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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
August 26, 1996
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Date of Report (date of earliest event reported)
DATALINK SYSTEMS CORPORATION
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Exact name of Registrant as Specified in its Charter
Nevada 0-21069 35-3574355
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State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
17420 High Street, Los Gatos, California 95032
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Address of Principal Executive Offices, Including Zip Code
(408) 354-5604
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Registrant's Telephone Number, Including Area Code
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective August 21, 1996, the Company completed a transaction with a
non-affiliated Canadian corporation (the Buyer) pursuant to which the Company
sold its Mail Alert System Software and related technology to the Buyer for
cash and a note. At closing, the Company received $1,500,000 Canadian in
cash. An additional payment of $1,500,000 Canadian is due in November 1996.
The Company also received a note for $36,730,000 Canadian. The note is due
December 31, 2006, and bears interest at 8% per annum. The note is
collateralized by the technology.
The Company and the Buyer entered into a "Management and Marketing
Agreement" dated August 21, 1996 (the Agreement). The Agreement expires
August 31, 2001, and may be extended for two additional two year terms. The
extension of the term will be automatic and the Company or the Buyer during
any extension can terminate the agreement with 90 days notice to the other
party. The significant terms of the agreement are as follows:
The Company will receive an annual fee of 10% of "Direct Cost of
Marketing, Distribution and Selling" technology related services, as defined
in the Agreement. The Company receives an exclusive worldwide right to use,
modify and sublicense the source code for the technology, including
application software, intellectual property and documentation.
The Company has first right of refusal in the event the Buyer desires to
transfer all or part of the application software. The Buyer will receive,
commencing January 1, 1997, an annual "owners fee" of $1,500,000 Canadian,
which is to be applied as follows: pay accrued interest and the excess, if
any; a) 60% of the remaining fee applied to the note balance, and b) 40% of
the remaining fee paid in cash to the Buyer until the note is paid in full.
Buyer will receive the "net revenue less owners fee payable," as defined
in the Agreement, related to the technology sold to be applied as follows: a)
60% of the net revenue applied to the note balance, and b) 40% of the net
revenue paid in cash to the Buyer until the note is paid in full.
After the note is paid, the "net revenue," as defined in the agreement,
related to the technology sold is to be applied as follows: 40% of the net
revenue paid in cash to the Buyer.
The cash received by the Company will be accounted for under the
provisions of the "Emerging Issues Task Force, 88-18: Sales of Future
Revenues." It is expected that the owners fees and net revenue allocated to
the Buyer will not be sufficient to service the note receivable principal and
interest payments due the Company and as such the note will not be recorded.
The note is expected to have no financial statement impact.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
Exhibit 10.1 Application Software Purchase Agreement between
Datalink Systems Corporation and Shalcor Investments
Exhibit 10.2 Management and Marketing Agreement between Datalink
Systems Corporation and Shalcor Investments
Exhibit 10.3 8% Secured Term Note<PAGE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
DATALINK SYSTEMS CORPORATION
Dated: October 10, 1996 By /s/ Anthony LaPine
Anthony LaPine, President
DRAFT: August 26, 1996
APPLICATION SOFTWARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 14th day of June, 1996.
BETWEEN:
SHALCOR INVESTMENTS INC. a Saskatchewan corporation having an office in
Regina, Saskatchewan (hereinafter referred to as "Shalcor")
OF THE FIRST PART
AND
DATALINK COMMUNICATIONS CORPORATION, a Nevada corporation, having an office in
San Jose, California, hereinafter referred to as "Communications")
OF THE SECOND PART
AND
DATALINK SYSTEMS CORPORATION, a Nevada corporation, having an office in Los
Gatos, California (hereinafter referred to as "Systems")
OF THE THIRD PART
WHEREAS:
1. the Vendor is the beneficial owner of the Purchased Assets; and
2. the Vendor has agreed to sell and assign the Purchased Assets to the
Purchaser and the Purchaser has agreed to purchase the Purchased Assets on the
terms and conditions hereinafter set forth and contained.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement, the recitals and the schedules, if any, the following
words, phrases and expressions shall have the following meanings:
a. "Application Software" means the computer programs consisting of the
modules and having the functional and technical specifications more
particularly described in Schedule A to this Agreement together with
Enhancements;
b. "Asset Valuation Report" means the Indication of Fair Market Value report
dated August 21, 1996, prepared for the Purchaser by Corporate Valuation
Services Limited effective as of the Valuation Date, as defined in the Asset
Valuation Report;
c. "Closing" has the meaning set out in Section 7.1;
d. "Closing Date" means August 21, 1996, or such other date as the parties
may agree;
e. "Confidential Information" of a party (the "Disclosing Party") shall mean
information of a confidential and proprietary nature relative to the
Disclosing Party or its business and in the case of the Purchaser includes,
without limitation, the Purchased Assets from and after the Closing Date and
other matters deemed confidential and proprietary by the Disclosing Party,
written notice of which is given to the party receiving such information (the
"Receiving Party"). Notwithstanding the foregoing, except with respect to the
Purchased Assets, "Confidential Information" of the Disclosing Party shall not
include:
i. written information not clearly marked as confidential or oral
disclosures not subsequently confirmed in writing as confidential;
ii. information which the Receiving Party can demonstrate
A. was published or generally known in the industry at the time
of its disclosure by the Disclosing Party, or became published or generally
known in the industry without breach of this Agreement by the Receiving Party;
B. was known to the Receiving Party at the time of disclosure by
the Disclosing Party, independently of the Disclosing Party and without breach
of an obligation of confidentiality to the Disclosing Party;
C. is disclosed to the Receiving Party by a third party which had
a right to disclose such information and was not in breach of an obligation of
confidentiality to the Disclosing Party;
D. is independently developed by the Receiving Party without use,
directly or indirectly, of any Confidential Information of the Disclosing
Party; or
E. information required to be disclosed pursuant to applicable
law, regulation, judicial or administrative order, lawful subpoena or
enforceable discovery demand, provided the Receiving Party uses commercially
reasonable efforts to obtain confidential treatment of such information.
f. "Customers" means any person using the Services:
g. "DataLink Entities" means Systems and Communications and "DataLink Entity"
means any one of them;
h. "Documentation" has the meaning specified in Subsection v. of the
definition of Purchased Assets;
i. "E-Mail" means electronic mail;
j. "Effective Date" means July 31, 1996;
k. "Enhancement" means any improvement, revision or other modification made
to or replacement of the Application Software by Vendor which is necessary:
i. to provide Customers with a then current Service;
ii. to keep the Service competitive with alternative products available
to Customers; and
iii. to keep the Service compatible with the personal computer and
networking technology then in use,
including, without limitation, the changes set out in Appendix A.1 to Schedule
A to the extent that the Purchaser, through its agent, continues to believe
that they make sense in light of then current market conditions and technical
developments;
l. "Infringement Claims" has the meaning specified in Subsection 5.1.b.;
m. "Intellectual Property" has the meaning specified in Subsection i. of the
definition of Purchased Assets;
n. "Letter of Representation" means a letter from the Vendor to Corporate
Valuation Services Limited in substantially the form attached as Schedule B;
o. "Management Agreement" means the Management and Marketing Agreement to be
entered into by the Purchaser and Systems on Closing for the management and
marketing of the Purchased Assets;
p. "Note" means the 8.0% Secured Term Note, secured on the Purchased Assets,
in substantially the form attached as Schedule D;
q. "Originality Certificate" means the Officer's Certificate in the form
attached as Schedule C;
r. "Patent" means the application for patent, a copy of which is attached as
Appendix A.1 of Schedule A;
s. "Purchase Price" has the meaning specified in Section 2.1;
t. "Purchased Assets" means the Application Software and all of the Vendor's
property and rights developed, acquired or used in connection with the
Application Software including, without limitation:
i. all products associated with or derivatives of the Application
Software and used to provide notification of the delivery of E-Mail messages
utilizing wireless technology;
ii. the benefit of all agreements necessary for the ownership of,
operation of, or the realization of the benefit from, the Application Software
including, without limitation, all service agreements and third party license
agreements;
iii. customer and supplier lists, inventions including, without
limitation, the invention embodied in the Patent, ideas, research,
discoveries, designs, systems, patterns, specifications, technology, know-how,
formulae, confidential information, data, source codes, object codes, computer
software development tools, operating systems, subroutines, algorithms,
methods, and processes;
iv. all intellectual property worldwide including, without limitation,
patents, trade marks, copyrights and trade secrets and applications for and
the right to apply for any intellectual property (the "Intellectual
Property"); and
v. copies of all records, documents (including, without limitation,
user documentation and source code listings), correspondence, notes and rights
related to the foregoing ("Documentation");
u. "Purchase Price" has the meaning set out in Section 2.1;
v. "Purchaser" means Shalcor and its permitted assigns;
w. "Section" means any section, subsection, article, clause, subclause,
paragraph or subparagraph of this Agreement;
x. "Security Agent Agreement" means the Security Agent Agreement to be
entered into by Communications, Shalcor and National Trust Company, as
security agent, on the Closing, for the purpose of holding the Purchased
Assets pursuant to the terms thereof;
y. "Service" means a service that provides screening and notification of the
delivery of E-Mail messages utilizing wireless technology which service is
currently known as MailXpress;
z. "Shalcor" means Shalcor Investments Inc. and its successors and assigns;
and
aa. "Vendor" means Communications and its permitted assigns.
1.2 Interpretation
a. The terms "this Agreement", "hereof" "hereunder" and similar expressions
refer to this Agreement and not to any particular Section, Subsection or other
portion of this Agreement and include any agreement amending or supplemental
to this Agreement. Unless something in the subject matter or context is
inconsistent therewith, reference herein to Sections and Subsections are to
Sections and Subsections of this Agreement.
b. Except as specifically stated in this Agreement, all references to
currency is to Canadian dollars.
c. This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of Alberta and the laws of Canada applicable therein,
except the conflict of laws rules, and the Parties attorn to the jurisdiction
of the Court of Queen's Bench of the Province of Alberta.
d. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Agreement the same will be construed as meaning the singular,
plural, masculine, feminine, neuter, body politic or body corporate where the
fact or context so requires and the provisions hereof and all covenants herein
will be construed to be joint and several when applicable to more than one
party.
e. Headings are inserted in the Agreement for convenience of reference only
and are not intended to affect the Agreement's interpretation.
1.3 Schedules
The following schedules are incorporated into and made part of this
Agreement:
Schedule A - Application Software Specifications
Schedule B - Letter of Representation to Corporate Valuation
Services Limited
Schedule C - Originality Certificate
Schedule D - Form of Note
Schedule E - Exceptions to the representations and warranties
set out in Article 4, if any
ARTICLE 2
AGREEMENT TO SELL, ASSIGN AND PURCHASE
2.1 The Vendor hereby sells, assigns and transfers all its right, title and
interest in the Purchased Assets to the Purchaser and the Purchaser hereby
purchases the entire right, title and interest of the Vendor therein, as of
the Effective Date, at and for $39,730,000 (the "Purchase Price") payable in
accordance with Article 3 hereof.
2.2 The parties agree that the fair market value of the Purchased Assets is
equal to the Purchase Price and agree that this determination is final and
conclusive between them.
ARTICLE 3
PURCHASE PRICE AND PAYMENT
3.1 The Purchase Price will be payable partly in cash and partly by execution
and delivery of the Note for the balance of the Purchase Price as follows:
a. $1,500,000 on Closing, by wire transfer, bank draft or solicitor's trust
cheque; and
b. $1,500,000 on or before November 1, 1996, by wire transfer, bank draft or
solicitor's trust cheque; and
c. $ 36,730,000, by execution and delivery of the Note;
3.2 The Purchaser will deduct and remit any withholding tax required to be
deducted and remitted in connection with any payment made under this Section
3.1.
