EXHIBIT 10.13
MANAGEMENT SERVICE AGREEMENT
THIS MANAGEMENT AGREEMENT (the "AGREEMENT") is made and entered into
with an "EFFECTIVE DATE" of April 10, 2002, by and among Thane International,
Inc., a Delaware Corporation ("THANE"), having a principal place of business at
00-000 Xxxxx Xxxxxxx, Xx Xxxxxx, XX 00000, and Biozhem Cosmeceuticals, a Texas
Corporation ("BIOZHEM"), having a principal place of business at 00000 Xxxxx
Xxx, Xxxxx Xxxxxx, XX 00000 (singly "PARTY," collectively "PARTIES").
RECITALS
Biozhem is the licensed distributor of skin care products known as the
RevitaCel System(TM) pursuant to its Licensing Agreement with Advanced Tissue
Sciences, Inc. ("ATS"), the holder of the patents for the Product ingredients.
Biozhem desires to contract with Thane to perform the management and other
duties associated with the sale and distribution of the Product within the
Territory as set forth herein on the terms and conditions as set forth in this
Agreement. All defined terms within this Agreement shall be as more specifically
defined in Section 1 below.
Thane is an international marketing company and desires to provide its
services to manage and operate the Project in accordance with the terms and
conditions, and in exchange for the compensation provided, herein.
The Parties, in consideration of the promises and of the mutual
covenants and conditions contained in this Agreement, agree as follows.
AGREEMENT
1. DEFINITIONS.
(a) ACCOUNTING PROCEDURES. Initially, all Product sales revenues
received by Thane from its management of the Project shall be deposited
into a bank account that shall be managed by Thane. In addition, Thane
shall maintain a separate operating account and shall prepare accurate
accounting statements according to generally accepted accounting
principals ("GAAP") consistently applied, setting forth all Gross
Revenue, Net Revenue, including expenses deducted in determining Net
Revenue, Finance Amounts, expenses, assets, liabilities, and other
detail as reasonably necessary to verify the foregoing amounts. At such
time as the Project becomes self-financing, the Parties shall mutually
agree upon an arrangement whereby all Product revenues received by
Thane for its management of the Project shall be deposited in a Biozhem
bank account that shall be managed by Thane. Thane shall distribute
monthly accounting statements, prepared in accordance with GAAP
consistently applied, within thirty (30) business days of month's end.
Net Revenue shall be disbursed monthly within thirty (30) days of the
end of each month, or at other times as determined by mutual agreement.
(b) AUDIT RIGHTS. Biozhem shall have the ability and right to inspect
and audit all books and records concerning the Product and the Project,
including Gross Revenue, Net Revenue, Finance Amounts, costs, unit
sales, returns, taxes, expenses, and inventory. Thane's books and
records subject to Biozhem's audit rights shall include, without
limitation, sales reports, returns reports, and credit card processing
reports relative to discount fees and chargebacks, in addition to, in
electronic format, applicable computer programs, computer print-outs,
computer databases, and computerized spreadsheets. Biozhem, or its duly
appointed representative, will conduct the inspection only during
normal business hours upon a written request submitted to Thane at
least ten (10) business days prior to the day of the inspection or at
least thirty-five (35) business days in advance if Thane is conducting
its annual independent audit at such time. If required by Biozhem's
independent certified public accountant for purposes of preparing its
audit, Thane shall provide audited annual accounting statements as part
of Thane's annual audited financial statements and charge the Project
the marginal cost of such Project audited financial statements. Biozhem
shall have the inspection and audit rights hereunder during the Term
hereof and the period ending two (2) years after the Termination of
this Agreement. Biozhem shall pay for the cost of any such inspection
and audit, unless it is determined that for any one (1)-year period
there has been an understatement of revenues due hereunder and the
amount of such underpayment (excluding interest) exceeds the total
actually paid for said one (1)-year period by more than five percent
(5%). In such event the reasonable cost of inspection and audit shall
be paid by Thane. Any underpayment shown by Biozhem's inspection shall
be paid immediately by Thane to Biozhem. Any underpayment or
overpayment shown by the Biozhem inspection shall be paid immediately
respectively by Biozhem to Thane or Thane to Biozhem
(c) COMPETING PRODUCT: A competing product is any beauty skin care
product other than the Product.
