EXHIBIT 10.6
MANUFACTURING AGREEMENT
BETWEEN
POWER PHOTO KIOSK INC.
AND
INTEGRATED KIOSK INC.
Power Photo & Integrated Kiosk Manufacturing Agreement
This Agreement is made on the 14 day of May, 1999
BETWEEN
Power Photo Kiosk Inc. (hereinafter referred to as "PPK") with its registered
office situated at 181 Whitehall Drive, Markham, Ontario, L3R 9T1, CANADA.
and
Integrated Kiosk Inc. (hereinafter referred to as "Integrated") with its
registered office situated at 397 Humberline Drive, Unit #7, Rexdale, Ontario,
M9W 5T5, CANADA.
WITNESSETH
Whereas, PPK has conceived and developed a photo kiosk utilizing digital
imaging and manipulation technology, known as the Power Photo Kiosk and all of
its variations and accessories, including but not limited to the proprietary
operating software, hardware configuration, licensing rights with various
licensors and various image packages.
Whereas, PPK has identified Integrated as having the expertise and
capability to manufacture the PRODUCT; and
Whereas, Integrated is desirous of manufacturing the PRODUCT and also
integrating or assembling all the associated hardware components
Now Therefore, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties do hereby agree as
follows:
ARTICLE 1: DEFINITIONS
Uppercase terms in this agreement have the meaning established for such terms in
the succeeding sections of this article 1.
1. The term PPK as used herein shall have the meaning ascribed in the
preamble.
2. The term Integrated as used herein shall have the meanin ascribed in the
preamble.
3. The PRODUCT as used herein shall mean the kiosk itself, the hardware
components or the proprietary software as set out in the preamble.
4. The term CONFIDENTIAL INFORMATION as used herein shall mean but not be
limited to drawings, specifications, design information, manufacturing
techniques and operating procedures related to the PRODUCT, plus any other
information received by one party from the other party which has been
marked or indicated in writing prior to disclosure as CONFIDENTIAL.
ARTICLE 2: GRANT OF MANUFACTURING RIGHTS
(a) Integrated agrees that the PRODUCT will be manufactured in accordance with
(i) all laws and regulations of Ontario; and (ii) the local laws and
regulations of the countries and jurisdictions where the PRODUCT will be
distributed and sold, provided that PPK shall first provide written
notification to Integrated of variations or changes in local laws and
regulations which are to be adhered to, where they differ from Ontario laws
and regulations.
(b) Integrated agrees to manufacture the PRODUCT for PPK and assemble the
PRODUCT as well as supply hardware components which are identified from
time to time such as touch screen computers, including the wiring, in
accordance with the plans and specifications supplied or approved by PPK
and approved by Integrated.
(c) Integrated shall have the exclusive right to manufacture all PRODUCT which
is supplied to or is distributed to the North American market, provided
Integrated is able to manufacture such product in a timely manner in
accordance with this agreement.
(d) PPK estimates that it will order a minimum of 600 kiosks in the first 12
months of this agreement and that those orders will be placed in 12 equal
increments. Orders for 50 kiosks will be delivered as follows: 10 kiosks in
week 5; 10 kiosks in week 6; 15 kiosks in week 7; and 15 kiosks in week 8.
Orders for quantities between 50 and 100 will similarly be delivered as
follows: 20% of the kiosks in week 5; 20% of the kiosks in week 6; 30% of
the kiosks in week 7; and 30% of the kiosks in week 8. Orders may increase
to over one hundred (100) kiosks per month and/or larger orders for single
customers from time to time. Integrated agrees to increase its
manufacturing capacity to accommodate increases in kiosk sales and provide
product on a timely basis in accordance with purchase orders and agreed
upon delivery schedules. Scheduling of orders requiring delivery or more
than one hundred (100) kiosks in a month will be prepared by INTEGRATED and
presented within 7 days and shall be subject to mutual agreement.
Power Photo & Integrated Kiosk Manufacturing Agreement
(e) All Products shall be delivered to PPK ex-works Integrated's assembly plant
in Toronto, Ontario. PPK shall advise INTEGRATED of the shipping
destination, agreed upon carrier to be used and any special instructions
relating thereto such as insurance and packing instructions, At PPK's
request, INTEGRATED will arrange for shipping as agent of PPK.
