<PAGE> 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
May 6, 1997
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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
2105 Hamilton Avenue, Suite 240, San Jose, California 95125
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Address of Principal Executive Offices, Including Zip Code
(408) 558-0800
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Registrant's Telephone Number, Including Area Code
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective May 6, 1997, the Company completed a transaction with a non-
affiliated Canadian corporation (the Buyer) pursuant to which the Company sold
its Quotexpress Software and related technology to the Buyer for cash and a
note. At closing, the Company received $4,072,500 Canadian in cash. From
this cash the Company paid finder's fees totaling $2,262,500 Canadian to two
non-affiliates leaving the Company with a net cash amount of $1,810,000
Canadian. The Company also received a note for $14,027,500 Canadian. The
note is due May 6, 2007, and bears interest at 6% per annum. The note is
collateralized by the technology.
The Company and the Buyer entered into a "Management and Marketing
Agreement" dated May 6, 1997 (the Agreement). The Agreement expires August
31, 2007, 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:
Until the note is paid in full, the Company will receive an annual fee
of 15% 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 February 28, 1998, an annual "owners fee" of $475,000 Canadian,
which is to be applied as follows: pay accrued interest and the excess, if
any; a) 55% of the remaining fee applied to the note balance, and b) 45% 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)
55% of the net revenue applied to the note balance, and b) 45% 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 will be distributed as follows: (a) 55% to the
Company as an agent's fee, and (b) 45% 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 605285 Ontario Inc.
Exhibit 10.2 Management and Marketing Agreement between
Datalink Systems Corporation and 605285 Ontario Inc.
Exhibit 10.3 6% Secured Term Note
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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: June 6, 1997 By/s/ Anthony LaPine
Anthony LaPine, President
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APPLICATION SOFTWARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 6th day of May, 1997 (the "Effective
Date").
BETWEEN: 605285 ONTARIO INC., an Ontario corporation, having an office
in Etobicoke, Ontario ("Purchaser")
OF THE FIRST PART
AND
DATALINK SYSTEMS CORPORATION, a Nevada corporation, having an office in
San Jose, California (hereinafter referred to as "Systems")
OF THE SECOND PART
WHEREAS:
1. Systems is the beneficial owner of the Purchased Assets; and
2. Systems has agreed to sell and assign the Purchased Assets to
Purchaser and 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 __________, 1997, prepared for 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 May 6,1997, 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 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, "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;
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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 Service;
g. "Documentation" has the meaning specified in Subsection v. of
the definition of Purchased Assets;
h. "Enhancement" means any improvement, revision or other
modification made to the Application Software by Vendor to be utilized with
the Service, including, without limitation, any improvement, revision or other
modification made by Vendor which is necessary:
i. to provide Customers with a then current Service;
ii. to keep the Service compatible with the personal
computer and networking technology then in use; and
iii. to maintain the Service as a state of the art or
industry leading technology,
including, without limitation, the changes set out in Appendix A.1
to Schedule A to the extent that Purchaser's Manager pursuant to the
Management Agreement continues to believe that they make sense in light of
then current market conditions and technical developments;
i. "Infringement Claims" has the meaning specified in Subsection
5.1.b.;
j. "Intellectual Property" has the meaning specified in
Subsection iv. of the definition of Purchased Asset";
k. "Letter of Representation" means a letter from Systems to
Corporate Valuation Services Limited in substantially the form attached as
Schedule B;
l. "Management Agreement" means the Management and Marketing
Agreement to be entered into by Purchaser and Systems on Closing for the
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management and marketing of the Purchased Assets;
m. "Note" means the 6.0% Secured Term Note, secured by the
Purchased Assets, in substantially the form attached as Schedule D;
n. "Originality Certificate" means the Officer's Certificate in
the form attached as Schedule C;
o. "Purchase Price" has the meaning specified in Section 2.1;
p. "Purchased Assets" means the Application Software and all of
Systems' property and rights necessary for the ownership of, operation of, or
the realization of benefits from, the Service, including, without limitation:
i. all products associated with or derivatives of the
Application Software utilized to provide the Service;
ii. the benefit of all agreements necessary for the
ownership of, operation of, or the realization of the benefit from, the
Service, including, without limitation, all service agreements and third party
license agreements;
iii. all inventions necessary for the ownership of,
operation of, or realization of the benefit from, the Service, including,
without limitation, ideas, research, discoveries, designs, systems, patterns,
specifications, technology, know-how, formulae, confidential information,
data, computer software development tools, operating systems, subroutines,
algorithms, methods and processes;
iv. all intellectual property rights necessary for the
ownership of, operation of, or realization of the benefit from, the Service,
including, without limitation, patents, trademarks, copyrights and trade
secrets and applications for and the right to apply for any intellectual
property, but excluding all trademark rights to the word QUOTEXPRESS subject
to Section ___, herein (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");
q. "Purchase Price" has the meaning set out in Section 2.1;
r. "Section" means any section, subsection, article, clause,
subclause, paragraph or subparagraph of this Agreement;
s. "Security Agent Agreement" means the Security Agent Agreement
to be entered into by Systems, Purchaser and Morris/Rose Ledgett, as security
agent, on the Closing, for the purpose of holding the Purchased Assets
pursuant to the terms thereof;
t. "Service" means a service that provides for the delivery of
real time stock quotes utilizing the Application Software, wireless technology
and alphanumeric paging services, and commonly known as the "QUOTEXPRESS."
u. "Warrant" means the warrant entitling Purchaser to acquire
Two Hundred Thousand (200,000) shares of Common Stock of Systems, commencing
on the Effective Date and continuing until the third anniversary of the
Effective Date.
1.2 Interpretation
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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 supplementing 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 are to Canadian dollars.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein, except the conflict of laws rules, and the parties attorn
to the jurisdiction of the courts of the Province of Ontario and the Federal
Courts of Canada. The parties expressly exclude the application of the Vienna
Convention for the International Sale of Goods.
