EXHIBIT 10(a)
AGREEMENT
AGREEMENT dated as of September 15, 1998 between (but effective upon the
first payment hereunder) Purchase Point Media Corporation, a Minnesota
corporation having its principal office at 0000 Xxxxxxxx Xxxxxx, Xxxx Xxxxxxxxx,
XX X0X 0X0, Xxxxxx (the "Company"), and ITG, LLC, an Oregon limited liability
company having its principal office at 0000 X.X. Xxxxxxxx Xxxx, Xxxxxx, Xxxxxx,
00000, X.X.X. (the "Contractor").
W I T N E S S E T H
WHEREAS, the Company owns a patented grocery cart display unit ("display
unit") called "The Last Word"(R) and comprised of the Display panel and
Advertising insert (each as hereinafter defined) that attaches to the back of
the baby seat on store shopping carts, and it is the Company's intention to have
display units installed in store shopping carts nationwide as expeditiously as
possible; and
WHEREAS, the Contractor is a facilitator of direct and indirect services to
stores throughout the United States and is desirous of utilizing its existing
direct and indirect infrastructure to provide the services being sought by the
Company.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.01. The term "Display panel" means a patented, plastic, weatherproof,
highly durable, Point of Purchase (POP) assembly, consisting of a clear plastic
front and an opaque solid white back, which when assembled together, form a 7
inches high x 16 inches wide x 1/4 inch thick panel.
1.02. The term "Advertising insert" means a 15 inch by 6 inch four color
printing consisting of 10, 3 inch by 3 inch (approximately) advertisements
displayed in two rows of five, sized for fitting snugly inside the Display
panel.
1.03. The term "Store" refers to one of the 27,000 stores, supermarkets,
superstores, shopping clubs and the like capable of being serviced by the
Contractor on a direct and/or indirect basis.
1.04. The term "opener" means the proprietary hand tool fabricated for the
Company and required for the opening of the display units.
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1.05. The term "Phase One" refers to the first six months following the
date of this Agreement. During Phase One, the Company and the Contractor will
evaluate developmental, execution and financial requirements of the Company's
project. It is agreed that regular communication will be maintained between the
Company and the Contractor during Phase One. At the culmination of Phase One,
the Company and the Contractor agree to meet for the purpose of discussing all
relevant information pertaining to the results of Phase One, with the understood
goal being the development of mutually agreeable performance measuring criteria,
the purpose of which will be to establish all target data for the duration of
this Agreement based on known data.
1.06. The term "Carts per Store" is understood to mean an average of 200
carts per retail Store serviced. It is further understood that the nature of an
average is to fluctuate.
ARTICLE II
ACTIVITIES OF THE PARTIES
2.01. The Contractor shall, for an agreed upon incremental fee, survey all
Stores as promptly as reasonably practicable to determine whether a given
store's shopping carts are appropriate for the installation of the display
units. The Contractor, based upon predetermined and agreed to templates received
from the Company, for the purpose of securing any and all measurements and
whereby measurements will be secured, shall also provide the Company with the
measurements for each Store necessary to manufacture the components to attach
the display units to the baby seats of the shopping carts and to manufacture the
tools used to open the display units.
2.02. The Contractor will promptly assemble a sales organization and use
its best efforts to sell in as short a time as possible as many of the 27,000
Stores as practicable on the use of the display units. The Company shall prepare
and provide the Contractor with a standard form contract for the purpose of
obtaining installation approval from Stores. Such contract shall not be modified
or amended in any material respect by the Contractor without the prior written
consent of the Company (which consent shall not be unreasonably withheld).
Written approval authorizing the Company and the Contractor to proceed with the
installation and maintenance of the display units shall be obtained from the
chain, the original of which approval shall be forwarded to the Company. In the
case where approvals for installation and maintenance may have to be obtained
from individual Stores in a chain, the Contractor shall also obtain such written
approvals. The original of these approvals shall also be forwarded to the
Company.
2.03. The Company will deliver display units to the Contractor, f.o.b. the
Contractor's central warehouse and regional offices throughout the United
States, from where the Contractor will forward them to the Contractor's
individual Store installers, or directly to
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the Stores, as directed by the Contractor. This procedure shall be continued
until all Stores seeking installation of the display unit have been fitted out.
2.04. The Contractor shall carry out the installation of the display units
in compliance with the Company's installation procedures as notified by the
Company to the Contractor. All modifications to installation instructions will
be communicated to the Contractor by the Company at least 45 working days prior
to taking effect in the retail installation environment. The Contractor shall be
held harmless for any display unit failures.
2.05. On a quarterly basis, the Contractor shall receive from the Company a
supply of replacement advertising inserts. The Company will deliver the
advertising inserts, in palletized form, f.o.b. the Contractor's central
warehouse and regional offices throughout the United States, from where the
Contractor shall forward them to its individual Store installers, who shall
change the inserts, or directly to the Stores, as directed by the Contractor.