(f) Risk of loss to Products shall pass to PPK upon delivery to the carrier for
shipment.
ARTICLE 3: SUB-CONTRACT AGREEMENT
(a) Integrated may sub-contract the manufacture of component parts of the kiosk
shell, namely the steel frame and millwork, subject to PPK's written
consent for each contractor which shall not be unreasonably withheld.
ARTICLE 4: TECHNICAL ASSISTANCE
1. Engineering and Technical Services
(a) PPK shall provide reasonable technical assistance to Integrated in
connection with the manufacturing of the PRODUCT, including providing
existing prototypes, engineering drawings, and bill of materials.
(b) Integrated may modify the PRODUCT as it may reasonably require to
efficiently manufacture the PRODUCT utilizing available components,
provided such modifications do not adversely affect the functionality or
aesthetics of the PRODUCT. PPK shall have the right to and shall be
responsible to approve any such changes, design and final product.
(c) Integrated shall provide all necessary tooling at Integrated's expense, and
shall own such tooling.
4. Ownership of Improvements and Designs
(a) Each party shall promptly disclose to the other party an improvements to
PRODUCT that such party conceives and develops.
(b) The parties mutually agree that any conceived improvemen to the PRODUCT
will always remain the property of PPK. Integrated may make, have made and
use such improvements conceived as long as this Agreement has not been
terminated.
(c) PPK retains the rights, at either party expense and in PPK's sole
discretion, to patent any or all aspects of the PRODUCT which PPK has
conceived and any improvements or enhancements thereto which Integrated
conceives. Integrated shall place on the PRODUCT whatever patent markings
and notices PPK may reasonably require.
(d) Both parties agree that all market information will be mutually shared in
order to enable Integrated to adapt the PRODUCT requirements with regard to
quality and performance.
Power Photo & Integrated Kiosk Manufacturing Agreement
ARTICLE 5: PATENT ENFORCEMENT
(a) PPK warrants that the making of the PRODUCT will not infringe the rights of
any other person.
(b) PPK agrees to indemnify Integrated and its approved sub- licensees from any
liability, damage or loss of any kind resulting from any claim or lawsuit
brought against Integrated or a sub-licensee by a third party alleging that the
PRODUCT infringes any patent or other property rights of the third party. PPK at
its own expenses shall pay all costs, settlements and damages incurred,
including solicitors fees and expenses of litigation, provided that Integrated
give PPK prompt notice of such claims and provide PPK assistance, to defend such
claims.
(c) Neither party shall compromise or settle any claim of infringement by or
against them respecting the PRODUCT or any claim of ownership, validity or
enforceability respecting the PRODUCT, or patents directed to the PRODUCT,
without the consent of the other party, which consent shall not be unreasonably
withheld. Each party shall reasonably cooperate with the other party in
connection with any such claims.
(d) If Integrated believes that any of PPK's rights respecting the PRODUCT are
being infringed and the infringement substantially adversely affects
Integrated's manufacturing rights of the PRODUCT hereunder, Integrated shall
promptly notify PPK. If PPK files suit against any alleged infringer, Integrated
shall provide reasonable non-monetary assistance to PPK without charge, but
subject to reimbursement of expenses. PPK shall be entitled to retain any and
all settlement amounts or awards resulting therefrom providing that Integrated
shall first receive any settlement monies relating to damages suffered by
Integrated. If PPK fails to cause such infringement to ease or to bring and
diligently pursue an action to cause such infringement to cease within ninety
(90) days of its notification or knowledge of such infringement, Integrated
shall have the option to bring such suit, at its expense, to name PPK as a party
if necessary or desirable, and to retain any and all settlement amounts or
awards resulting therefrom, and PPK shall provide reasonable non-monetary
assistance to Integrated in such action without charge. If Integrated is a party
to any lawsuit involving any such rights, Integrated shall not settle or
compromise said lawsuit without PPK's consent, which shall not be reasonably
withheld.
ARTICLE 6: WARRANTIES AND LIABILITY
(a) Integrated shall maintain a minimum of five million Canadian dollars
(CA$5,000,000) of general commercial liability insurance which shall insure the
PRODUCT.