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
Schedule F - Warrant
ARTICLE 2
AGREEMENT TO SELL, ASSIGN AND PURCHASE
2.1 Systems hereby sells, assigns and transfers all its right, title
and interest in the Purchased Assets to Purchaser and Purchaser hereby
purchases the entire right, title and interest of Systems therein, as of the
Effective Date, at and for $18,100,000 Canadian (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.
2.3 Subject to the terms and conditions of this Agreement, Systems
shall grant to Purchaser, and Purchaser shall accept, the Warrant, entitling
Purchaser to acquire Two Hundred Thousand (200,000) shares of Common Stock of
Systems upon the terms and conditions set forth therein.
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2.4 Systems hereby grants Purchaser an option to acquire all right,
title and interest in, to and under the trademark "QUOTEXPRESS", together with
any good will of the business connected with the use of and symbolized by said
trademark, at an exercise price of Canadian Ten Dollars (Cdn. $10.00). The
option set forth herein shall become exercisable, if at all, in the event of
termination or expiration of the Marketing Agreement, provided that Purchaser
is not then in default thereof. This option shall terminate and be of no
further force and effect on the 180th day following termination or expiration
of the Marketing Agreement.
In the event of exercise of the option described herein and at
Purchaser's request, Systems will (i) promptly execute a written assignment of
title to Purchaser for the QUOTEXPRESS trademark and waive all moral rights
therein, (ii) assist Purchaser in every proper way (but at Purchaser's
expense) to obtain and from time to time enforce trademark and other rights
and protections relating to the QUOTEXPRESS trademark, and to that end, agrees
to execute all documents for use in applying for and obtaining trademark
registration, rights and protections, as Purchaser may desire, together with
any assignments thereof to Purchaser or persons designated by it. In the
event Purchaser is unable, after reasonable effort, to secure signatures on
any documents needed to apply for any trademark registration or other right or
protection relating to the QUOTEXPRESS invention, whether because of physical
or mental incapacity or for any other reason whatsoever, Systems hereby
irrevocably designates and appoints Purchaser and its duly authorized officers
and agents as his agent and attorney-in-fact, to act for and in its behalf and
stead, to execute and file any such application or applications and to do all
other lawfully permitted acts to further the issuance of trademark
registrations or similar protections thereon with the same legal force and
effect as if executed by it.
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. $100,000 to be paid to the solicitors of the Purchaser and
credited against the purchase price on the Closing Date; and
b. $4,072,500 on Closing, by wire transfer; and
c. $14,027,500 by execution and delivery of the Note;
3.2 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 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 Representations of Systems
Systems hereby, undertakes, represents and warrants to Purchaser at the
date hereof, at the Closing Date, and acknowledges that Purchaser is relying
on such undertakings, representations and warranties that:
a. Systems is a corporation (i) duly incorporated and organized,
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validly subsisting and in good standing under the laws of the jurisdiction of
its incorporation; (ii) duly authorized, with 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 Systems pursuant hereto nor
the fulfillment 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
Systems or any material agreement or instrument to which Systems is subject or
will require any consent or other action by any person or administrative or
governmental body;
c. Systems 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 Purchaser and its counsel;
e. the names of the individuals involved in the development of
the Application Software, the Purchased Assets or any element thereof, are set
out in Subsection 4.1.e. of Schedule E and all these individuals were:
i. employees of Systems or its predecessor in interest who
worked within the scope of their employment to develop the Application
Software, the Purchased Assets, or any element thereof, and who executed a
written waiver of their moral rights in the copyright to the foregoing in
favour of Systems;
ii. independent contractors or employees of independent
contractors which contractors were subject to agreements assigning their
interest, if any, in the Application Software, Purchased Assets, or any
element thereof to Systems or its predecessor in interest, and who executed a
written waiver of their moral rights in the copyright to the foregoing in
favour of Systems; 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
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 Systems has
licenses for such third party software which allow Systems to market such
software, directly or indirectly through sublicensees, as part of the
Application Software and those licenses which are assignable, will be assigned
to Purchaser on Closing, and with respect to those licenses which are not
assignable, Systems will procure new licenses in the name of Purchaser, or if
unavailable, Systems will procure new licenses in the name of Purchaser to
similar products and will modify the source code of the Application Software,
if necessary, to be compatible at its own cost and expense. None of the third
party software is custom software developed specifically for use with the
Application Software; or, if the third party software is so customized; the
license is assignable to the Purchaser, perpetual in term, and terminable only
for material breach following a reasonable cure period. All of the third
party software is readily
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available in the open market and capable of being obtained by the Purchaser in
the event a license terminates, or if the particular software is not capable
of being obtained at such time, other software suitable for substitution
therefor is readily available in the open market and Systems will modify, at
its own cost
and expense, the source code of the Application Software, if necessary, to be
compatible;
g. the Application Software, and any other aspect of the
Service, was not derived from any third party's pre-existing material except
as set out in Subsection 4.1 g. of Schedule E;
h. Systems has not used or enforced or failed to use or enforce
any Intellectual Property rights or other rights associated with the
Application Software or Purchased Assets in any manner which could adversely
affect the validity or enforceability of the Intellectual Property;
i. to the best of its knowledge there is not, and has not been,
any infringement or violation of Systems' rights in and to the Intellectual
Property;
j. Systems 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 Systems before any court or administrative agency which
could materially adversely affect the financial condition or overall
operations of Systems or the Purchased Assets, and no judgment, order or
decree enforceable against Systems which does involve or may require the
expenditure of money as a condition to or a necessity for the right or ability
of 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 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 and ensure year 2000 complaint operation;
n. the Application Software operates in accordance with the
applicable associated user Documentation;
o. 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 in Canada and the United States and no
such licenses, agreements, approvals or consents will be required by
Purchaser;
p. it has not done anything so as to preclude Purchaser from
having full enjoyment and quiet possession of the Purchased Assets;
q. there are no outstanding options, agreements of purchase and
sale or other agreements or commitments obligating Systems to sell the
Purchased Assets or any of them, except pursuant to this Agreement;
r. there are no taxes, levies or other similar assessments
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including, without limitation, sales, use or other taxes payable by Systems in
connection with the purchase and sale contemplated by this Agreement;
s. the Application Software is available for use;
t. the Purchased Assets are not used in carrying on a business
in Canada;
u. the assumptions, referred to in the Asset Valuation Report,
are true and correct;
v. 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; and
w. all copyright, patent or trademark registrations or
applications for registration of the Application Software in any jurisdiction
have been disclosed to the Purchaser, including complete and accurate
documentation relating thereto; if there are no such applications or
registrations, then Systems shall supply to the Purchaser, on closing, all
relevant or necessary information and documentation which will enable the
Purchaser to make such application for registration of patent, copyright or
trademark as Purchaser may determine.