(d) CUSTOMER LIST: A list of all of Biozhem's future customers related
to the Project, commencing from the execution date of this Agreement,
and all direct response customer names, addresses and phone numbers
generated by Thane from the management of the Project.
(e) DOMESTIC SALES: Domestic sales shall be all sales from telephone or
mail orders pursuant to the Infomercial or any short-form infomercials
shown in the United States or any orders resulting from print or
catalog advertising distributed in the United States.
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(f) FINANCE AMOUNTS: Those amounts that Thane has advanced on behalf of
the Project, said Finance Amounts to be interest free, to cover the
following: all Project related costs, including, without limitation,
patent, formulation, producer and talent royalties and royalty
milestones all as listed in Section 3.8, inventory purchases, and
fulfillment, media and telemarketing costs, and the financing of the
outstanding balance of the inventory upon execution of this Agreement.
(g) GROSS REVENUE: Gross Revenue shall be calculated utilizing GAAP,
consistently applied, and shall include any and all revenue received by
Thane from the sale of the Product during the Term of this Agreement
less any Product returns, cancellations and bad debts.
(h) INFOMERCIAL: The existing twenty-eight (28) minute commercial
promoting the sale of the Product produced for and owned by Biozhem,
including all associated intellectual property rights. Biozhem warrants
that all claims made in the Infomercial have appropriate substantiation
as required by governmental agencies. Upon execution of this Agreement,
Biozhem shall provide Thane with a mixed beta master and an unmixed
textless master, and all testimonial and other required talent release
forms and agreements, and any and all claims substantiation. Biozhem
retains ownership of the Infomercial and all associated intellectual
property rights including any remixed or edited versions.
(i) INTERNATIONAL AND NON-DOMESTIC SALES: International and
Non-Domestic Sales is defined as all sales other than Domestic Sales,
and includes, without limitation, all Internet sales, home shopping
channel sales, all sales in Canada and sales in any country other than
the United States.
(j) LICENSING AGREEMENT: The Licensing Agreement between Biozhem
Cosmeceuticals and ATS attached hereto as "EXHIBIT A" requiring a
royalty payment for use of the NouriCel ingredient.
(k) "NET REVENUE" shall be calculated in accordance with GAAP,
consistently applied, and shall mean the sum remaining after
subtracting from Gross Revenue the following expenses fairly and
reasonably incurred under the terms of this Agreement: (i) a reasonable
amount to create and maintain a rolling reserve fund, initially at
twelve percent (12%) of gross revenue but after six (6) months to be
reviewed and adjusted monthly to reflect a reasonably accurate actual
return rate base on recent historical performance; (ii) payment of all
sales taxes; (iii) payment of all actual outbound and inbound
fulfillment costs, including shipping fees, handling charges, and
merchant account charges; (iv) payment of all gross media/advertising
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actual costs including standard media commissions paid to third parties
and/or paid in-house, depending on media buys and management services
provided; (v) actual cost to refurbish return merchandise for resale;
(vi) all Product purchase, manufacturing, insurance costs; (vii)
payment of all royalties as and when due; (viii) payment of all costs
and expenses for viewing cassettes and broadcast dubs for television
stations and cable networks; (ix) payment of all advances on
compensation paid by Thane to Biozhem, the total amortized over a six
(6) month period, commencing at the beginning of the Term unless Net
Revenue to Biozhem exceeds the sum of one hundred and fifty thousand
dollars ($150,000) in any one month period, then payment on said
advances shall accelerate to one hundred percent (100%) of payment on
advances for the balance of the Net Income for that month, such
calculation to occur for each month until said advances have been
repaid in full; (x) Thane's Management Fee; (xi) payment for reasonable
costs for development, production and distribution of marketing
materials, if any; (xii) payment for export, documentation and
clearance costs, if any; (xiii) payment for travel and entertainment as
mutually agreed upon; (xiv) commencing December 1, 2002, a set-aside of
a proportionate amount for the payment of milestone royalties;
provided, however, that Thane shall have no obligation to pay said
milestone royalty payments if the Project is in the Recoupment Period,
as defined in Section 5.4; and (xv) third party legal fees as mutually
agreed upon by the Parties. With respect to any of the foregoing, if
Biozhem can produce and market the Product or acquire services of equal
quality, as mutually determined by the Parties, at a lower cost, Thane
or its subcontractor(s), if any, shall adopt such cost-saving
production and/or marketing practices and cost or pricing structure or
utilize the lower cost alternative. Unless otherwise provided herein,
in no event shall Net Revenue be decreased by costs or expenses
attributable to the general administrative or overhead expenses of
Thane or any subsidiary or affiliate of Thane.
