Exhibit 10.01
DEVELOPMENT AGREEMENT
This Agreement ("Agreement") entered into as of April 1, 2003 (the "Effective
Date") between Airos Group, Inc., an Ontario corporation, with offices at 000
Xxxxxxxx Xx., Xxxxxxxx, Xxxxxxx (the "Contractor") and Smart Chip Technologies.,
a Florida corporation (the "Company"), with its corporate office at 000 X. Xxxx
Xxxxxxx Xx., Xxx Xxxxx, XX 00000 and a Development Center, which will be its
principal place of business for this Agreement, at 000 Xxxx 0000 Xxxxx, Xxxx
Xxxx Xxxx, Xxxx 00000.
WHEREAS, the Company is in the business of developing and commercially
exploiting smart card, terminal, PC, and server-based based loyalty systems (the
"Project"), and Contractor represents that it has extensive experience in POS
terminal application development, Smart Card development, PC development, as
well as large-scale server-based systems, including development and processing
using Relational Databases and Application Servers deploying J2EE Enterprise
Java Beans, technical project management, quality assurance management and
system integration applicable to the Project (the "Services"); and
WHEREAS, the Company desires to retain the services of the Contractor
to provide the Services (as hereinafter set forth) and the Contractor desires to
render the Services, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Contractor and the Company hereby agree as follows:
1. Services
1.1 Appointment; Responsibilities - The Company hereby engages the
Contractor to perform the Services commencing as of the Effective Date, in
accordance with the terms and conditions herein.
(a) Term - This Agreement shall be for a term of two years (the
"Term") and shall be terminable on the terms and subject to
the conditions set forth in this Agreement, and shall be
extendable by mutual agreement, for an additional two (2) one
year Terms.
(b) Reporting - The Contractor shall report to and operate under
the direction of the Company representative Xxxxx Xxxxx or his
designee (hereafter "SCTN Tech").
1.2 Services - Contractor shall render Services to the Project as set
forth in Schedule I, attached hereto, and as may be additionally required by
Company from time to time during the term of this Agreement. The terms for
provision of additional services shall be mutually agreed upon and Schedule I
shall be amended accordingly.
(a) Initial Development - See Schedule I. Contractor is solely
responsible for the means, manner, and method of Contractor's
work, subject to the general objectives and requirements, and
specific direction, of SCTN's technical specifications and the
SCTN Tech, and the Procedures described below.
(b) Multiple Releases - Contractor agrees to plan and develop the
Project in Multiple Releases, as directed by the Company's
Marketing Management and as mutually agreed by Contractor and
SCTN Tech.
(c) First Right of Refusal - Contractor will be given the First
Right of Refusal for implementation, integration and
customization services that Company is to provide to clients,
as mutually agreed by Contractor and SCTN Tech.
(d) Implementation services - Contractor will provide
Implementation Services of the Product in a manner, method and
frequency consistent with standard industry practices, as
mutually agreed by Contractor and SCTN Tech.
(e) Network Services - Contractor will provide Network Services
and Support of the Product in a manner, method and frequency
consistent with standard industry practices, as mutually
agreed by Contractor and SCTN Tech.
(f) Maintenance - Contractor will provide Maintenance of the
Product in a manner, method and frequency consistent with
standard industry practices, as mutually agreed by Contractor
and SCTN Tech.
(g) Customer Support - Contractor will provide Customer Support of
the Product in a manner, method and frequency consistent with
standard industry practices, as mutually agreed by Contractor
and SCTN Tech.
(h) Technical Support - Contractor will provide Technical Support
of the Product in a manner, method and frequency consistent
with standard industry practices, as mutually agreed by
Contractor and SCTN Tech.
1.3 Procedures - Contractor shall render Services to the Project in
accordance with the following procedures:
(a) Location of work to be performed - Contractor shall render
services primarily at Contractor's offices or any other place
of Contractor's choosing. However, upon request, Contractor
shall provide the services at such other place or places as
reasonably requested by Company as appropriate for the
performance of particular services.
(b) Contractor's schedule - Contractor's schedule and hours worked
under this Agreement shall generally be subject to
Contractor's discretion. Company relies upon Contractor's
discretion to determine a sufficient time as is reasonably
necessary to fulfill this Agreement.