All of the representations, warranties and covenants contained in this
Agreement made and to be made by Systems will survive the Closing Date and
continue in full force and effect for the benefit of Purchaser until the later
of (i) full payment of all amounts owing under the Note; and (ii) the third
anniversary of the Effective Date.
4.2 Representations and Warranties of Purchaser
Purchaser undertakes, represents and warrants to Systems at the date
hereof and at the Closing Date and acknowledges that Systems is relying on
such undertakings, representations and warranties that 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; (ii) duly authorized, with 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 corporate power
and authority and right to enter into this Agreement and each and every
agreement to be executed and delivered by 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 Purchaser will survive the Closing Date and
continue in full force and effect for the benefit of Systems while any money
due on the Note is outstanding.
ARTICLE 5
COVENANTS
5.1 Systems' Assumption of Liability and Indemnity
Systems hereby covenants and agrees to be liable to Purchaser for and to
indemnify and save harmless Purchaser from and against, effective as and from
the Closing Date, any claims, demands, actions, causes of action, damage,
loss, costs (including legal costs of a solicitor), liability or expense which
may be made
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or brought against Purchaser and which it may suffer or incur as a result of,
in respect of, or arising out of:
a. any non-fulfillment of or breach of any covenant,
undertaking, representation or warranty on the part of Systems, 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 Purchaser on or after the Closing Date ("Infringement Claims").
5.2 Purchaser's Assumption of Liability and Indemnity
Purchaser hereby covenants and agrees to be liable to Systems for and to
indemnify and save harmless Systems from and against, effective as and from
the Closing Date, any claims, demands, actions, causes of action, damage,
loss, costs (including legal costs of a solicitor), liability or expense which
may be made or brought against Systems and which it may suffer or incur as a
result of, in respect of, or arising out of any non-fulfillment of or breach
of any covenant, undertaking, representation or warranty on the part of
Purchaser under this Agreement or any document or instrument contemplated by
this Agreement.
5.3 Limitation on Indemnity for Infringement Claims
Systems' obligation to indemnify Purchaser, set out in subsection 5.1 b.
is subject to Purchaser providing Systems with prompt notice of any
Infringement Claims forthwith upon Purchaser receiving notice of such claims.
Purchaser may defend the claim, at its own expense. Systems, at its own
expense, also has the right to defend any Infringement Claim either by itself,
if Purchaser has elected not to do so, or jointly with Purchaser. Purchaser
will provide reasonable assistance to Systems with respect to the defense of
any Infringement Claim, at Systems' reasonable expense. Systems will provide
reasonable assistance to Purchaser with respect to the defense of any
Infringement Claim, at Purchaser's reasonable expense.
5.4 Other Covenants
Systems (and with respect to Section 5.4 d. only, Purchaser) covenants
and agrees as follows:
a. until the Closing Date, Systems 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 Purchaser;
b. Systems will make available to Purchaser for due diligence
investigations, all information, documents and agreements pertaining to the
development, acquisition and marketing of the Application Software and Service
including, without limitation, computer code and related documentation,
marketing and product business plans and the full cooperation of Systems
management;
c. Systems will complete the Certificate of Originality and
deliver it to Purchaser and Purchaser's counsel on or before Closing;
d. 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
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Information, directly or indirectly, for any purpose other than as required in
the performance of this Agreement or the Management Agreement; and
e. Systems will acquire, at its expense and in Purchaser's name,
licenses for any third party software comprising part of the Purchased Assets
not assignable or assigned by Systems to Purchaser.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Purchaser's Obligations
The obligations of 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 Purchaser and may be waived in writing
in whole or in part):
a. the execution and delivery of all of the closing deliveries
identified in Section 7.3;
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 Systems or the Purchased Assets;
d. Systems 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 Systems contained in
Section 4.1 will be true and correct on Closing.
6.2 Conditions to Systems' Obligations
The obligations of Systems 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 Systems and may be waived in writing in whole or in
part):
a. delivery of the Purchase Price, and the execution and
delivery of all closing deliveries identified in Section 7.4;
b. 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 Purchaser contained in
Section 4.2 will be true and correct on Closing.
ARTICLE 7
CLOSING
7.1 Closing Date
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 Purchaser's
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Solicitors ("Closing").
7.2 Survival
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.
Without limiting the generality of the foregoing, the parties hereto expressly
acknowledge and agree that the option to acquire the "QUOTEXPRESS" trademark
will survive the Closing and continue in full force.
7.3 Systems' Closing Deliveries
At the Closing, Systems will duly execute and deliver or cause to be
executed and delivered to Purchaser the following:
a. a bill of sale assigning the Purchased Assets to Purchaser;
b. the Management Agreement;
c. the Originality Certificate;
d. the Letter of Representation;
e. the Security Agent Agreement;
f. the Warrant;
g. copies of the Purchased Assets including, without limitation,
copies of all Documentation;
h. certified copies of resolutions of the directors of Systems
authorizing the transactions; and
i. such other agreements and documents as Purchaser may
reasonably request to give effect to the terms and conditions of this
Agreement.
j. originals of all authors' assignments of copyright, patent
and trademark and waivers of moral rights in the Application Software;
j. copies of all patent, trademark and copyright registrations
in respect of the Application Software; and
k. information sufficient to enable the Purchaser to apply for
and receive registration of copyright, patent or trademark in or relating to
the Application Software.
