EXHIBIT 10.9
JOINT DEVELOPMENT AND PROCUREMENT AGREEMENT DATED DECEMBER 17, 1996, BETWEEN
INGENICO, S. A. AND INTERNATIONAL VERIFACT INC.
JOINT DEVELOPMENT AND PROCUREMENT AGREEMENT
THIS AGREEMENT made as of the 17th day of December, 1996
AMONG:
INGENICO, a body corporate
incorporated under the laws of France
and having its head office in the City
of Puteaux Cedex, France
(hereinafter called "Ingenico")
OF THE FIRST PART
- and -
INTERNATIONAL VERIFACT INC., a
corporation continued under the laws
of Canada and having its head office
in the City of North York, Ontario,
Canada
(hereinafter called "IVI")
OF THE SECOND PART
WITNESSES THAT:
WHEREAS Ingenico and IVI have entered into a Master Alliance Agreement dated
December 5, 1996, to which this Joint Development and Procurement Agreement
constitutes Schedule "B" (the "Master Agreement");
AND WHEREAS Ingenico carries on the business of development, distribution,
marketing and manufacturing of transaction terminals with application to payment
systems, loyalty, electronic benefit transfer systems, and terminal systems for
smart card technology, principally in Europe, the Middle East, Africa,
Australia, Asia, Pacific and the Americas;
AND WHEREAS IVI carries on the business of development, distribution,
marketing and manufacturing of transaction terminals with application to payment
systems, loyalty, electronic benefit transfer systems and terminal systems in
the Americas, the Middle East, Europe, Asia pacific and Australia;
AND WHEREAS the parties therefore desire to enter into this Joint
Development and Procurement Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties covenant and agree with one another as follows:
ARTICLE ONE
INTERPRETATION
Section l.01 DEFINITIONS: In this agreement, unless the context shall
otherwise require, the following definitions shall apply:
(A) "Advisory Committee" has the meaning set out in Section 2.02;
(b) "Effective Date" means January 1, 1997;
(c) "Master Agreement" means the Master Alliance Agreement between Ingenico
and IVI dated December 5, 1996;
(d) "Parties" means all the parties to this agreement including any person
subsequently agreeing to be bound by this agreement;
(e) "Procurement and Manufacturing Team" has the meaning set out in Section
3.02.
(f) "Product Development Plan" means the annual product plan described in
Section 2.03;
(g) "Procurement Plan" has the meaning ascribed in Section 3.05.
(h) "Related Materials" means any and all information, documentation, tools,
manufacturing equipment and related devices, marketing materials,
artwork, schematics, software, raw materials, molds, bill of materials,
product testing tools, manufacturing procedure manuals, operation
manuals, and any other material of any kind necessary to produce and
market the Common Future Product, in any form, on any media, which
pertains to the use and exploitation of any Party's ownership interest or
license in any Common Future Product, but not including any Common Future
Product.
All other capitalized terms used in this Agreement and not defined herein
have the meanings ascribed thereto in the Master Agreement.
Section 1.02 CURRENCY: All dollar amounts referred to herein shall, unless
otherwise expressly stated, mean United States of America dollars.
Section 1.03 GOVERNING LAW AND ATTORNMENT: This agreement shall be
governed by and construed in accordance with the laws of New York, U.S.A. and
the parties hereto hereby attorn to such jurisdiction.
ARTICLE TWO
DEVELOPMENT
Section 2.01 JOINT DEVELOPMENT OF COMMON FUTURE PRODUCTS
(A) The Parties shall use their best efforts to implement a new, worldwide
standard alternative to their competitors, by complying with Europay Mastercard
Visa ("EMV") requirements and maximizing the Unicapt Technology, Ingenico
Technology, the IVI Technology and the resources of both Ingenico and IVI by
developing Common Future Products with common architecture and componentry. The
Parties acknowledge that they intend to reduce their respective development
costs by maximizing and coordinating their joint resources, expediting timing of
product development, and optimizing the geographic location of their operations.
The Parties shall, from and after the Effective Date, be jointly represented
before worldwide standards bodies such as EMV, SET, American Express, Smart Card
Form, and similar organizations, provided that each Party shall continue to
represent itself before local standards bodies;
(B) During the term of this Agreement, the Parties will jointly conduct, if
decided:
(I) product management, namely planning, support, documentation and
training;
(II) design, development, validation and qualification of both basic
platform (i.e. mother board, peripheral, operating systems and tool, and
management of the library of international applications; and
(III) introduction of Common Future Products.
Section 2.02 ADVISORY COMMITTEE: The Advisory Committee shall be comprised
of seven individuals, including the two Presidents of IVI and Ingenico, namely
four nominees of Ingenico and three nominees of IVI. The business of the
Advisory Committee shall include reviewing the Product Development Plan, product
definition and planning, definition of Library of International Applications,
allocation of the available funding and resources, proposing Common Future
Products, determining mechanisms to determine ownership rights in Common Future
Products and related transfer prices and reporting to the Parties.
