readily available to the public, or any
information which the Corporation or Consultant is required to disclose by law.
Non-Competition
4.02 (1) Consultant shall not, either during the continuance of this Agreement
or for a period of:
(a) 2 years, or
(b) 1 year,
following the date of termination of this Agreement, either individually or in
partnership or jointly or in conjunction with any person as principal, agent,
employee, shareholder (other than a holding of shares listed on a Canadian or
United States stock exchange that does not exceed 10% of the outstanding shares
so listed) or in any other manner whatsoever carry on or be engaged in or be
concerned with or interested in or advise, lend money to, guarantee the debts or
obligations of or permit his name or any part thereof to be used or employed by
any person engaged in or concerned with or interested in any business activity
competitive with those aspects of the Business described in Schedule "B" annexed
hereto within:
(i) North America;
(ii) Canada;
Sub-Sections 4.02 (1)(a) and (b) and Sub-Sections 4.02(l)(i),and Sub-Sections
(iii) are each separate and distinct covenants, severable one from the other and
the greatest of Sub-Sections 4.02 (1)(a) and (b) and Sub-Sections 4.02(l)(i) and
(ii) shall apply unless such covenant is determined to be invalid or
unenforceable, in which event the next greatest shall apply, and so on.
Proprietary Properties
4.03 (a) All inventions, innovations, improvements, copyright or trade mark
rights created or developed by Consultant in the course of providing his
services hereunder or in any way relating to the business of the Corporation,
whether patented, trade marked or not shall be the exclusive property of the
Corporation and the Corporation shall have the exclusive right to file any
patent applications, trade mark applications, copyright or other protection, in
the name of the Corporation
in connection therewith and Consultant shall co-operate with the Corporation and
its nominee and provide all necessary assistance in the filing and prosecution
of such applications or protection at the expense of the Corporation.
4.03 (b) Consultant covenants and agrees that the concepts and promotions
including all copyright and trademark rights inherent in the services made
available by it to the Corporation are proprietary information and property of
the Corporation and shall not be used or divulged by Consultant without the
Corporation's prior written-consent on such terms as may be agreed upon by the
Corporation in its sole discretion.
5.00 TERMINATION
Termination by the Corporation
5.01 This Agreement and the engagement of Consultant hereunder may be
terminated, at the option of the Corporation, in the following manner and
circumstances:
- - (a) if the Consultant has committed any material breach of this Agreement and
such breach has not been cured within fifteen (15) days of written notice of
such breach being given by the Corporation to the Consultant; or
(b) forthwith if Consultant shall become insolvent or bankrupt or makes - an
assignment for the benefit of creditors or be adjudged bankrupt or if a receiver
or similar officer is appointed in respect to the property or assets of the
Consultant; or
(c) forthwith upon the death of Consultant.
Termination by Corporation or Consultant
5.02 Notwithstanding anything in this Agreement to the contrary, either party
shall have the right to terminate this Agreement, prior to the expiration of the
term or any renewal thereof, upon thirty (30) days prior written notice to the
other party.
Delivery of the Corporation's Property at Termination
5.03 Upon any termination of this Agreement, Consultant shall at once deliver or
cause to be delivered to the Corporation all books, documents, effects, money,
securities or other property belonging to the Corporation or for which the
Corporation is liable to others, which are in the possession, charge, control or
custody of Consultant.
Survival of Certain Sections
5.04 Notwithstanding any termination of this Agreement for any reason whatsoever
the provisions of Sections 4.01, 4.02 and 4.03 of this Agreement and any other
provisions of this Agreement necessary to give efficacy thereto shall continue
in full force and effect following such termination.
RENEWAL OF AGREEMENT
Renewal
6.01 The Corporation may offer to renew this Agreement for a period of one year
and so on from year to year by giving notice in writing to Consultant by not
later than the first day of the third last month of the contract year. Such
notice shall include the Corporation's proposals for any changes in terms or
conditions of the service engagement. Consultant shall communicate its
acceptance of such offer by giving notice in writing thereof to the Corporation
no later than 15 days after receipt of the said offer. Any proposed changes in
remuneration or other terms and conditions of the service engagement shall be
agreed upon in writing between the parties.
Non-Renewal
6.02 In the event that the Corporation gives notice of non-renewal of this
Agreement in writing to Consultant by not later than the 1 st day of the third
last month of the contract year or the Corporation does offer to renew this
Agreement as set forth in Section 6.01 and Consultant does not accept such
offer, this Agreement shall expire and the service engagement hereunder shall
terminate without any notice or payment of remuneration in lieu of notice in
accordance with the provisions of this Agreement on the last day of the contract
year.
INDEMNITY
7.01 The Corporation shall indemnify and hold the Consultant harmless from and
against any and all liabilities, losses, costs, damages and expenses whatsoever
which the Consultant may suffer or incur, including, without limiting the
generality of the foregoing, all legal fees incurred in connection with any such
losses, costs, damages and expenses as a result of any demand, claim, action,
suit or proceeding made, threatened or brought against the Consultant as a
result of any and all claims of patent, copyright and /or trade mark
infringement relating to the Corporation's patents, copyrights and/or trademarks
arising out of the exercise by the Consultant of the rights granted to it by the
Agreement.
