<PAGE> 1
EXHIBIT 10.2
THIS AGREEMENT made as of the 1st day of July, 1999.
BETWEEN:
CKNW/CFMI, A DIVISION OF WIC RADIO LTD. a company having its
business offices at 2000-700 West Georgia Street Vancouver, B.C.
("CKNW/CFMI")
AND
BLUE ZONE ENTERTAINMENT, INC., a company having its registered
office at 52 Water Street, Vancouver, B.C. V6B 1A4
("BZE")
A. BZE specializes in strategic interactive development, web site
design and other internet services.
B. CKNW/CFMI specializes in radio production and promotion.
C. CKNW/CFMI have developed individual Web Sites but desire such Web
Sites to be re-designed, enhanced, hosted and maintained by Blue
Zone
C. The parties desire to enter into this Agreement on the terms and
conditions hereinafter set forth.
NOW THEREFORE THIS AGREEMENT WITNESSES that it is agreed by and
among the parties hereto as follows:
ARTICLE 1
DEFINITIONS
1.1 In this Agreement, the following expressions shall have the
following meanings:
a) "CKNW" means CKNW, a division of WIC RADIO Ltd.;
b) "ROCK101" means ROCK101/CFMI, a division of WIC RADIO Ltd.;
c) "BZE" means Blue Zone Entertainment, Inc.;
d) "AGREEMENT" means this agreement, including any written
amendments hereafter made to this agreement;
<PAGE> 2
-2-
e) "WEB SITES" means CKNW and ROCK101's internet world wide Web
Sites, with the Universal Resource Locator addresses
www.CKNW.com and www.ROCK101.com.
ARTICLE 2
ENGAGEMENT OF BZE
2.1 CKNW/CFMI hereby engages BZE to design, maintain and operate the
Web Sites on the terms and conditions set forth herein.
2.2 The parties acknowledge that all remuneration provided herein,
including monthly fees, commissions and net revenue distributions
are for the period commencing July 1, 1999.
2.3 CKNW/CFMI shall:
a) pay an initial production fee of $20,000 (plus applicable
taxes) to towards a $100,000 development budget to BZE for its
know-how and effort in creating the Web Sites, 100% of such
fee to be payable upon execution of this contract as a deposit
prior to commencing production of the Web Sites, and the
balance ($80,000) to be provided in the form of commercial
air-time during the first 12 months of the contract, in
accordance with Article 8.3.
b) pay BZE a monthly fee starting July 1, 1999 of $4,000 (plus
applicable taxes) to be applied toward the monthly maintenance
of the Web Sites.
c) provide, during the life of this agreement but without
transfer of any ownership, all equipment, software,
connectivity, hosting fees and out of pocket expenses which
CKNW/CFMI and BZE mutually agree are necessary for BZE's
activities relating to the ongoing maintenance of the Web
Sites;
d) collect and distribute Web Sites revenue in accordance with
Article 3; and
e) provide BZE full access to CKNW/CFMI's news, sports and other
proprietary content (and, where permissible, content purchased
by CKNW/CFMI, with a cost allocation against revenue to cover
royalties, mutually agreed upon by CKNW/CFMI and BZE) for use
only on the Web Sites, subject always to CKNW/CFMI's right and
discretion to exclude any content which, for any reason, it
does not wish to appear on the Web Sites.
f) make its best efforts to sell advertising on the Web Sites and
pursue other interactive media and internet business for the
benefit of the Web Sites and CKNW/CFMI and BZE;
g) provide BZE with a license to publish and broadcast CKNW/CFMI
content online.
h) provide BZE with contra air-time to offset BZE development
costs in accordance with Article 8.
<PAGE> 3
-3-
i) Invite and include a representative of BZE in all internal
strategic meetings pertaining to the development and
commercialization of the Web Sites including meetings
facilitated by CKNW/CFMI with 3rd parties.
2.4 BZE shall:
a) re-design, maintain, and operate, the Web Sites at a leading
level of aesthetic and technical quality and content;
b) act as an advertising representative for the Web Sites and
make its best efforts to sell advertising on the Web Sites and
associated streaming media feeds and to pursue other
interactive media and internet business for the benefit of the
Web Sites and CKNW/CFMI;
c) provide exclusive site hosting and streaming media hosting for
the CKNW/CFMI Web Sites.
d) provide exclusive ad management, whether facilitated by BZE or
a third party and content sales support for the Web Sites.
e) remain in good corporate standing and provide, at its own
expense, all know-how, management and personnel necessary to
carry out BZE's obligations herein.