3.3 The Purchaser will not be responsible for any taxes, levies or other
similar assessments including, without limitation, sales or use taxes payable
in connection with the purchase and sale contemplated by this Agreement, if
any.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Each of the DataLink Entities hereby, jointly and severally, undertakes,
represents and warrants to the Purchaser at the date hereof, at the Closing
Date and at the date of the payment referred to in Subsection 3.1 b. and
acknowledges that the Purchaser is relying on such undertakings,
representations and warranties that:
a. each of the DataLink Entities is a corporation (i) duly incorporated and
organized, validly subsisting and in good standing under the laws of the
jurisdiction of its incorporation; (ii) duly authorized, with the necessary
and sufficient permits and licenses to enable it to own its properties and to
carry on its business as presently owned and carried on by it; and
(iii) having the power and authority and right to enter into this Agreement
and each and every agreement and document to be executed and delivered by it
pursuant hereto and to perform each of its obligations as therein and herein
contained;
b. neither execution nor delivery of this Agreement and each and every other
agreement executed and delivered by the DataLink Entities pursuant hereto nor
the fulfilment or compliance with any of the terms hereof or thereof will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, the articles and by-laws, as amended, of
the DataLink Entities or any material agreement or instrument to which the
DataLink Entities or either of them is subject or will require any consent or
other action by any person or administrative or governmental body;
c. the Vendor now has and on the Closing Date will have good and marketable
title, free and clear of any and all claims, liens, encumbrances, mortgages,
security interests and charges, licenses or rights of other persons whatsoever
to all of the Purchased Assets except as set out in Subsection 4.1 c. of
Schedule E;
d. there are no agreements or contracts or other documents pertaining to the
acquisition or development of the Purchased Assets except as set out in
Subsection 4.1 d. of Schedule E, copies of which have been delivered to the
Purchaser and its counsel;
e. the names of the individuals involved in the development of the
Application Software are set out in Subsection 4.1 e. of Schedule E and all
these individuals were:
i. employees of the Vendor or its predecessor in interest who worked
within the scope of their employment to develop the Application Software or
part of it; or
ii. independent contractors or employees of independent contractors
which contractors were subject to agreements assigning their interest, if any,
in the Application Software to the Vendor or its predecessor in interest, a
description of which agreements is set out in Subsection 4.1 d. of Schedule E
and copies of which agreements have been delivered to the Purchaser and its
counsel;
f. the Application Software does not contain any third party software except
as set out in Subsection 4.1 f. of Schedule E, and the Vendor has licenses for
such third party software which allow the Vendor to market such software,
directly or indirectly through sublicensees, as part of the Application
Software and those licenses are assignable and will be assigned to the
Purchaser on Closing;
g. the Application Software was not derived from any third party's pre-
existing material except as set out in Subsection 4.1 g. of Schedule E, all
right, title and interest to which material was acquired by the Vendor
pursuant to the agreements identified in Subsection 4.1 d. of Schedule E;
h. the Vendor has not used or enforced or failed to use or enforce any
Intellectual Property rights or other rights associated with the Application
Software in any manner which could adversely affect the validity of the
Intellectual Property;
i. to the best of its knowledge there is not, and has not been, any
infringement or violation of the Vendor's rights in and to the Intellectual
Property;
j. the Vendor has not received notice of any claim of adverse ownership,
invalidity or other opposition to or conflict with the Purchased Assets;
k. there are now no and at the Closing Date will be no action, claim or
demand or other proceedings pending or, to the best of its knowledge,
threatened against the DataLink Entities before any court or administrative
agency which could materially adversely affect the financial condition or
overall operations of the DataLink Entities or either of them generally or the
Purchased Assets, and no judgment, order or decree enforceable against the
Vendor which does involve or may require the expenditure of money as a
condition to or a necessity for the right or ability of the Purchaser to
conduct its business involving the Purchased Assets;
l. it has not entered into any agreement which would entitle any person to
any valid claim against the Purchaser for a broker's commission, finder's fee
or any like payment in respect of the purchase and sale of the Purchased
Assets or any other matters contemplated by this Agreement;
m. the Application Software has been developed in accordance with good
professional standards applicable in the computer software industry including,
without limitation, using modern flexible programming languages and
development tools and writing computer code to allow the relevant Application
Software to run efficiently using the minimum amount of computer memory and
disk storage;
n. the Application Software operates in accordance with the applicable
associated user Documentation;
o. none of the Purchased Assets has been disclosed to any third party except
under obligations of confidentiality, the benefit of which obligations is
hereby assigned to the Purchaser;
p. there are no licenses, agreements, approvals or consents required or
advisable to enable Systems to lawfully and properly market the Application
Software and the service based on the Application Software in Canada and the
United States and no such licenses, agreements, approvals or consents will be
required by the Purchaser;
q. it has not done anything so as to preclude the Purchaser from having full
enjoyment and quiet possession of the Purchased Assets;
r. there are no outstanding options, agreements of purchase and sale or other
agreements or commitments obligating the Vendor to sell the Purchased Assets
or any of it, except pursuant to this Agreement;
s. there are no taxes, levies or other similar assessments including, without
limitation, sales, use or other taxes payable by the Owner in connection with
the purchase and sale contemplated by this Agreement;
t. the Application Software is available for use;
u. the Purchased Assets are not used in carrying on a business in Canada;
v. the ASSUMPTIONS, referred to in the Asset Valuation Report, are true and
correct; and
w. the Application Software is application software and is not systems
software as the terms "application software" and "systems software" are
generally used and understood in the computer industry.
All of the representations, warranties and covenants contained in this
Agreement and made and to be made by the DataLink Entities will survive the
Closing Date and continue in full force and effect for the benefit of the
Purchaser while any money due on the Note is outstanding.
4.2 Representations and Warranties of the Purchaser
The Purchaser undertakes, represents and warrants to the Vendor at the
date hereof and at the Closing Date and acknowledges that the Vendor is
relying on such undertakings, representations and warranties that the
Purchaser is now and on the Closing Date will be a corporation (i) duly
incorporated and organized, validly subsisting and in good standing under the
laws of the jurisdiction of its incorporation; and (ii) having the corporate
power and authority and right to enter into this Agreement and each and every
agreement to be executed and delivered by the Purchaser pursuant hereto and to
perform each of its obligations as therein and herein contained to purchase
the Purchased Assets in accordance with the terms of this Agreement.
The representations, warranties and covenants contained in this Agreement
and made and to be made by the Purchaser will survive the Closing Date and
continue in full force and effect for the benefit of the Vendor while any
money due on the Note is outstanding.
ARTICLE 5
COVENANTS
5.1 DataLink Entities' Assumption of Liability and Indemnity
Each of the DataLink Entities hereby, jointly and severally, covenants
and agrees to be liable to the Purchaser for and to indemnify and save
harmless the Purchaser from and against, effective as and from the Closing
Date, any claims, demands, actions, causes of action, damage, loss, costs
(including legal costs on a solicitor and his own client basis), liability or
expense which may be made or brought against the Purchaser and which it may
suffer or incur as a result of, in respect of, or arising out of:
a. any non-fulfilment of or breach of any covenant, undertaking,
representation or warranty on the part of the DataLink Entities, or any of
them, under this Agreement or any document or instrument contemplated by this
Agreement; and
b. subject to Section 5.3, infringement of any third party rights to the
Intellectual Property as a result of the use of the Intellectual Property by
the Purchaser on or after the Closing Date ("Infringement Claims").
5.2 Purchaser's Assumption of Liability and Indemnity
The Purchaser hereby covenants and agrees to be liable to the Vendor for
and to indemnify and save harmless the Vendor from and against, effective as
and from the Closing Date, any claims, demands, actions, causes of action,
damage, loss, costs (including legal costs on a solicitor and his own client
basis), liability or expense which may be made or brought against the Vendor
and which it may suffer or incur as a result of, in respect of, or arising out
of any non-fulfilment of or breach of any covenant, undertaking,
representation or warranty on the part of the Purchaser under this Agreement
or any document or instrument contemplated by this Agreement.
5.3 Limitation on Indemnity for Infringement Claims
The Vendor's obligation to indemnify the Purchaser, set out in
subsection 5.1 b. is subject to the Purchaser providing the Vendor with prompt
notice of any Infringement Claims forthwith upon the Purchaser receiving
notice of such claims. The Purchaser may defend the claim, at its own
expense. The Vendor, at its own expense, also has the right to defend any
Infringement Claim either by itself, if the Purchaser has elected not to do
so, or jointly with the Purchaser. The Purchaser will provide reasonable
assistance to the Vendor with respect to the defense of any Infringement
Claim, at the Vendor's reasonable expense. The Vendor will provide reasonable
assistance to the Purchaser with respect to the defense of any Infringement
Claim, at the Purchaser's reasonable expense.
5.4 Other Covenants
The Vendor (and with respect to Section 5.4 e. only, the Purchaser)
covenants and agrees as follows:
a. if the transactions contemplated by this Agreement do not close on or
before the Closing Date as a result of a breach of this Agreement by the
Vendor, then the Vendor will reimburse the Purchaser up to $20,000 of costs
incurred by the Purchaser in connection with the transactions contemplated by
this Agreement;
b. until the Closing Date, the Vendor will not sell, license or otherwise
dispose of any of the Purchased Assets or any part thereof or interest
therein, or agree to do so, or enter into any negotiations with a view to any
of the foregoing, without the prior approval of the Purchaser;
c. the Vendor will make available to the Purchaser for due diligence
investigations, all information, documents and agreements pertaining to the
development, acquisition and marketing of the Application Software including,
without limitation, all computer code including source code and related
documentation, marketing and product business plans and the full cooperation
of the DataLink Entities management but no such availability or review of this
material will relieve the Vendor of its obligations under this Agreement;
d. the Vendor will complete the Certificate of Originality and deliver it to
the Purchaser and the Purchaser's counsel on or before Closing;
e. each Receiving Party that receives Confidential Information from the
Disclosing Party shall maintain such Confidential Information in confidence,
shall not reveal the same to any third party (other than its employees on a
need to know basis in connection with the Receiving Party's performance under
this Agreement or the Management Agreement) and shall not use such
Confidential Information, directly or indirectly, for any purpose other than
as required in the performance of this Agreement or the Management Agreement;
and
f. the Vendor will acquire, at its expense and in the Purchaser's name,
licenses for any third party software comprising part of the Purchased Assets
not assignable or assigned by the Vendor to the Purchaser.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 The obligations of the Purchaser hereunder will be subject to the
satisfaction or compliance with, at or before Closing, of each of the
following conditions precedent (each of which is hereby acknowledged to be
included for the exclusive benefit of the Purchaser and may be waived in
writing in whole or in part):
a. the execution and delivery of the Management Agreement by the Vendor;
b. all legal and regulatory approvals and consents, whether from
shareholders, governmental authorities or other third parties necessary to the
completion of the transactions contemplated by the terms of this Agreement
have been obtained;
c. there will have been no material adverse change, financial or otherwise,
in the DataLink Entities or the Purchased Assets;
d. the Vendor will have performed or complied with, in all respects, all of
its undertakings, covenants and agreements hereunder to be performed or
complied with; and
e. the representations and warranties of the Vendor contained in Section 4.1
will be true and correct on Closing.
