Exhibit
10.3


 


THIS SALES DISTRIBUTOR
AGREEMENT, made and entered into on
             
, 2004 by and between:


 


CORTEX NETWORKS CORP.


 


having its principal
place of business at:


 


One Raymond Street


Ottawa, Ontario
K1R 1A2


 


(hereinafter
referred to as the “Distributor”)


 


and


NORTH ELECTRIC COMPANY, INC.


 


 having its principal place of business at:


 


One Springfield
Center


6131 Falls of
Neuse Road, Suite 205


Raleigh, NC 27609


 


(hereinafter
referred to as the “Company”).


 


IN CONSIDERATION of the
mutual covenants and conditions herein contained, the parties mutually agree as
follows:


 


1.  Appointment


 


1.1                                 The
Company hereby appoints and designates the Distributor, and the Distributor
hereby accepts such appointments and agrees to act as the Company’s sales
distributor, for the terms and purposes and subject to the terms and conditions
and limitations hereinafter stated, within and only within the geographical
area (hereinafter referred to as the “Territory”) described in
Schedule “A” annexed hereto. The Parties acknowledge and agree that the
appointment made hereunder is exclusive with respect to the Products in the
Territory.


 


2.  Terms


 


2.1                                 This
Agreement becomes effective as of the date hereof (the “Effective Date”) and
payment will be computed as provided in Section 4 and will apply to all
new orders and agreements entered into by the Distributor within the Territory
after the Effective Date.


 


2.2                                 Subject
to the terms of Section 11 hereof, this Agreement shall be effective
through and including July 31, 2005. This Agreement shall automatically
renew for one (1) year terms with the same terms contained herein provided,
however, that either party may terminate this Agreement for any reason
whatsoever by giving the other not less than ninety (90) days advance written
notice of termination.


 

















 


2.3                                 The
sole products of the Company in respect of which the Distributor is authorized
to act as distributor of the Company, consists of the items or classifications
of items listed on Schedule “A” (hereinafter referred to as the
“Products”).


 


2.4                                 The
Company shall not have or exercise any control over the conduct of the business
of the Distributor. The Distributor covenants and agrees to hold the Company,
its directors and officers harmless and agrees to and shall indemnify the
Company, its directors and officers of and from any claim, loss, expense, cost
or damage of any nature whatsoever as a result of any activities of the
Distributor, its agents, employees or affiliates.


 


2.5                                 All
orders shall be transmitted by the Distributor to the Company at its principal
place of business and shall not be effective until accepted in writing by the
Company. It is acknowledged and agreed by the Distributor that no binding
agreement shall be formed for orders unless and until same have been accepted
by the Company as provided herein. In addition, the Distributor shall not
obligate or purport to obligate the Company by issuing or making any warranties
or guarantees with respect to the Products to any third party, other than those
warranties or guarantees issued by the Company


 


2.6                                 The
Company shall not be liable for any of the Distributor’s office, sales,
marketing, installation, advertising, personnel or labour related expenses or
other operating expenses or any other expenses of the Distributor under or
connected with this Agreement. However, the Company shall furnish the
Distributor, without charge, appropriate quantities of descriptive literature,
service manuals, data sheets, installation instructions, advertising materials
and sales promotional materials (collectively, the “Materials”) concerning the
Products offered for sale by the Distributor as the Company may have available
for such purposes.


 


2.7                                 The
Company will provide the Distributor and its customers, technical and
engineering assistance relating to the Products.


 


2.8                                 The
Company shall keep the Distributor informed of promotional programs and furnish
the Distributor all sales leads received which are applicable to the
Distributor’s Territory. The Company shall not sell the Products directly or
indirectly sell or distribute the Products to any customer in the Territory
without the prior written consent of the Distributor, which may be unreasonably
withheld.


 


3.  Relationship of
the Parties.


 


3.1                                 The
Distributor shall be considered as an independent contractor.  The relationship between the Distributor and
the Company shall not be construed to be that of employer and employee, a
partnership, joint venture or agency of any kind.