(l) PRODUCT: The Product is a set of skin creams, cleanser and serum
(collectively known as the "REVITACEL(TM)SYSTEM") as follows: one 4.0
oz bottle of RevitaCel Foaming Cleanser, one 2.0 oz bottle of RevitaCel
Activating Serum, one 1.6 oz bottle of RevitaCel Replenishing Complex,
one 2.0 oz bottle of 24-Hour Moisturizer, an instructional pamphlet in
English, along with Product packaging ("BASIC UNIT"), and two eye skin
products as follows: one 50 ml bottle of RevitaCel Firming Eye Gel and
one 50 ml bottle of RevitaCel Replenishing Complex (collectively "UP
SELL EYE UNIT") as more fully described in that "EXHIBIT B" attached
hereto and incorporated herein by reference. The Product includes any
improvements to these six (6) named creams, cleanser and serum. Biozhem
has applied for a trademark for the name "RevitaCel" and is the
licensee of the patents for the proprietary formula contained in the
RevitaCel Replenishing Complex. The Product does not include hair,
nail, lip or other applications or products not specified on "EXHIBIT
B."
(m) PROJECT: All aspects of the management of the worldwide marketing,
selling, and distribution of the Product, limited, however, to those
rights as described in the Licensing Agreement, and the accounting for
the Product sales, Gross Revenue and Net Revenue (as more specifically
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described in Section 1 herein), through the marketing channels
described below in the Territory, for the Term herein, by airing the
Infomercial and utilizing other Product marketing materials.
(n) TERRITORY: The Territory includes all countries of the world in all
possible market areas available today and those that will be available
in the future in which Biozhem holds the distribution rights pursuant
to and to the extent set forth in the Licensing Agreement, including
without limitation: print; retail; radio; television; cable; satellite
cable and television; catalog; credit card syndication; continuity club
and database; the Internet; and home shopping networks.
2. WARRANTIES & COVENANTS.
2.1. THANE. Thane warrants, promises, and covenants that it has the
complete right, power and authority to enter into this Agreement, and that it is
a corporation duly organized and validly existing under the laws of the State of
Delaware, and is duly qualified and in good standing as a foreign corporation
authorized to transact business in the State of California. Thane shall use
commercially reasonable efforts to manage, sell, market and distribute the
Product during the term of this Agreement.
2.2. BIOZHEM. Biozhem warrants, promises, and covenants that it: (i) is
a corporation duly organized and validly exiting under the laws of the State of
Texas, and that it has the full corporate right and power to enter into this
Agreement; (ii) has the ability, power and authority to grant the rights to
Thane as set forth in this Agreement; (iii) will take all steps necessary to
protect all intellectual property rights and other property rights of the
Product, the Product name, the Product's proprietary formulation, and the
Infomercial, including, but not limited to, copyrights, patents, trademarks,
releases, contractual rights and releases from talent, and any and all required
governmental approvals that currently exist or may exist for the Product for the
Term of this Agreement, and will maintain and have the sole and exclusive right
during the Term to defend all such rights in full force; (iv) has not and will
not knowingly violate any third parties' intellectual property rights; and (v)
has disclosed to Thane all agreements, arrangements and encumbrances affecting
the Product and/or the Product's financial viability.
2.3. CONFIDENTIALITY. The Parties each agree not to disclose
confidential information regarding the Product's formulations, technical
information, designs, drawings, concepts, ideas, sketches, wordings, pricing,
cost and expenses, media or marketing strategies, trade secrets, or Customer
List, not to disclose confidential information regarding the Infomercial
production and airings, and not to disclose confidential information regarding
the other Parties, their affiliated companies, their products, their operations,
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or any other company information which may be deemed a trade secret, or is
sensitive in nature and not otherwise known to the public, including the
contents of this Agreement ("CONFIDENTIAL INFORMATION"), or use such
Confidential Information for commercial purpose unless such Confidential
Information is readily available to the public, without the prior written
consent of the other Party and further shall treat all such Information in
strict confidence, and not disclose it to anyone outside of the relevant
Party(s') organization. This provision shall survive Termination of this
Agreement.