7.4 Purchaser's Closing Deliveries
At Closing 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;
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c. the Management Agreement;
d. the Security Agent Agreement;
e. any representations or other documentation reasonably
required by Systems in connection with the issuance of the Stock Certificate;
f. the Warrant;
g. a certified copy of a resolution of the directors of
Purchaser authorizing the transactions; and
h. such other agreements and documents as Systems may reasonably
request to give effect to the terms and conditions of this Agreement.
7.5 Delivery to Security Agent
At Closing and as security for its obligations under the Note, Purchaser
will electronically deliver to the Security Agent, under the Security Agent
Agreement, the source code for the Application Software delivered to Purchaser
by Systems.
ARTICLE 8
NOTICES
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.
The addresses for service of notices hereunder of the following persons
shall be:
Systems: DataLink Systems Corporation
2105 Hamilton Avenue
Suite 240
San Jose, CA 95125
Attention: President
Purchaser: 605285 Ontario Inc.
1350 Martin Grove Road
Etobicoke, Ontario
M9W 4X3
CANADA
Attention: Secretary-Treasurer
Fax No. (905) 880-4123
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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, and any and all ancillary documents contemplated herein,
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
Purchaser may assign any part of its interest in this Agreement or the
Purchased Assets, except that any assignment to a competitor of Systems
requires the prior written consent of Systems. Such assignment shall be
effected by:
a. giving written notice of the name and address of the
assignee;
b. by delivering to Systems 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.
Systems may not assign this Agreement, without the prior written consent
of Purchaser, except that Systems 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, to (I) any corporation,
partnership or other entity which is controlled by, controlling or under
common control with, Systems; or (ii) a purchaser of all or substantially all
the assets of Systems, or any person or entity into which systems is merged or
consolidated by:
a. giving written notice of the name and address of the
assignee;
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b. by delivering to 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
"Systems" and "Purchaser". as used herein will include Systems' and
Purchaser'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 Systems among them relating to the
subject matter hereof.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement on the
day first above written.
DATALINK SYSTEMS CORPORATION
By:/s/ Anthony LaPine
Anthony LaPine
Chief Executive Officer
605285 ONTARIO INC.
By:/s/ Gino DiGioacchino
Gino DiGioacchino
Secretary-Treasurer
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<PAGE>
MANAGEMENT AND MARKETING AGREEMENT
THIS AGREEMENT made as of May 6, 1997.
BETWEEN:
605285 ONTARIO INC., a corporation having an office in Etobicoke, Ontario
(hereinafter referred to as "Owner")
OF THE FIRST PART
AND
DATALINK SYSTEMS CORPORATION, a Nevada corporation, having an office in
San Jose, California (hereinafter referred to as "Manager")
OF THE SECOND PART
WHEREAS:
A. Owner has acquired or developed and owns all of the right, title
and interest to the Technology;
B. Owner wishes to appoint Manager, as 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 this Agreement together with
Enhancements;
c. "Application Software Purchase Agreement" means the agreement
of purchase and sale made as of May 6, 1997, between Owner and Manager;
d. "Customer" means any person using the Service;
e. "Documentation" has the meaning set out in Subsection v. of
the definition of Technology together with all revisions thereto;
f. "Enhancement" means any improvement, revision or other
modification made to the Application Software by Vendor to be utilized with
the Service, including, without limitation, any improvement, revision or other
modification made by Vendor which is necessary:
i. to provide Customers with a then current Service;
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ii. to keep the Service compatible with the personal
computer and networking technology then in use,
iii. to maintain the Service as a state of the art or industry
leading technology,
including, without limitation, the changes set out in Appendix A.1
to Schedule A to the extent that Purchaser's Manager, 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
i. "Intellectual Property" has the meaning specified in
Subsection iv. of the definition of Technology;
j. "Interest Amount" means an amount equal to the annual
interest payable under the Note;
k. "Manager" means DataLink Systems Corporation and its
permitted assigns in its capacity as the agent for Owner and Manager of the
Technology appointed by 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 6.0% Secured Term Note dated as of May 6,
1997 issued by Owner to Manager in connection with the purchase of the
Technology;
o. "Overhead and Administration Costs" has the meaning specified
in Subsection 3.1 c.;
p. "Owner's Fee" has the meaning specified in Subsection 3.1
q. "Principal Payments" means the amounts payable to Owner
pursuant to subsections 3.1 b.i. and 3.2 c.ii.A. for payment against the
principal sum outstanding under the Note;
r. "Security Agent" means Morris/Rose Ledgett, the Security
Agent under the Security Agent Agreement;
s. "Security Agent Agreement" means the Security Agent Agreement
made as of May 6, 1997, among Owner, Manager and Security Agent;
t. "Service" means a service that provides for the delivery of
real time stock quotes utilizing the Application Software, wireless technology
and alphanumeric paging services, and commonly known as the "QUOTEXPRESS";
u. "Technology" means the Application Software and all of
Owner's property and rights necessary for the operation of the Service,
including, without limitation:
i. all products associated with or derivatives of the
Application Software utilized to provide the Service;
ii. the benefit of all agreements necessary for the
ownership of, operation of, or the realization of the benefit from, the
Service, including,
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without limitation, all service agreements and third party license agreements;
iii. all inventions necessary for the operation of the Service,
including, without limitation, ideas, research, discoveries, designs, systems,
patterns, specifications, technology, know-how, formulae, confidential
information, data, computer software development tools, operating systems,
subroutines, algorithms, methods and processes;
iv. all intellectual property rights necessary for the
operation of the Service, 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");
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 Ontario and the laws of Canada
applicable therein, except the conflict of law rules, and the parties attorn
to the jurisdiction of the courts of the Province of Ontario and the Federal
Courts of Canada.