2.7 Nothing in this Agreement shall be construed as transferring or
diminishing ownership of any interest in any assets, including
intellectual property rights, or altering the ownership structure
of CKNW/CFMI or BZE in any way, or to entitle BZE to any interest
whatsoever in CKNW/CFMI's broadcasting business or entitle
CKNW/CFMI to any interest whatsoever in BZE's interactive
business
2.8 This Agreement will commence on August 1, 1999 and terminate on
the earlier of:
a) an agreement in writing of the parties to terminate;
b) three years from the date hereof, unless renewed or extended
by written agreement of the parties after making good faith
efforts to negotiate a renewal or extension hereof;
c) for any reason, upon 6 months' notice from CKNW/CFMI to BZE or
from BZE to CKNW/CFMI;
d) in the event of default in accordance with Article 6.
2.9 In the event of termination for any reason other than default by
BZE, CKNW/CFMI agrees to provide BZE with a positive letter of
reference.
2.10 The parties agree that during the term of this Agreement their
relationship is exclusive, meaning CKNW/CFMI shall not employ any
other third party to maintain, design, host or alter CKNW/CFMI's
Web Sites CKNW/CFMI or stream/host CKNW/CFMI's media feeds
online. Blue Zone will not engage
<PAGE> 4
-4-
directly or indirectly in website design services for - radio
stations based in British Columbia, without the prior written
consent of CKNW/CFMI, such consent not to be unreasonably
withheld.
2.11 The parties acknowledge that CKNW/CFMI are the sole owners of the
domain names www.cknw.com and www.rock101.com and all content
originally provided by CKNW/CFMI including text, graphics,
pictures, sounds or moving images placed on the Web Sites, and
digitized or coded by BZE for placement on the Web Sites. With
respect to all code developed and owned by BZE which is required
to run the Web Sites, BZE hereby grants an irrevocable and
non-transferable, non-exclusive license to CKNW/CFMI to retain
and use such code. On the event of default by CKNW/CFMI per
Article 6.1, there will be immediate termination of license. All
trademarks and logos of BZE, which may be used on the Web Sites
from time to time are owned by BZE, but will be included in back
ups of the Web Sites.
2.12 All code, graphics, audio and video on the Web Sites must be
backed up at least once every quarter and once after every major
change. A copy of this tested backup will be presented to
CKNW/CFMI within ten working days of its creation. This code
cannot be altered, re-purposed, sold, shared, distributed or
transmitted in any way without the prior written consent of BZE,
unless this agreement has been terminated per Article 2.8.
ARTICLE 3
ACCOUNTING AND DISTRIBUTION OF REVENUE
3.1 Web Sites revenue shall consist of the fees paid by advertisers
who pay for a presence on the Web Sites and exclusively placed
within associated streaming media feeds, e-commerce, content
sales and additional revenue sources which the parties may agree
in writing to include. Such revenue, after deduction of Web Site
expenses which shall, hereunder, be charged against Web Sites
revenue, are referred to herein as "Net Web Site Revenue".
3.2 The parties acknowledge CKNW/CFMI and BZE are each making certain
proprietary assets or goodwill available to assist business. It
is intended that net revenue which is attributable principally to
a proprietary asset or goodwill of one party shall be divided
75%/25% in favour of that party. More particularly, the parties
agree:
3.3 Advertising revenue, meaning revenue from advertisers who pay for
a presence on the Web Sites, shall be distributed, after payment
of related expenses which shall not exceed ten (10) % of net
revenue unless both parties agree to such costs, 75% to CKNW/CFMI
and 25% to BZE.
3.4 In determining what expenses shall be charged against Web Sites
revenue for the determination of Net Web Site Revenue, both
CKNW/CFMI and BZE will assign job numbers to each category of
expense, allocate hourly and monetary costs against such
categories in an accurate and timely fashion, and such
<PAGE> 5
-5-
allocations will be reviewed and approved by CKNW/CFMI and BZE
prior to any distributions.