 


4.  Prices and Payment
Terms


 


4.1                                 The
Company agrees to sell the Products to the Distributor at its U.S. list price
less a discount of twenty-five percent (25%). The Company agrees to enter into
negotiations with the Distributor to adjust the pricing structure in the event
that the Distributor identifies exceptional business opportunities which can
only be secured by offering the products at discount levels which would
otherwise yield margins which the


 


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Distributor could not
sustain. Failure to reach an agreement in such negotiations shall not be
grounds for termination of this Agreement.


 


4.2                                 The
Company will invoice the Distributor for Products when the Company ships such
Product. Payment is due forty-five  (45)
days from date of invoice. All payments due to the Company under this Agreement
will be in U.S. dollars.


 


4.3                                 Shipments
of Products may be delivered to the Distributor or to the end customer, as the
Distributor may direct. All shipments will be fob destination. In all cases,
the Company’s title and the risk of loss or damage to any Product shall pass to
the Distributor upon delivery of the Products to the Distributor or end
customer, as applicable.


 


4.4                                 The
Company may make partial shipments against the Distributor’s purchase orders
upon mutual agreement of the parties.


 


5.  Sample and
Demonstration Products


 


5.1                                 The
Company will provide, free of charge, such training and marketing materials as
defined by the Company from time to time, as may be reasonably required by the
Distributor to promote and sell the Products. 
Distributor will purchase from the Company any hardware and third party
software they feel is necessary for demonstration product purposes (e.g. a
Linux based laptop computer for demonstration purposes) and the Company shall
supply all Company developed software free of charge. The Company will work
with the Distributor to provide potential customers evaluation equipment on a
no cost loan basis as deemed appropriate by the Company to secure sales.


 


6.  Duties of
Distributor


 


6.1                                 The
Distributor agrees to exercise its best efforts to introduce, promote the sale
of and obtain orders for Product within the boundaries of the Territory.


 


6.2                                 During the term of this Agreement, the
Distributor shall use its best efforts to maintain adequate contact with
customers after orders are received, to support the customer in placing orders
and follow-up services to the extent that the Distributor has the technical
capability of performing such work.


 


6.3                                 The
Distributor agrees to comply with the terms of the Export Administration Act of
1979 (the “Act”) of the United States of America, as amended, and the rules and
regulations promulgated there under, now or hereafter in effect, including
without limitation or restriction established by the Act and such rules and
regulations upon the export and re-export of any of the Products acquired by
the Distributor pursuant to this Agreement, and technical data relating to such
Products.


 


7.   Warranty


 


7.1                                 The
Company warrants that each Product to be delivered hereunder free from hardware
defects and faults and shall, under normal use and conditions, at the time of
delivery and for one (1) year thereafter conform substantially to the Company’s
specifications for such Product. The warranty period includes software bug fixes
as required for all supported software releases.


 


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7.2                                 The
Company agrees to replace or repair any product or assembly returned to it by
the Distributor during the warranty period free of charge inclusive of all
shipping costs.  Upon receipt of the
returned Product, the Company will examine such Product to determine to its own
satisfaction that the alleged defect did not arise as a result of misuse,
neglect, improper installation, repair, alteration or accident. Provided that
the defect did not arise from such circumstances, the Distributor’s sole remedy
and the Company’s sole obligation shall be to repair or replace the Product at
the Company’s sole option, or, if neither repair or replacement is possible, to
refund the purchase price paid for such Product. The Company will notify the
Distributor if Products are not subject to warranty adjustments and unless
instructions as to the disposition of such Products are received from the
Distributor within fourteen (14) days of such notification, the Products will
be returned to the Distributor, freight collect.


 


8.  Service Repairs


 


8.1                                 The Distributor agrees to receive any
Products returned to it by its customers for service or repair and to forward
such Products to the Company. The Company agrees to provide a quotation for
price and turnaround time for service repair within five working days of
delivery from the Distributor to the Company. Service/repair turnaround time
shall not exceed ten working days from receipt of the order to service/repair
from the Distributor.


 


9.  Trademarks and
Trade Names


 


9.1                                 The
Distributor may use trade names and trademarks of the Company for the duration
of this Agreement and shall limit such use to activities relating to soliciting
orders for Products offered by the Company and on or in connection with written
material approved by the Company.  The
Distributor shall not at any time do or permit any act to be done which may in
any way impair the rights of the Distributor in its trade names and trademarks.