(b) PPK shall maintain a minimum of two million Canadian dollars (CA$2,000,000)
of general commercial liability insurance which shall insure the PRODUCT.
Power Photo & Integrated Kiosk Manufacturing Agreement
(c) Integrated warrants the PRODUCT shall be manufactured in accordance with the
approved designs, shall be free of defects in workmanship and materials
(excluding any that are supplied by PPK), and shall be tested and found
operational prior to delivery to PPK. Without extending the foregoing, this
warranty specifically excludes damage or non-functionality caused by (i)
physical mishandling, abuse, contact or application of external force, (ii)
causes external to the PRODUCT, including electrical fluctuations and improper
operating environment, placement or storage of the PRODUCT; use of the PRODUCT
other than for its intended purpose or not in accordance with its operating
instructions; (iv) use of equipment, software, or attachments not supplied by
Integrated; and (v) modifications, repairs or services performed by any person
not authorized by Integrated.
(d) As its sole and only obligation under the warranty, Integrated shall at its
option repair or replace the PRODUCT with a new or refurbished PRODUCT or parts.
The warranty period for the repaired or replacement product shall expire on the
same day as the warranty on the original product.
(e) The Warranty Period is twelve (12) months commencing on the earliest of (i)
the date of delivery to the first purchaser from PPK, (ii) or the date the kiosk
is first placed in use. Warranty claims shall be made (i) by written notice
within thirty (30) days after discovery of the defect within the Warranty
Period; or (ii) the defective PRODUCT is returned to Integrated no longer than
thirty (30) days following the last day of the Warranty Period, provided that
PPK supplies written notification to Integrated of the serial numbers of the
defective PRODUCTS prior to the end of the Warranty Period. Each warranty claim
shall be accompanied by proof of purchase by the end user showing the date of
purchase.
(f) There are no warranties of any kind respecting the equipment and services
provided by Integrated except as set out in this agreement. All other warranties
and conditions, express, implied or imposed by operation of law, are excluded
and disclaimed, subject to any limitations imposed by law.
(g) The liability of Integrated for losses or damages of every nature and kind,
whether in contract or tort, arising from or related to this agreement and any
equipment or services supplied by INTEGRATED, shall be limited to direct damages
in an amount not exceeding in the aggregate the price actually paid for the
specific equipment sold or services rendered to PPK. In no event shall
INTEGRATED be liable for incidental, special, consequential or punitive,
aggravated or exemplary damages, including and not limited to loss of use, loss
of data and economic loss, and all such are hereby excluded and waived by PPK.
Power Photo & Integrated Kiosk Manufacturing Agreement
ARTICLE 7: INDEMNIFICATION
(a) PPK shall defend and hold Integrated and its sub-license harmless from any
claims, suits, losses and damages arising from (i) a claim that the PRODUCT
infringes any Patent or intellectual property rights of a third party; or (ii)
the use, placement, or operation of the PRODUCTS after delivery by Integrated to
PPK, other than a loss arising from a breach by INTEGRATED of the warranty
provisions of this agreement.
(b) Integrated shall defend and hold PPK harmless from any claims, suits, losses
and damages arising from (i) breach or non-performance by INTEGRATED of the
warranty obligations as set out in this agreement; (ii) alleged defects in the
manufacture of the PRODUCT caused by Integrated's deviation from PRODUCT
specifications as set out by PPK.
ARTICLE 8: RECORDS AND REPORTS
(a) PPK will carry out from time to time a quality audit and re-set the
specifications as may be required. Changes to specifications shall be subject to
reasonable approval by INTEGRATED as to its ability to source the required
components and manufacture the PRODUCT with such changes. Any cost increases
resulting from changed specifications will result in corresponding price
increases, including standard overhead, administrative and profit markup.
ARTICLE 9: OBLIGATIONS OF THE PARTIES
(a) Integrated and their associates will undertake their bes efforts to comply
with the specifications, volumes and quantities as may be required by PPK on and
subject to the other terms of this agreement.
ARTICLE 10: NOTICE AND BREACH
(a) All notices, submissions, requests and statements to be given and all
payments to be made hereunder shall be given or made by delivery to the
respective addresses of parties as set forth below unless notification of a
change of address is given in writing. Any notice shall be in writing and signed
by an authorized officer of the party giving the notice. Notices shall be
delivered may be sent by facsimile, but shall be followed by hand delivery and
shall be deemed to have been given at the time of the delivery.
