EXHIBIT 1.2
MARKETING, DEVELOPMENT & DISTRIBUTION AGREEMENT
THIS AGREEMENT made as of the 14th day of December, 2001.
BETWEEN:
Cyop Systems International Incorporated, a company
formed under the laws of the state of Nevada, USA
(hereinafter referred to as "Marketer")
- and -
Mitch White an individual residing in the Province of
British Columbia, Canada
(hereinafter referred to as Vendor)
WHEREAS pursuant to the software acquisition agreement between Cyop Systems Inc.
and the Vendor made as of even date herewith (the "Software Acquisition
Agreement"), Cyop Systems Inc sold and Vendor purchased from Cyop Systems Inc.
certain computer software as more particularly set out in the Software
Acquisition Agreement of even date;
AND WHEREAS the parties hereto wish to enter into an agreement to better exploit
the Work, and to further explore certain synergies and business opportunities
available to the parties hereto with respect to the Work, and with respect to
other aspects of the computer software business;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises
and the mutual covenants herein contained the parties hereto covenant and agree
as follows:
1. Definitions
1.0 For the purposes of this Agreement, the following terms shall have the
meanings herein:
"Act of Insolvency" means that a party, other than for purposes a
re-organization:
(i) institutes proceedings for its winding-up, liquidation, or
dissolution or consents to the filing of any petition with
respect thereto or files a petition seeking reorganization,
readjustment, arrangements, composition or similar relief
under any Canadian or other applicable law or consents to the
filing of any such petition or to the appointment of a
receiver, liquidator, trustee or similar officer of itself or
any part of its property or makes an assignment for the
benefit of creditors or is unable, or admits in writing its
inability, to pay its debts as they become due or otherwise
acknowledges its insolvency or is deemed for the purposes of
any applicable law to be insolvent or voluntarily suspends
transaction of its usual business or any action is taken by
such party in furtherance of any of the aforesaid purposes or
if such party takes any action pursuant to the Winding-Up Act,
or
(ii) provided that if a court having jurisdiction enters a decree
or order for its winding up, liquidation or dissolution or
adjudges it to be insolvent or enters a decree or order, which
remains in force, undischarged or unstayed, for a period of 20
days or more, approving, as properly filed, a petition seeking
reorganization, readjustment, arrangement, composition or
similar relief for any such party under any Canadian or other
applicable law, or the appointment of any receiver,
liquidator, trustee or similar officer of any such party or
all or any part of its property, or
(iii) provided that if any application is made with respect to it
under the Companies' Creditors Arrangement Act (Canada) or
similar or replacement legislation or if a proceeding is
instituted for its winding up or a petition in bankruptcy is
presented against it under a bankruptcy or similar act and
such application, proceeding or petition is not dismissed,
stayed or withdrawn within 20 days after such party has notice
or knowledge of the institution thereof
"Agreement" means this Agreement as may be amended from time to time and any
Schedule annexed thereto.
"Business Day" means any day between the hours of 8:00 a.m. and 5:00 p.m.
Pacific Coast Standard Time, other than a Saturday, Sunday or statutory holiday
observed in the Province of British Columbia.
"Gross Earnings" means the percentage, as set out in Schedule II hereto of
Adjusted Gross Sales of the Work less the current year's interest on the
Acquisition Promissory Note.
Adjusted Gross Sales" means the sum of all gross revenues billed and collected
by February 28 of the following year from the sales of the Marketer Software,
less the following deductions: (1) customer add on charges including shipping,
packaging and handling, (2) returned merchandise, (3) marked-down and price
adjusted merchandise, (4) customer discounts, (5) taxes, inclusive of sales,
value added, withholding, goods and services and similar taxes, and (6)
allowances for bad debts and anticipated product returns, price protection and
defective merchandise.
"Ownership Percentage" means that percentage ownership interest, being One
Hundred (100%), the Vendor has acquired in the Work calculated in accordance
with the provisions of the Schedule 'A' of the Software Acquisition Agreement.
"Promissory Note and Acquisition Promissory Note" shall be as set forth in the
Software Acquisition Agreement.
"Software" means computer software in the form of a CD-ROM disk or other device
containing substantially full and complete software code, including the source
code, the assembly code, the object code, and such data files and other files as
are necessary for the Work to achieve its functional purpose, whereby date and
visual images, with or without sound, can be manipulated, communicated,
reproduced or perceived with the aid of a computer or other hardware platform.