2.4. NON-COMPETITION. The management rights granted herein are
exclusive and Biozhem agrees not to manufacturer, market, authorize a third
party to manufacture or market the Product for itself or for third parties in
the Territory in competition with Thane's management and marketing efforts
during the Term of this Agreement. Thane agrees not to recommend any Competing
Product (i) when taking orders for the Product, (ii) communicating with any
person on the Customer List or (iii) utilizing the Customer List in any manner
to market, sell or distribute any Competing Product; provided, however, that the
foregoing shall not preclude Thane from selling Competing Products to customers
on the Customer List that were Thane customers prior to the date hereof or
directly derived in response to Competing Product advertisement and marketing.
3. MANAGEMENT DUTIES/MANAGEMENT FEE.
3.1. MANAGEMENT OF PRODUCT DISTRIBUTION. With respect to Domestic
Sales, Thane shall function in a management capacity only, managing directly, or
through the use of agents or sub-contractors, all aspects of the marketing, sale
and distribution of the Product in the Territory, including, but not limited to,
the management of accounts receivable, accounts payable, inbound and outbound
fulfillment, customer service, merchant processing, database, inbound continuity
club, purchasing, inventory control, air tape trafficking, marketing planning,
media planning and buying, Internet sales, direct response print, package
inserts, after-market sales, and accounting and operational reporting
(collectively "MANAGEMENT DUTIES"). Thane shall use commercially reasonable
efforts to manage such Product distribution. All revenues, costs, inventories,
account receivables, and profits generated from Thane's management services
remains the sole property of Biozhem. Thane shall consult with Biozhem on an
ongoing basis and seek Biozhem's input and approval of Thane's overall marketing
plan, product pricing, distribution, obtaining new manufacturers and suppliers,
changes in Product formulations or configurations, creative approval of
marketing materials, and other management issues requested by Biozhem. Biozhem
shall use commercially reasonable efforts in obtaining direct contractual
relationships between its current manufacturers, suppliers, vendors, and Thane,
and shall assist Thane in all ways necessary to ensure a successful and smooth
transition of the existing marketing activities. Thane's right to manage and
market the Product throughout the Territory shall be exclusive, subject to any
Early Terminating Event, as described in Section 5.2. Thane shall abide by all
national, state and local laws.
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3.2. MANUFACTURE/INSURANCE. Thane will have the sole and exclusive
responsibility to control all manufacturing aspects of the Project and shall be
responsible for establishing and maintaining appropriate standards of quality
for the manufacture of the Product, excepting that Thane shall use Biozhem's
designated manufacturer and suppliers and may not utilize new or additional
manufacturers and suppliers without Biozhem's prior written approval. Thane
shall acquire and maintain adequate product liability insurance for the Product,
for not less than two million dollars, in full force for the Term of this
Agreement, with Biozhem named as an additional insured under a standard broad
form vendor endorsement to the policy; provided, however, that the Project shall
pay for its relative share of the cost of such product liability insurance
policy with an annual audit adjustment.
3.3. USE OF SUBCONTRACTORS. Notwithstanding Section 11 prohibiting
assignment of this Agreement, Thane may subcontract any and all Management
Duties to its agents and subcontractors, including subcontracting to a
subsidiary, parent or other affiliated company, so long as such subsidiary,
parent, or affiliates provide such services at or below market price, and their
services are of like quality as mutually agreed upon by the Parties.
3.4. THANE DISTRIBUTION. For International and Non-Domestic Sales,
other than Canada, which is set forth in Section 3.5, Thane shall acquire the
Product at the prices set forth in this Section 3.4 and sell the Product within
the countries and via the channels for its own account and at its own expense.