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 - Specifications of Application Software
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ARTICLE 2
MANAGEMENT SERVICES
2.1 Appointment of Agent/Manager
Owner hereby appoints Manager 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
Manager hereby accepts such appointment.
2.2 Management Duties
a. Manager will, in good faith, observe and perform the
following obligations in respect of the marketing, distribution, sale,
Enhancement and support of the Service in a good and workmanlike manner,
utilizing its capable management and technical expertise:
i. Marketing, Distribution and Sale. 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. Manager will use commercially reasonable efforts to provide the
Service and maximize sales of it. Manager will be responsible for developing
and negotiating the contracts required to supply the Service to Customers.
Owner will be entitled to receive copies of and to comment on standard form
sales and support service contracts and Manager shall address all such
comments with Owner and take into account all of Owner's directions and
instructions forming a part of such comments. All such contracts will contain
provisions of confidentiality acceptable to 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 Owner.
Owner will be entitled to conduct an inspection of the
management of the marketing, distribution, sale, Enhancement and support of
the Service at any time during regular business hours upon reasonable notice
to Manager. Notwithstanding any other provision in this agreement, Manager
will take into account any and all commercially reasonable directions and/or
specifications given by Owner pertaining to the marketing, distribution, sale,
Enhancement and support of the Service which Manager may receive from Owner
from time to time in writing.
ii. Support, Training and Consulting. Manager will have
complete responsibility for delivery and installation of the Service. Manager
will provide all support services for Customers including telephone and
on-site support. 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 Manager pursuant to the terms of its support services
agreements. Manager will provide all Enhancements.
iv. With respect to any third party software contained in
the Application Software which is not assignable or for which the term expires
or is terminated, Manager will procure new licenses in the name of Owner, or
if unavailable, Manager will procure new licenses in the name of Owner to
similar products and will modify the source code of the Application Software,
if necessary, to be compatible;
b. In addition to the duties referred to in Subsection 2.1 a.,
Manager will, in good faith and in satisfaction of its fiduciary duty to Owner
do the following:
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i. Reviews. Manager will review and report to Owner or its
duly appointed agent on Manager's performance under this Agreement on an
annual basis. Such reviews will be scheduled by mutual agreement of all
parties.
ii. Computer Code. Manager will deliver computer code (in
object code and source code form) together with all related documentation and
development tools necessary or desirable to enable the software to operate
properly to Owner or its duly appointed agent quarterly, within thirty (30)
days of the end of each fiscal quarter of Manager. Manager will assist Owner
or its agent in verifying that the computer code delivered to Owner is fully
functional Application Software, or Enhancements.
iii. Conflict of Interest. Manager acknowledges and agrees
that it is acting in a fiduciary capacity as agent of Owner and will conduct
itself as such in all dealings on behalf of Owner and in connection with the
performance of its obligations under this Agreement. In particular, Manager
will avoid conflicts of interest between itself and Owner in connection with
the business of providing the Service.
2.3 Insurance
a. Without in any way limiting the liability of Manager under
this Agreement, 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
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 two
million dollars ($2,000,000.00) for bodily injury and property damage;
iii. employer's liability insurance with limits of not less
than one million dollars ($1,000,000.00) for each employee engaged in the
services where Workers' Compensation does not exist; and
iv. Unless otherwise directed by Owner, in writing,
insurance covering loss of or damage to all machinery, tools, equipment,
supplies and structures owned by Manager and/or rented or leased from a third
party or parties and used by Manager or its sub-contractors in performing its
obligations under this Agreement.
b. 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.
c. For greater certainty, the parties agree and understand that
the obligations of Manager, as set forth in this Section 2.3, may be fulfilled
if Manager's existing insurance policy satisfies the requirements of this
Section.
ARTICLE 3
ALLOCATION AND DISTRIBUTION OF FEES
3.1 Distribution of Fees Before Payout of the Note
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a. Manager will distribute, annually, until the Note is paid in
full, the Net Sales in the following order of priority:
i. to pay Owner's Fee; and
ii. to pay the Expenses.
b. Manager will distribute, annually, until the Note is paid in
full, the Net Revenue less Owner's Fee payable in the year in the following
order of priority:
i. 55% to Owner, for payment against the principal sum
outstanding from time to time under the Note and in accordance with the Note;
and
ii. 45% to Owner, for retention by Owner.
c. For the purposes of Subsection 3.1 a. the following terms
have the following meanings:
i. "Agency Fee" means fifteen percent (15%) of the annual
costs of marketing, distributing and selling the Service referred to in
Subsection 3.1 c. ii. A.;
ii. "Expenses" means the following cumulative costs and
fees to the extent not previously recouped by Manager in accordance herewith:
A. costs of marketing, distributing and selling the
Service;
B. 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 overhead
and administrative costs of Manager to provide the Service, for a year,
determined as the pro rata share of Manager's total overhead and
administrative costs for the year, determined by multiplying Manager's total
overhead and administrative costs by the fraction, the numerator of which is
the Net Sales and the denominator of which is the aggregate gross amount paid
by Manager's customers for installation, use and support for all of Manager's
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 (For purposes
of this Agreement, overhead and
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administrative costs will exclude any salaries of senior management executives
who did not actively participate in the performance of the management
obligations of Systems set forth herein.); and
vii. "Owner's Fee" means an annual fee payable by Manager
to Owner of $475,000 (prorated for any partial year) on February 28 of each
year during the term of this Agreement, commencing February 28, 1998.
d. Notwithstanding anything else contained in this Agreement, in
no event, without the prior written consent of Owner, will fees or other
amounts for the Service:
i. be set below competitive prices prevailing in the market
for similar services as determined by Manager acting in the best interests of
Owner; and
ii. be discounted for any other consideration granted to
Manager, its affiliates or associates that is not provided to 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 sold by Manager hereunder and the other services sold by Manager
outside the scope of this Agreement.