"Marketer Software" means the Software of the Ownership Percentage listed and
described in Schedule "A" of the Software Acquisition Agreement.
"Work" has the meaning defined in the Software Acquisition Agreement executed
between the parties of even date.
1.1 Headings. The division of this Agreement into Sections and the insertion of
recitals and headings are for convenience of reference only and shall not affect
the construction or interpretation hereof.
1.2 Singular, Plural, Gender. Wherever in this Agreement the context so
requires, the singular number shall include the plural number and vice versa and
any gender herein used shall be deemed to include the feminine, masculine or
neuter gender.
1.3 Agreement. The terms "hereof', "hereto", "herein", "hereunder" and similar
expressions refer to this Agreement and not to any particular Section or other
portion hereof and include any agreement supplemental hereto.
1.4 Entire Agreement. The Parties agree that this Agreement and the Software
Acquisition Agreement constitutes the complete and exclusive statement of the
terms and conditions between them covering the performance thereof and cannot be
altered, amended or modified except in writing executed by both parties hereto.
Any representation, warranty or condition, written or otherwise, not expressly
contained in this Agreement or in an authorized written amendment thereto shall
not be enforceable by either party. Each of the parties acknowledges that it has
not been induced to enter into this Agreement by any representation not
specifically stated herein.
1.5 Severability. If any of the provisions contained in this Agreement is found
by a court of competent jurisdiction to be invalid, illegal or unenforceable in
any respect, the validity, legality or unenforceability of the remaining
provisions contained herein shall not be in any way affected or impaired
thereby.
1.6 Governing Law. This Agreement and its application and interpretation will be
governed exclusively by the laws prevailing in the Province of British Columbia
applicable therein (excluding any conflict of laws rule or principle that might
refer such construction to the laws of another jurisdiction). The courts of the
Province of British Columbia shall have exclusive jurisdiction over all matters
arising in relation to this Agreement and each party hereby submits to the
jurisdiction of the courts of the Province of British Columbia.
1.7 Date for Action. In the event that any date on which any action is required
to be taken hereunder by any of the parties is not a Business Day, such action
shall be required to be taken on the next succeeding day which is a Business Day
unless otherwise provided in this Agreement.
1.8 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with Generally Accepted Accounting Principles, which
shall mean, at any time, accounting principles generally accepted in the United
States as recommended in the Handbook of the American Institute of Certified
Public Accountants or as recommended by such other entity as may be approved by
a significant segment of the accounting profession in the United States, which
are applicable to the circumstances as of the date of determination.
2. Appointment of Marketer
2.1 The parties hereto agree to better exploit the Work during the term of this
Agreement and Vendor hereby grants exclusive rights to Marketer during the term
of this Agreement with respect to of the Work to enable Marketer to exploit the
Work in the manner contemplated in this Agreement.
2.2 Marketer shall provide services and management skills, as it deems necessary
to exploit the Work on behalf of Vendor, Marketer, including the services set
forth in Section 3 hereof.
2.3 In consideration of the capital investment, expenditures, time and effort to
be incurred by Marketer hereunder, the Vendor hereby agrees to appoint Marketer
as its sole and exclusive agent and representative to develop, enhance, modify,
market, distribute and maintain the Work during the term of this Agreement.
Marketer shall be entitled to appoint any agent or subcontract to perform any of
its tasks or responsibilities.
2.4 Marketer and Vendor agree that the activities hereunder shall be supervised
by an executive committee, which shall be comprised of two to six members. An
equal number of members shall be appointed by each of the Marketer on the one
hand, and the vendor on the other hand. The Chairman of the executive committee
shall be appointed by the representatives of the vendor of the Work other than
Marketer. The Vice-Chairman shall be appointed by the Marketer. Any two members
may request a meeting of the executive committee by providing at least fourteen
(14) days' prior written notice. All of such meetings shall be held at the
offices of the Marketer or such other place as may be agreed. Two members of the
executive committee, one of whom is an appointee of the Marketer must be present
at any meeting in order to constitute a quorum. In the event that there are not
enough members present to constitute a quorum, the Chairman shall adjourn the
meeting for a date which is five (5) days later at the same place and those
representatives who are present shall constitute a quorum.