(c) Equipment, software, supplies - Unless otherwise agreed by
Company in advance, Contractor shall be solely responsible for
procuring, paying for, and maintaining any and all equipment,
software, paper, tools or other supplies necessary or
appropriate for the performance of Contractor's services
hereunder. Existing DB and System Software to be turned over
to Contractor by Company, additional software required as part
of Product to be supplied by Company or arranged by mutual
agreement.
(d) Progress Reports - Progress reports will be provided by
Contractor to the Company in a manner, format and frequency
consistent with standard industry practices, as mutually
agreed by Contractor and SCTN Tech.
(e) Problem Tracking - Problem Tracking will be provided by
Contractor to the Company in a manner, format and frequency
consistent with standard industry practices, as mutually
agreed by Contractor and SCTN Tech.
(f) Version Control and Release Control - Version Control and
Release Control methodologies will be used by Contractor that
are adequate to control multiple concurrent development
threads of the Project and multiple releases of the Product,
and that are acceptable to the Company. Contractor will
furnish Company reports and listings, as requested, in a
manner, format and frequency consistent with standard industry
practices, as mutually agreed by Contractor and SCTN Tech.
(g) Verification - The accuracy and quality of the program code
produced will be verified by the development and execution of
test plans, and acceptance of results, including System
Testing, Integration Testing, Quality Assurance Testing,
Performance Testing, and Stress Testing. Plans, reports and
results will be provided by Contractor to the Company in a
manner, format and frequency consistent with standard industry
practices, as mutually agreed by Contractor and SCTN Tech.
(h) Documentation - Contractor shall be responsible for creation
and delivery of electronic copies of all appropriate
documentation, including Project Plans, Program, System,
Testing, Release, Operations, and User Documentation in a
manner, format and frequency consistent with standard industry
practices, as mutually agreed by Contractor and SCTN Tech.
(i) Copies of Code - Contractor shall be responsible for creation
and delivery of electronic copies of all Program Code (Source
and Executable) of the System, Programs, Libraries, Testing,
Utilities, Release Control, Databases, and any Operational
Entities on a weekly basis or as agreed by SCTN Tech, in a
format and frequency consistent with standard industry
practices, as mutually agreed by Contractor and SCTN Tech.
(j) Turnover upon Termination - Upon Termination of this Agreement
by either Party for any reason except failure by Company to
pay Fees as agreed herein, Contractor agrees to submit to
Company the latest version of all Code and Documentation, as
described above, and to use Contractor's best efforts to work
with SCTN Tech to effect a complete and undisrupted transition
of the Project.
2. Compensation
2.1 General - The Company shall compensate the Contractor for all
services under this Agreement, as set forth below.
2.2 Fees & Personnel - Commencing from the Effective Date, Contractor
shall be compensated for Services rendered at a rate of eighty dollars (US $80)
per hour for each person engaged on behalf of Contractor in the Project (the
"Fee") until the total Fees billed exceed five hundred thousand dollars (US
$500,000), at which time the rate for all services will be reduced to sixty five
dollars (US $65) per hour. The Fee, which will include all billable hours plus
pre-approved travel expenses, will be payable per the conditions listed below.
Contractor will use his best efforts to avoid changing the Project personnel
once they have begun work on the Project, unless it is absolutely necessary.
Contractor shall be responsible for the payment of all taxes including without
limitation, all Canadian and provincial, income, unemployment, social security
and medicare taxes. Conditions of payment:
(a) Payment of Fees - Company will pay Contractor's Fees on a
deferred basis until the first Release of the Product to a
paying client (when revenues begin to be received by Company),
then Company will begin repayment from Product Revenues as
stated below. As soon as Company receives adequate revenues,
Company will begin paying Contractor's Fees within 30 days of
receipt of invoice, without the "Deferral Bonus." "Adequate
revenues" as used herein, is defined to mean product revenues
received by Company, less the 10% for payback of Deferral
Bonus, in an amount sufficient, in the opinion of Company
Management, to pay Company's base costs plus the then current
Contractor's Fees, or a portion thereof.
(b) Payment from Revenues - Company will repay Deferred Fees at
the rate of 10% of Product revenues received by Company, plus
the "Deferral Bonus" described below, until all deferred Fees
have been repaid. This is anticipated by Company and
Contractor to occur beginning in Month 9 of the Term. Company
may, at its option, repay all or some of the Deferred Fees at
any time from other sources of funds or revenue, in addition
to the Product revenue repayment schedule.