3.2 Distribution of Owner's Fee
Owner's Fee in any year and the amount payable to Owner pursuant to
Subsection 4.4 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
(i) in the case of any amount payable pursuant to subsection
4.4(b), to pay the Interest Amount in respect of any subsequent years;
(ii) in the case of the Owner's Fee, to pay as follows:
A. 55% to Owner, for payment against the principal sum
outstanding from time to time under the Note and in accordance with the Note;
and
B. 45% to Owner, for retention by Owner.
3.3 Distribution of Fees After Payout of the Note
a. Manager will distribute, annually after the Note has been
paid in full, the Net Revenue in the following order of priority:
i. 55% to Manager as an agent's fee; and
ii. 45% to Owner.
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.
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3.4 Timing and Payment of Distributions
Amounts payable to Owner for a year pursuant to Sections 3.1, 3.2 and 3.3
will be paid within 60 days following the calendar year end.
3.5 Set Off
Manager will have the right to set off amounts payable by Manager to
Owner under this Agreement against amounts payable to Manager by Owner under
the Note except that Manager will have no right of set off and will pay the
following amounts to Owner without regard to the equities between Manager or
its affiliates and Owner and the parties acknowledge and agree that these
amounts are liquidated amounts payable forthwith:
i. amounts payable to Owner pursuant to Subsections 3.1 b.
ii. and 3.2 c.ii. for their retention; and
ii. amounts payable by Owner as sales taxes or goods and
services taxes, which amounts will be remitted forthwith upon their being due,
by Manager to the appropriate authorities on behalf of Owner.
3.6 Reports
a. Manager will give Owner, on a confidential basis, 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 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, Manager will give 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
annually, within 90 days of the end of each fiscal year.
3.7 Financial Statements
Manager will provide the following financial statements, for the business
pertaining to the Service, to Owner, annually, within 90 days of the end of
each fiscal year of Manager:
i. the annual reports referred to in Section 3.6;
ii. an audited income statement; and
iii. an audited balance sheet.
3.8 Books and Records
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.
Owner will have the right to audit the books and records of Manager pertaining
to the Service once each year for a period of four years after the year end.
For this purpose, Owner or its nominee will have, during normal business
hours, access to and the right
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to copy and remove copies of all books and accounting records relating to the
calculation of fees accrued and collected for Services. All information
obtained by Owner or its nominee will be subject to the confidentiality
obligations of this Agreement.
3.9 Taxes
(a) Manager will charge and collect from Customer any and all
taxes of any type that are imposed on the use, sale or support of the Service
by Manager by any federal provincial, state, local or any other taxing
authority in any country in which the Service is provided and Manager will pay
and duly remit on a timely basis to the appropriate taxation authority the tax
so charged and collected;
(b) Manager is responsible to withhold and remit on a timely
basis the amount of any income, sales or any other tax imposed on the Agency
Fee or any other amount paid or credited to the Manager hereunder by any
federal, provincial, state, local or any other taxation authority in any
country regardless of whether the obligation to withhold and remit such amount
is on the Owner;
(c) Subject to subsections 3.9(b) and 3.5 hereof, the Owner and
Manager are required to pay their respective taxes of any type imposed on them
for fees paid or credited to the Owner or Manager hereunder; and
(d) Manager will prepare or provide the Owner with any and all
information or other documentation on a timely basis required by the Owner to
enable the Owner to prepare any return required to be filed by it with any
taxing authority in connection with an amount withheld in accordance with this
subsection 3.9 or alternately, the Manager shall prepare and file such a
return on the Owner's behalf in the name of the Owner within the time required
to file such return and shall provide a copy thereof to the Owner.
ARTICLE 4
GRANT OF RIGHTS
4.1 In consideration of Owner's Fee and other good and valuable
consideration (the receipt and sufficiency of which is acknowledged by Owner)
Owner hereby grants Manager, 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 and/or the object code for the
Application Software, the Intellectual Property and the Documentation for use
only with products or services other than the Service. Manager's right to
sub-license the source code, as contemplated by this Section, is subject to
the prior written agreement of the sublicensee to be bound by a sublicense
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. provide Owner the right to sue the sublicensee directly for a
breach of the sublicense by the sublicensee.
4.2 Any modifications to the Application Software made by Manager
that are not Enhancements will be owned by Manager. Any modifications to the
Intellectual Property or the Documentation that do not relate to an
Enhancement will be owned by Manager.
4.3 Neither Manager nor any of its affiliates or associates will,
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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.
4.4 Manager will have, upon termination of this Agreement, an
exclusive, world wide, paid up right to use, sub-license (subject to the
provisions of Section 4.1) and modify the Application Software:
a. upon termination of this Agreement by Owner pursuant to
Subsection 5.4, if Manager is not then in default of this Agreement; or
b. upon termination of this Agreement by Owner, pursuant to
Section 5.3, if Manager pays Owner, an amount calculated as the difference
between Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) and the
amount of Owner's Fee credited to Owner to the date of termination.
4.5 Protection of Proprietary Rights
Each party hereto shall promptly notify the other party in writing of any
infringement of, or action contesting the validity of, a patent, copyright or
trademark or misappropriation of any trade secret relating to the Application
Software or the Technology. In the case of an infringement, misappropriation
or other action described herein, Manager is hereby authorized to, but shall
not be required to, institute an action against the infringer, misappropriator
or other third party, and to defend or prosecute such action in whatever
manner deemed appropriate by Manager, in its sole discretion. The reasonable
costs and expenses relating thereto shall be deemed to be included within the
definition of "Expenses". If Manager elects not to commence such an action,
then Owner may, but shall not be required to, institute such an action at its
own cost and expense. Any recoveries obtained as a result of instituting such
an action shall be deemed to be Net Sales for the purposes of distributing
such funds. Owner shall cooperate with and generally assist Manager in taking
any action authorized hereunder. This provision shall survive any termination
or expiration of this Agreement, to the extent Manager retains any license to
the Application Software or the Technology.