Thane shall use its best efforts to reasonably sell and distribute the Product
under this Section 3.4. All Product to be sold in all countries other than the
United States or as provided in Section 3.5, shall be purchased by Thane at
$15US per Basic Unit; provided, however, that Product for all Internet sales
shall be purchased at $35US. All Product sold via QVC or home shopping network
shall be sold in accordance with Biozhem's contract with Fox Marketing. Up Sell
Eye Units shall be purchased at $3.75US per Up Sell Eye Unit. Purchase terms for
all sales shall be net 30 days, FOB point of manufacture. Components of the
Product shall be purchased for a comparable purchase prices. The Management Fee
defined in Section 3.9 shall not apply to any International and Non-Domestic
Sales. Thane shall notify Biozhem if it does not intend to market in a
particular international country/territory. If Thane so notifies Biozhem of its
intent not to market in a particular international country/territory or if there
are no purchase orders for the Product within a particular international
country/territory within the first nine (9) months of this Agreement, all rights
to said country/territory under this Agreement shall revert to Biozhem
("REVERTED TERRITOR(IES)". At Biozhem's sole and absolute discretion, it shall
have the right, but not the obligation, to utilize the services of any company
other than Thane to market and distribute Product in a Reverted Territory and
Thane shall receive no payment for sales in said Reverted Territory. In the
alternative, Biozhem may, in its sole and absolute discretion, elect to choose
Thane and Thane would hereby agree to sell to Biozhem the Product for sales in a
Reverted Territory and to pick and pack the product for Biozhem to pick up at
the fulfillment house, all for a price of one hundred and seven percent (107%)
of Thane's cost of production. Thane shall account to Biozhem for costs of
production with respect to such Product pursuant to Section 3.1 but otherwise,
the duties set forth in Section 3.1 shall not apply to Thane with respect to
such Product.
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3.5. SALES WITHIN CANADA. With respect to all sales to customers within
Canada, Thane shall receive a management fee of two percent (2%) of the Gross
Revenue. The Parties agree to divide the net profits from such sales, as
determined by GAAP, consistently applied, on an equal basis. The provisions set
forth in Section 1(k), Net Revenue, with respect to cost savings and prohibition
against overhead allocation, and the provisions of Section 3.3, shall both apply
to Thane's management of the Canadian market. The Parties shall determine the
application of this Section 3.5 in good faith in accordance with normal business
customs.
3.6. FINANCE PROJECT COSTS. Thane shall finance, by advancing on behalf
of the Project, interest free funds to cover the Finance Amounts ("FINANCE"),
and, upon execution of this Agreement, Thane shall assume management of the
existing Product inventory, and Finance the outstanding balance of same, but not
to exceed the value of such inventory. Thane shall recoup all Finance Amounts as
described in Section 1(k), Net Income.
3.7. MANAGEMENT OF CUSTOMER LIST. The Parties agree that the Customer
List shall be solely owned by Biozhem, however, during the Term herein, only
Thane shall manage the Customer List in accordance with all applicable local,
state and federal privacy and trade secret laws. Biozhem shall at all times have
the right to view, copy, and use the Customer List for purposes other than sale
of the Product during the Term of this Agreement. Thane shall not sell or lease
the Customer List to third parties without Biozhem's prior written consent,
which consent may be withheld in its sole and absolute discretion.
3.8. DISBURSE TALENT, PRODUCER, FORMULATOR AND PATENT ROYALTIES. Thane
shall be responsible for accounting for and Finance of "PRODUCT ROYALTIES" and
disbursing pursuant to this Agreement the amounts due and owing to ATS, Beauty
Resource, Inc., Xxxxxxx Xxxxxx, Script to Screen, Inc., Xxxxxx Xxxxx and Xxxxxxx
Xxxxxx, MD, in accordance with the royalty structures set forth on "EXHIBIT C"
hereto; provided further that Thane shall also be responsible to Finance the
payment for the April 19, 2002 royalty payment to Xxxxxxx Xxxxxx and the April
30, 2002 royalty payment to ATS; provided further, however, that Thane shall
have no obligation to pay said royalty payments if the Project is in the
Recoupment Period, as defined in Section 5.4.
3.9. THANE'S MANAGEMENT FEE. As compensation for Thane's Management
Duties herein, beginning on the date of Thane's first air date of the
Infomercial, Thane shall receive a "MANAGEMENT FEE" equal to seven percent (7%)
of the Gross Revenue of all Product Domestic Sales generated by Thane and its
subsidiaries.
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3.10. PROJECT LOSSES. Thane shall not be responsible for any losses
incurred by Biozhem unless directly caused by Thane's gross negligence or
willful mismanagement of the Project.