2.5 Marketer shall regularly advise the executive committee of the status of the
development, modifications, enhancements, marketing and distribution of the
Work.
2.6 Marketer shall provide the executive committee with all such information,
reports, business plans, financial statement or other information that the
executive committee may request with respect to any matter relating to this
Agreement.
3. Marketer Services
3.1 Marketer represents that it, and/or its affiliated companies, has knowledge
of the software market, including expertise, which will enable it to market,
distribute, develop and maintain the Work through its affiliated companies.
Vendor hereby appoints Marketer:
(i) to exclusively maintain, develop, enhance, distribute and
market the Work worldwide;
(ii) to grant licenses or sublicenses and make subdistribution
arrangements and provide development, maintenance enhancement
and warranty services on the Work; and
(iii) as the Vendor's agent and attorney in fact to enter into any
agreements in relation to the licensing or other marketing,
distribution, bank financing and development of the Work.
3.2(a) Vendor agrees that Marketer may delegate or subcontract any of the
responsibilities contained in this Agreement to its affiliated companies and
entities and/or to third parties; provided, however, that no such delegation
shall relieve Marketer of any of its obligations or representations hereunder.
(b) Vendor acknowledges that Marketer may engage sales agents to establish a
distribution network for selling, marketing, distributing and licensing the
video game based on the Work.
3.3(a) Marketer agrees to market, develop and distribute the Work subject to
market demand and technological capabilities of the Work, and subject to
Marketer's reasonable commercial judgment, through its affiliated entities or
through third parties. In furtherance thereof Marketer may determine
redevelopment, sales, marketing strategies and set selling prices for the
software based on the Work. Marketer shall be responsible for the costs of
reproduction, marketing, duplication and distribution of the software based on
any distributed Work, including enhancements.
(b) Marketer shall use its reasonable commercial efforts subject
to Marketer's reasonable commercial judgment and subject to
market conditions, to diligently, directly or indirectly,
market, sell, distribute, package and price any distributed
Work with a view to developing sales;
(c) Marketer shall use reasonable commercial efforts subject to
Marketer's reasonable commercial judgment to secure
appropriate distribution channels for any distributed Work,
subject to market demand and technical capabilities of such
Work;
(d) Marketer shall use reasonable commercial judgment to maintain
commercial functionality of any distributed Work in the market
place in accordance with industry standards.
(e) Marketer (including its affiliated companies) has not made and
does not hereby make any representations or warranties to
Vendor with respect to the quantity of sales of any
distributed Work. Vendor shall not make any claim nor shall
any liability be imposed upon Marketer and its affiliated
companies based on any claim that more sales could have been
made or that better business could have been done that which
was actually made or done by Marketer and its affiliated
companies or that better prices or terms could have been done
that which was actually made or done by Marketer and its
affiliated companies or that better prices or terms could have
been obtained by Marketer and its affiliated companies in
connection with the exploitation of any distributed Work.
3.4 Vendor acknowledges that Marketer and its affiliated entities manufacture
and sell Software platforms, some of which may be similar to or competitive with
the Work, and nothing herein shall be deemed in any way to limit or inhibit
Marketer from manufacturing, selling or otherwise exploiting such other software
in such manner as it sees fit. Vendor further acknowledges that it shall have no
right or interest in or to any such other software.
4. Development
Marketer shall have the exclusive right in its sole discretion to develop the
Work. The development of the Work and an assessment of its technological
feasibility and commercial potential shall be at the sole discretion of the
Marketer. Marketer makes no representation to Vendor as to the future
technological feasibility or marketability of the Work.
5. Maintenance.
(a) Marketer agrees to deliver the most current version of the
Work to Vendor from time to time, upon reasonable notice by
Vendor.
(b) Marketer agrees to ensure that those marketed software based
on the Work is maintained in accordance with industry
standards.
(c) Marketer agrees to ensure that all instruction booklets, as
usually provided for such software based on the Work in the
industry, reflect the functionality for consumer use.
(d) Marketer agrees to perform its maintenance obligations to the
extent necessary to meet the obligations to end users of the
work.