ARTICLE 5
TERM AND TERMINATION
5.1 Term
This Agreement will be for an initial term expiring August 31, 2007, (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 Automatic Extension
The initial term or any-extension term of this Agreement will be
automatically extended to the next extension term without notice or election
by Manager. Manager may, during any extension term, terminate this Agreement
on 90 days notice given to Owner.
5.3 Termination
Owner may, during the initial term or any extension term, terminate this
Agreement as follows:
a. upon 10 days written notice by Owner to Manager of a breach
of
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any of Manager's obligations to pay Owner under this Agreement, subject to
Section 3.5, if such breach has not been remedied;
b. upon 30 days written notice by Owner to Manager of a material
breach by 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 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 Manager, in the case of the
petitioning into bankruptcy of Manager, the appointment of a receiver or the
liquidation of the business and affairs of Manager or the commencement of or
ordering of the winding-up of the business and affairs of Manager.
5.4 Termination by Non-Renewal
Owner may, at the end of the initial term or during any extension term,
terminate this Agreement upon 90 days notice given to Manager and upon payment
of all outstanding principal and accrued and unpaid interest under the Note.
5.5 Rights and Duties on Termination
Should the Agreement terminate pursuant to this Article 5, Manager will:
a. promptly provide to 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
Owner 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 to Owner (subject to Manager's right to
set-off amounts owed to Manager by Owner in accordance with Section 3.5) and
provide a full accounting to Owner for fees payable to Owner under this
Agreement.
e. within 90 days of the termination date, provide to Owner, a
final report setting forth the details in respect of all services provided to
Customers for the Service during the period from the end of the last fiscal
year to the termination date including type of service, amount and type of all
fees and other amounts payable to date, potential Customer and projected
revenues, and all other information necessary and relevant to conducting the
Service for the Customers.
5.6 Surviving Obligations
Section 5.5 and Articles 6, 7 and 8 will survive the termination of this
Agreement.
ARTICLE 6
OWNERSHIP OF TECHNOLOGY
6.1 Ownership of Technology
Manager acknowledges that Owner owns all right, title and interest to the
Technology and the Enhancements and that Manager has no rights thereto except
the
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rights expressly granted by this Agreement.
ARTICLE 7
LIABILITY
7.1 Indemnification by Manager
Manager will be liable to Owner for and indemnify and hold Owner harmless
from any and all claims, losses, liability, costs, taxes (including penalties
and interest thereon), expenses (including reasonable legal costs of a
solicitor) and damages which may arise pursuant to this Agreement including
misrepresentations made by 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), failure to comply with
subsection 3.9 herein or any other material breach of this Agreement. If any
suit, claim or proceeding involving Owner is based on a cause of action which
if proven would entitle Owner to claim the benefit of the indemnification
provided for herein and provided that Manager is given the complete authority,
information and cooperation of Owner, at Manager's expense, required to defend
or settle the suit Manager will:
a. defend the suit at its own expense; and
b. pay all damages and costs awarded against Owner provided that
Manager will not be responsible for any cost, expense or compromise made by
Owner without Manager's written consent.
Owner will be entitled to appoint its own counsel to represent it in any
such action at Owner's expense. In no event will 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.
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. Without limiting the generality of the foregoing, any sublicence of the
source code of the Application Software will require the sublicensee to
execute a written
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agreement expressly binding the sublicensee not to use or disclose the source
code other than as set forth in the sublicence agreement. 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 Owner's right set out in Section 12.4, in the event
that 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), Owner
shall first offer such Application Software to Manager in accordance with the
following provisions:
a. Owner shall deliver a written notice (the "Notice") to
Manager, stating I. Owner's bona fide intention to transfer the Application
Software; ii. the purchase price and terms of payment for which Owner proposes
to transfer the Application Software; and iii. the name and address of the
proposed transferee.
b. Within ninety (90) days after receipt of the Notice, Manager
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 Owner of such election (the "Election
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Notice"). If the Notice provides for the payment of non-cash consideration,
Manager 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 Manager 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 Owner and Manager shall execute such documents and instruments and make
such deliveries as may be reasonably required to consummate such purchase and
sale.
d. If Manager elects not to purchase or acquire the Application
Software, then Owner may transfer the Application Software to the transferee
proposed in the Notice, provided that such transfer: i. is completed within
ninety (90) days after the expiration of Manager's right to elect to purchase
the Application Software, ii. is made on terms no less favourable to Owner
than as designated in the Notice, and iii. 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, 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 initially escalating the dispute to senior management of the
parties for resolution and, in the event that senior management cannot resolve
the dispute within 30 days of escalation of the dispute to such level, then
the parties agree that such dispute shall be settled by arbitration in
accordance with the Arbitration Act (Ontario) in Toronto, Ontario. 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 (Ontario), 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.
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10.5 Controlling Provisions
In all respects not otherwise provided for in this Article 10, the
provisions of the Arbitration Act (Ontario), 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 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 will be received by the addressee, for the
purposes of this Agreement upon written acknowledgment of receipt of such
telecopy.
The addresses for service of notices hereunder of the following
persons will be:
Manager: DataLink Systems Corporation
2105 Hamilton Ave., Suite 240
San Jose, California
Attention: President
Fax No. :408 558-0816
Owner: 605285 Ontario Inc.
1350 Martin Grove Road
Etobicoke, Ontario
Attention: Secretary
Fax. No.:(905) 880-4123
Any of the foregoing may change their address for service in this Section
by notice given in accordance with this Section.
ARTICLE 12
GENERAL
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:
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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, and any and all ancillary documents contemplated herein,
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. Owner may assign all or any part of its interest in this
Agreement or the Technology, provided however, that any assignment to a
competitor of Manager, shall require the prior written consent of Manager.
Any assignment shall be effected by:
i. giving written notice of the name and address of the
assignee;
ii. by delivering to 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.
b. Manager may not assign this Agreement, without the prior
written consent of Owner, except that Manager 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, to (i) any
corporation, partnership or other entity which is controlled by, controlling
or under common control with, Manager; or (ii) a purchaser of all or
substantially all the assets of Manager, or any person or entity into which
Manager is merged or consolidated by:
i. by giving written notice of the name and address of the
assignee; and
ii. by delivering to 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 Manager's and Owner's
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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.
