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EXHIBIT 10.4
SHAREHOLDER AGREEMENT
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THIS AGREEMENT made the 5th day of
January 2006.
BETWEEN:
INNOVATIVE LOYALTY SOLUTIONS INC. a
corporation incorporated under the
laws of the Province of Ontario
("ILS")
- And -
CONSORTEUM INC., a corporation
incorporated under the laws of the Province
of Ontario
("CONSORTIUM")
-And -
WILLIAM BATEMAN and MICHAEL
PRASSE
(collectively the
"SHAREHOLDERS")
BACKGROUND
Each of ILS and Consorteum wish to
set out the desired terms and
conditions governing the operation of a joint venture to supply a
loyalty card
program called My Golf Rewards (the "Program") to the golf
industry.
The parties have caused a company to
be incorporated in Ontario under the
name My Golf Rewards Inc. ("MGR").
This agreement amongst shareholders
will outline the management
responsibilities and ownership percentage amongst the shareholders
of MGR,
NOW THEREFORE, in consideration of
the premises, the mutual covenants
contained in this Agreement and other consideration (the receipt
and sufficiency
of which are acknowledged), the parties agree as follows:
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ARTICLE I
AGREEMENT TERMS
1.1 AGREEMENT. Each party acknowledges and agrees that the terms,
conditions,
rights and obligations in respect of the operation of MGR shall be
governed by
this Agreement.
1.2 INITIAL INVESTMENT. The parties acknowledge that Consorteum has
provided
access to an initial investment to MGR of up to $250,000 commencing
on or before
February 1, 2007.
1.3 LICENCE. From such funds, MGR has acquired a Fidelisoft licence
to use and
exploit the software and other intellectual property necessary for
MGR to carry
on the Program and its business.
1.4 ADDITIONAL ONGOING FUNDS. It is agreed that additional
investments may be
required on an ongoing basis for operational and marketing costs of
the Program.
Consorteum at its discretion may source funding for MGR from
additional
investors or parties at any time. The parties acknowledge and agree
that such
may result in dilution of their respective share ownership
positions.
1.5 SHAREHOLDER INTEREST. As the major investor in MGR, Consorteum
holds a 49%
ownership stake, ILS holds a 25% ownership stake and each of the
Shareholders
holds a 13% ownership stake in MGR.
1.6 REVENUE AND PROFIT SHARE POSITION. The Shareholders waive their
right to
receive dividends paid out of the MGR program until Consorteum has
received
repayment of funds advanced to MGR by it. Once Consorteum's debt
has been repaid
in full and ongoing MGR operational costs are covered out of gross
revenues, all
parties will share in net profits based on their respective share
ownership
percentages. At that time, ILS and the Shareholders will be
responsible for all
of the costs of the program in relation to respective percentage
ownership.
1.7 EQUITY PURCHASE. Consorteum and the Shareholders will offer ILS
the option
to purchase up to an additional 24% equity stake in MGR. ILS may
purchase this
equity at anytime up until December 31, 2013 based on the following
terms.
1. ILS will pay
50% of the market value of the additional equity
acquired; provided that the minimum price will be the amount of
Consorteum's initial investment into the program, plus 50% of
such
amount
2. Consorteum and
the Shareholders will transfer equity to ILS pro rata
to their respective shareholdings.
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1.8 DISCLOSURE OF EXPENDITURE. It is agreed that all expenditures
connected to
the development of the Program be fully disclosed, recognised and
agreed upon by
Consorteum prior to payment or approval to funding. This includes
all
expenditures to date relating to the program, and all future
expenditure.
1.9 BOARD REPRESENTATION. All parties will vote their shares in MGR
to ensure
that ILS will be entitled to have two nominees on the board,
Consortium will be
entitled to have two nominees on the board and the Shareholders
will be entitled
to have one nominee on the board. of directors of MGR.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 ILS WARRANTIES. ILS represents and warrants to Consorteum as
follows
(acknowledging that Consorteum is relying on the representations
and warranties
of ILS contained in this Agreement and any agreement, certificates
or other
document delivered by ILS pursuant hereto in connection with this
Agreement):
(a) ILS has the capacity
and authority and has taken all necessary
action to enter into, execute and deliver this Agreement;
(b) This Agreement
constitutes and the agreements and other instruments
contemplated herein when executed will constitute valid and
binding
obligations of ILS enforceable in accordance with the terms
hereof
and thereof subject, however, to limitations with respect to
enforcement imposed in connection with laws affecting the rights
of
creditors generally including, without limitation, applicable
bankruptcy,
insolvency, moratorium, reorganization or similar laws
and to the extent that equitable remedies such as specific
performance and injunction are in the discretion of the court
from
which they are sought; and
(c) No consent, licence,
approval, order or authorization of or
registration, filing or declaration with any governmental
authority
that has not been obtained or made by ILS and no consent of any
third party is required to be obtained by ILS in connection with
the
execution, delivery and performance by ILS of this Agreement or
the
consummation of the transactions contemplated by the Program.
2.2 CONSORTEUM WARRANTIES. Consorteum represents and warrants to
ILS as follows
(acknowledging that ILS is relying on the representations and
warranties of
Consorteum contained in this Agreement and any agreement,
certificates or other
document delivered by Consorteum pursuant
he