Power Photo Kiosk Inc.
181 Whitehall Drive
Markham, Ontario
L3R 9T1 Fax: (905) 948-8377
Attention: Ron Thompson
Power Photo & Integrated Kiosk Manufacturing Agreement
Integrated Kiosk Inc.
397 Humberline Drive
Unite #7
Rexdale, Ontario
M9W 5T5 Fax: (416) 675-5868
Attention: Michael Parker
ARTICLE 11: TERM AND TERMINATION
1. The Term
Subject to the termination provisions set out below the initial term of this
Agreement shall be a term of 5 (five) years and successive one year renewal
terms thereafter through the end of the life of the PRODUCT.
2. Termination
(a) Either party may give notice to the other in written for one year prior to
the expiry date or any automatic extension thereof to terminate this Agreement.
(b) This Agreement shall terminate if either party becomes insolvent or makes a
general assignment for the benefit of its creditors, or files or has filed
against it a petition in bankruptcy.
(c) Termination of this Agreement shall not affect the right of the parties to
collect damages or other relief resulting from a breach of this Agreement by the
other party. In the event of termination of this Agreement all purchase orders
in Integrated's possession effective as of the termination shall be fulfilled
provided payment for undelivered orders shall be made in full on delivery.
(d) Either party may terminate this Agreement in the event o a material breach
by the other party, which breach is not cured within 60 days of written notice
of the specifically described breach.
ARTICLE 12: GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the law of
the Province of Ontario, Canada and the applicable federal laws of Canada.
ARTICLE 13: ARBITRATION
Any controversies or disputes between the parties, arising out of or relating to
this Agreement or the subject matter hereof which are not capable of
satisfactory amicable resolution shall be finally settled by binding arbitration
in accordance with the rules of conciliation and arbitration of the Arbitration
Act (Ontario). If the parties can agree on one arbitrator, a single arbitrator
shall be used, if not, arbitration shall be by three arbitrators. All hearings
and discovery shall take place in English. Judgement or any order of the
arbitrators may be enforced in any court of competent jurisdiction.
Power Photo & Integrated Kiosk Manufacturing Agreement
ARTICLE 14: ENTIRE AGREEMENT
(a) This Agreement represents the final and complete Agreement between the
parties and supersedes all prior negotiations, representations and agreements.
There are no agreements, collateral agreements, representations, warranties or
terms except as contained herein.
(b) Modifications to or waiver of rights under this Agreemen shall be in writing
and signed by the parties.
ARTICLE 15: PARTIAL INVALIDITY
In case anyone or more of the provisions contained herein for any reason shall
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability, shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision(s) had never been contained herein.
ARTICLE 16: PRICES AND TERMS
(a) PRODUCT pricing is as set out in Exhibit (A) attached.
(b) Integrated may withhold delivery or performance under this agreement at any
time that PPK is in default of making any payment as and when due. In the event
of a disputed payment, PPK may pay any undisputed portion and shall pay the
disputed amount to an agreed third party in escrow pending resolution of the
dispute, and upon such payment being made Integrated shall resume delivery or
performance.