6. Gross Revenue Allocations
6.1 The Marketer and Vendor agree to share in the exploitation of the Work as
follows:
(a) Vendor shall be allocated and entitled to receive 100% of the
Adjusted Gross Sales each year up to the amount required to
pay all accrued and unpaid interest on the Acquisition
Promissory Note; and
(b) thereafter, Vendor shall be allocated and entitled to receive
One Hundred percent (100%) of the Adjusted Gross Sales equal
to the Vendor's Ownership Percentage times the Gross Earnings.
(c) the balance of any and all revenues and profits created from
the exploitation of the Ownership Percentage shall be
allocated and paid to the Marketer or its assigns.
It is acknowledged that the Vendor's entitlement to the Adjusted Gross Sales
hereunder is a legal and beneficial interest and not a security or ownership
interest.
It is agreed that those development costs and related amortization of
development costs incurred in the development of the Ownership Percentage shall
be an expense incurred in the business created hereunder and allocated to the
Vendor up to the amount of cash and promissory note payments received by the
Marketer.
6.2 In the event of any dispute between Vendor and those other parties that may
have an interest in the Work, in relation to the allocation of the Adjusted
Gross Sales or Gross Earnings, the CFO of the Marketer shall determine the
proper allocation of the Gross Earnings or Adjusted Gross Sales among Vendor and
those other interests, and Vendor agrees to be bound by the decision of such
person.
7. Payment
7.1 Until such time as the principal and accrued interest due pursuant to the
terms and conditions of the Promissory Note and Acquisition Promissory Note have
been paid in full, Vendor agrees to apply amounts received by it under Section 6
above as follows:
(a) firstly, to the payment of interest accrued and unpaid
pursuant to the terms of the Acquisition Promissory Note and;
(b) secondly, 52% of the balance remaining, to the payment of
principal balance owed under the Promissory Note and
Acquisition Promissory Note; and
(c) finally, the balance to be remitted to the Vendor after
deduction of any applicable. income and other taxes as
required under tax law, for the Vendor's own use.
7.2 Net amounts due to shall be paid to Vendor on an annual basis on the last
Business Day of March of the following year.
Vendor hereby authorizes Marketer to remit and if necessary advance funds
of the Vendor for all applicable. income taxes as required under tax law.
8. Term
8.1 The term of this Agreement shall be for an initial period of 15 years from
the date of this Agreement. This Agreement shall be automatically renewed for
additional five-year terms upon notice to the other party not less than 90 days
prior to the expiry of the then current term.
9. Reporting
9.1 Marketer agrees to provide Vendor with an annual report of the business
created hereunder containing a statement of all Adjusted Gross Sales and Vendors
Gross Earnings allocation thereof not later than March 31 of each year.
10. Rights of Termination
10.1 Without limiting any of its rights or remedies at law or equity, Vendor may
terminate this Agreement on 30 days written notice to Marketer in the event that
Marketer commits an Act of Insolvency, or there is a material breach of any
uncured material representation, warranty, covenant or obligation of this
Agreement by Marketer. However, Marketer shall have 60 days to cure such breach
or to have commenced in good faith a cure of such breach.
11. Remedies
11.1 Marketer shall indemnify, hold harmless, defend and bear all reasonable
costs of defending Vendor, together with its successors and permitted assigns,
from, against or in respect of any and all damage, loss, deficiency, expense
(including, but not limited to, any reasonable legal costs or expenses), action,
suit, proceedings, demand, or judgment to or against Vendor arising out of, in
connection with any claim for warranty, product liability, product maintenance,
or with respect to the condition of products sold or distributed by Marketer not
expressly assumed by Vendor as provided herein.
12. Assignment
12.1 The right and authority of Marketer to license or delegate certain of its
duties or responsibilities as contemplated pursuant to Section 3 does not
entitle Marketer to make any assignment of its rights or obligations hereunder,
other than as expressly provided herein. Notwithstanding any other provisions in
this Agreement, Marketer shall be entitled to assign its rights under this
Agreement to any third party for financing purposes or as security to any bank
or other lender.
12.2. Vendor shall not assign, sell or transfer its rights under this Agreement
without the prior written consent of the Marketer. The parties hereto
acknowledge that Marketer may transfer, sell or assign any percentage interest
Marketer may have in the Work provided however that any amounts due to Vendor
under this Agreement shall not be diminished thereby.
12.3 Vendor agrees to subordinate its interest to Marketer's bank 's or lender
for those accounts receivable and inventory created from the exploitation of the
Ownership Percentage and shall enter into a subordination agreement with
Marketer's bank or lender in the form required by such lenders in respect
thereof. In Furtherance of the foregoing Vendor shall execute the Individual
Acknowledgement Agreement attached within.