3.11. MOVING AND MANAGEMENT OF EXISTING DATABASE. Upon execution of
this Agreement, Biozhem shall pay the costs associated with moving its existing
customer database to a location designated by Thane. Thane shall manage said
existing customer database separately from the Project and the Customer List in
return for a management fee of seven percent (7%) of the Gross Revenue generated
by sales to customers on that existing customer database, including continuity
customers. Biozhem shall pay Thane all reasonable costs incurred by Thane in
providing, picking, packing and shipping the Product. All revenue from this
existing customer database, less Thane's seven percent (7%) management fee and
Thane's costs pursuant to this Section 3.11, shall belong to Biozhem, and shall
not be subject to any other terms of this Agreement. At such time as there are
no further orders from this existing customer database, and no further legal
requirements to retain such information, Thane shall promptly return to Biozhem
the records and information contained in this customer database.
3.12. MEDIA TEST. Upon execution of this Agreement, Thane shall, within
thirty (30) days of the execution date, edit the Infomercial to change the claim
of reduction in fine lines and wrinkles to sixty percent (60%), and retest the
Infomercial using comparable media at comparable rates as used previously in the
Biozhem test ("MEDIA TESTING PERIOD").
4. DISBURSEMENT OF BIOZHEM REVENUES/ADVANCES.
4.1. NET REVENUE ACCOUNTING/PAYMENT. Thane shall determine, account,
and pay to Biozhem Net Revenue in accordance with its Accounting Procedures, and
subject to all Audit Rights.
4.2. EXECUTION ADVANCE. Under the terms of this Section 4.2, Thane
shall pay to Biozhem, six hundred thousand dollars ($600,000) as an "EXECUTION
Advance" against future Net Revenue compensation. The Execution Advance shall be
on a NON-REFUNDABLE BUT RECOUPABLE BASIS, as defined in Section 5.4 below, and
shall offset any and all Net Revenue compensation due and payable to Biozhem
hereunder. Thane shall pay two hundred and fifty thousand dollars ($250,000) of
the Execution Advance upon execution of this Agreement. The three hundred and
fifty thousand dollar ($350,000) balance of the Execution Advance shall be due
and payable on or before the end of the Media Testing Period, if Thane
determines that the media test results of Section 3.12 warrant continuing the
Project.
4.3. ROLL-OUT ADVANCE. On or before ninety days (90) days from Thane's
first air date of the Infomercial, Thane shall pay to Biozhem an additional
"ROLL-OUT ADVANCE" of six hundred thousand dollars ($600,000). The Roll-out
Advance shall be on a non-refundable but recoupable basis and shall offset any
and all Net Revenue compensation due and payable to Biozhem hereunder. If Thane
fails to pay the $600,000 Roll-out Advance by September 15, 2002, Biozhem may
terminate this Agreement in accordance with Section 5.2 herein.
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4.4. NON-REFUNDABLE EXCEPTION. Monies advanced herein shall be on a
non-refundable basis, excepting that advanced monies shall be refundable to
reimburse Thane's out-of-pocket costs upon termination of this Agreement by the
an event which materially impairs Thane's ability to manage the Project as
contemplated herein, including without limitation, Biozhem misrepresenting a
material fact herein, and action on the part of governmental authorities
preventing substantial performance of this Agreement.
5. TERM/TERMINATION.
5.1. TERM. The term of this Agreement shall begin on the Effective Date
and continue for one year after the first air date of the Infomercial, such date
to be no later than forty-five (45) days after signing this Agreement ("INITIAL
TERM"). The Initial Term shall be automatically renewed for additional one year
periods thereafter, so long as Thane has met its Minimum Performance
Disbursements set forth below, and subject to Section 5.2 ("TERM").