3.5 BZE will be entitled to a commission of 15% of the money paid to
CKNW/CFMI for any Web Sites advertisements sold by BZE after July
1, 1999, to be paid at the time of net revenue distributions, and
such commissions shall be charged as an expense against Gross Web
Sites revenue
3.51 CKNW/CFMI will be entitled to a commission of 15% of the money
paid to CKNW/CFMI for any Web Sites advertisements sold by
CKNW/CFMI after July 1, 1999, to be paid at the time of net
revenue distributions, and such commissions shall be charged as
an expense against Gross Web Sites revenue
3.6 Subject only to a reasonable holdback agreeable to the parties
for anticipated expenses, CKNW/CFMI shall distribute all Net Web
Sites Revenue at the end of each quarter, or so soon thereafter
as the approval process under Article 3.3 permits, for the
accounting period beginning July 1, 1999.
3.7 CKNW/CFMI shall prepare and distribute financial reports within
60 days after each quarter.
3.8 If any financial report shows that in the period covered by such
report a party has retained or been paid an amount which exceeds
or is less than its entitlement for such period then that party
shall forthwith repay such excess or be paid such deficiency.
ARTICLE 4
LIABILITY AND INSURANCE
4.1 Each party covenants and agrees with the others to indemnify and
save harmless the others from any and all liability, obligations,
claims or losses resulting from any liability arising from
content it alone has created, from its unauthorized acts and from
its failure to comply with its obligations hereunder.
4.2 BZE will carry:
a) a Comprehensive General Liability policy with all normal
extensions including, but not limited to, products, completed
operations, broad form property damage, non-owned automobile,
personal injury, contingent employers' liability, and a cross
liability clause with a limit of not less than $2,000,000.
b) an errors and omissions liability policy with a limit of not
less than $2,000,000 and this policy will include a cross
liability clause. Coverage will include protection in respect of
libel and slander and defamation of character.
4.3 The policies outlined in (a) and (b) above will include
CKNW/CFMI, a division of WIC Radio Ltd. as an additional insured.
A certificate of insurance evidencing (a) and a complete copy of
(b) will be provided. All coverages must be in a form acceptable
to and approved by our insurance advisor.
<PAGE> 6
-6-
4.4 BZE shall indemnify and save harmless CKNW/CFMI from any
deductible, insured's contribution or uninsured claims or
liabilities arising from the activities of BZE except as
described in article 4.5.
4.5 Notwithstanding Article 4.4, CKNW/CFMI shall bear its own
liability for damages or other claims incurred:
a) as a result of the willful act or omission or the gross
negligence of CKNW/CFMI or its employee(s);
b) in connection with or in the course of the performance or
purported performance by a party of any work or service
related to BZE's operations carried out solely by CKNW/CFMI or
its employees; or
c) arising from any content produced by CKNW/CFMI and merely
reproduced (with necessary formatting and coding by BZE) on
the Web Sites.
4.5 Notwithstanding Article 4.4, BZE shall bear its own liability for
damages or other claims incurred:
a) as a result of the willful act or omission or the gross
negligence of BZE or its employee(s);
b) in connection with or in the course of the performance or
purported performance by a party of any work or service
related to BZE's operations carried out solely by BZE or its
employees; or
c) arising from any content produced by BZE alone.
ARTICLE 5
DECISION MAKING AND INSPECTION OF BOOKS
5.1 Except as expressly provided herein, all decisions regarding the
maintenance, design, content, and alterations to the Web Sites,
and all decisions regarding the pursuit and conduct of other
business by BZE shall be subject to CKNW/CFMI's ongoing approval,
in CKNW/CFMI's discretion, not to be reasonably withheld.
5.2 A designated representative from each of CKNW/CFMI and BZE shall
meet monthly or on such further occasions as any one of them
requests, to review any issues pertaining to the Web Sites or
this Agreement.
5.3 CKNW/CFMI shall keep complete and accurate books of account,
accounting and banking records, corporate documents and records,
and any other records necessary to the proper operation of the
Web Sites. Such records will be kept in accordance with generally
accepted accounting and business procedures, and in full
accordance with all requirements of law. BZE shall have the right
at all reasonable times (but at its own expense) to examine and
make copies of or extracts from all such documents and books.
Such right may be exercised through any agent or employee of BZE
designated by it or by an independent chartered accountant or
lawyer designated by BZE.