 


10. Proprietary Information


 


10.1                           It is
anticipated that the Company shall be obliged to disclose information and
details of its business operations, products, trademarks and other data
pertaining to its business in order to enable Distributor to understand and
adequately promote the Products of the Company.  The content of such disclosures is proprietary information and
such disclosures and explanations are made solely for the purpose of facilitating
such understanding and representation. 
The Distributor agrees that information so obtained shall be held in
confidence by it, its employees, agents and representatives and the Distributor
shall take all reasonable measures to prevent disclosure of such information to
others.  The proprietary information
shall not be used or exploited in any way other than as authorized by the
Company.  Information, whether written
or oral, shall be considered proprietary so long as it does not meet any of the
following criteria:


 


(a)  Information which at the time of disclosure
had been previously published in the public domain.


 


(b)  Information which is published into the
public domain by the Company after disclosure.


 


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(c)  Information which, prior to disclosure to
the Distributor, was already in its possession by lawful means as evidenced by
written records kept in the ordinary course of business by the Distributor or
by proof of actual use by the Distributor.


 


(d)  Information which, subsequent to disclosure,
is obtained by the Distributor by way of a third person who is lawfully in
possession of such information and not in violation of any contractual, legal
or fiduciary obligation to the Distributor with respect to such information and
does not require the Distributor to refrain from disclosing such information to
others.


 


10.2                           Notwithstanding
the foregoing, the Distributor shall not be in violation of this Agreement if
it is compelled to disclose proprietary information by a court of competent
jurisdiction.


 


11.  Termination of Agreement


 


11.1                           This Agreement is effective as of the
Effective Date and shall remain in force until July 31, 2005. The
Agreement shall automatically be extended for one (1) year periods thereafter.


 


11.2                           After
termination, the Distributor shall be entitled to have the Products ordered and
acknowledged by the Company for identified customers solely to enable the
Distributor to meet its commitments to such customers made prior to
termination.


 


11.3                           Notwithstanding
the foregoing, this Agreement may be terminated by either party immediately
upon written notice to the other:


 


a) If the non-terminating
party is declared insolvent by a court of competent jurisdiction, goes into
liquidation, bankruptcy or receivership or becomes a party to any creditor’s
arrangement proceedings for the settlement or composition of its debts or to
dissolution proceedings;


 


b) If the non-terminating
party in any other way breaches any term of this Agreement and fails to remedy
such default within thirty (30) days after receipt of notice in writing from
the other party of the default; or


 


c) If any representation
or certificate made or furnished by the non-terminating party hereunder is
false or misleading.


 


11.4                           Upon
termination of this Agreement for any reason, the Distributor shall forthwith
return to the Company all Materials, blueprints, drawings, sales materials,
data sheets, samples, models, demonstration units, technical documents and
other written materials and the like of which the Company may have furnished to
the Distributor in connection with the Distributor’s activities hereunder, so
that none of the foregoing items or any copies thereof shall remain in the
Distributor’s possession.


 


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12.  Indemnity


 


12.1                           The Company agrees to defend, indemnify
and hold the Distributor, its directors, officers, employees and agents
harmless from and against all damages, costs, expenses, liabilities and losses
(including but not limited to, legal fees and expenses) (collectively
“Damages”) arising out of any claim, action or demand by a third party alleging
that: (i) the product or any part thereof infringes any third party
intellectual Property rights;  (ii) the
Company failed to materially comply with its warranties under this Agreement;
and (iii) the Product caused injury or death to person or damage to property,
solely to the extent that the Product caused such injury, death or damage.


 


13.  Notice


 


13.1                           All
notices given or orders placed pursuant to this Agreement shall be in writing
and shall be addressed to the parties at their respective addresses set forth
below:


 




	
  The Distributor:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cortex Networks
  Corp.

  One Raymond Street

  Ottawa, Ontario K1R 1A2

  	
   

  	
   

  






 




	
  Attention:

  	
   

  	
  Shawn DeLay

  Vice President

  	
   

  	
   

  






 




	
  The Company:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  North Electric
  Company, Inc.