(c) If on reasonable grounds PPK believes that the prices at which Integrated
currently supplies the PRODUCT are not reasonably competitive in the
marketplace, PPK will provide INTEGRATED with detailed information on the
reasons therefore for consideration. Based on such information INTEGRATED may
agree to alter its price to a price agreeable to both parties to, or decline to
do so. If agreement on price continuation or adjustment is not arrived at, PPK
may solicit quotations from other qualified, reputable manufacturers for a fixed
price quotation based on the specifications and quantities being purchased by
PPK under the terms of this agreement for the term of the agreement. If PPK
obtains a firm quotation that is at least 2% less than the price being charged
by INTEGRATED, it may submit the quotation and all information to support the
credentials of the third party manufacturer to INTEGRATED with a request that
INTEGRATED match the quotation. INTEGRATED may then either (i) alter its pricing
to match the quotation; (ii) waive the exclusivity provisions of this agreement;
terminate this agreement to further orders. If INTEGRATED disputes the third
party quotation and submit the matter to settlement by arbitration. This process
will be completed in no more than 60 days
(d) If INTEGRATED disputes the third party quotation as not being in accordance
with the foregoing
Power Photo & Integrated Kiosk Manufacturing Agreement
provisions it may submit the dispute to determination by arbitration pursuant to
this agreement. The arbitrator shall determine the matter, and if the third
party or its quotation is not in accordance with this agreement, shall rule such
quotation as invalid. If the quotation is found to be valid, INTEGRATED shall
elect within ten (10) days which of options (i), (ii) or it shall take under the
preceding paragraph
ARTICLE 17: CONFIDENTIALITY
(a) The parties shall maintain the terms of this Agreement i confidence, and
shall not disclose the terms of this Agreement (other than to their financiers,
professional advisers and auditors) without the prior written consent of the
other party, which consent shall not be unreasonably withheld, except when
disclosure is reasonably necessary to comply with provisions of law, to obtain
or continue financing, to obtain legal advice, or to consult with accountants.
In connection with any necessary disclosure, the disclosing party shall take
reasonable steps to restrict the extent of disclosure.
(b) Each party will protect the other's CONFIDENTIAL INFORMATION (as determined
in the Article 1). Neither party will disclose to third parties the other's
CONFIDENTIAL INFORMATION without the prior written consent of the party.
(c) Information received under this agreement shall not be exempted from the
obligations of confidentiality and limited use even if the information is
covered by another secrecy agreement.
(d) Notwithstanding anything else in this agreement, information received by one
party from the other party shall not be deemed to be CONFIDENTIAL INFORMATION or
proprietary if:
* It was in the possession of the one party prior to the disclosure by the
other party;
* It was available to the public prior t the disclosure to the one party;
* It is subsequently acquired by the one partyfrom a third party whose
source of information was neither directly nor indirectly the other party
and the third party had the right to disclose the information with the
prior written approval of the other party.
(d) PPK and Integrated may not without the other party's prior written consent
disclose to any third party, use, exploit or copy any CONFIDENTIAL INFORMATION
disclosed by the other party. Both parties agree, however, that notwithstanding
any other provision in this agreement, Integrated may disclose PPK's
CONFIDENTIAL INFORMATION to be an approved sub-contractor.
(e) Both parties shall take all reasonable precautions to prevent third parties
from gaining unauthorized access to information received from the other party.
(f) If requested by one party on termination of this Agreement, the other party
shall return all CONFIDENTIAL INFORMATION received from the one party and copies
thereof.
Power Photo & Integrated Kiosk Manufacturing Agreement
ARTICLE 18: FORCE MAJEURE
Neither party shall be liable for any failure or delay in its performance under
this agreement due to causes, including, but not limited to, act of God, act of
civil or military authority, fire, epidemic, flood earthquake, riot, war
sabotage, labour shortage or dispute, government action, which are beyond its
reasonable control; provided that the delayed party gives the other party
written notice of such cause promptly, and in any event within ten (10) days of
discovery thereof. This provision does not apply to payment obligations.
The party so affected shall be released under this Agreement, but only to the
extent and only for the period that its performance of said obligations is
prevented by circumstances of Force Majeure in the event of Force Majeure the
parties may meet to correct such failure an to consider renegotiation of this
agreement. If such Force Majeure persists for six (6) months or more, this
Agreement may be terminated upon ten (10) day prior written notice by either
party.
Dated this 14 day of May, 1999.
For and on behalf For and on behalf
INTEGRATED KIOSK INC. POWER PHOTO KIOSK INC.
/s/ Mark Durst /s/ Ron Thompson
- ------------------------- ----------------------------
Signature Signature
Mark Durst - President Ron Thompson - President
- ------------------------- ----------------------------
Name and Position Name and Position
Power Photo & Integrated Kiosk Manufacturing Agreement
EXHIBIT (A)
TERMS:
1/3 Upon acceptance of the order
1/3 Two weeks following acceptance of the order
1/3 Net 30 shipping date
PRICE:
Pricing is shown here for each major component, however kiosk orders will only
be accepted with all major components listed below.