5.2. EARLY TERMINATING EVENTS. This Agreement may be terminated upon 30
days written notice to the other Party ("TERMINATION DATE"), upon the occurrence
of any one or more of the following events:
(a) Thane fails to pay the balance of the Execution Advance on or
before the end of the Media Testing Period;
(b) Thane fails to pay the Roll-out Advance by September 15, 2002;
(c) Thane reasonably determines the Project is no longer financially
feasible. Thane shall have no further obligation to Finance the Project
upon termination, but shall continue to manage the wind down of the
Project as provided for herein and shall disburse Patent, Producer and
Talent Royalties on Product sold;
(d) If either Party is declared insolvent or bankrupt, or makes an
assignment for the benefit of creditors, or a receiver is appointed or
any proceeding is demanded by, for or against the other under any
provision of the Federal Bankruptcy Act or any amendment thereof which
is not removed within sixty (60) days after notice from the
non-bankrupt party;
(e) Thane fails to meet its Minimum Performance Disbursements, as
defined below; or
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(f) Either Thane or Biozhem breaches a material provision of this
Agreement ("MATERIAL BREACH") and such breach remains uncured for a
period of sixty (60) days after the non-breaching party informs the
breaching party in writing of the existence of the Material Breach.
5.3. MINIMUM PERFORMANCE DISBURSEMENTS. Upon 30 day written notice to
Thane, Biozhem may terminate this Agreement if Thane fails to disburse to
Biozhem five million dollars ($5,000,000) by the end of the Initial Term or by
failing to disburse additional five million dollar ($5,000,000) amounts yearly
for the extended term hereafter. Thane may advance monies to Biozhem in order to
meet the Minimum Performance Disbursement, which advances may be recoupable
against Net Revenues in the subsequent years.
5.4. WIND-DOWN/RECOUPMENT OF COSTS. Following the expiration,
termination or early termination of this Agreement, for any reason, all rights
to manage the marketing of the Product shall revert to Biozhem, excepting that
Thane shall retain the right to market the Products to the then existing
customers on the Customer List, on an exclusive basis, UNTIL SUCH TIME AS IT HAS
RECOUPED the following costs and payments that have not yet been repaid to Thane
("RECOUPMENT PERIOD"): (i) any and all advances made to Biozhem during the Term
herein; (ii) all milestone royalties advanced to Talent, Producer or Patent
Owner; (iii) all Management Fees earned; and (iv) all financing and operational
deficits for Management Duties related to Domestic Sales, excluding those costs
incurred after the Termination Date, but including without limitation, inventory
costs, returns, and chargebacks; provided however, that Biozhem shall have the
right, but not the obligation, to buy out these above listed recoupment costs;
provided, further, that the first seven percent (7%) of all Adjusted Gross
Revenue (as defined at the end of this section 5.4) shall be paid to Biozhem on
a monthly basis until the Recoupment Period has ended. Following the Recoupment
Period, Thane shall have no further rights to market, distribute or sell the
Product and shall cease any further use of the Customer List. During the
Recoupment Period, Biozhem may market, sell and distribute the Product to new
customers. For the purposes of this Section 5.4 only, "ADJUSTED GROSS REVENUE"
shall mean all gross revenue received by Thane from sales of the Product, less
shipping and handling charges received from customers, returns, credits, bad
debt, payment of any applicable sales taxes, and a rolling return reserve
initially set at twelve percent (12%) of Gross Revenue, and subsequently
adjusted to reflect the actual return rate when such becomes known.
5.5. RETURN OF MATERIALS. Following the termination of the Recoupment
Period, as defined in Section 5.4, Thane shall have ten (10) days to return the
following materials to Biozhem, and further shall retain no copies of same: (i)
the Infomercial and any associated masters produced by Biozhem and associated
testimonials, talent release forms and agreements and claims substantiation that
Biozhem provide to Thane; (ii) all but one copy of the Licensing Agreement, said
copy to be used solely for auditing and potential litigation purposes; and (iii)
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the Product and all components thereof, the same to be purchased by Biozhem at
Thane's cost of production; provided however that Thane may retain an amount of
the Product reasonably required to fulfill its prior sales commitments.
Following the end of the Recoupment Period, Thane shall return within thirty
(30) days all Confidential Information that originated with Biozhem that can
reasonably be returned and shall not utilize any such information that cannot
reasonably be returned to Biozhem. It is the Parties intent that Thane may use
the Customer List for six (6) months after end of the Recoupment Period solely
for the purpose of fulfilling any legal requirements that Thane may have
relating to sales of the Product. Thereafter, Thane shall promptly return to
Biozhem all copies of the Customer List in its possession or under its control.