6.2 The obligations of the Vendor hereunder will be subject to the
satisfaction or compliance with, at or before Closing, of each of the
following conditions precedent (each of which is hereby acknowledged to be
included for the exclusive benefit of the Vendor and may be waived in writing
in whole or in part):
a. the execution and delivery of the Note, the Management Agreement and the
Security Agent Agreement by the Purchaser;
b. the Purchaser will have performed or complied with, in all respects, all
of its undertakings, covenants and agreements hereunder to be performed or
complied with; and
c. the representations and warranties of the Purchaser contained in
Section 4.2 will be true and correct on Closing.
ARTICLE 7
CLOSING
7.1 The transaction of purchase and sale contemplated by this Agreement will
be completed at 3:00 P.M. on the Closing Date at the offices of the
Purchaser's Solicitors ("Closing").
7.2 This Agreement and its component parts will not merge upon Closing or on
execution, delivery or registration of any documents executed, delivered or
registered pursuant to this Agreement or otherwise, but will survive Closing.
7.3 At the Closing the Vendor will duly execute and deliver or cause to be
executed and delivered to the Purchaser the following:
a. a bill of sale assigning the Purchased Assets to the Purchaser;
b. the Management Agreement;
c. the Originality Certificate;
d. the Letter of Representation;
e. the Security Agent Agreement;
f. copies of the Purchased Assets including, without limitation, copies of
all Documentation;
g. certified copies of resolutions of the directors of the DataLink Entities
authorizing the transactions; and
h. such other agreements and documents as the Purchaser may reasonably
request to give effect to the terms and conditions of this Agreement.
7.4 At Closing the Purchaser will execute and deliver or cause to be executed
and delivered the following:
a. wire transfer, bank draft or solicitor's trust cheque for the cash amount
of the Purchase Price payable on Closing pursuant to Section 3.1, subject to
any withholding tax payable in connection with such payment;
b. the Note;
c. the Management Agreement;
d. the Security Agent Agreement;
e. a certified copy of a resolution of the directors of the Purchaser
authorizing the transactions; and
f. such other agreements and documents as the Vendor may reasonably request
to give effect to the terms and conditions of this Agreement.
7.5 At Closing, the Purchaser, with the Vendor's assistance, will be entitled
to have a hard copy of the Purchased Assets printed out or, at the Purchaser's
option, copied electronically to disks, tapes or other storage media of the
Purchaser's choice and the printed or electronic copies delivered to the
Purchaser.
7.6 At Closing and as security for its obligations under the Note the
Purchaser will deliver to the Security Agent, under the Security Agent
Agreement, the source code for the Application Software delivered to the
Purchaser by the Vendor.
ARTICLE
NOTICES
8.1 Every request, notice, statement, communication, bill or waiver provided
for in this Agreement shall be in writing and shall be directed to whom it is
to be given, made or delivered at such person's address for service as
specified in this Section and may be served:
a. personally, by delivering it to whom it is to be served during that
person's normal business hours. Any personally served notice shall be deemed
to be received by the addressee, for the purposes of this Agreement, when
actually delivered as aforesaid; or
b. by telecopy (or by any other like method by which a written and recorded
message may be sent) directed to whom it is to be given, unless the sender is
aware that the relevant receiving equipment is not functioning properly. Any
notice so served shall be received by the addressee, for the purposes of this
Agreement upon written acknowledgment of receipt of such telecopy.
8.2 The addresses for service of notices hereunder of the following persons
shall be:
the DataLink Entities: c/o DataLink Systems Corporation
17420 High Street
Los Gatos, California
Attention: President
Purchaser: Shalcor Investments Inc.
2398 Scarth Street
Regina, Saskatchewan
SAP 2J7
Attention: Secretary-Treasurer
Fax No. 306-522-8190
8.3 Any of the foregoing may change their address for service in this Section
by notice given in accordance with this Section.
ARTICLE 9
MISCELLANEOUS
9.1 Severability
If any one or more of the provisions or parts thereof contained in this
Agreement should be or become invalid, illegal or unenforceable in any respect
in any jurisdiction, the remaining provisions or parts thereof contained
herein will be and will be conclusively deemed to be, as to such jurisdiction,
severable therefrom and:
a. the validity, legality or enforceability of such remaining provisions or
parts thereof will not in any way be affected or impaired by the severance of
the provisions or parts thereof severed; and
b. the invalidity, illegality or unenforceability of any provision or part
thereof contained in this Agreement in any jurisdiction will not affect or
impair such provision or part thereof or any other provisions of this
Agreement in any other jurisdiction.
9.2 Further Assurances
Each of the parties will, at any time and from time to time at the
request of the other, execute and deliver any and all such further instruments
or assurances as may be necessary or desirable to give effect to the terms and
conditions of this Agreement.
9.3 Counterpart and Facsimile Execution
This Agreement may be executed in one or more counterparts and may be
executed by facsimile signatures and all such counterparts and facsimile
signatures taken together will constitute one and the same Agreement and will
be binding on the parties as if they had originally signed one copy of this
Agreement.
9.4 Assignment
Shalcor may assign all or part of its interest in this Agreement and the
Purchased Assets to its affiliates or associates, to the affiliates or
associates of Transprairie Energy Management Ltd. and to persons related to
them:
a. by giving written notice of the names and addresses of the assignees; and
b. by delivering to the Vendor a written undertaking of the assignees
acknowledging receipt of a copy of this Agreement and agreeing to be bound by
the terms and conditions of the Agreement severally and not jointly with any
other person and only to the extent of the assignee's undivided interest in
the Purchased Assets.
The Vendor may assign this Agreement in whole, but not in part, and only
with an assignment of all of its rights and obligations under the Note and the
Security Agent Agreement by:
a. giving written notice of the name and address of the assignee;
b. by delivering to the Purchaser a written undertaking of the assignees
acknowledging receipt of a copy of this Agreement and agreeing to be bound by
the terms and conditions of this Agreement.
9.5 Binding Effect
This Agreement and all of its provisions will enure to the benefit of the
parties and their respective successors and assigns, and will be binding upon
the parties and their respective successors and assigns. The expressions the
"Vendor" and the "Purchaser" as used herein will include Communication's and
Shalcor's assigns whether immediate or derivative, respectively.
9.6 Time of the Essence
Time will be of the essence of this Agreement.
9.7 Amendment
This Agreement may be altered or amended in any of its provisions when
any such changes are reduced to writing and signed by the parties hereto but
not otherwise.
9.8 Costs
Each party hereto will bear its own legal, accounting and other costs
relating to all matters involved in this transaction.
9.9 Confidentiality
Each of the parties will treat this Agreement and all information
relating to this Agreement and the transactions contemplated by this Agreement
confidentially and no public disclosure by any party will be made without the
prior approval of the other, not to be unreasonably withheld, except as
legally required by a party to satisfy disclosure obligations to shareholders
and regulators, in which case simultaneous notice of such disclosure will be
given to the other parties.
9.10 Entire Agreement
This Agreement, the Management Agreement, the Security Agent Agreement,
the Note and the exhibits and schedules referenced in each of the foregoing
constitute the entire Agreement among the parties and supersedes all
proposals, oral or written, and all other communications among them relating
to the subject matter hereof.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement on the
day first above written.
IN WITNESS WHEREOF the parties hereto have property executed this
Agreement.
DATALINK COMMUNICATIONS CORPORATION
/s/ Datalink Communications Corporation
DATALINK SYSTEMS CORPORATION
/s/ Datalink Systems Corporation
SHALCOR INVESTMENTS INC.
/s/ Shalcor Investments Inc.
<PAGE>
<PAGE>
SCHEDULE A
APPLICATION SOFTWARE DESCRIPTION
MailXpress
FUNCTIONAL SPECIFICATIONS
The application software necessary to provide the Service including,
without limitation, the following modules developed or licensed by the Vendor:
Post.Office MTA Licensed from Software.com Inc.
Post.Office Files Standard Windows Nt flat files
MailAlert Robot Developed by Communications
DataLink Database Paradox using Borland Database Engine
Auto Attendant System Licensed from Stylus Innovation Inc.
and Dialogic
MailAlert Paging Developed by Communications
Fax-Back Licensed from Omtool Limited
The above modules have the following general functions:
Post.Office MTA
This module stores E-Mail messages whether the message has been forwarded
from the Customer's original E-Mail box or has been sent directly through the
Internet.
Post.Office Files
These files contain the E-Mail messages.
MailAlert Robot
This module monitors the E-Mail messages stored in Post.Office Files,
using criteria from the DataLink Database to indicate alerts and deletions.
Checking is based on Windows NT's procedure "notice of and event". The
MailAlert Robot looks for such a notice, in this case, receipt of an E-mail
message, then checks the DataLink Database for alert criteria and
specifications.
DataLink Database
This module stores the Customer defined criteria and specifications for
the disposition of E-Mail messages received.
MailAlert Paging
This module receives notices from the MailAlert Robot with respect to
alerts or notifications to be given to a Customer. It accesses the DataLink
Database for the pager phone number of the Customer, the date and serial
number of the message, the name of the sender and the description of the
message. It formats this information into a string of characters and
transmits these through the modem pool to the appropriate paging company
using an appropriate paging protocol.
Fax-Back
This module consists of an Auto Attendant System that can be accessed by
the Customer. With a touch tone phone, a Customer can enter an identification
number to request the system to access a specified message and the Customer
may arrange to have the full text of the message sent to his primary or
secondary fax number or to an adjacent third party fax machine.
TECHNICAL SPECIFICATIONS
Certain components of the Application Software are described in more
detail in the Patent application attached as Appendix A.1 to this Schedule A.
ENHANCEMENTS
Certain Enhancements currently contemplated are set out in Appendix A.2
to this Schedule A, although whether or not these particular Enhancements will
be implemented is subject to then current market conditions and available
technology.<PAGE>
<PAGE> SCHEDULE B
Form of Letter of Representation<PAGE>
<PAGE>
SCHEDULE C
Originality Certificate<PAGE>
<PAGE>
SCHEDULE D
8.0% Secured Term Note<PAGE>
<PAGE>
SCHEDULE E
Exceptions to Representations and Warranties, if any.
Draft: August 26, 1996
MANAGEMENT AND MARKETING AGREEMENT
THIS AGREEMENT made as of the 21st day of August, 1996.
BETWEEN:
SHALCOR INVESTMENTS INC. a Saskatchewan corporation having an office in
Regina, Saskatchewan (hereinafter referred to as "Shalcor")
OF THE FIRST PART
AND
DATALINK SYSTEMS CORPORATION, a Nevada corporation, having an office in Los
Gatos, California (hereinafter referred to as "Systems")
OF THE SECOND PART
WHEREAS:
A. The Owner has acquired or developed and owns all of the right, title and
interest to the Technology;
B. The Owner wishes to appoint the Manager, as the Owner's agent, to manage
and market the Technology on the terms and conditions set out in this
Agreement.
