Common use of Financial Considerations Clause in Contracts

Financial Considerations. (a) Product Owner's cost of the Infomercial shall not exceed $250,000, and Product Owner's cost of the Spot shall not exceed $28,000 (collectively referred to as "Cost Estimate"). For purposes of determining Hawthorne's costs for all purposes under this Agreement, Hawthorne's staff will be invoiced at actual salaries, plus 25% for taxes and benefits, and out-of-pocket expenditures will be invoiced at Hawthorne's actual cost with no markup by Hawthorne. (b) The terms of payment for production of the Spot are five thousand dollars ($5,000) upon execution of this Agreement, five thousand dollars ($5,000) one day prior to the commencement of principal photography for the Spot, and final payment in full within 90 days from the execution of this Agreement, with payment to be evidenced by a promissory note in the form attached hereto as Attachment D. The payments by Product Owner for the Infomercial shall be, as follows: (i) Fifteen percent (15%) of the Cost Estimate, at the time the final Infomercial script ("Script") and Cost Estimate are presented to Product Owner; (ii) Fifteen percent (15%) of the Cost Estimate, plus estimated talent fees one business day prior to commencement of principal photography for the Infomercial; (iii) Thirty percent (30%) of Cost Estimate one day prior to the planned commencement of principal photography, (iv) Final balance (based on actual costs), and Stock Warrants (as defined in Section 7(j) herein) at the completion of editing of the Infomercial, upon final Product Owner approval and prior to release of tape master or release of copies of the Infomercial. (c) The following costs are above the Cost Estimate and will be billed to and paid by Product Owner at Hawthorne's cost: (i) For travel approved in advance by Product Owner, all travel and living expenses incurred by Hawthorne personnel (coach airfare, standard hotel rates, $50 meal per diems) in connection with Hawthorne's responsibilities under this Agreement; (ii) All legal opinions for the Script, Commercial off-line and Commercial on-line edits (estimated cost: $1,500 to $5,000) rendered by attorneys with expertise in direct response television ads; (iii) All approved by Product Owner talent related costs related to the production and subsequent airing of the Infomercial including, but not limited to: talent casting, travel, wardrobe, teachers, broker fees; talent fees and royalties, payroll fees, pension and welfare fees, taxes; AFTRA/SAG talent residuals. (d) Subsequent to the termination of the Cost Estimate of the Commercial, any additional production work due to Product Owner's initiated changes in either the Product, Product offer, Script, set design, talent, music, graphics, shooting schedule, rough edit, or final edit will be invoiced at Hawthorne's cost as additional charges to Product Owner. Notwithstanding the above, any additional costs directly resulting from Hawthorne's changes in either the Product, Product offer, Script, set design, talent, music, graphics, shooting schedule, rough edit, or final edit shall be for the account of Hawthorne, unless otherwise agreed to in writing by Product Owner. Unanticipated talent, crew and equipment overtime charges incurred during taping or filming sessions will be invoiced to Product Owner, unless such overtime is due to Hawthorne's negligence. Hawthorne reserves the right to invoice Product Owner for additional charges incurred by Hawthorne due to unreasonable delays caused by Product Owner. The additional charges set forth in this Section 7(d), should they occur, will be mutually agreed upon in advance by both Product Owner and Hawthorne. (e) Hawthorne shall have a lien on all tapes of the Commercial until full payment for any due or outstanding accounts is received from Product Owner. (f) The Cost of the Infomercial Media Test shall not exceed $60,000, and cost of Spot Media Test shall not exceed $7,500. The foregoing Media Test budgets do not include the cost of Dubs. (g) Hawthorne will receive a commission equal to fifteen percent (15%) of the total gross media cost for media time that is purchased by Hawthorne for the Commercial. (h) Product Owner shall pay Hawthorne Participation Fees at the following rates: (i) Two and one-half percent (2.5%) of all direct response (television, print or otherwise) Net Product Sales (as defined in Section 7(i), below), direct response upsell Net Product Sales, and retail Net Product Sales; (ii) Seven percent (7%) of direct response continuity Net Product Sales; and (iii) Ten percent (10%) of the Net Product Sales in all other Integrated Marketing. (i) For purposes of this Agreement, Net Product Sales are equal to gross Product revenues less returns, credit card chargebacks and bad debts, and do not include sales taxes or shipping and handling fees. (j) Product Owner will issue to Hawthorne stock options ("Stock Options") as described on Attachment E. (k) Subsequent to the Media Test, Hawthorne will make disbursements from the merchant account in the following priority: (i) Reimbursable expenses incurred by Hawthorne in the course of fulfilling its obligations under this Agreement including, but not limited to: media costs and commissions; telemarketing, fulfillment and merchant account set-up and operating expenses; cost of Product and Product packaging as determined by Hawthorne for the commencement or continuation of any Roll Out or for marketing through Integrated Media Channels, customer refunds, Dubs and additional pre-approved production fees, if any, retail distribution fees, if any; (ii) Reimbursable expenses incurred by Product Owner, Product Owner's share of gross profits (defined as "List Profits" below) resulting from rental of Product customer names generated pursuant to this Agreement ("Customer List"), and Upsell Club Revenues (as defined), if any; (iii) Hawthorne Participation Fees, calculated on an accrual basis, and other pre-approved additional fees, if any, (iv) Product Owner profits, if any, calculated on an accrual basis. (l) Provided that funds are available in merchant account, Hawthorne shall distribute from the merchant account payments described in Sections 7(k)(i) and 7(k)(ii) at its discretion to meet obligations to suppliers of Product, or for other materials or services hereunder. An accounting of all such payments will be provided to Product Owner in a form that is satisfactory to both parties within thirty (30) days following the end of each month. (m) Provided that funds are available in the merchant account, Hawthorne shall distribute payments, if any, described in Sections 7(k)(iii) and 7(k)(iv) herein from the merchant account within twenty (20) days following the end of each month, and shall accompany such payments with an accounting in a form that is satisfactory to both parties. (n) Hawthorne grants Product Owner the right to examine Hawthorne's books and records related to Product sales resulting from Hawthorne's activities pursuant to this Agreement up to two (2) times per calendar year, such examination to take place at Hawthorne's place of business during normal business hours upon seven (7) days' written notice. Product Owner agrees to bear the cost of such examination except in the event that examination discloses a discrepancy in Product Owner's favor of more than five percent (5%); in which case Hawthorne shall bear Product Owner's reasonable costs of such examination. Notwithstanding the above, any payment discrepancies shall be adjusted and paid within thirty (30) days of discovery of such discrepancies, including interest at ten percent (10%) per annum..

Financial Considerations. (a) Product Owner's cost of the Infomercial shall not exceed $250,000, and Product Owner's cost of the Spot shall not exceed $28,000 (collectively referred to as "Cost Estimate"). For purposes of determining Hawthorne's costs for all purposes under this Agreement, Hawthorne's staff will be invoiced at actual salaries, plus 25% for taxes and benefits, and out-of-pocket expenditures will be invoiced at Hawthorne's actual cost with no markup by Hawthorne. (b) The terms of payment for production of the Spot are five thousand dollars ($5,000) upon execution of this Agreement, five thousand dollars ($5,000) one day prior to the commencement of principal photography for the Spot, and final payment in full within 90 days from the execution of this Agreement, with payment to be evidenced by a promissory note in the form attached hereto as Attachment D. The payments by Product Owner for the Infomercial shall be, as follows: (i) Fifteen percent (15%) of the Cost Estimate, at the time the final Infomercial script ("Script") and Cost Estimate are presented to Product Owner; (ii) Fifteen percent (15%) of the Cost Estimate, plus estimated talent fees one business day prior to commencement of principal photography for the Infomercial; (iii) Thirty percent (30%) of Cost Estimate one day prior to the planned commencement of principal photography, (iv) Final balance (based on actual costs), and Stock Warrants (as defined in Section 7(j) herein) at the completion of editing of the Infomercial, upon final Product Owner approval and prior to release of tape master or release of copies of the Infomercial. (c) The following costs are above the Cost Estimate and will be billed to and paid by Product Owner at Hawthorne's cost: (i) For travel approved in advance by Product Owner, all travel and living expenses incurred by Hawthorne personnel (coach airfare, standard hotel rates, $50 meal per diems) in connection with Hawthorne's responsibilities under this Agreement; (ii) All legal opinions for the Script, Commercial off-line and Commercial on-line edits (estimated cost: $1,500 to $5,000) rendered by attorneys with expertise in direct response television ads; (iii) All approved by Product Owner talent related costs related to the production and subsequent airing of the Infomercial including, but not limited to: talent casting, travel, wardrobe, teachers, broker fees; talent fees and royalties, payroll fees, pension and welfare fees, taxes; AFTRA/SAG talent residuals. (d) Subsequent to