Section 2.03 PRODUCT DEVELOPMENT PLAN: At least sixty days prior to the
commencement of each year, the Parties through the Advisory Committee shall
complete a Product Development Plan for
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Common Future Products. Each such Product Development Plan shall be submitted to
the Parties for their approval prior to the commencement of each calendar year
and shall be approved by the Board of Directors of each of IVI and Ingenico by
January 31. For the 1997 calendar year, the Advisory Committee shall complete
the Product Development Plan and obtain the approval of the Parties by March 31,
1997. Such Product Development Plan will identify product definition, resource
requirements, funding requirements, timetable, estimated product costs, volume,
ownership, use and transfer arrangements. Following such joint approval, each of
the Parties shall fund the Product Development Plan budget requirements promptly
as required in accordance with the terms of such plan.
Section 2.04 CONTRACTING: From and after the Effective Date, the Parties
shall second sufficient employees, in whole or in part, as the Advisory
Committee determines, and as set out in the Product Development Plan, is
required for high level product management, core technical skills, procurement
and manufacturing management, marketing management and the secondary technical
level support. Any employees seconded, in whole or in part, for these purposes
by the Parties shall be provided at the direct cost of the providing Party.
Section 2.05 DISTRIBUTION OF COMMON FUTURE PRODUCTS: The Parties agree
that both Parties shall have the right to distribute any Common Future Products
in their respective Territory, pursuant to the terms of the Marketing and
Distribution Agreement, mutadis mutandis. Each Party shall be able to acquire a
Common Future Product from the manufacturer at cost, which for such purposes
shall not include any research and development expenses.
Section 2.06 ESCROW FOR COMMON FUTURE PRODUCTS: An agreement to escrow the
Related Materials and any other materials relating to the Common Future Products
with terms and conditions similar to that contemplated in Section 2.10 of the
Technology License Agreement shall be entered into with respect to the Common
Future Products.
Section 2.07 CONTRACTED PRODUCTS: The Parties agree that each shall have
the ability to contract the other at any time to develop and manufacture a
product (a "Contracted Product") to the specifications of the requesting Party.
In such cases the payment of research and development costs, if any, by the
requesting Party, shall be as negotiated and agreed by the Parties at such time.
Any Contracted Product shall be sold to the requesting Party at a transfer price
negotiated and agreed by the Parties at such time. The ownership of the
Contracted Product shall reside with the Party which develops and manufactures
the Contracted Product. The distribution and marketing of any Contracted Product
shall be subject to the Marketing and Distribution Agreement. An agreement to
escrow the Related Materials and any other materials relating to the Contracted
Products with terms and conditions similar to that contemplated in Section 2.10
of the Technology License Agreement shall be entered into with respect to the
Contracted Products.
ARTICLE THREE
OPERATIONS
Section 3.01 OPERATIONS: The Parties shall combine their procurement of
supplies, jointly select and certify competitive suppliers and manufacturers,
and negotiate with suppliers, so as to increase the available product lines and
gross margins on product sales for each Party.
Section 3.02 PROCUREMENT AND MANUFACTURING TEAM: The Procurement and
Manufacturing Team shall consist of a minimum of five people consisting of the
Presidents of IVI and Ingenico and the Senior procurement and manufacturing
officers of each of IVI, Ingenico (France) and Ingenico (Australia). The Team
leader will rotate on a yearly basis between an Ingenico nominee and an IVI
nominee. The team leader for 1997 will be an IVI nominee. The business of the
Procurement and Manufacturing Team shall include the development and maintenance
of a common service center for both Parties which includes a
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data base of approved suppliers and manufacturers, functional specifications for
all products, a forecasting system, the identification and selection of
suppliers and manufacturers and the negotiation with suppliers and manufacturers
on behalf of each of Ingenico and IVI. The Parties agree to jointly fund
resources as set out in the Procurement Plan expense budget to provide local
procurement and quality control supervision in Europe, North America and Asia
Pacific.
Section 3.03 MANUFACTURING: The Procurement and Manufacturing Team shall
determine, together with the Advisory Committee, the most cost effective basis
for manufacturing of Common Future Products and manufacturing locations for all
Products. Each of the Parties shall, however, be entitled in its own discretion
to determine the location and terms and conditions of its own manufacturing
operations, provided that the Procurement and Manufacturing Team shall be
consulted and review all manufacturing propositions of each of the Parties and
endeavour to arrange manufacturing operations which are mutually satisfactory to
both Parties in order to reduce the manufacturing cost for both Parties.