NOW THEREFORE in consideration of the entitlements to receive certain
cash distributions under this Agreement, and the covenants, agreements and
premises herein contained, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement, the recitals and the schedules, if any, the following
words, phrases and expressions will have the following meanings:
a. "Agency Fee" has the meaning specified in Subsection 3.1. c.;
b. "Application Software" means the computer programs consisting of the
modules and having the functional and technical specifications more
particularly described in Schedule A to the Application Software Purchase
Agreement;
c. "Application Software Purchase Agreement" means the agreement of purchase
and sale made as of June 14, 1996, between Shalcor, Systems and DataLink
Communications Corporation;
d. "Customer" means any person using the Service;
e. "Documentation" has the meaning set out in Subsection iv. of the
definition of Technology together with all revisions thereto;
f. "Enhancement" means any improvement, revision or other modification made
to or replacement of the Application Software by Systems necessary:
i. to provide Customers with a then current Service;
ii. to keep the Service competitive with alternative products available
to Customers; and
iii. to keep the Service compatible with the personal computer and
networking technology then in use;
including, without limitation, the changes set out in Appendix A.2 to
Schedule A to the Application Software Purchase Agreement to the extent that
the Owner, through its agent, continues to believe they make sense in light of
then current market conditions and technical developments;
g. "Expenses" has the meaning specified in Subsection 3.1 c.;
h. "Gross Sales" has the meaning specified in Subsection 3.1 c.;
i. "Intellectual Property" has the meaning specified in Subsection iii. of
the definition of Technology;
j. "Interest Amount" means an amount equal to the annual interest payable
under the Note;
k. "Manager" means Systems and its permitted assigns in its capacity as the
agent for the Owner and the manager of the Technology appointed by the Owner
under this Agreement;
l. "Net Revenue" has the meaning specified in Subsection 3.1 c.;
m. "Net Sales" has the meaning specified in Subsection 3.1 c.;
n. "Note" means the 8.0% Secured Term Note dated as of August 21, 1996 issued
by Shalcor to DataLink Communications Corporation in connection with the
purchase of the Technology;
o. "Overhead and Administration Costs" has the meaning specified in
Subsection 3.1 c.;
p. "Owners" means Shalcor and its permitted assignees, if any, jointly each
as to an undivided interest in the Technology and "Owner" means any one of
them;
q. "Owners' Fee" has the meaning specified in Subsection 3.1 c.;
r. "Patent" means the application for patent for the Mail Alert System in the
United States Patent Office recorded as Case Docket No. P3001;
s. "Principal Payments" means the amounts payable to the Owners pursuant to
Subsections 3.1 b. i. and 3.2 c. i. for payment against the principal sum
outstanding under the Note;
t. "Security Agent Agreement" means the Security Agent Agreement made as of
August 21, 1996, among Shalcor, DataLink Communications Corporation and
National Trust Company and "Security Agent" means the Security Agent under the
Security Agent Agreement;
u. "Service" means a service that provides screening and notification of the
delivery of E-Mail messages utilizing wireless technology which service, at
the date of this Agreement, is known as MailXpress;
v. "Technology" means the Application Software and all of the Owner's
property and rights developed, acquired or used in connection with the
Application Software including, without limitation:
i. the benefit of all agreements necessary for the operation of, the
ownership of, or the realization of the benefit from, the Application Software
including, without limitation, all service agreements and third party license
agreements;
ii. customer and supplier lists, inventions including, without
limitation, the invention embodied in the Patent, ideas, research,
discoveries, designs, systems, patterns, specifications, technology, know-how,
formulae, confidential information, data, source codes, object codes, computer
software development tools, operating systems, subroutines, algorithms,
methods and processes;
iii. all intellectual property worldwide including, without limitation,
patents, trade marks, copyrights, trade secrets, applications for and the
right to apply for any intellectual property (the "Intellectual Property");
and
iv. copies of all records, documents (including, without limitation,
user documentation and source code listings), correspondence, notes and rights
related to the foregoing ("Documentation").
1.2 Interpretation
a. The terms "this Agreement", "hereof" "hereunder" and similar expressions
refer to this Agreement and not to any particular Section, Subsection or other
portion of this Agreement and include any agreement amending or supplemental
to this Agreement. Unless something in the subject matter or context is
inconsistent therewith, reference herein to Sections and Subsections are to
Sections and Subsections of this Agreement.
b. Except as specifically stated in this Agreement, all references to
currency is to United States of America dollars. Any currency conversion
required or contemplated by this Agreement with respect to Canadian and United
States of America currency will be based on the rate published by the Bank of
Canada as the noon spot rate applicable for the purchase of United States of
America dollars on the business day immediately before the date of
conversion.
c. This Agreement will be governed by and interpreted in accordance with the
laws of the Province of Alberta and the laws of Canada applicable therein,
except the conflict of law rules, and the parties attorn to the jurisdiction
of the Court of Queen's Bench of the Province of Alberta.
d. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Agreement the same will be construed as meaning the singular,
plural, masculine, feminine, neuter, body politic or body corporate where the
fact or context so requires and the provisions hereof and all covenants herein
will be construed to be joint and several when applicable to more than one
party.
e. Headings are inserted in the Agreement for convenience of reference only
and are not intended to affect the Agreement's interpretation.
1.3 Schedules
The following schedules are incorporated into and made part of this
Agreement:
Schedule A - User Service Agreement Language
ARTICLE 2
MANAGEMENT SERVICES
2.1 Appointment of Agent/Manager
The Owner hereby appoints Systems as its agent for the sole and specific
purpose of managing the marketing, distribution, sale, Enhancement and support
of the Service, subject to the terms and conditions of this Agreement, and
Systems hereby accepts such appointment.
2.2 Management Duties
a. The Manager will, in good faith, observe and perform the following
obligations in respect of the marketing, distribution, sale, Enhancement and
support of the Service:
i. Marketing, Distribution and Sale. The Manager will be responsible
for the marketing of the Service including, without limitation, developing
marketing materials, organizing product demonstrations, establishing
distribution channels, pricing, promotion and sale of the Service. The
Manager will use commercially reasonable efforts to provide the Service and
maximize sales of it. The Manager will be responsible for developing and
negotiating the contracts required to supply the Service to Customers. The
Owner will be entitled to receive copies of and to comment on standard form
sales and support service contracts. All such contracts will contain
provisions of confidentiality acceptable to the Owner. In addition, Manager
will have responsibility for the billing and collection of fees and payments
from Customers and for the payment of fees to the Owner.
ii. Support, Training and Consulting. The Manager will have complete
responsibility for delivery and installation of the Service. The Manager will
provide all support services for Customers including telephone and on-site
support. The Manager will also provide all required training and consulting
support.
iii. Maintenance and Enhancements. All maintenance necessary to
correct any errors in the Technology found by any Customer will be provided by
the Manager pursuant to the terms of its support services agreements. The
Manager will provide all Enhancements.
b. In addition to the duties referred to in Subsection 2.1 a., the Manager
will, in good faith and in satisfaction of its fiduciary duty to the Owners do
the following:
i. Reviews. The Manager will review and report to the Owner or its
duly appointed agent on the Manager's performance under this Agreement on a
quarterly basis. Such reviews will be scheduled by mutual agreement of all
parties.
ii. Computer Code. The Manager will deliver computer code (in object
and source form) together with all related documentation and development tools
necessary or desirable to enable the software to operate properly to the Owner
or its duly appointed agent quarterly, within thirty (30) days of the end of
each fiscal quarter of the Manager. The Manager will assist the Owner or its
agent in verifying that the computer code delivered to the Owner is fully
functional Application Software, or Enhancements.
iii. Conflict of Interest. The Manager acknowledges and agrees that it
is acting in a fiduciary capacity as agent of the Owner and will conduct
itself as such in all dealings on behalf of the Owner and in connection with
the performance of its obligations under this Agreement. In particular, the
Manager will avoid conflicts of interest between itself and the Owner in
connection with the business of providing the Service.
2.3 Insurance
a. Without in any way limiting the liability of the Manager under this
Agreement, the Manager will be responsible to maintain and keep in force
during the term of this Agreement the following insurance coverage:
i. automobile liability insurance on all vehicles used in connection
with this Agreement. In respect of such vehicles not owned by the Manager, it
will maintain and keep in force as aforesaid non-owned automobile liability
insurance protecting its liability including that assumed under this
Agreement. The limits of such insurance will be at least; for bodily injury
(including passenger hazard) and property damages, one million dollars
($1,000,000.00) inclusive for any one accident.
ii. comprehensive general liability insurance (including liability
under this Agreement) with inclusive limits of not less than five million
dollars ($5,000,000.00) for any one occurrence in respect of bodily injury and
property damage;
iii. employer's liability insurance with limits of not less than One
Million ($1,000,000.00) Dollars for each employee engaged in the services
where Workers' Compensation does not exist; and
iv. unless otherwise directed by the Owner, in writing, insurance
covering loss of or damage to all machinery, tools, equipment, supplies and
structures owned by the Manager and/or rented or leased from a third party or
parties and used by the Manager or its sub-contractors in performing its
obligations under this Agreement.
b. Upon request, the Manager will supply the Owner with certificates
evidencing the above insurance.
c. The above insurance policies will not be changed in any manner which could
affect the interests of the Owner without thirty (30) days' prior written
notice by registered mail to the Owner.
d. For greater certainty, the parties agree and understand that the
obligations of the Manager may be fulfilled if the Manager's existing
insurance policy satisfies the requirements of this Section.
e. Any insurance carried by the Manager will contain a waiver of subrogation
in favour of the Owner.
ARTICLE 3
ALLOCATION AND DISTRIBUTION OF FEES
3.1 Distribution of Fees Before Payout of the Note
a. The Manager will distribute, annually, until the Note is paid in full, the
Net Sales in the following order of priority:
i. to pay any withholding taxes payable by the Owner in connection with
the distribution of the Owners' Fee pursuant to Section 3.2;
ii. to pay the Owners' Fee to the Owners in proportion to their
respective ownership interest in the Technology; and
iii. to pay the Expenses.
b. The Manager will distribute, annually, until the Note is paid in full, the
Net Revenue less the Owners' Fee payable in the year in the following order of
priority:
i. 60% to the Owners in proportion to their respective ownership
interest in the Technology, for payment against the principal sum outstanding
from time to time under the Note and in accordance with the Note; and
ii. 40% to the Owners in proportion to their respective ownership
interest in the Technology, for retention by the Owners.
c. For the purposes of Subsection 3.1 a. the following terms have the
following meanings:
i. "Agency Fee" means 10% of the annual direct costs of marketing,
distributing and selling the Service referred to in Subsection 3.1 c. ii. A.;
ii. "Expenses" means the annual:
A. direct costs of marketing, distributing and selling the
Service;
B. direct cost of Enhancements;
C. Overhead and Administration Costs; and
D. Agency Fee;
iii. "Gross Sales" means gross amounts paid by Customers, in a year, to
install, use and get support for the Service;
iv. "Net Revenue" means Net Sales less Expenses;
v. "Net Sales" means Gross Sales less:
A. normal course of business selling credits for discounts or
rebates for the year; and
B. returns or adjustments for the Service for which a refund has
been paid or credited to the Customer, to the extent of the payment or credit
in the year;
vi. "Overhead and Administration Costs" means the direct overhead and
administrative costs of Systems to provide the Service, for a year, which
costs for 1997, will not exceed 28% of Gross Sales and thereafter will not
exceed 10% of Gross Sales, for a year, determined as the pro rata share of
Systems' total overhead and administrative costs for the year, determined by
multiplying Systems' total overhead and administrative costs by the fraction,
the numerator of which is the Gross Sales and the denominator of which is the
aggregate gross amount paid by Systems' customers for installation, use and
support for all of Systems' services less normal course of business selling
credits for discounts and rebates and less returns adjustments for which a
refund has been paid or credited to the customer, to the extent of the payment
or credit; and
vii. "Owners' Fee" means an annual fee payable by Systems to the Owners
of $1,500,000 commencing January 1, 1997.
d. Notwithstanding anything else contained in this Agreement, in no event,
without the prior written consent of the Owners, will fees or other amounts
for the Service:
i. be set below competitive prices prevailing in the market for similar
services as determined by the Manager acting in the best interests of the
Owner; and
ii. be discounted for any other consideration granted to Systems, its
affiliates or associates that is not provided to the Owner.
e. All amounts to be determined for the purposes of the calculations required
pursuant to this Article 3 will be determined in accordance with United States
generally accepted accounting principles consistently applied from year to
year and consistently applied between the Service and the services sold by
Systems.