(1) Kiosk Shell and Frame (as per specifications in Exhibit C, items 1,2 and 3) $3,630
(2) Computer (as per specifications in Exhibit B) $2,085
(3) Integration (as per specifications in Exhibit C, items 4 and 6) $3,260
TOTAL COST FORT MANUFACTURE & INTEGRATION $8,975 + applicable taxes
Power Photo & Integrated Kiosk Manufacturing Agreement
EXHIBIT (B)
The following is the minimum computer specifications. Integrated reserves the
right to substitute comparable components when necessary, provided that the
substitutions do not materially effect the performance of the kiosk and such
substitutions are approved by PPK.
* Intel Manufactured Pentium II Motherboard
* Intel Pentium II CPU 350 MHz
* 128 Mb SDRAM
* Western Digital 26400 EIDE HDD
* Matrox Marvel G200 AGP video
* Liteon CD-ROM
* US Robotics 56K Modem
* 3 ECP Parallel ports plus 1 regular parallel port and 3 serial ports
* Soundblaster PCI 64
* Power supply with software control
* Additional standard features: floppy drive, PS/2 mouse and keyboard, 2 USB
ports
Power Photo & Integrated Kiosk Manufacturing Agreement
EXHIBIT (C)
The following is the kiosk specifications. Integrated reserves the right to
substitute comparable components when necessary, provided that the substitutions
do not materially effect the performance of the kiosk and such substitutions are
approved by PPK.
* 1: Metal Frame 3 - 14Ga. Adjustable shelves (std metal with durable
textured baked enamel, color: black)
4 - 12 Ga. Unistrut corner posts (std metal with
durable textured baked enamel, color: black)
16 Ga. Securing Brackets with 1/4" foam tape for CPU,
Printers, and Touchscreen Monitor (std metal with
durable textured baked enamel, color: black)
16 Ga. Printer shoot (std metal painted black)
16 Ga. Box for securing bill Acceptor (std metal
painted black)
16 Ga. Locked down Coin Box (std metal painted black)
16 Ga. Stainless steel top with 1/8" decorative bars
(logo's NIC)
16 Ga. Stainless steel trim frame at printer chute
2" chrome plated piano hinge at 4 doors
1" x 1" angle frame inside each door (std 14 Ga. Metal
painted black)
Forklift cutouts (reinforced and welded to bottom
framework)
* 2. Kiosk Enclosure 1/2" plywood cover with plastic laminate backer sheet
on inside (typical)
Side doors; 1/2" plywood covered with plastic laminate
#1
3/8" Karadon on return edges of side panels
(3/8" rounded edge)
3/16" plexi glass with 1/8" white masonite
for graphic panels
Edges on graphic cutouts finished in PVC
(color: navy blue)
3/4" x 3/4" hinged wood frames for graphic
panels (graphics NIC)
Back Door; 1/2" plywood covered with plastic laminate
#1 3/4" plywood covered with plastic
laminate #1
Front Door; 1/2" plywood covered with 1/4" Karadon
3/8" Karadon on return edges of sides of
panel (3/8" rounded edge)
3/8" removable plexi lense at camera
3/16" light deflecting removable lenses at
both light boxes
3/16"removable plexi lenses at graphic above
and below monitor
1/2" ply with brushed metal finish for plate for
coin/bill acceptor
1/2" x 1/8" rubber gasket at both monitors cutouts
Front door lockable, all others internally latched
and released
110/50W-halogen light entered at top of unit (blue
color light)
Plastic Laminate No. 1 - Formica 969-50 suede finish
Karadon Solid Surface - Color match to Corian Azure
Wire Management 3" x 3" duct, 72" - 12 outlet
PowerBar, 1 1/2" x 1" wire management,
Velcro plug straps.
Misc. internal packaging to secure equipment during
shipping (top monitor not included)
2-4" muffin fans (one top and one bottom of Kiosk)
Cut out access in bottom for electrical and telephone
connection
* 3. Lighting 2-CSA Approved light boxes with internal transformers
2 x 3 x 20w low voltage lights manufactured by
subcontractor
* 4. Touch Screen KDS 15" K7MACD or equivalent
* 5. Computer Patriot Computer as per Exhibit "B"
* 6. Money Acceptor Mars Series 2000 downstacker (700 bill holder
included) or Mars Cashflow 33