the termination of the Cost Estimate of the Commercial, any additional production work due to Product Owner's initiated changes in either the Product, Product offer, Script, set design, talent, music, graphics, shooting schedule, rough edit, or final edit will be invoiced at Hawthorne's cost as additional charges to Product Owner. Notwithstanding the above, any additional costs directly resulting from Hawthorne's changes in either the Product, Product offer, Script, set design, talent, music, graphics, shooting schedule, rough edit, or final edit shall be for the account of Hawthorne, unless otherwise agreed to in writing by Product Owner. Unanticipated talent, crew and equipment overtime charges incurred during taping or filming sessions will be invoiced to Product Owner, unless such overtime is due to Hawthorne's negligence. Hawthorne reserves the right to invoice Product Owner for additional charges incurred by Hawthorne due to unreasonable delays caused by Product Owner. The additional charges set forth in this Section 7(d), should they occur, will be mutually agreed upon in advance by both Product Owner and Hawthorne. (e) Hawthorne shall have a lien on all tapes of the Commercial until full payment for any due or outstanding accounts is received from Product Owner. (f) The Cost of the Infomercial Media Test shall not exceed $60,000, and cost of Spot Media Test shall not exceed $7,500. The foregoing Media Test budgets do not include the cost of Dubs. (g) Hawthorne will receive a commission equal to fifteen percent (15%) of the total gross media cost for media time that is purchased by Hawthorne for the Commercial. (h) Product Owner shall pay Hawthorne Participation Fees at the following rates: (i) Two and one-half percent (2.5%) of all direct response (television, print or otherwise) Net Product Sales (as defined in Section 7(i), below), direct response upsell Net Product Sales, and retail Net Product Sales; (ii) Seven percent (7%) of direct response continuity Net Product Sales; and (iii) Ten percent (10%) of the Net Product Sales in all other Integrated Marketing. (i) For purposes of this Agreement, Net Product Sales are equal to gross Product revenues less returns, credit card chargebacks and bad debts, and do not include sales taxes or shipping and handling fees. (j) Product Owner will issue to Hawthorne stock options ("Stock Options") as described on Attachment E. (k) Subsequent to the Media Test, Hawthorne will make disbursements from the merchant account in the following priority: (i) Reimbursable expenses incurred by Hawthorne in the course of fulfilling its obligations under this Agreement including, but not limited to: media costs and commissions; telemarketing, fulfillment and merchant account set-up and operating expenses; cost of Product and Product packaging as determined by Hawthorne for the commencement or continuation of any Roll Out or for marketing through Integrated Media Channels, customer refunds, Dubs and additional pre-approved production fees, if any, retail distribution fees, if any; (ii) Reimbursable expenses incurred by Product Owner, Product Owner's share of gross profits (defined as "List Profits" below) resulting from rental of Product customer names generated pursuant to this Agreement ("Customer List"), and Upsell Club Revenues (as defined), if any; (iii) Hawthorne Participation Fees, calculated on an accrual basis, and other pre-approved additional fees, if any, (iv) Product Owner profits, if any, calculated on an accrual basis. (l) Provided that funds are available in merchant account, Hawthorne shall distribute from the merchant account payments described in Sections 7(k)(i) and 7(k)(ii) at its discretion to meet obligations to suppliers of Product, or for other materials or services hereunder. An accounting of all such payments will be provided to Product Owner in a form that is satisfactory to both parties within thirty (30) days following the end of each month. (m) Provided that funds are available in the merchant account, Hawthorne shall distribute payments, if any, described in Sections 7(k)(iii) and 7(k)(iv) herein from the merchant account within twenty (20) days following the end of each month, and shall accompany such payments with an accounting in a form that is satisfactory to both parties. (n) Hawthorne grants Product Owner the right to examine Hawthorne's books and records related to Product sales resulting from Hawthorne's activities pursuant to this Agreement up to two (2) times per calendar year, such examination to take place at Hawthorne's place of business during normal business hours upon seven (7) days' written notice. Product Owner agrees to bear the cost of such examination except in the event that examination discloses a discrepancy in Product Owner's favor of more than five percent (5%); in which case Hawthorne shall bear Product Owner's reasonable costs of such examination. Notwithstanding the above, any payment discrepancies shall be adjusted and paid within thirty (30) days of discovery of such discrepancies, including interest at ten percent (10%) per annum...