3.2 Distribution of Owners' Fee
The Owners' Fee in any year and the amount payable to the Owner pursuant
to Subsection 4.5 b., if any, will be payable in the following order of
priority:
a. to pay the Interest Amount;
b. to pay any accrued and unpaid interest on the Note; and
c. the excess, if any, as follows:
i. 60% to the Owners in proportion to their respective ownership
interest in the Technology, for payment against the principal sum outstanding
from time to time under the Note and in accordance with the Note; and
ii. 40% to the Owners in proportion to their respective ownership
interest in the Technology, for retention by the Owners.
3.3 Distribution of Fees After Payout of the Note
a. The Manager will distribute, annually after the Note has been paid in
full, the Net Revenue in the following order of priority:
i. 60% to Systems as an agent's fee; and
ii. 40% to the Owners.
b. For the purposes of Subsection 3.3 a., the terms defined in
Subsection 3.1 c. have the same meaning except that Subsection 3.1 c. ii. D.,
the Agency Fee, is deleted from the definition of Expenses.
3.4 Timing and Payment of Distributions
Amounts payable to the Owner for a year pursuant to Sections 3.1, 3.2 and
3.3 will be paid within 60 days from the year end.
3.5 Set Off
Systems will have the right to set off amounts payable by Systems to the
Owners under this Agreement against amounts payable to DataLink Communications
Corporation by the Owners under the Note except that Systems will have no
right of set off and will pay the following amounts to the Owners without
regard to the equities between Systems or its affiliates and the Owners and
the parties acknowledge and agree that these amounts are liquidated amounts
payable forthwith:
a. amounts payable to Owners pursuant to Subsections 3.1 b. ii. and
3.2 c. ii. for their retention; and
b. amounts payable by the Owners as withholding taxes, sales taxes or goods
and services taxes, which amounts will be remitted forthwith upon their being
due, by Systems to the appropriate authorities on behalf of the Owners.
3.6 Reports
a. The Manager will give the Owner, on a confidential basis, quarterly
reports within 30 days of the end of each fiscal quarter and annual reports
within 90 days of the end of each fiscal year, setting forth the details in
respect of all services provided to Customers for the Service during such
quarter or such year including the name and address of all Customers, type of
service, amount and type of all fees and other amounts payable to date,
potential Customers and projected revenues.
b. In addition, the Manager will give the Owner, on a confidential basis, the
detailed calculations necessary to establish Gross Sales, Net Sales and Net
Revenue including, without limitation, the component parts thereof quarterly,
within 30 days of the end of each fiscal quarter, and annually, within 90 days
of the end of each fiscal year.
3.7 Financial Statements
The Manager will provide the following financial statements, for the
business pertaining to the Service, to the Owners:
a. monthly, within 10 days of the end of each month, an unaudited income
statement;
b. quarterly, within 30 days of the end of each of Systems' fiscal quarters:
i. the quarterly reports referred to in Section 3.6;
ii. an unaudited income statement; and
iii. an unaudited balance sheet;
c. annually, within 90 days of the end of each fiscal year of Systems:
i. the annual reports referred to in Section 3.6, reviewed and
commented on by Systems' auditors;
ii. an audited income statement; and
iii. an audited balance sheet.
3.8 Books and Records
The Manager will keep and maintain complete and accurate books and
records related to the business of providing the Service, separate and apart
from the books and records maintained for its own services. These will
include records of all services provided to Customers for the Service, all
costs of providing the Service and the appropriate fees accruing and
collected. These books and records will be maintained according to U.S.
generally accepted accounting principles and practices respecting all matters
pertinent to this Agreement. The Owner will have the right to audit the
books and records of Systems pertaining to the Service once each year for a
period of four years after the year end. For this purpose, the Owner or its
nominee will have, during normal business hours, access to and the right to
copy and remove copies of all files, data, correspondence, books and
accounting records relating in any way to the Service or this Agreement. All
information obtained by the Owner or its nominee will be subject to the
confidentiality obligations of this Agreement.
3.9 Taxes
The Manager will charge Customers with any and all taxes of any type that
are imposed on the use, sale or support of the Service by the Manager.
Subject to Subsection 3.5 b., the Owner and Systems will pay their respective
taxes of any type imposed on them for fees distributed to them pursuant to
this Agreement.
ARTICLE 4
GRANT OF RIGHTS
4.1 In consideration of the Owners' Fee and other good and valuable
consideration (the receipt and sufficiency of which is acknowledged by the
Owner) the Owner hereby grants Systems, during the term of this Agreement and
subject to the restrictions imposed in this Agreement, an exclusive, worldwide
right to use, modify and sub-license the source code for the Application
Software, the Intellectual Property and the Documentation for use only with
products or services other than the Service. Systems' right to sub-license
the source code, as contemplated by this Section, is subject to the prior
written agreement of the licensee to be bound by a license agreement, the
terms and conditions of which:
a. are no less restrictive with respect to the use of the source code than
the terms of this Agreement;
b. include language substantially similar to the language set out in
Schedule A to this Agreement, with the necessary changes required to suit the
source code sub-licence and sub-licensee; and
c. provide the Owner with all the benefits of the license that accrue to
Systems including, without limitation, the right to sue the licensee directly
for a breach of the license by the licensee.
4.2 Any modifications to the Application Software made by Systems that are
not Enhancements will be owned by Systems. Any modifications to the
Intellectual Property or the Documentation that do not relate to an
Enhancement will be owned by Systems.
4.3 Neither Systems nor any of its affiliates or associates will, directly or
indirectly, develop, acquire or market or be involved with or support any
person that does develop, acquire, market or sell any services that directly
compete with the Service in Canada or the United States of America during the
term of this Agreement and for a period of three years from the date of
termination hereof.
4.4 Notwithstanding any other provision of this Agreement, the Manager will
mark the Service with copyright notices showing the Owner's copyrights in the
Technology and the Enhancements and will not modify, alter or otherwise change
the copyright markings on the Service.
4.5 Systems will have, upon termination of this Agreement and subject to the
restrictions imposed in this Agreement, an exclusive, world wide, paid up
right to use, sub-licence (subject to the provisions of Section 4.1) and
modify the Application Software for use only with products and services other
than the Service:
a. upon termination of this Agreement by the Owner pursuant to Subsection
5.4, if neither the Manager nor Systems is then in default of this Agreement;
or
b. upon termination of this Agreement by the Owner, pursuant to Section 5.3,
if Systems pays the Owners, in proportion to their respective ownership
interest in the Technology, an amount calculated as the difference between
$12,500,000 and the amount of the Owners' Fee credited to the Owners to the
date of termination.
ARTICLE 5
TERM AND TERMINATION
5.1 Term
This Agreement will be for an initial term expiring August 31, 2001, (the
"initial term") and may be extended, for two additional two year terms, each
term expiring on the respective second anniversary date of the beginning of
such term.
5.2 The initial term or any extension term of this Agreement will be
automatically extended to the next extension term without notice or election
by the Manager. The Manager may, during any extension term, terminate this
Agreement on 90 days notice given to the Owner.
5.3 The Owner may, during the initial term or any extension term, terminate
this Agreement as follows:
a. upon 10 days written notice by the Owner to the Manager of a breach of any
of the Manager's obligations to pay the Owner under this Agreement, subject to
Section 3.5, if such breach has not been remedied;
b. upon 30 days written notice by the Owner to the Manager of a material
breach by the Manager (other than a failure to pay referred to in
Subsection 5.3 a.) of this Agreement if such breach is not remedied within the
30 day notice period, or if steps are not being taken by the Manager which can
reasonably be expected to remedy such breach within 60 days of the date of the
notice; or
c. forthwith upon written notice to the Manager, in the case of the
petitioning into bankruptcy of the Manager, the appointment of a receiver or
the liquidation of the business and affairs of the Manager or the commencement
of or ordering of the winding-up of the business and affairs of the Manager.
5.4 Any Owner may, at the end of the initial term or during any extension
term, terminate this Agreement upon 90 days notice given to the Manager and
upon payment of all accrued and unpaid interest under the Note.
5.5 Rights and Duties on Termination
Should the Agreement terminate pursuant to this Article 5, the Manager
will immediately:
a. provide to the Owner all copies of the Technology and Enhancements
(including, in particular, the most current versions of each);
b. forthwith give the Security Agent under the Security Agent Agreement
notice to release all deposited source code and other materials to Shalcor and
refrain from objecting to the release of the source code and other materials
by the Security Agent;
c. cease marketing the Service;
d. pay all accrued fees (other than those payable to Systems) to the Owner
and provide a full accounting to the Owner for fees payable to the Owner under
this Agreement.
5.6 Surviving Obligations
Sections 4.3, 4.5, 5.5 and Articles 6, 7 and 8 will survive the
termination of this Agreement except that if Shalcor terminates this
Agreement, pursuant to Section 5.4, the non-competition obligations of Systems
and its affiliates, set out in Section 4.3, will terminate.
ARTICLE 6
OWNERSHIP OF TECHNOLOGY
6.1 Ownership of Technology
The Manager acknowledges that the Owner owns all right, title and
interest to the Technology and the Enhancements and that the Manager has no
rights thereto except the rights expressly granted by this Agreement.
ARTICLE 7
LIABILITY
7.1 Indemnification by Manager
The Manager will be liable to the Owner for and indemnify and hold the
Owner harmless from any and all claims, losses, liability, costs, expenses
(including reasonable legal costs on a solicitor and his own client basis) and
damages which may arise pursuant to this Agreement including
misrepresentations made by the Manager, improper installation of, improper
support of, improper use of or infringement of any third party right by, the
Technology (whether in negligence or otherwise) or any other material breach
of this Agreement. If any suit, claim or proceeding involving the Owner is
based on a cause of action which if proven would entitle the Owner to claim
the benefit of the indemnification provided for herein and provided that the
Manager is given the complete authority, information and cooperation of the
Owner, at the Manager's expense, required to defend or settle the suit the
Manager will:
a. defend the suit at its own expense; and
b. pay all damages and costs awarded against the Owner provided that the
Manager will not be responsible for any cost, expense or compromise made by
the Owner without the Manager's written consent.
The Owner will be entitled to appoint its own counsel to represent it in
any such action at Owner's expense. In no event will the Owner be responsible
to any Customers for any matter whatsoever.
7.2 Limitation of Liability
Neither party shall be liable for any indirect, incidental, special or
consequential damages including, without limitation, damages for loss of data,
loss of business or failure to realize expected profits or savings or other
economic or commercial loss of any kind or loss of use of the Technology or
the service provided using the Technology and costs of substituted technology
or services, whether under any theory of contract (even in the nature of a
breach of a condition or a fundamental term or a fundamental breach), tort
(including negligence or misrepresentation), strict liability or any other
legal or equitable theory, even if such party has been advised of the
possibility thereof, all of which liability is hereby expressly waived by each
party.
7.3 Notwithstanding the form of sales agreement used by the Manager to sell
the Service to Customers, the Manager will not enter into any agreement unless
the agreement contains the terms set out in Schedule A which wording will not
be modified except with the express written consent of the Owner.
ARTICLE 8
CONFIDENTIALITY AND NON-DISCLOSURE
8.1 Each party acknowledges that all material and information which is or
will come into the possession or knowledge of the other in connection with
this Agreement or the performance thereof, consists of confidential and
proprietary data, whether or not so marked, disclosure of which to or use by
third parties will be damaging. All parties, therefore, agree to hold such
material and information in strictest confidence, not to make use thereof
other than for the performance of this Agreement, to release it only to
employees or persons contracted to either party requiring such information,
and not to release or disclose it to any other party. Each party agrees not
to release such information or material to any employee or contractor who has
not signed a written agreement expressly binding himself not to use or
disclose it. This paragraph will survive the termination of this Agreement.