12.12 Equitable Remedies
The parties acknowledge that money damages would not be a sufficient
remedy for certain violations of the terms of this Agreement and, accordingly,
either party will be entitled to specific performance and injunctive relief as
remedies for such violations of the Agreement by the other party. These
remedies will not be exclusive remedies but will, in addition to all other
remedies, be available to such party, at law or equity.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed
by their duly authorized representatives as of the date first above written.
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DATALINK SYSTEMS CORPORATION 605285 ONTARIO INC.
By:/s/ Anthony LaPine By:/s/ Gino DiGioacchino
Anthony LaPine Gino DiGioacchino
Chief Executive Officer Secretary-Treasurer
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<PAGE>
6.0% SECURED TERM NOTE
605285 ONTARIO INC.
in favour of
DATALINK SYSTEMS CORPORATION
6.0% TERM NOTE MADE AS OF May 6, 1997.
Principal Sum: $14,027,500 Canadian
Due Date: May 6, 2007
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 May 6, 1997, among the
Corporation and the Holder;
b. "Corporation" means 605285 Ontario 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 Systems Corporation or its permitted
assignees;
f. "Interest Amount" has the meaning specified in Section 1.1j
of the Management and Marketing Agreement;
g. "Management and Marketing Agreement" means the Management and
Marketing Agreement made as of May 6, 1997, between 605285 Ontario Inc. and
DataLink Systems Corporation;
h. "Note" means this 6.0% Secured Term Note as originally
executed, or as amended or supplemented as herein provided;
i. "Person" includes any individual, firm, corporation, company,
joint venture, partnership, association, trust or unincorporated body of
persons;
j. "Principal Sum" has the meaning specified above;
k. "Sale Proceeds" has the meaning specified in Section 8.3;
l. "Service" means a service that provides for the delivery of
real time stock quotes utilizing the Application Software (as defined in the
Application Software Purchase Agreement), wireless technology and
alphanumeric paging services, and commonly known as the "QUOTEXPRESS."
m. "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;
<PAGE>
n. "Security Agent Agreement" means the Security Agent Agreement
entered into by the Corporation, the Holder and Morris/Rose Ledgett, as
security agent, for the purpose of holding the Technology pursuant to the
terms hereof; and
o. "Technology" means the Purchased Assets, as defined in the
Application Software Purchase Agreement.
1.2 Interpretation
a. The terms "this Note, "hereof" thereunder" 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
supplementing 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
Ontario and the laws of Canada applicable therein, except the conflict of law
rules, and the parties attorn to the jurisdiction of the courts of the
Province of Ontario and the Federal Court of Canada.
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 forth in Section 3.2;
and
c. all other moneys which may be owing by the Corporation to the
Holder pursuant to this Note, subject to the terms and conditions of this
Note.
ARTICLE 3
PAYMENT OF PRINCIPAL AND INTEREST
3.1 Principal
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a. The Principal Sum outstanding on May 6, 2007 will be paid on
___, 2007.
b. Prepayment of the Principal Sum outstanding, from time to
time for each year ended December 31 will be made annually, within sixty (60)
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 6.0% per annum calculated, but not compounded,
yearly, and not in advance.
b. Interest accrued and unpaid at May 1, 2007 will be paid on
_______, 2007.
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 Principal and Interest Acceleration
Notwithstanding Section 3.2 c., but subject to the limitation of
liability set forth in section 8.4 upon the occurrence of a Management
Agreement Termination Event:
a. outstanding Principal Sum and accrued and unpaid interest at
the Management Agreement Termination Date will be prepaid within 30 days of
the Management Agreement Termination Date; and
b. interest accruing and 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, pursuant to Section 5,
of the Management and Marketing Agreement.
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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
managing, developing, utilizing 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 during any period in
which there is any outstanding principal or any accrued and unpaid interest on
this Note, the Corporation will not, and the Corporation hereby covenants that
it will not, without the prior written consent of the Holder, sell or transfer
all or any part of the technology, or make, give, create, assume or allow to
subsist any mortgage, pledge, hypothecation, 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 hypothecation 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.
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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, rights hereby granted will cease, terminate 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 Escrow
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
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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, 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;
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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;
e. provided that the Corporation will not have remedied such
default within thirty (30) days (five (5) days in the case of a monetary
default) 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.
8.2 Remedies
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 California 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
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<PAGE>
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 20% 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.
8.4 Limitation of Liability
Notwithstanding anything contained in this Note, the Corporation will not
have any obligation to pay the Principal Sum outstanding from time to time
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, provided that
the Holder will not have remedied such default within ten (10) days following
receipt by the Holder from the Corporation of notice of the default.
b. if proceedings for the bankruptcy, receivership, 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.
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
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consent by the Holder will bind the Holder or the Corporation 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:
605825 Ontario Inc.
1350 Martin Grove Road
Etobicoke, Ontario
M9W 4X3
CANADA
Fax No. (905) 880-4123
Attention: Secretary-Treasurer
To the Holder at:
DataLink Systems Corporation
2105 Hamilton Avenue, Ste. 240
San Jose, California 95125
Fax No. (408) 558-0816
Attention: President
Notices shall be effective on delivery if delivered personally to the
Corporation or Holder.
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
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<PAGE>
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, and any and all ancillary documents contemplated herein, 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 any part of its interest in Technology,
except that any assignment to a competitor of Systems requires the prior
written consent of the Holder. An assignment shall be effected by:
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.
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 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.
12.7 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.
12.8 Remedies Not Exclusive
No right or remedy herein is exclusive of any other right or remedy. Each
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<PAGE>
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.
605285 ONTARIO INC.
By:/s/ Gino DiGioacchino
Gino DiGioacchino
Secretary-Treasurer
DATALINK SYSTEMS CORPORATION
By:/s/ Anthony LaPine
Anthony LaPine
Chief Executive Officer
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