<PAGE> 7
-7-
ARTICLE 6
DEFAULT
6.1 In this Article, the following expressions shall have the
following meanings:
a) "Default" means:
i) failure to promptly and honestly honour any financial
obligation herein;
ii) any action or omission which causes the Web Sites to cease
to exist;
iii) any assignment for the benefit of creditors, appointment of
a trustee or receiver of any assets, or institution of any
bankruptcy proceedings which is acquiesced in or is not
dismissed within ninety days of the bringing of such action;
iv) the dissolution, winding-up or termination of a party; or
iiv) a breach of any other provision of this Agreement of which
the party is advised by notice in writing from another
party, which failure continues for fourteen days after the
said notice. The party who is in receipt of such a notice
may request that the validity of the notice be determined by
a single arbitrator appointed pursuant to the provisions of
the Commercial Arbitration Act (B.C.). The costs of the
arbitrator so appointed shall be borne by the party
requesting arbitration, and if it is determined that the
notice is invalid, the requesting party shall be repaid the
cost of the arbitration by the party who issues the notice.
6.2 In the event of a Default by any party, a non-defaulting party
may do any one or more of the following:
a) terminate this agreement immediately without giving up any
claim for damages arising from the default;
b) pursue any remedy available to it in law, equity or by
statute, it being acknowledged by each party that specific
performance, injunctive relief (mandatory or otherwise) or
other equitable relief may be the only adequate remedy for a
default;
c) take all steps and make all payments as may reasonably be
required to cure the default, in which event all payments,
costs and expenses incurred therefore shall be payable by the
defaulting party to the non-defaulting party on demand;
d) waive the default provided, however, that any waiver of a
particular default shall not operate as a waiver of any
subsequent or continuing default and shall not bind the other
non-defaulting party.
ARTICLE 7
PROMOTION OF BZE
<PAGE> 8
-8-
7.1 CKNW/CFMI will promote BZE without charge in the following ways:
a) CKNW/CFMI shall permit BZE to include reasonable promotional
logos, hyperlinks and design credits, on each and every page
of the Web Sites.
b) After termination of this Agreement, CKNW/CFMI shall ensure
that an acknowledgment of BZE's design of the Web Sites
appears at the bottom of the main page of the Web Sites for a
period of five years after termination, or until the majority
of the Web Sites, including the front end design and back-end
programming/database is redesigned by someone else, whichever
happens first.
c) CKNW/CFMI will actively promote the Web Site content,
services, features and the URL(s) with on-air promotional
spots. Each of the CKNW/CFMI stations will broadcast these
promotions on a regular basis to assist in attracting traffic
to the Web Site. CKNW/CFMI will give BZE a design credit
within those promotional broadcasts. These credits will
include a BZE mention and a "SITE DESIGNED BY BLUE ZONE" or
alternative credit to be determined by BZE within all such
promotional broadcasts. CKNW/CFMI will include a credit and
reasonable promotion of BZE on all promotional ads CKNW/CFMI
broadcasts or prints for the Web Site;
d) CKNW/CFMI will make good faith efforts to ensure its sales and
other staff refers all requests it receives for internet ad
designs, web design or other services of an interactive media
or internet nature to BZE.
ARTICLE 8
CONTRA
8.1 The parties agree that the value of the Web Sites at launch (Fall
1999) is Fifty Thousand Dollars ($50,000) per Web Site for a
total value of One Hundred Thousand Dollars ($100,000). This
total development cost represents approximately 1000 hours at
BZE's book rate of $100.00 per hour. This development budget to
BZE for its know-how and effort in creating the Web Sites, minus
the initial deposit will place a value of $80,000 on the Web
Sites at public launch. CKNW/CFMI will provide to BZE commercial
air-time of equal value ($80,000) during the first 12 months of
the contract, in accordance with Article 8.3.
8.2 After the public launch of the Web Sites, the parties will
collectively assign a monthly value for ongoing interactive
development by BZE beyond that covered by the basic maintenance
fee, and provide BZE with additional contra commercial air time
of equal value.
8.3 Blue Zone will have the right to choose which station(s) and
times to place such commercial air time, and have full creative
control over such commercials. CKNW/CFMI has the right to approve
the suitability for broadcast of all creative. Such approval will
not be unreasonably withheld. All commercials will be booked
<PAGE> 9
-9-
on a pre-emptible basis, subject to air time availability. BZE
agrees to pay CKNW/CFMI for all out of pocket costs incurred in
producing these commercial announcements. The commercials are
intended for the sole use of BZE to advertise its products or
services, and are not to be used either directly or indirectly
for any other product or service.