Nothing herein will prevent either party from using, disclosing or authorizing
disclosure of information or data:
a. that now or hereafter becomes disclosed in published papers, literature or
patents or is generally known in the trade or public through no action or
failure to act on any party's part;
b. that was in either party's possession or was available to either party
from a third party without restriction on disclosure prior to the execution of
this Agreement but this exception does not include the Technology;
c. that was received by either party from a third party who was not under an
obligation of confidentiality to the party whose information is being
provided;
d. that is independently developed by either party;
e. that is disclosed with the written consent of the party whose information
is being disclosed; or
f. that is disclosed pursuant to a court order or other legal compulsion.
8.2 All memoranda, notes, records, reports, papers and any other documents
and all copies thereof about any party's business in any way obtained by any
other party pursuant to this Agreement will be the disclosing party's property
and will be returned promptly to the disclosing party upon termination of this
Agreement or at any time upon request.
8.3 The contents of this Agreement and any agreements entered into pursuant
to this Agreement are hereby declared proprietary and confidential to the
parties hereto.
8.4 Each of the parties (the "Indemnifying Party") agrees to indemnify the
other (the "Indemnified Party") for all damages, costs, and expenses
(including court costs and reasonable legal fees) incurred by the Indemnified
Party as a result of a failure of the Indemnifying Party to comply with its
obligations under this Article 8.
ARTICLE 9
RIGHT OF FIRST REFUSAL
9.1 Subject to Shalcor's right set out in Section 12.4, in the event that the
Owner desires to transfer all or any part of the Application Software (or is
required by operation of law or other involuntary transfer to do so), the
Owner shall first offer such Application Software to Systems in accordance
with the following provisions:
a. the Owner shall deliver a written notice (the "Notice") to Systems,
stating the Owner's bona fide intention to transfer the Application Software;
the purchase price and terms of payment for which the Owner proposes to
transfer the Application Software; and the name and address of the proposed
transferee.
b. Within ninety (90) days after receipt of the Notice, Systems shall have
the right, but not the obligation, to elect to purchase the Application
Software upon the price and terms of payment designated in the Notice, by
delivering written notice to the Owner of such election (the "Election
Notice"). If the Notice provides for the payment of non-cash consideration,
Systems may elect to pay the consideration in cash equal to the good faith
estimate of the present fair market value of the non-cash consideration
offered.
c. If Systems elects to purchase or obtain the Application Software
designated in the Notice, then the closing of such purchase shall occur within
ninety (90) days after delivery of the Election Notice, and each of the Owner
and Systems shall execute such documents and instruments and make such
delivered as may be reasonably required to consummate such purchase and sale.
d. If Systems elects not to purchase or acquire the Application Software,
then the Owner may transfer the Application Software to the transferee
proposed in the Notice, provided that such transfer: is completed within
ninety (90) days after the expiration of Systems' right to elect to purchase
the Application Software, is made on terms no less favourable to the Owner
than as designated in the Notice, and complies with all of the terms and
conditions of this Agreement, the Application Software Purchase Agreement and
the Note. If the Application Software is not so transferred, the Owner must
give notice in accordance with this Section prior to any other or subsequent
transfer of the Application Software.
ARTICLE 10
ARBITRATION
10.1 Arbitration of Disputes
Any dispute arising between the parties under this Agreement will be
settled by arbitration in Calgary, Alberta. Any party may at any time serve a
notice on the other parties specifying a matter in dispute and giving notice
of its intention to arbitrate such matter. Within 30 days of receiving such
notice the parties will appoint a single arbitrator to determine the dispute.
If the parties cannot agree on an arbitrator within such 30 day period then
the arbitrator will be appointed in accordance with the provisions of the
Arbitration Act (Alberta), upon application by any party.
10.2 Timing of Arbitration Proceedings and Decisions
If the arbitrator fails to commence proceedings within 30 days of being
appointed or fails to render a decision within 30 days after concluding the
arbitration proceedings, a new arbitrator may, at the election of any party,
be chosen in a like manner as if none had previously been appointed.
10.3 Arbitration Decision to be Binding
The decision of the arbitrator will be in writing and signed, and will be
final and binding on the parties as to the question submitted for
determination and the parties will abide by the decision and perform the terms
thereof.
10.4 Costs of Arbitration
Unless otherwise determined by the arbitrator, all expenses in connection
with such arbitration will be divided equally between the parties, with the
exception of expenses of counsel, witnesses and employees of the parties which
will be borne by the parties incurring them.
10.5 Arbitration Act (Alberta)
In all respects not otherwise provided for in this Article 10, the
provisions of the Arbitration Act (Alberta), as amended from time to time will
apply to any arbitration undertaken hereunder.
ARTICLE 11
NOTICES
11.1 Notice
Every request, notice, statement, communication, bill or waiver provided
for in this Agreement will be in writing and will be directed to whom it is to
be given, made or delivered at such person's address for service as specified
in this Section and may be served:
a. personally, by delivering it to whom it is to be served during that
person's normal business hours. Any personally served notice will be received
by the addressee, for the purposes of this Agreement, when actually delivered
as aforesaid; or
b. by telescopy (or by any other like method by which a written and recorded
message may be sent) directed to whom it is to be given, unless the sender is
aware that the relevant receiving equipment is not functioning properly. Any
notice so served will be received by the addressee, for the purposes of this
Agreement upon written acknowledgment of receipt of such telescopy.
11.2 The addresses for service of notices hereunder of the following persons
will be:
Manager: DataLink Systems Corporation
17420 High Street
Los Gatos, California
Attention: President
Fax No.: (408) 354-9267
Owner: Shalcor Investments Inc.
2398 Scarth Street
Regina, Saskatchewan
Attention: Secretary-Treasurer
Fax. No.: (306) 522-8190
11.3 Any of the foregoing may change their address for service in this
Section by notice given in accordance with this Section.
ARTICLE 12
MISCELLANEOUS
12.1 Severability
If any one or more of the provisions or parts thereof contained in this
Agreement should be or become invalid, illegal or unenforceable in any respect
in any jurisdiction, the remaining provisions or parts thereof contained
herein will be and will be conclusively deemed to be, as to such jurisdiction,
severable therefrom and:
a. the validity, legality or enforceability of such remaining provisions or
parts thereof will not in any way be affected or impaired by the severance of
the provisions or parts thereof severed; and
b. the invalidity, illegality or unenforceability of any provision or part
thereof contained in this Agreement in any jurisdiction will not affect or
impair such provision or part thereof or any other provisions of this
Agreement in any other jurisdiction.
12.2 Further Assurances
The parties will, at any time and from time to time at the request of the
other, execute and deliver any and all such further instruments or assurances
as may be necessary or desirable to give effect to the terms and conditions of
this Agreement.
12.3 Counterpart and Facsimile Execution
This Agreement may be executed in one or more counterparts and may be
executed by facsimile signatures and all such counterparts and facsimile
signatures taken together will constitute one and the same Agreement and will
be binding on the parties as if they had originally signed one copy of this
Agreement.
12.4 Assignment
a. The Owner may assign all or part of its interest in this Agreement and in
the Technology to the extent that it is permitted to and does assign its
interest in the Application Software Purchase Agreement;
i. by giving written notice of the names and addresses of the
assignees; and
ii. by delivering to the Manager a written undertaking of the assignees
acknowledging receipt of a copy of this Agreement and agreeing to be bound by
the terms and conditions of this Agreement severally and not jointly with any
other person and only to the extent of the assignee's undivided interest in
the Technology.
b. The Manager may assign its interest in this Agreement in whole, but not in
part, and only with an assignment of all of its rights and obligations and the
rights and obligations of its affiliates under the Application Software
Purchase Agreement, the Note and the Security Agent Agreement:
i. by giving written notice of the name and address of the assignee;
and
ii. by delivering to the Owner a written undertaking of the assignee
acknowledging receipt of a copy of this Agreement and agreeing to be bound by
the terms and conditions of this Agreement.
12.5 Binding Effect
This Agreement and all of its provisions will enure to the benefit of the
parties and their respective successors and assigns, and will be binding upon
the parties and their respective successors and assigns. The expressions the
"Manager" and the "Owner" as used herein will include Systems' and Shalcor's
assigns whether immediate or derivative, respectively.
12.6 Relationship of the Parties
This Agreement is not a joint venture or other such business arrangement
and any agreement between the parties as to joint business activities will be
set forth in subsequent written agreements. Each party is acting
independently and not as partner, or joint venturer with the other parties for
any purpose. Except as provided in this Agreement none of the parties will
have any right, power, or authority to act or to create any obligations,
express or implied, on behalf of the other parties hereto.
12.7 Time of the Essence
Time will be of the essence of this Agreement.
12.8 Amendment
This Agreement may be altered or amended in any of its provisions when
any such changes are reduced to writing and signed by the parties hereto but
not otherwise.
12.9 Costs
Each party hereto will bear its own legal, accounting and other costs
relating to all matters involved in this transaction.
12.10 Confidentiality
The parties will treat this Agreement and all information relating to
this Agreement and the transactions contemplated by this Agreement
confidentially and no public disclosure by either party will be made without
the prior approval of the other, not to be unreasonably withheld, except as
legally required by a party to satisfy disclosure obligations to shareholders
and regulators, in which case simultaneous notice of such disclosure will be
given to the other party.
12.11 Entire Agreement
This Agreement, the Application Software Purchase Agreement, the Note and
the exhibits and schedules referred to therein, constitute the entire
Agreement among the parties and supersede all proposals, oral or written, and
all other communications among them relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed
by their duly authorized representatives as of the date first above written.
DATALINK SYSTEMS CORPORATION
/s/ Datalink Systems Corporation
SHALCOR INVESTMENTS INC.
/s/ Shalcor Investments Inc.
<PAGE>
SCHEDULE A
In consideration of Systems paying Customer Ten ($10.00) Dollars (the
receipt and sufficiency of which is hereby acknowledged by the Customer),
which amount is paid by Systems acting as agent on behalf of the Owner (such
agency being limited solely to the making of such payment and to receiving on
behalf of the Owner, the Customer's covenant herein), Customer hereby agrees
that Owner is in no way responsible or liable for any matters arising as a
result of this Agreement or related to the use or loss of use of the Service.
LIABILITY. Notwithstanding any other provision of this Agreement, neither
Systems nor any owner of the Software or Service or any person involved in the
creation, development, maintenance, production, use, distribution, marketing,
delivery or installation of the Software or the Service will be liable for any
direct, indirect, consequential or incidental damages, (including damages for
loss of business profits, business interruption, loss of business information)
arising out of the use or inability to use such product even if Systems or
such other person has been advised of the possibility of such damages.
Customer acknowledges and agrees that none of the owners of the Software or
the Service will have any liability for damages from any and all causes
whatsoever, including but not limited to any claim in respect of a breach of
this Agreement by Systems, the performance or non-performance of the Software
or the Service or any other matter arising from or relating to the creation,
development, maintenance, production, use, distribution, marketing, delivery
or installation of the Software or the Service regardless of whether such
damages are contractual, tortious (including negligence) or statutory in
nature. Customer expressly acknowledges and agrees that any owner of the
Software or Service or any person involved in the creation, development,
maintenance, production, use, distribution, marketing, delivery or
installation of the Software or the Service is a third party beneficiary of
the Customer's covenants contained in the Sections headed "Liability",
"Ownership" and "Confidentiality and Non-Disclosure" and may claim the benefit
of these provisions directly against Customer.