7.02 The Consultant acknowledges and agrees that it shall be liable for any and
all income taxes (federal and provincial), goods and services taxes, provincial
sales taxes (if applicable), and any other taxes that may be payable to any
regulatory authority for the services rendered to or the payments made by the
Corporation to the Consultant hereunder. The Consultant shall indemnify and hold
the Corporation harmless from and against any and all liabilities, losses,
costs, damages and expenses whatsoever which the Corporation may suffer or
incur, including, without limiting the generality of the foregoing, all legal
fees incurred in connection with any such losses, costs, damages and expenses as
a result of any demand, claim, action, suit or proceeding made, threatened or
brought against the Corporation as a result of Consultant failing to pay such
taxes.
7.03 The Consultant covenants and agrees that at no time during or following
termination of this Agreement will do or say anything to conduct himself in such
manner as to bring Corporation into disrepute or harm or diminish its business
reputation and good name. If it is determined at law by a court of competent
jurisdiction that such a breach has occurred, the Corporation may immediately
terminate this Agreement and in addition to any other remedy available to the
Corporation, no further payments shall be required to be made to Consultant
under sections 3.01,3.02, 3.03 and 3.04 of the Agreement.
8.0 GENERAL
Sections and Headings
8.01 Under no circumstances shall this Agreement be deemed to create an
employment or agency relationship between the Consultant and the Corporation.
The Consultant shall at all times be and remain an independent contractor.
8.02 The divisions of this Agreement into Articles and Sections and the
insertion of headings are for the convenience of reference only and shall not
affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof, "hereunder" and similar expressions refer to this Agreement
and not to any particular Article, Section or other portion hereof and include
any agreement or instrument supplemental or ancillary hereto. Unless something
in the subject matter or context is inconsistent therewith, reference herein to
Articles and Sections are to Articles and Sections of this Agreement.
Number
8.03 In this Agreement words importing the singular number only shall include
the plural and vice versa and words importing the masculine gender shall include
the feminine and neuter genders and vice versa and words importing persons shall
include individuals, partnerships, associations, trusts, unincorporated
organizations and corporations and vice versa.
Benefit of Agreement
8.04 This Agreement is for the personal services of Consultant and may not be
assigned by Consultant without the prior written consent of the Corporation,
which consent may be unreasonably and arbitrarily withheld. Subject to the
foregoing, this Agreement shall ensure to the benefit of and be binding upon the
heirs, executors, administrators and legal personal representatives of
Consultant and the successors and permitted assigns of Consultant and the
Corporation respectively.
Entire Agreement
8.05 This Agreement and any schedules annexed hereto constitutes the entire
agreement between the parties with respect to the subject matter hereof and
cancels and supersedes any prior understandings and agreements between the
parties hereto with respect thereto. There are no representations, warranties,
forms, conditions, undertakings or collateral agreements, express, implied or
statutory between the parties other than as expressly set forth in this
Agreement.
Amendments and Waivers
8.06 No amendment to this Agreement shall be valid or binding unless set forth
in writing and duly executed by both of the parties hereto. No waiver of any
breach of any provision of this Agreement shall be effective or binding unless
made in writing and signed by the party purporting to give the same and, unless
otherwise provided in the written waiver, shall be limited to the specific
breach waived.
Severability
8.07 If any provision of this Agreement is determined to be invalid or
unenforceable in whole or in part, such invalidity or unenforceability shall
attach only to such provision or part thereof and the remaining part of such
provision and all other provisions hereof shall continue in full force and
effect.
Notices
8.08 Any demand, notice or other communication (hereinafter in this Section 8.08
referred to as a "Communication") to be given in connection with this Agreement
shall be given in writing and may be given by personal delivery or by registered
mail addressed to the recipient as follows:
To the Corporation:
Alpha Corporation
151 Bloor Street West, Suite 890
Toronto, ON
M5S 1 S4
Fax: (416) 927-1222
Aftn-. Mr. Michael Kraft
To the Consultant:
Michael P. Kraft &Associates Inc. 151 Bloor Street West Suite 890 Toronto,
ON M5S 1S4
or such other address or individual as may be designated by notice by either
party to the other. Any Communication given by personal delivery shall be
conclusively deemed to have been given on the day of actual delivery thereof
and, if made or given by registered mail, on the fourth day, other than a
Saturday, Sunday or statutory holiday in Ontario, following the deposit thereof
in the mail. If the party giving any Communication knows or ought reasonably to
know of any difficulties with the postal system which might affect the delivery
of mail, any such Communication shall not be mailed but shall be given by
personal delivery.
Governing Law
8.09 This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario.
Attornment
8.10 For the purpose of all legal proceedings this Agreement shall be deemed to
have been performed in the Province of Ontario and the courts of the Province of
Ontario shall have jurisdiction to entertain any action arising under this
Agreement. The Corporation and Consultant each hereby attorns to the
jurisdiction of the courts of the Province of Ontario provided that nothing
herein contained shall prevent the Corporation or Consultant from proceeding at
its election against the other of them, as the case may be, in the courts of any
other province or country.