2.06. The Contractor will subcontract (at no additional charge to the
Company) the following services to its parent company, International Trade
Group, LLC: (i) electronic data interchange with stores (EDI), (ii) accounting
services, (iii) electronic links with field service representatives for instant
data transfer, (iv) design of computer systems to support field operations and
reporting and (v) West Coast operations office.
ARTICLE III
NON-COMPETE
The Company recognizes that among the Contractor's assets are its contacts
and ability to deliver national distribution quickly. To safeguard these assets
of the Contractor, the Company agrees to execute non-compete agreements
covering:
o non-circumvention agreement preventing the Company from doing business,
directly or indirectly, with any of the Contractor's installation service
companies, employees, agents or individuals including but not limited to in
the retail environment.
o A no-hiring agreement preventing the Company from hiring any of the
Contractor's services providers, employees, sales representatives or field
personnel for a period of three years after they have left the Contractor's
employ or terminated the Contractor's service contract for any reason.
ARTICLE IV
TERMS OF PAYMENT
The Company shall pay the Contractor for its work in both cash and stock
options as detailed below:
Cash Payments
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1) Monthly retainer. The Company will pay the Contractor a retainer of
$85,000 per month for the first six months of operations known as Phase One.
Following the execution of this Agreement, the Company shall cause to be placed
into an escrow account, designated by the Contractor, the full six-month
equivalent retainer value (i.e., $510,000). Starting the seventh month, the
Company may deduct up to, but no more than, $20,000 per month for the purpose of
the repayment of the Contractor's amortized start-up expenses during Phase One.
Such amortization will be applied up to a maximum of $5,000 against sales
commissions and $15,000 against installation fees.
2) Sales commission. The Company will pay the Contractor a sales commission
of $1.00 per cart for each Store contract signed and approved. The Company will
pay this commission ten days prior to the shipment of the units, provided that
the Contractor shall have submitted the following:
i. invoice
ii. a brief report covering the Contractor's survey of the chain or
the Store
iii. the original copy of the Store's executive officer's letter of
approval.
While the Company and the Contractor both recognize the benefit and need to make
sales presentations to as many food chains as possible in as short a period of
time as possible in order to neutralize competitor reaction, the amount of this
payment is open to review during Phase One as the Company's cash flow builds up.
Upon subsequent agreement between the parties, should sales commissions exceed
the Company's cash flow position during Phase One, then such sales commissions
may be accrued, in whole or in part, for no more than 30 days. Additional terms
of exclusions relative to payment to the Contractor for services rendered in
light of the Company's cash flow position may be discussed and modified during
Phase One at the discretion of the parties. This commission applies only to the
first year following installation of the display units in a given Store, at
which time the sales maintenance commission will become effective.
3) Sales maintenance commission. The Company will pay the Contractor a
sales maintenance commission of $0.50 per cart per annum (annuity) ten days
after each Store contract anniversary date.
4) Installation fee. The Company will pay the Contractor an installation
fee on of $2.00 per cart to cover the cost of the Contractor's installers (field
service representatives).
Terms: 60% of total projected carts ten days prior to the shipment of the
units
40% on receipt of the installation audit signed by the Contractor's
installer certifying the exact number of in-Store carts installed.
During Phase One as the Company's cash flow builds up, and upon subsequent
agreement between the parties, such installation fees may be accrued, in whole
or in part, for no more than 30 days. Additional terms or exclusions relative to
payment to the Contractor for services
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rendered in light of the Company's cash flow position may be discussed and
modified during Phase One at the discretion of the parties.
5) Advertising maintenance fee. The Company will pay the Contractor an
advertising maintenance fee of $0.50 per cart to cover the cost of the
Contractor's installers (field service representatives) changing advertising
inserts once every quarter or more frequently as agreed to between the Company
and the Contractor.
Terms: 50% payable ten days prior to the scheduled ad change date
50% within five working days following receipt of the audit
cards received from the Contractor's installers.
The Company will be fully responsible for the payment of the quarterly rental to
the Stores for the use of their carts. The amount payable to the Stores will be
10% of gross advertising revenues. Under no condition shall any transaction
occur which involves payment between the Stores and the Contractor or its
installers, in regard to the matters contemplated by this Agreement, without the
Company's written approval.
Stock Options
The Company will cause stock options to be issued in favor of the Contractor, or
individuals designated by the Contractor, as follows:
300,000 free trading shares of the Company's Common Stock at $5.00 per
share and 300,000 free trading shares at $1.00 per share, exercisable
within a three year period. Each of the options will be issued in
three equal 100,000 share blocks, with one block being exercisable in
whole or in part after each of the first, second and third year of
this Agreement, subject to the Contractor having met its installation
targets (inclusive of signed-up stores or accounts which may be
pending installation). Targets will be developed and agreed to based
on data derived from mutual information developed during the Phase One
initiative. In the event that the Contractor does not meet the
mutually agreed to target installations, the exercisability of such
options shall be reduced on a pro rata basis.