OWNERSHIP. The Customer acknowledges and agrees that this agreement only
gives it the right to use the Service during the term of this Agreement. The
Customer does not obtain any right, title or interest to the Software or
Service except the right to use the Service provided by this Agreement.
CONFIDENTIALITY AND NON-DISCLOSURE. The Customer acknowledges that all
material and information which is or will come into its possession or
knowledge in connection with this Agreement or the use of the Service,
consists of confidential and proprietary data of Systems or the owners of the
Software and the Service, whether or not so marked, disclosure of which to or
use by third parties will be damaging. The Customer therefore agrees to hold
such material and information in the strictest confidence, and not to make use
thereof other than for its own internal use. Nothing herein will prevent the
Customer from using, disclosing or authorizing disclosure of information or
data that is in the public domain through no fault of the Customer or breach
of this Agreement by the Customer.
SURVIVAL. The Sections under the headings "Liability", "Ownership" and
"Confidentiality and Non-Disclosure" will survive termination of this
Agreement on behalf of Systems, the owner of the Software and Service and any
person involved in the creation, development, maintenance, production, use,
distribution, marketing, delivery and installation of the Software and the
Service.
Draft: August 26, 1996
8.0% SECURED TERM NOTE
SHALCOR INVESTMENTS INC.
in favour of
DATALINK COMMUNICATIONS CORPORATION
8.0% TERM NOTE MADE AS OF AUGUST 21, 1996.
Principal Sum: Cdn. $36,730,000
Due Date: December 31, 2006
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Note, unless the context otherwise requires:
a. "Application Software Purchase Agreement" means the Application Software
Purchase Agreement made as of June 14, 1996, among the Corporation, the Holder
and DataLink Systems Corporation;
b. "Corporation" means Shalcor Investments Inc. and its permitted assignees;
c. "Default" means any event which after notice or lapse of time or both,
would constitute an Event of Default;
d. "Event of Default" means any of the events specified in Article 8;
e. "Holder" means DataLink Communications Corporation or its permitted
assignees;
f. "Management and Marketing Agreement" means the Management and Marketing
Agreement made as of August 21, 1996, between Shalcor Investments Inc. and
DataLink Systems Corporation;
g. "Note" means this 8.0% Secured Term Note as originally executed, or as
amended or supplemented as herein provided;
h. "Person" includes any individual, firm, corporation, company, joint
venture, partnership, association, trust or unincorporated body of persons;
i. "Principal Sum" has the meaning specified above;
j. "Sale Proceeds" has the meaning specified in Section 8.3;
k. "Service" means a service that provides screening and notification of the
delivery of E-Mail messages utilizing wireless technology which service is
currently known as MailXpress;
l. "Service Proceeds" means the Interest Amount and the Principal Payments, as
these terms are defined in the Management and Marketing Agreement, paid to the
Corporation pursuant to that agreement;
m. "Security Agent Agreement" means the Security Agent Agreement entered into
by the Corporation, the Holder and National Trust, as security agent, for the
purpose of holding the Technology pursuant to the terms hereof; and
n. "Technology" means the Purchased Assets, as defined in the Application
Software Purchase Agreement.
1.2 Interpretation
a. The terms "this Note", "hereof" "hereunder" and similar expressions refer
to this Note and not to any particular Section, Subsection or other portion of
this Note and include any agreement amending or supplemental to this Note.
Unless something in the subject matter or context is inconsistent therewith,
reference herein to Sections and Subsections are to Sections and Subsections
of this Note.
b. Except as specifically stated in this Agreement, all references to
currency is to Canadian dollars. Any currency conversion required or
contemplated by this Agreement with respect to Canadian and United States of
America currency will be based on the rate published by the Bank of Canada as
the noon spot rate applicable for the purchase of United States of America
dollars on the business day immediately before the date of conversion.
c. Except as set forth in Section 8.2, this Note shall be governed by and
interpreted in accordance with the laws of the Province of Alberta and the
laws of Canada applicable therein, except the conflict of law rules, and the
Parties attorn to the jurisdiction of the Court of Queen's Bench of the
Province of Alberta.
d. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Note the same will be construed as meaning the singular,
plural, masculine, feminine, neuter, body politic or body corporate where the
fact or context so requires and the provisions hereof and all covenants herein
will be construed to be joint and several when applicable to more than one
party.
e. Headings are inserted in the Note for convenience of reference only and
are not intended to affect the Note's interpretation.
ARTICLE 2
PROMISE TO PAY
2.1 The Corporation, for value received, and in consideration of these
premises hereby acknowledges itself indebted to the Holder and promises and
covenants with the Holder to pay to the Holder:
a. the Principal Sum outstanding from time to time;
b. interest on the Principal Sum outstanding from time to time, such
interest to be calculated, payable and paid as set out in Section 3.2; and
c. all other monies which may be owing by the Corporation to the Holder
pursuant to this Note,
subject to the terms and conditions of this Note and to the Corporation's
obligations to pay withholding taxes on any such payments.
ARTICLE 3
PAYMENT OF PRINCIPAL AND INTEREST
3.1 Principal
a. The Principal Sum outstanding on December 31, 2006 will be paid on
December 31, 2006.
b. Prepayment of the Principal Sum outstanding, from time to time for each
year ended December 31 will be made annually, within thirty (30) days of
receipt of Service Proceeds for the year, if the amount of Service Proceeds
received for such year exceeds the amount of accrued and unpaid interest as at
the end of such year. The amount of the annual prepayment, if any, against
the Principal Sum outstanding from time to time will be equal to the
difference between the Service Proceeds received for the year and the amount
of accrued and unpaid interest as at the end of such year.
3.2 Interest
a. Interest on the Principal Sum outstanding from time to time pursuant to
this Note will accrue from the date hereof up to and including the date of
payment at the rate of 8.0% per annum calculated, but not compounded, yearly,
and not in advance.
b. Interest accrued and unpaid at December 31, 2006, will be paid on December
31, 2006.
c. Interest accrued and unpaid at December 31 of each year, will be prepaid
annually within thirty (30) days of receipt by the Corporation of Service
Proceeds for the year, to the extent of the Service Proceeds, if any.
d. Accrued interest, if any, that is not paid in any year will continue to
accrue and be outstanding until paid but will not be added to the Principal
Sum payable under this Note and will not bear interest.
e. The covenant of the Corporation to pay interest at the rate provided
herein will not merge in any judgment in respect of any obligation of the
Corporation hereunder and such judgment will bear interest as aforesaid and be
payable in the same manner.
3.3 Interest Acceleration
Notwithstanding Section 3.2 c., upon the occurrence of a Management
Agreement Termination Event:
a. interest accrued and unpaid at the Management Agreement Termination Date
will be prepaid within 30 days of the Management Agreement Termination Date;
and
b. interest accruing due under this Note, will be payable annually and will
be paid on December 31 of each year.
For the purposes of Section 3.3, the following terms have the meanings
set out below:
"Management Agreement Termination Date" means the date of the occurrence
of a Management Agreement Termination Event; and
"Management Agreement Termination Event" means the termination of the
Management and Marketing Agreement by the Corporation or any other Owner, as
that term is defined in the Management and Marketing Agreement, pursuant to
Section 5.4, of the Management and Marketing Agreement.
ARTICLE 4
ASSIGNMENT
4.1 Assignment of Service Proceeds
The Corporation hereby assigns the Service Proceeds to the Holder as
security for payment of the Corporation's obligations to the Holder under this
Note.
The provisions of this Section 4.1 and the rights of the Holder hereunder
will, notwithstanding any other provisions of this Note, wholly terminate on
the earlier of the date upon which this Note is retired or the indebtedness
hereunder is otherwise extinguished.
ARTICLE 5
SECURITY
5.1 Security for the Note
In consideration for the premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the Corporation, and the due payment of all principal and interest on this
Note from time to time outstanding and on all other monies from time to time
owing on the security hereof and to secure the due performance by the
Corporation of obligations herein contained, the Corporation does hereby
grant, assign, mortgage, pledge, charge, hypothecate and create a security
interest in, to and in favour of the Holder in the Technology provided that
the charge hereby created will in no way hinder or prevent the Corporation at
any time and from time to time (until an Event of Default occurs pursuant to
Article 8 hereof and the Holder will have determined to enforce the same) from
selling, alienating, assigning, licensing or otherwise disposing of or dealing
with all or any part of the subject matter of the said charge in the ordinary
course of its business and for the purpose of carrying on or extending the
same or from entering into the Management and Marketing Agreement; provided
further that the Corporation will not, and the Corporation hereby covenants
that it will not, without the prior written consent of the Holder, make, give,
create and assume or allow to subsist any mortgage, pledge, hypothec, lien,
charge, encumbrance, assignment or other security, whether fixed or floating,
upon the Technology or any part thereof.
TO HAVE AND TO HOLD such assets and interests and all rights hereby
conferred unto the Holder, its successors and assigns forever, but in trust
nevertheless, for the uses and purposes and with the powers and authorities
subject to the terms and conditions mentioned and set forth in this Note.
5.2 Further Assurances
The Corporation will forthwith, and from time to time at its sole cost
and expense, execute and do or cause to be executed and done all deeds,
documents and things which, in the reasonable opinion of the Holder, are
necessary or advisable for giving the Holder (so far as may be possible under
the local laws of the places where the Technology is situated) a valid
mortgage, pledge, charge and hypothec of the nature herein specified upon the
Technology to secure payment of monies intended to be secured by this Note,
and for better assuring, mortgaging, pledging, charging, assigning,
hypothecating and confirming unto the Holder the Technology, and for
conferring upon the Holder such power of sale and other powers over the
Technology as are hereby expressed to be conferred.
5.3 Defeasance
The Holder will at the written request and sole cost and expense of the
Corporation cancel and discharge the lien of this Note and execute and deliver
to the Corporation such deeds or other instruments as will be requisite to
discharge the lien hereof and to reconvey to the Corporation any part of the
Technology subject to the lien of this Note and to release the Corporation
from the covenants herein contained and upon delivery of such written request
to the Holder the estate and rights hereby granted will cease, determine and
be void, provided that the Corporation will have satisfied the payment of all
principal monies, and interests due or to become due on this Note.
5.4 Possession and Use of Technology
Until an Event of Default occurs pursuant to Article 8 hereof and the
Holder will have determined to enforce the same pursuant to the provisions of
this Note, the Corporation will, subject however to the express terms hereof,
be suffered and permitted to possess, manage, develop, operate and enjoy the
Technology, and freely to control the conduct of its business and to take and
use any income, rents, issues and profits thereof in the same manner, to the
same extent and with the same effect, except as provided herein, as if this
Note had not been made.