13. U.S. Tax Matters
13.1 The parties hereto recognize and agree that they will have created an
unincorporated joint venture for the Work taxable as a general partnership for
United States federal income tax purposes. The parties hereto appoint the
Marketer as "tax matters partner" for the joint venture/general partnership, as
such term is defined in section 6231 of the U.S. Internal Revenue Code of 1986.
The Marketer agrees to prepare and file all U.S. Federal, State, and Local
income tax returns for such joint venture/general partnership and prior to the
filing thereof forward drafts to the executive committee.
14. No Partnership for Non Tax Purposes
14.1 Notwithstanding anything in this Agreement to the contrary, the parties
hereby confirm that they do not intend to form a partnership or limited
partnership under the laws of any jurisdiction, and do not intend to be partners
with one another or any third party for purposes of this Agreement, or otherwise
for exploiting the Work.
15 Notice
Unless otherwise expressly provided in this Agreement, any notice, request,
direction, consent, waiver, extension, agreement or other communication that is
or may be given or made hereunder shall be in writing and either personally
delivered to a responsible officer of the addressee or sent by mail, courier or
confirmed facsimile transmission to:
Marketer Vendor
Cyop Systems International Incorporated
Suite 880, Attention: Mitch White
50 W Liberty Street 5469 Wildwood Crescent
Reno, Nevada Tsawwassen, BC
USA 89501
The parties hereto may change their respective address for notice by notice
given in the manner aforesaid. Any notice given by mail, courier or confirmed
facsimile transmission shall be deemed to have been received on the next
business day after transmission. Any notice given by personal delivery shall be
deemed to have been received on the business day on which it is delivered and
left at the recipient's address for notice.
16. Currency
Any dollar amounts noted herein are represented in United States currency.
17. Successors and Assigns
Subject to the restrictions and conditions of assignment and transfer herein
contained, this Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and other
legal representatives, successors and permitted assigns.
18. Severability
Each provision of this Agreement is intended to be severable. If any provision
hereof is illegal or invalid, such illegality or invalidity shall not effect the
validity of the remainder hereof.
19. Entire Agreement
This Agreement and the Software Acquisition Agreement sets forth all (and is
intended by all parties to be an integration of all) of the representations,
promises, agreements and understandings among the parties hereto with respect to
the purchase, sale, maintenance and development of the Work, and there are no
representations, promises, agreements or understandings, oral or written express
or implied, among them other than as set forth, referred to, or incorporated
herein.
20. Further Assurances
The parties hereto will execute such other and further documents and assurances
or cause the same to be executed and delivered in order to give full effect to
the provisions of this Agreement upon written request.
21. Gender, Etc.
Words importing the singular number only include the plural, and words in the
plural include the singular, and the words importing the masculine gender shall
include the feminine gender and the neuter gender where the context so requires,
and wording importing Person shall include Persons or vice versa.
22. Headings
The division of this Agreement into sections and the article headings are for
convenience or reference only and shall not affect the interpretation or
construction of this Agreement.
23. Time of the Essence
Time shall be of the essence in this Agreement.
24. Waiver
No waiver of any provision of this Agreement shall constitute a waiver of any
other provision nor shall any waiver of any provision of this Agreement
constitute a continuing waiver unless otherwise expressly provided.
This Agreement shall be effective as of the date first written above.
The parties have read and agree to the terms and conditions of this Agreement
and acknowledge by way of signature below.
Mitch White (Vendor)
Per:
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Authorized Signatory
Cyop Systems International Incorporated.
Per:
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Authorized Signatory
SCHEDULE A
Working Title of Software
Credit-play transaction Network delivers an online financial transaction
platform that provides industry-leading security, real-time
transaction processing, reporting and client support. CTN offers the
industry benchmark in terms of ease-of-use, flexibility, scalability
and processing speed
Schedule II
Attached to and forming part of
Marketing, Development & Distribution Agreement
Dated December 14,2001
Pursuant to the definition "Gross Earnings"
The applicable percentage each year of the agreement shall be:
Year one Twenty percent (20%)
Year two seventeen percent (17%)
Year three fifteen percent (15%)
Year four and thereafter ten percent (10%)