(c) Deferral Bonus - Contractor will be paid a Deferral Bonus of
six percent (6%) per month in Company stock, restricted by SEC
Rule 144, for all Fees deferred until Product Revenues begin,
up to a maximum total aggregate Deferral Bonus of two million
dollars (US $2,000,000) worth of stock issued. The stock price
used to calculate the number of shares due will be equal to
the closing stock price on the last business day of each month
for which the Deferred Fees are invoiced.
(d) Inclusion of prior balance due - The balance currently due to
Contractor from Company (US $31,789) will be considered
Deferred Fees due, to be repaid from revenues. The Deferral
Bonus will be calculated as part of paragraph (c) above, and
the 96,378 more shares and 200,000 more options due under the
previous contract will be issued immediately.
(e) Contractor will be provided options on the Company stock at
the rate of 100,000 shares each month, beginning on April 30,
2003, and continuing as long as there is an outstanding
balance of Deferred Fees, at a strike price equal to 150% of
the closing stock price on the last business day of the month.
The options will be issued monthly and are exercisable within
three years of issuance.
(f) First right of refusal - Contractor will be given first right
of refusal for implementation, integration and customization
services for Company's clients. Company will charge a profit
margin (% TBD) on Contractor's resources. Company and
Contractor estimate the first such client services will begin
in Month 5 of the Term, and will cover a four month period,
second client in Month 9.
(g) Withholding - Company shall not be responsible for withholding
income or other taxes from the payments made to Contractor.
Contractor shall be solely responsible for filing all returns
and paying any income, social security, or other tax levied
upon or determined with respect to the payments made to
Contractor pursuant to this Agreement.
3. Termination
3.1 Termination - With effect from the Effective Date, this Agreement
shall end on the earlier of: (i) the end of the Term or renewal Term or (ii)
upon termination for Cause (as defined herein);
3.2 Cause - For the purpose of this Section 3, "Cause" shall exist if;
(a) Contractor (i) substantially fails to perform Contractor's
areas of responsibility set forth herein, (ii) engages in
conduct which, in the sole discretion of the Company, is
unethical, illegal or which otherwise brings adverse notoriety
to Company or has an adverse effect on the name or public
image of the Company, (iii) fails to comply with the
instructions of Company in a manner detrimental to the
Company, provided that with respect to clauses (i) and (iii),
if Contractor has cured any such condition (that is reasonably
susceptible to cure) within 15 days following delivery of the
advance notice (as defined herein) then "cause" shall be
deemed not to exist. For purposes of this Section 3, "advance
notice" shall constitute a written notice delivered to
Contractor that sets forth with particularity the facts and
circumstances relied upon by the Company as the basis for
cause.
(b) The Company fails to pay the Fee for a period of more than 90
days from the date which is defined above, or (ii) the
Contractor is asked to engage in conduct which is unethical or
illegal.
3.3 Termination Compensation - Upon termination for Cause by the
Company or termination without Cause by the Contractor, Contractor shall be
entitled to the compensation set forth as the Fee herein, prorated to the
effective date of such termination, subject to the Procedures described in
Section 1, above. Upon termination for Cause by Contractor, Contractor shall be
entitled to the compensation set forth as the Fee herein, prorated to the
effective date of such termination.
4. Development Rights; Confidential Information; Non-competition
4.1 Development Rights
Contractor agrees and declares that all proprietary information
including but not limited to trade secrets, know-how, patents and other rights
in connection therewith developed by or with the contribution of Contractor's
efforts during the term of his provision of Services to the Company, shall be
the sole property of the Company. Upon the Company's request (whenever made),
Contractor shall execute and assign to the Company all the rights in the
proprietary information.
Company reserves all rights, including copyrights and all derivative
rights, of all works created by Contractor under this Agreement, including but
not limited to source code, documentation, executables, architectural drawings,
and operating instructions. Contractor hereby prospectively assigns all such
works to Company, for the consideration provided in Section 2.
4.2 Confidentiality
(a) The term "Information" as used in this section means any and
all confidential and proprietary information including but not
limited to any and all specifications, formulae, prototypes,
software design plans, computer programs, and any and all
records, data, methods, techniques, processes and projections,
plans, marketing information, materials, financial statements,
memoranda, analyses, notes, and other data and information (in
whatever form), as well as improvements and know-how related
thereto, relating to the Company or its products. Information
shall not include information that (a) was already known to or
independently developed by Contractor prior to its disclosure
as demonstrated by reasonable and tangible evidence
satisfactory to the Company; (b) shall have appeared in any
printed publication or patent or shall have become part of the
public knowledge except as a result of breach of this
Agreement by the Contractor or similar agreements by other
Contractor's or Company's employees (c) shall have been
received by the Contractor from another person or entity
having no obligation of confidentiality to the Company or (d)
is approved in writing by the Company for release by the
Contractor.