5.5 Notwithstanding Section 5.4 hereof the source code version of the
Application Software, as defined in the Application Software Purchase
Agreement, will be held by the Security Agent pursuant to the terms and
conditions of the Security Agent Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Corporation's Representations and Warranties
The Corporation hereby represents and warrants to the Holder for the
benefit of the Holder as follows:
a. the Corporation is a corporation duly incorporated, organized and validly
subsisting in good standing under the laws of the jurisdiction of its
incorporation, and has the requisite power and authority to carry on the
business now carried on by it, to own and to license the properties used in
its business, to execute and deliver this Note, to consummate the transactions
contemplated hereby and to duly observe and perform all its covenants and
obligations herein set forth;
b. the execution and delivery of this Note does not and will not conflict
with or result in a breach of or violate any of the terms, conditions or
provisions of any agreement governing the Corporation or violate any of the
terms, conditions or provisions of any law, judgment, order, injunction,
decree, regulation or ruling of any court or governmental authority, domestic
or foreign, to which the Corporation is subject or constitute or result in a
default under any agreement, contract or commitment to which the Corporation
is a party, the effect of which conflict, breach, violation or default might
materially adversely affect the financial condition of the Corporation or
would impair the ability of the Corporation to duly observe and perform their
respective obligations contained herein;
c. the execution and delivery of this Note will not constitute an event of
default or an event which, with the giving of notice or lapse of time or both,
would constitute an event of default, under any agreement, contract, indenture
or other instrument relating to any indebtedness (whether for borrowed money
or otherwise) of the Corporation which would give any party to any such
agreement, contract, indenture or other instrument the right to accelerate
maturity for the payment of any monies under any such agreement, contract,
indenture or other instrument; and
d. no authorization, approval, order, license, permit or consent of any
governmental authority, regulatory body or court, and no registration,
declaration or filing by the Corporation with any such governmental authority,
regulatory body or court is required in order for the Corporation:
i. to incur the obligations expressed to be incurred by the Corporation
in or pursuant to this Note;
ii. to execute and deliver all documents and instruments to be
delivered by the Corporation pursuant to this Note;
iii. to duly perform and observe the terms and provisions of this Note;
and
iv. to render this Note legal, valid, binding and enforceable against
the Corporation in accordance with its terms.
ARTICLE 7
COVENANTS OF THE CORPORATION
The Corporation hereby covenants and agrees with the Holder for the
benefit of the Holder as follows:
7.1 To Pay Principal and Interest
The Corporation will duly and punctually pay or cause to be paid to the
Holder the Principal Sum and accrued interest thereon and all other moneys
from time to time owing hereunder (subject to the Corporation's obligation to
pay withholding taxes), on the dates, at the places, in the moneys and in the
manner mentioned herein.
7.2 To Carry on Business
The Corporation will carry on and conduct its business in a proper and
efficient manner; and at all reasonable times it will furnish or cause to be
furnished to the Holder or its duly authorized agent or attorney such
information relating to the business of the Corporation involving the Service
as the Holder may reasonably require; and, subject to the express provisions
hereof, it will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence and rights.
ARTICLE 8
DEFAULT
8.1 Events of Default
If any one or more of the following events has occurred and is
continuing:
a. the non-payment when due of the Principal Sum, accrued interest thereon
and any other amounts due under this Note;
b. the breach by the Corporation of any material provision of this Note;
c. any representation or warranty made by the Corporation herein or in any
financial statements, reports or other documents supplied to the Holder by the
Corporation hereunder is false, incorrect or inaccurate in any materially
adverse respect;
d. if proceedings for the dissolution, liquidation or winding-up of the
Corporation or for the suspension of the business or operations of the
Corporation are commenced, unless such proceedings are being actively and
diligently contested by the Corporation in good faith, or in the event a
bankruptcy, liquidation, receivership or dissolution of the Corporation will
occur;
provided that the Corporation will not have remedied such default within
thirty (30) days following receipt by the Corporation from the Holder of
notice of the default, the Holder may, by written notice declare the Principal
Sum and accrued interest thereon and any other amounts payable to it under
this Note to be immediately due and payable without further presentation,
notice or demand and the Corporation will immediately pay to the Holder all
indebtedness of the Corporation owing to it pursuant to this Note, subject to
the Corporation's obligation to pay withholding taxes.
8.2 Remedies and Limitation of Recourse
If an Event of Default will occur and be continuing and the Corporation
will fail forthwith to pay the amounts owing hereunder, or remedy any breach
of any of its obligations secured by this Note as herein outlined, the Holder
shall have all of the rights and remedies of a secured party under the
California Uniform Commercial Code or other applicable law then in effect.
Without limiting the generality of the foregoing, the Holder, in addition to
any other rights and remedies it may have, in its own name will be entitled
and empowered to sell the Technology as provided in Section 8.3 below as well
as institute action or proceeding at law or in equity for the collection of
the sums so due and unpaid and may prosecute any such action or proceedings to
judgment or final decree, and may enforce any such judgment or final decree
against the Corporation or other obligor upon this Note and collect in the
manner provided by law out of the Technology, as provided for in this Note
wherever situated the monies adjudged or decreed to be payable.
Notwithstanding anything else contained in this Note, the Holder
covenants and agrees that its recourse for payment of any obligations of the
Corporation to the Holder under this Note and funds available from the
Corporation will be limited to the Service Proceeds and the Sale Proceeds
received by the Corporation which will be paid by the Corporation to the
Holder in the following order of priority:
a. to pay interest due and payable under this Note;
b. to pay the Principal Sum outstanding from time to time; and
c. to pay any other amounts owing by the Corporation to the Holder under this
Note.
8.3 Sale of Technology
a. If an Event of Default has occurred and is continuing as provided in
Section 8.2 hereof or the indebtedness created hereby either with respect to
principal or interest remains in whole or in part unpaid as of the Due Date,
the Holder will be entitled and empowered to dispose of the Technology or any
part thereof: i. at public sale, which public sale may be conducted at the
location designated by the trustee for cash or on credit and on such terms as
the trustee may in its sole discretion, elect after giving at least five days
notice of the time and place of sale in the manner provided by law, or ii. at
private sale upon like notice for cash or on credit and on such other terms as
the Holder may in its sole discretion elect.
b. The proceeds of the sale ("Sale Proceeds") of the Technology will be
allocated as follows:
i. to reimburse the Holder (to a maximum of 10% of the gross proceeds
of sale), for all costs and expenses incurred as the result of an Event of
Default and in connection with re-possession, storing, advertising, marketing
and selling the Technology including, without limitation, reasonable
attorneys' fees and costs;
ii. to the Holder as a reduction of amounts owing by the Corporation
under this Note allocated firstly as to interest and the remainder as to
principal; and
iii. the balance to the Corporation.
c. Any balance owing by the Corporation under this Note after the allocation
of the Sale Proceeds will be forgiven by the Holder and the Corporation will
have no further liability under this Note.
d. This Note is non-negotiable. The Holder will have no right or recourse
against any legal person in respect of the covenants contained in this Note
other than the Corporation, and its assigns but only severally and not jointly
and only to the extent of each person's interest in the Technology.
e. Limitation of Liability
Notwithstanding anything contained in this Note, the Corporation will not
have any obligation under the Note if any one or more of the following events
has occurred and is continuing with respect to the Holder of its rights or
obligations under the Management and Marketing Agreement:
a. the non-payment when due of amounts owing by the Holder to the Corporation
under the Management and Marketing Agreement;
b. the breach by the Holder of any other material provision of the Management
and Marketing Agreement; and
c. if proceedings for the dissolution, liquidation or winding-up of the
Holder or for the suspension of the business or operations of the Holder are
commenced, unless such proceedings are, being actively and diligently
contested by the Holder in good faith, or in the event a bankruptcy,
liquidation, receivership or dissolution of the Holder will occur;
provided that the Holder will not have remedied such default within thirty
(30) days following receipt by the Holder from the Corporation of notice of
the default.
ARTICLE 9
WAIVER
9.1 Either the Holder or the Corporation may waive any breach of any of the
provisions contained in this Note or any default by the other person in the
observance or performance of any covenant, condition or obligation required to
be observed or performed by such person under the terms of this Note, provided
any such waiver shall only be effective upon the delivery of written notice by
the waiving party. No waiver, consent, act or omission by the Holder or the
Corporation will extend to or be taken in any manner whatsoever to affect any
subsequent breach or default or the rights resulting therefrom and no waiver
or consent by the Holder will bind the Holder or the Corporation will bind
them unless it is in writing. The inspection or approval by the Holder or the
Corporation of any document or matter or thing done by the other will not be
deemed to be a warranty or holding out of the adequacy, effectiveness,
validity, or binding effect of such document, matter or thing or a waiver of
the obligations of the other.
ARTICLE 10
TIME OF THE ESSENCE
10.1 Time will be of the essence of this Note.
ARTICLE 11
NOTICES
11.1 Any notice required or permitted by any of the provisions of this Note
may be given to the Corporation or the Holder in writing at the following
addresses, or such other addresses as they may specify in writing from time to
time:
To the Corporation at:
2398 Scarth Street
Regina, Saskatchewan
S4P 2J7
Fax No. 306-522-8190
Attention: Secretary-Treasurer
To the Holder at:
17420 High Street
Los Gatos, California
Fax No. 408-354-9267
Attention: President
Notices shall be effective on delivery if delivered personally to the
Corporation or Holder. If sent by telecopy, notice will be effective on the
next business day after the date notice is sent.
ARTICLE 12
MISCELLANEOUS
12.1 Severability
If any one or more of the provisions or parts thereof contained in this
Note should be or become invalid, illegal or unenforceable in any respect in
any jurisdiction, the remaining provisions or parts thereof contained herein
will be and will be conclusively deemed to be, as to such jurisdiction,
severable therefrom and:
a. the validity, legality or enforceability of such remaining provisions or
parts thereof will not in any way be affected or impaired by the severance of
the provisions or parts thereof severed; and
b. the invalidity, illegality or unenforceability of any provision or part
thereof contained in this Note in any jurisdiction will not affect or impair
such provision or part thereof or any other provisions of this Note in any
other jurisdiction.
12.2 Further Assurances
The Corporation and the Holder will, at any time and from time to time at
the request of the other, execute and deliver any and all such further
instruments or assurances as may be necessary or desirable to give effect to
the terms and conditions of this Note.
12.3 Counterpart Execution
This Note may be executed in one or more counterparts and may be executed
by facsimile signatures and all such counterparts and facsimile signatures
taken together will constitute one and the same Note and will be binding on
the Corporation and the Holder as if they had originally signed one copy of
this Note.
12.4 Assignment
The Corporation may assign all or part of its interest in the Technology:
a. by giving written notice of the names and addresses of the assignees; and
b. by delivering to the Holder a written undertaking of the assignees
acknowledging receipt of a copy of the Note and agreeing to be bound by the
terms and conditions of the Note severally and not jointly with any other
person and only to the extent of the assignee's undivided interest in the
Technology.
The Holder may assign this Note in whole, but not in part, and only with
an assignment of all of its rights and obligations under the Management and
Marketing Agreement by giving the Corporation written notice of the name and
address of the assignee.
12.5 Binding Effect
This Note and all of its provisions will enure to the benefit of the
Holder and the Corporation and will be binding upon the Holder and the
Corporation. The expressions the "Holder" and the "Corporation" as used
herein will include the Holder's and the Corporation's assigns whether
immediate or derivative, respectively.
12.6 Time of the Essence
Time will be of the essence of this Note.
12.7 Amendment
This Note may be altered or amended in any of its provisions when any
such changes are reduced to writing and signed by the parties hereto but not
otherwise.
12.8 Costs
Each party hereto will bear its own legal, accounting and other costs
relating to all matters involved in the preparation, delivery and enforcement
of this Note.
12.9 Remedies Not Exclusive
Except as provided in Section 8.2 of this Note no right or remedy herein
is exclusive of any other right or remedy. Except as provided in Section 8.2
of this Note each and every right and remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter existing
at law or in equity, and may be exercised from time to time as often as deemed
expedient, separately or concurrently.
IN WITNESS WHEREOF the Corporation and the Holder have duly executed
these presents under the hands of their proper officers in that behalf.
SHALCOR INVESTMENTS INC.
/s/ Shalcor Investments
DATALINK COMMUNICATIONS CORPORATION
/s/ Datalink Communications Corporation