Section 3.04 PROCUREMENT: Each of Ingenico and IVI shall utilize, to the
extent practicable, common procurement of all goods and services required for
the manufacture and assembly of the Ingenico Products, IVI Products, Ingenico
Future Products, IVI Future Products and Common Future Products. All goods and
services so procured shall be made available to Ingenico and IVI at cost. The
Procurement and Manufacturing Team is authorized to act on behalf of and
represent both Parties in any negotiations with suppliers and manufacturers,
subject to the ultimate approval of the Parties.
Section 3.05 PROCUREMENT PLANS: At least sixty days prior to the
commencement of each year, the Parties, through the Procurement and
Manufacturing Team, shall complete a Procurement Plan which shall include terms
relating to the exchange of information and designate responsibility to one of
the Procurement and Manufacturing Team members as common procurement manager for
each particular product which shall be determined by the Procurement and
Manufacturing Team. Each such Procurement Plan shall be submitted to the Parties
for their approval, prior to the commencement of each calendar year and shall be
approved by the Board of Directors of each of IVI and Ingenico by January 31.
For the 1997 calendar year the Procurement and Manufacturing Team shall complete
the Procurement Plan and obtain the approval of the Parties by March 31, 1997.
Following such approval, each of the Parties shall fund the procurement plan
expense budget requirements promptly as required in accordance with the terms of
such plan.
ARTICLE FOUR
RIGHT OF FIRST REFUSAL
Section 4.01 RIGHT OF FIRST REFUSAL ON NEW PRODUCTS: From and after the
Effective Date, should either of Ingenico or IVI desire or intend to develop any
IVI Future Product or Ingenico Future Product (any such product is hereafter
referred to as a "New Product"), such party (the "Initiating Party") shall,
prior to implementing any development of such New Product, extend by way of
initiating notice in writing accompanied by a proposed specific product
development plan, an offer to the other party (the "Recipient Party") to develop
such New Product jointly pursuant to the provisions of this Agreement. Should
the Recipient Party determine to accept the offer set forth in the initiating
notice, such party shall notify the Initiating Party of its acceptance within
thirty (30) days of delivery of the initiating notice and shall agree to the
payment of fifty per cent (50%) of the costs as set out in the proposed specific
Product development plan. Upon acceptance of such offer the New Product shall be
considered to be a Common Future Product. Upon and at all times after such
acceptance, the Initiating Party shall be and remain the sole and absolute owner
of all intellectual property rights in the Common Future Product subject to any
applicable third party rights in third party components, and subject to a
license in favour of the Recipient Party as set forth in the Technology License
Agreement. Should the Recipient Party not respond to the initiating notice
within the aforesaid thirty (30) day period, the Recipient Party shall be deemed
to have waived its rights
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pursuant to this subsection and the Initiating Party shall thereafter be
entitled to develop such New Product at its own initiative and expense and for
its own account. All initiating notices delivered pursuant to this section 4.01
shall describe the New Product and its cost in such detail that the Recipient
Party shall have sufficient basis to make an informed decision and response.
Section 4.02 RIGHTS OF ACCESS: In the event of completion of the offer and
acceptance provided for pursuant to section 4.01 above, the Common Future
Product shall be developed jointly by the Parties pursuant to the provisions of
this Agreement. To the extent that either Party (the "Owner") has any interests
of any kind, whether by ownership, license or other right, at any time or times,
in any Related Material of any Common Future Product which has been accepted for
joint development pursuant to the provisions hereunder, such Party grants and
assigns to the other Party (the "Non-Owner") an unlimited, unilateral right of
physical access and use of the Related Materials and access to the suppliers of
all parts, components and technology provided by third parties, provided that,
to the extent the nature of certain Related Materials may make simultaneous
access by both Parties impractical, the Parties shall arrive at such
arrangements as to use and access as shall be reasonable in all of the
circumstances, subject to arbitration in accordance with the provisions of the
Master Alliance Agreement in the event of disagreement. All Related Materials
shall be placed in escrow in accordance with the provisions of such reasonable
agreements as may be required by the escrow agent which shall be referrable to
the triggering events below and which shall be subject to timely update and
verification in respect of all upgrades, enhancements and new releases. The
Parties shall enter into an escrow agreement with a New York, New York escrow
agent, at the cost of both Parties shared equally. Such escrowed materials shall
be released to the non-Owner in the event that:
(i) the Owner is in breach or default of its obligation hereunder;
(ii) there has been an Event of Default (other than that described in
Section 13.01 (a) of the Master Alliance Agreement) by the Owner; or
(iii) the Non-Owner is denied reasonable physical access and use of the
Related Materials and access to suppliers by the Owner.