(b) Contractor agrees to hold in trust and confidence all
Information disclosed to it and further agrees not to exploit
or disclose the Information to any other person or entity or
use the Information directly or indirectly for any purpose
other than for Contractor's work with the Company.
(c) Contractor agrees to disclose the Information only to persons
necessary in connection with Contractor's work with the
Company and who have undertaken in writing the same
confidentiality obligations set forth herein in favor of the
Company. Contractor agrees to assume full responsibility for
the confidentiality of the Information disclosed to Contractor
and to prevent its unauthorized disclosure, and shall take
appropriate measures to ensure that such persons acting on his
behalf are bound by a like covenant of secrecy.
(d) Contractor acknowledges and agrees that the Information
furnished hereunder is and shall remain proprietary to the
Company. Unless otherwise required by statute or government
rule or regulation, all copies of the Information, shall be
returned to the Company immediately upon request without
retaining copies thereof.
5. Miscellaneous
5.1 Representation and Warranty - Contractor represents and warrants to
the Company that the execution and delivery of this Agreement and the
fulfillment of the terms hereof (i) will not constitute a breach of any
agreement or other instrument to which Contractor is party, and (ii) does not
require the consent of any person.
5.2 Notices - All notices, requests or other communications provided
for in this Agreement shall be made in writing either (a) by personal delivery
to the party entitled thereto, (b) by facsimile or electronic mail with
confirmation of receipt, (c) by mailing to the last known address of the party
entitled thereto or (d) by express courier service. The notice, request or other
communication shall be deemed to be received upon personal delivery, upon
confirmation of receipt of facsimile or electronic mail transmission or upon
seven (7) days from mailing from any national mail service or upon receipt if by
express courier service; provided, however, that if a notice, request or other
communication is not received during regular business hours, it shall be deemed
to be received on the next succeeding business day of the Company.
If to Contractor:
Airos Group
000 Xxxxxxxx Xx.
Xxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
If to Company:
Smart Chip Technologies
000 X. 0000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
5.3 Assignment and Succession. This Agreement is personal to Contractor
and Contractor shall not assign or delegate his rights or duties to a third
party, whether by contract, will or operation of law, without the Company's
prior written consent.
5.4 Headings. The Article, Section, paragraph and subparagraph headings
are for convenience of reference only and shall not define or limit the
provisions hereof.
5.5 Invalidity. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality or enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
5.6 Waivers. No omission or delay by either party hereto in exercising
any right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof, or the exercise of any other
right, power or privilege.
5.7 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
5.8 Entire Agreement. This Agreement contains the entire understanding
of the parties and supersedes all prior agreements and understandings relating
to the subject matter hereof. No representation, promise or inducement has been
made by either party hereto that is not embodied in this Agreement and neither
party shall be bound by or liable for any alleged representation, promise or
inducement not set forth herein. This Agreement may not be amended, except by a
written instrument hereafter signed by each of the parties hereto.
5.9 Interpretation. The parties hereto acknowledge and agree that each
party and its or his counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its drafting. Accordingly, (i) the rules
of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement,
and (ii) the terms and provisions of this Agreement shall be construed fairly as
to all parties hereto and not in favor of or against any party regardless of
which party was generally responsible for the preparation of this Agreement.
5.10 Governing Law. The validity and construction of this agreement
shall be governed by the laws of the State of Utah without reference to the
choice of law principles thereof and the parties hereto consent to and agree
that the courts of the State of Utah, County of Salt Lake, shall be the
jurisdiction and forum for the resolution of all disputes related to this
agreement or arising there from.
IN WITNESS WHEREOF, each of the Company and the Contractor has caused
this Agreement to be signed by its duly authorized officer as of the day and
year first above written.
SMART CHIP TECHNOLOGIES AIROS GROUP INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Miki Radivojsa
----------------------------------------- -----------------------------
Name: Xxxxx X. Xxxxx Name: Miki Radivojsa
Title: Chairman & Chief Product Architect Title: President
Schedules Omitted