ARTICLE V
TERM AND MISCELLANEOUS
5.01. Subject to the Contractor meeting installation targets (inclusive of
signed-up stores or accounts which may be pending installation) developed and
agreed to based on data derived from mutual information developed during the
Phase One initiative, as well as satisfactory and timely handling of the
quarterly (or more frequent as agreed to by the Company and the Contractor)
advertising insert changes, the Company will give the Contractor an exclusive
contract for the services covered herein, in the United States for a ten year
period, renewable by mutual consent at least one year in advance.
Notwithstanding the foregoing, if the Company terminates this Agreement prior to
the expiration of the agreed to term of ten years for
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any reason whatsoever (except for a material breach by the Contractor of this
Agreement), the Company shall promptly pay the Contractor as liquidated damages
the greater of (a) fees and commissions due for one year based on the number of
installed carts then outstanding or (b) $1,000,000.
5.02. Notice of termination shall be given, by either party, one year in
advance. Since the Company will have become very dependant on the systems and
services provided by the Contractor, the Contractor agrees that it, and to the
extent necessary its parent company, immediately following notice of
termination, will, providing termination of this Agreement by the Contractor was
without cause, provide the Company with copies of all systems and software
programs and files pertinent thereto, to permit the Company to continue to
provide the service to the Stores, provided such systems, software and files are
not proprietary in nature to the Contractor, its parent company or independent
contractors.
5.03. Time is of the essence in order to neutralize any competitive
reaction to the Company entering the advertising market with its display unit.
To this end, the Company and the Contractor will hold regular monthly meetings
to review the efficiency of the previous month's work and also to examine the
possibility of increasing the monthly installation rate.
5.04. All information which either party designates as confidential will be
treated as confidential by the party receiving the information, unless (a) it is
rightfully possessed by the receiving party prior to disclosure from the other
party; (b) it is independently developed by the receiving party; (c) it was
furnished to others without restrictions similar to those imposed herein on the
right of the receiving party to use or disclose; (d) it becomes rightfully known
to the receiving party, without confidential restriction, from a source other
than the other party; or (e) disclosure to a third party is approved in writing.
Each party agrees (a) to exercise reasonable care not to divulge any
confidential information to any third party, such care to be commensurate with
the care exercised with respect to the protection of its own confidential
information; (b) to restrict the use of such information to matters related to
the parties' relationship as established by the terms and conditions of this
Agreement; and (c) to restrict access to such information to employees whose
access is necessary to the implementation of this Agreement and to the provision
of services in accordance with the terms and conditions of this Agreement.
5.05. Neither party shall be liable for any delay or failure in its
performance of any of the acts required by this Agreement when such delay or
failure arises beyond the control and without the fault or negligence of such
party. Such causes may include, without limitation, acts of God or public
enemies, labor disputes, material or component shortages, embargoes, rationing,
acts of local, state or national governments or public agencies, utility or
communication failures or delays, fire, flood, epidemics, riots or strikes. The
time for performance of any act delayed by such events shall be postponed for a
period equal to the delay.
5.06. Each of the parties represents and warrants to the other that its
computer systems and computer software are year 2000 compliant.
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5.07. The validity of this Agreement and of any of its terms or provisions,
as well as the rights and duties of the parties under this Agreement, shall be
construed pursuant to and in accordance with the laws of the State of Oregon,
without regard to its conflict of laws principles.
5.08. The Contractor reserves the right to transfer its rights and
obligations under this Agreement, in whole or in part, to a newly formed company
whose objective will be to provide the services set forth in this Agreement.
5.09. This Agreement supersedes all prior offers, proposals, written and
oral exchanges.
5.10. The Company agrees to service and provide the Contractor with
reasonable evidence of a product liability insurance policy in the amount of at
least $1,000,000 and furthermore agrees to hold the Contractor and any parent
company harmless from any and all liability, except for any such liability
arising from their gross negligence or willful misconduct.
5.11. The Company will develop target performance data related to the sale
of advertising space. With the sale of advertising space being the primary
source of the revenues from which the Contractor will be paid, it is appropriate
to develop "failure to perform" criteria for sales of advertising space with
such criteria being similar in nature to the target criteria developed for
display installations and advertising transfers performed by the Contractor.
5.12. The Company shall provide the necessary funds to facilitate any and
all "Uninstall" operations related to The Last Word advertising display panels.
These funds will be held in reserve for the sole purpose of facilitating the
removal of any and all advertising display panels as stipulated in agreements
with the retail customer. It is further understood that the "Uninstall" feature
may become a necessity to sales negotiations and closing of one or more
accounts.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement.
PURCHASE POINT MEDIA CORPORATION
By /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
President
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ITG, LLC
By /s/ Alain de la Motte
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