Copy of Agreement
8.11 Consultant hereby acknowledges receipt of a copy of this Agreement duly
signed by the Corporation
8.12 Time shall be of the essence of this agreement
IN WITNESS WHEREOF the parties have executed this Agreement.
SIGNED, SEALED AND DELIVERED MICHAEL P. KRAFT & ASSOCIATES INC.
in the presence of
Per:
Witness Michael P. Kraft
ALPHA CORPORATION
Per:
Michael P. Kraft
President & CEO
Per:
Richard Sherman
Vice President
SCHEDULE "A"
"Custom Publishing" Services (i.e. book packaging and development services),
specifically regarding developing and providing content through the creation of
nonfiction books under the imprint of widely respected and recognized
"authorities" that are famous names in their respective fields - companies,
brands, experts or institutions (such as the Investors Group "Managing Your
Money" Book Series) in Canada and the U.S. as per the specific business
practices and methods utilized by the Alpha Media division of the Corporation as
outlined in the Business Plan of May, 1996. The Consultant acknowledges having
received a copy of such Business Plan.
Book Sales, specifically regarding the marketing, sales and distribution of
promotional publishing products in Canada and the U.S. (such as the Cadbury's
"Tale of the Great Bunny" Book), as per the business practices and methods
utilized by the Alpha Marketing division of the Corporation.
International Book Publishing, specifically regarding the development and sales
(copublishing revenue) for book product and book packages for international
markets (such as the English-As-A-Foreign Language (EFL) and English-For-Special
Purposes Series (ESP) published in China and Cuba), as per the business
practices and methods utilized by the Alpha International division of the
Corporation and International Alpha Media, Inc. an affiliated company of the
Corporation as outlined in the Business Plan of March, 1997 The Consultant
acknowledges having received a copy of such Business Plan.
SCHEDULE "B"
Sales Commission
Sales Commission shall be equal to 50% of the Net Profits (as herein after
defined) less the aggregate amount of the Recoverable Consulting Fees paid or
payable by the Corporation to the Consultant pursuant to Section 3.01 of the
Agreement.
For the purposes of the Agreement, the term "Net Profits" as used herein shall
mean the Gross Profit (as hereinafter defined), minus
(a) Administration & Operating Fee at 4% of gross sales calculated as
hereinafter provided, and
(b) the aggregate of all payments made to the Consultant under Section 3.04
("Reimbursement of Certain Expenses").
(iii)For the purposes of this Agreement, the term "Gross Profits" as used
herein shall mean the gross sales from sales generated by the
Consultant beginning May 1s. 1998 and collected by the Corporation
(excluding any applicable sales taxes or value added taxes)minus cost
of goods sold with respect to such sales including without
limitations, any or all
(a) pre-production costs (eg. writing, art, film, molds);
(b) manufacturing costs (eg. paper, print & binding or toy/plastic
part production);
(c) duty and freight costs (if applicable);
(d) royalties or profit sharing with supplier (if applicable);
(e) financing fee (if applicable) for any Pre-Production Costs and/or
Manufacturing Costs that must be paid up front above any customer deposits will
be added at the actual cost of funds to the Corporation; and
(f) discounts, rebates or return of goods (if applicable).
Ov) Sales Commission shall be calculated and payable on the last day of the
month in which the Corporation receives payment in full for the sale
generated by the Consultant less the aggregate amount of the Recoverable
Consulting Fees. Post Termination Participation It is understood and agreed
by the parties hereto that Consultant shall continue to participate in and
be paid in accordance with section 3.02 in respect of any and all confirmed
purchase orders accepted by the Corporation through Consultant during the
90 day period following termination of this Agreement. Such Sales
Commissions will be payable in full within 5 business days from receipt of
final payment by the Corporation. The obligations of the Corporation to pay
Consultant his Sales Commission relating to such period shall survive the
termination hereof, notwithstanding anything herein contained to the
contrary.
ADDENDUM (i)
Effective October 1st, 1997, the Consultant's monthly fee will be $3,000.00 plus
GST.
Dated at Toronto, this 26th day of May, 1997.
Accepted by
ALPHA CORPORATION Accepted by:
/s/ Michael P. Kraft /s/ Michael P. Kraft
- -------------------- ----------------------------
Michael P. Kraft, Michael P. Kraft
President & C.E.O.
/s/ Richard Sherman
- --------------------
Richard Sherman,
Vice President
ADDENDUM (II)
Effective January 1st, 1998, this Agreement will be renewed and extended until
April 30, 1998.
Dated at Toronto, this 26th day of May, 1998.
Accepted by
ALPHA CORPORATION Accepted by:
/s/ Michael P. Kraft /s/ Michael P. Kraft
- -------------------- ----------------------------
Michael P. Kraft, Michael P. Kraft
President & C.E.O.
/s/ Richard Sherman
- --------------------
Richard Sherman,
Vice President