Section 4.03 DISTRIBUTION RIGHT OF FIRST REFUSAL: In the event the
Recipient Party either rejects or is deemed to have waived its right of first
refusal pursuant to Section 4.01, it shall nevertheless be entitled at any time
after the expiry of the aforesaid thirty (30) day notice period, to purchase and
have such New Product become a Common Future Product, upon payment of sixty-five
per cent (65%) of the non-recurring engineering costs incurred by the Initiating
Party up to the date of such purchase, the right to market and distribute such
New Product in its respective Territory in accordance with all of the provisions
of the Marketing and Distribution Agreement, provided that such distribution
rights shall be subject always to any conflicting arrangements which the
Initiating Party may have made independently during the interval between the
expiry of the time for exercise of the aforesaid right of first refusal and the
point in time at which the Recipient Party gives notice to the Initiating Party
of the Recipient Party's wish to distribute the New Product.
ARTICLE FIVE
GENERAL
Section 5.01 TERM: Subject to express provisions herein and in the Master
Alliance Agreement to the contrary, the provisions of this Agreement shall
remain in effect unless and until terminated by mutual agreement of the Parties.
Section 5.02 INTENT OF PARTIES: Each of the parties affirms that it is
entering into this Agreement in a true sense of cooperation. Each party
recognizes and values the contribution of the others to the success of the
Business. Each of the parties also affirms its desire and intention that its
association with the other
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Parties as contemplated herein be an amicable long-term relationship with no
intended or foreseeable termination date. Each Party pledges to work in good
faith for the resolution of any disputes which may arise between the Parties.
Section 5.03 NOTICE: Any notice required or permitted to be given
hereunder or any tender or delivery of documents may be sufficiently given by
personal delivery, or by sending the same by prepaid registered mail, return
receipt requested, or by telefax, to the parties at the following addresses or
telex numbers (as the case may be):
(A) if to Ingenico at the following address:
Ingenico.
9, quai de Dion Bouton
92816 Puteaux Cedex
France
Telecopy: +33(1) 47 72 56 95
Attention: Jean-Jacques Poutrel, President du Conseil
with a copy to:
R.G.S. Hull
Smith Lyons
Suite 5800, Scotia Plaza
40 King Street West
Toronto, Ontario, Canada
M5H 3Z7
(B) if to IVI, to it at:
International Verifact Inc.
79 Torbarrie Road
Toronto, Ontario
Canada M3L 1G5
Telecopy: (416) 245-9896
Attention: L. Barry Thomson, President and CEO
with a copy to:
Mark A. Convery
Meighen Demers
Barristers and Solicitors
Box 11, Merrill Lynch Canada Tower
1100-200 King Street West
Toronto, Ontario, Canada
M5H 3T4
Telecopy: (416) 977-5239
or at such other address or telefax number of any party as such party may advise
the other by notice in writing. Any notice or other document, if personally
delivered at such address during normal business hours, shall be deemed to have
been given on the date of delivery, and if mailed, as aforesaid, shall be deemed
to have been given on the date of delivery by postal authorities, or if sent by
telefax, delivery shall be deemed to have occurred on the date following receipt
of the telefax, provided that an acknowledgment of transmission is received by
the sender.
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Section 5.04 ARBITRATION:
(a) BEST ENDEAVOURS TO SETTLE DISPUTES: In the event of any dispute, claim,
question or difference arising between the parties hereto in respect of
the provisions, the subject matter, the interpretation, or the effect of
this Agreement or any breach hereof, the parties shall use their best
endeavours to settle such dispute, claim, question or difference. To this
effect, they shall consult and negotiate with each other, in good faith
and understanding of their mutual interests, to reach a just and
equitable solution satisfactory to all parties;
(b) ARBITRATION: Except as is expressly provided in this Agreement, if the
parties do not reach a solution pursuant to Section 5.03(a) within a
period of 30 days, then upon written notice by either party to the other,
the dispute, claim, question or difference shall be finally settled by
arbitration in accordance with Section 16.12 of the Master Agreement;
Section 5.05 SUCCESSORS AND ASSIGNS: This agreement shall inure to the
benefit of and be binding upon the parties hereto, their respective successors
and permitted assigns, as owners of the Shares.
Section 5.06 RELATIONSHIP OF PARTIES: This Agreement does not constitute a
partnership and nothing herein contained is intended to constitute, nor shall it
be construed to constitute, the parties as partners of each other or of the
Corporation. Nothing contained herein shall constitute either party or the
Corporation as agent of either party or the Corporation.
Section 5.07 SEVERABILITY: The inability or unenforceability of any
provision of this Agreement or any covenant herein contained on the part of any
party shall not affect the validity or enforceability of any other provision or
covenant hereof or herein contained.
Section 5.08 Assignment: This Agreement is not assignable by any party
hereto without the prior written consent of the others.
IN WITNESS WHEREOF the parties hereto have executed these presents.
INGENICO
Per: __________/S/____________________
Per: __________/S/____________________
INTERNATIONAL VERIFACT INC.
Per: __________/S/____________________
Per: __________/S/____________________
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