ARTICLE 9
ACKNOWLEDGMENTS UPON TERMINATION
9.1 Upon termination of this Agreement, CKNW/CFMI shall perform a
final distribution in accordance with the terms hereof, and
thereafter BZE shall not be entitled to any further payments,
remuneration or share of revenue. In that event, all equipment
and software purchased by CKNW/CFMI, together with incidental
documentation, as well as all copyright to Web Sites content, and
all design, HTML, Web page and database coding, is owned by
CKNW/CFMI and shall be relinquished to CKNW/CFMI forthwith.
9.2 BZE is the sole owner of all of its proprietary, patented and
copyrighted technology, equipment, chattels or software created
by BZE, and all such items shall be relinquished to BZE forthwith
except code which is subject to the license granted under Article
2 herein.
ARTICLE 10
ARBITRATION
10.1 All disputes or differences whatsoever which shall at any time
hereafter (whether during the continuance in effect of this
Agreement or upon or after its discharge or termination) arise
between the parties concerning this Agreement, its construction
or effect or as to the rights, duties and liabilities of the
parties hereto, under or by virtue of this Agreement, or
otherwise, as to any other matter in any way connected with or
arising out of or in relation to the subject matter of this
Agreement shall be referred to arbitration pursuant to the
provisions of the Commercial Arbitration Act (B.C.).
ARTICLE 11
NOTICES
11.1 Any notice or demand or other document required or permitted to
be given under the terms of this Agreement shall be sufficiently
given to the party to whom it is addressed if delivered or
forwarded by registered mail or facsimile to the parties hereto
at the addresses set forth below.
a) CKNW/CFMI:
-------------------------------------------
b) BZE:
--------------------------------------------
or to such other address as either party or parties may furnish
to the other from time to time. Every such notice shall be deemed
to have been received and
<PAGE> 10
-10-
given at the time when, in the ordinary course of transmission,
it would have been delivered at the address to which it was sent.
ARTICLE 12
INTERPRETATION
12.1 The headings to the paragraphs of this Agreement are inserted
for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
12.2 Where the context of this Agreement requires, all pronouns and
any variations thereof shall be deemed to refer to the masculine, feminine or
neuter, or singular or plural, as the identity of the person, persons, entity or
entities may require.
12.3 In the event that any provision of this Agreement or any part
thereof is invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions shall not in any way be affected
thereby.
ARTICLE
RELATIONSHIP
The parties agree and acknowledge that their relationship is an
Interactive Partnership designed to commercialize the Web Sites
and generate revenue. Nothing contained in this agreement shall
be deemed or construed to constitute a relationship or
partnership, joint venture, or agency relationship between BZE
and CKNW/CFMI.
BZE has the right to represent the Web Sites in accordance with
Article 2.4.
Each party represents that it is and shall be during the currency
of this Agreement a "resident of Canada" within the meaning of
the Income Tax Act (Canada).
ARTICLE
MISCELLANEOUS
1.1 The parties shall execute and deliver such further documents, and
do such further acts and things as may be required to implement
the intent and provisions of this Agreement and shall not act
unreasonably or arbitrarily in respect of any matter hereunder.
14.2 Time shall be of the essence of each of the provisions of this
Agreement.
14.3 This Agreement may be executed by the parties hereto in any
number of counterparts with the same effect as if the parties
hereto had all signed the same document. All counterparts of this
Agreement shall be construed together and constitute one
instrument.
<PAGE> 11
-11-
14.4 The termination of this Agreement will not affect the rights or
obligations of any party arising pursuant hereto prior to the
date of termination.
14.5 No party shall assign this Agreement or any part of it to any
other person without the written consent of the remaining parties
hereto.
14.6 This Agreement shall ensure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns.
14.7 This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the
laws of the Province of British Columbia and laws of Canada
applicable therein excluding any conflicts of law, rule or
principle which might refer such construction to the laws of
another jurisdiction.
14.8 Each of the Owners acknowledges that it has obtained such
independent legal advice with respect to this Agreement and the
matters contemplated thereby as it determined appropriate or
necessary.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement to take effect as of July 1, 1999
Authorized Signatory of )
CKNW/CFMI, a division of WIC RADIO LTD. )
)
)
)
)
/s/ )
---------------------------------------
Authorized Signatory )
)
/s/ )
---------------------------------------
Authorized Signatory )
The Corporate Seal of )
BLUE ZONE ENTERTAINMENT, INC. )
was hereunto affixed in the )
presence of: )
)
)
/s/ Bruce Warren )
---------------------------------------
Authorized Signatory ) c/s
)
/s/ Jamie Ollivier )
---------------------------------------
Authorized Signatory