  One Springfield Center

  6131 Falls of Neuse Road, Suite 205

  Raleigh, NC 27609

  	
   

  	
   

  






 




	
  Attention:

  	
   

  	
  Dan Ference

  President

  	
   

  	
   

  






 


13.2                           A party
may change its address from time to time by providing written notice to the
other party in the aforesaid manner.


 


14.  Construction of
Agreement


 


14.1                           This
Agreement shall be interpreted in accordance with the commonly understood
meaning of the words and phrases hereof. The sections and paragraph headings
contained herein are for the purposes of convenience only and are not intended
to define or limit the contents of said sections or paragraphs.


 


15.  Governing Law


 


15.1                           This
Agreement will be enforced and construed in accordance with the laws of Canada
and the Province of Ontario, excluding its conflict of laws rules.  The


 


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parties agree that any
suit or proceeding arising under this Agreement shall be instituted only in a
court of law located in Ottawa, Ontario, Canada and the parties hereby
irrevocable agree and submit to the jurisdiction and venue of any such
proceeding and agree that service of process may be effected in the same manner
notice is given hereunder.  In any
action to enforce this Agreement the prevailing party will be entitled to costs
and reasonable lawyers’ fees.  This
Agreement shall not be governed by the United Nations Convention of Contracts
for the International Sale of Goods, the application of which is hereby
expressly excluded


 


16.  Illegal Payment


 


16.1                           No illegal
payment shall be made by the Distributor for any purpose on behalf of the
Company as indicated but not limited by the following stipulations. The Company
retains the right of immediate termination of this Agreement in the event the
Distributor violates any portion of this clause.


 


(a) The Distributor
agrees that no payment will be made to promote the sale of the Company’s
Products to any commercial customer, or any government, government agency or
any individual appointed, elected, or otherwise designated as an employee,
official, or officer thereof.


 


(b) The Distributor
agrees to make no payments to any person who it has reason to believe will pass
the payment to a third party for the purpose of influencing or inducing a
decision to do business with the Company.


 


(c) The Distributor
agrees that no political contributions will be made which are illegal in the
USA, or the country in which such political contributions are made.


 


(d) The Distributor
agrees to make no payment, or offer of payment to obtain information about a
competitor’s bid on any proposal or project in which the Company may be
involved.


 


17.  Counterparts


 


17.1                           Each of
the parties hereto agree that this Agreement may be executed in any number of
counterparts; each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.


 


18.  General


 


18.1                           This
Agreement supersedes and cancels any previous agreements or understanding,
whether oral, written or implied, heretofore in effect and sets forth the
entire Agreement between the Company and the Distributor. No amendment,
revision or modification of this Agreement shall be effective or binding unless
made by mutual written agreement of the parties.


 


18.2                           This
Agreement may not be assigned by a party without the prior written consent of
the other party. This Agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective successors and permitted assigns.


 


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18.3                           In the
event that any provision hereof is found invalid or unenforceable pursuant to
judicial decree or decision, the remainder of this Agreement shall remain in
full force and effect according to its terms.


 


19.                                 Non-solicitation
of Employees and Consultants


 


19.1                           The
parties agree that during the term of this Agreement and for a period of one
year following any expiration or termination of this Agreement, neither party
will employ or solicit to employ any person or consultant who was an employee
or consultant of the other party during the term of this Agreement, without
mutual written consent by both parties to allow such solicitation or
employment, such consent may be unreasonably witheld.


 


IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed on the day and year
first above written.


 


	
  CORTEX NETWORKS CORP.

  	
   

  	
  NORTH ELECTRIC COMPANY, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
  BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Shawn Delay, Vice
  President

  	
   

  	
  Name:

  	
  Dan Ference, President

  	
   

  
	
  & Title

  	
   

  	
  & Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
								



 


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SCHEDULE “A”


 


	
  1.  Territory:

  	
   

  	
  Canada

  
	
   

  	
   

  	
   

  
	
  2.  Products:

  	
   

  	
  NAS-6131

  



 


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