6. INDEMNIFICATION.
6.1. BIOZHEM. Biozhem agrees to defend and hold Thane, its successors,
assigns, licensees, agents, associates, subsidiary and parent companies,
directors and employees harmless from any and all claims, damages, costs and
expenses, attorney's fees, damages, recoveries, and settlements which arise
from, or may arise out of, any representation, claim, statement, promise,
warranty, and presentation that Biozhem makes about the Product, from any
infringement of Biozhem on the intellectual property rights of another, and from
the breach by Biozhem of any of its representations, warranties, covenants,
obligations, agreements or duties under this Agreement.
6.2. THANE. Thane agrees to defend and hold Biozhem, its successors,
assigns, licensees, agents, associates, subsidiary and parent companies,
directors and employees harmless from any and all claims, damages, costs and
expenses, attorney's fees, damages, recoveries, and settlements which arise
from, or may arise out of, any representation, claim, statement, promise,
warranty, and presentation that Thane makes about the Product, or that any of
Thane's representatives, sales people, public relations people, agents, and
marketing people make about the product , which Biozhem has not approved or
ratified, from product liability and Product defects, and from the breach by
Thane of any of its representations, warranties, covenants, obligations,
agreements or duties under this Agreement.
6.3. DEFENSE. If either Party is sued in any court for damages by
reason of any of the acts of the other Party referred to herein, such other
Party shall defend said action (or cause same to be defended) at its own expense
and shall pay and discharge any judgment that may be rendered in any such
action; if such other Party fails or neglects to so defend in said action, the
Party sued may defend the same and any expenses, including reasonable attorneys'
fees, which it may pay or incur in defending said action and the amount of any
judgment which it may be required to pay shall be promptly reimbursed upon
demand. Nothing herein is intended to nor shall it relieve either Party from
liability for its own act, omission or negligence.
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7. INDEPENDENT AND SEPARATE ENTITIES. Thane and Biozhem enter into this
Agreement as separate and independent corporations, businesses and companies.
Thane and Biozhem will be responsible for the payment of all compensation,
wages, taxes, dues, employment benefits and operating expenses in connection
with the separate operations of their respective businesses, corporations and
companies. This Agreement does not create a partnership, agency or joint venture
relationship between Thane and Biozhem. Thane and Biozhem agree that neither
will, nor permit any person or entity acting for or on its behalf to, bind or
obligate the other Party, or represent to have such authority, without the
express prior written approval of the other Party.
8. ENTIRE AGREEMENT/AMENDMENTS. This Agreement contains the entire understanding
of the Parties with respect to the management services for the Product, and
supercedes all prior agreements and understandings with respect thereto. No
amendment to this Agreement shall be effective unless set forth in a written
instrument executed by the Parties.
9. CONTROLLING LAW/ENFORCEMENT. The laws of the State of California will govern
the interpretation of this Agreement, and the rights and obligations of the
Parties to it, without regard to the State's conflict of laws principles. If any
party to this Agreement retains the services of an attorney, requests an
arbitration, or files a lawsuit to enforce the arbitration award, for the
purpose of enforcing the terms and conditions of this Agreement, an arbitrator
or court may award the prevailing party costs and expenses, including reasonable
attorney's fees.
10. ARBITRATION. Any dispute between the Parties hereto shall be resolved by
binding arbitration in Riverside County, California pursuant to the
then-existing arbitration rules of the American Arbitration Association. The
Parties agree that the courts of Riverside County, California shall have
jurisdiction to enforce the arbitrator's award, and the parties agree to submit
to the jurisdiction of such courts for the purposes of any such enforcement
action or any action in aid of the arbitrator's authority. The Parties hereby
stipulate that they shall have a right to discovery on reasonable terms and
conditions (as determined by the arbitrator in the event the parties cannot
decide), as provided in Section 1283.05 of the California Code of Civil
Procedure, but such discovery shall be conducted promptly and without
unreasonably delaying the hearing of the dispute. In any event, the date of
arbitration shall be set no later than sixty (60) days after service of the
notice of arbitration. In any arbitration or enforcement action, the prevailing
party shall be entitled to its reasonable attorneys' and accountants' fees and
costs. Service of any claim, arbitration or litigation hereunder may be made
against a Party hereto by service according to the same procedure set forth
herein for service of notice to such Party.
11. NO ASSIGNMENT. Except as provided in Section 3.3 on subcontracting, Thane
shall not have the right to assign this Agreement without Biozhem's prior
written approval and any assignment not approved by Biozhem shall be null and
void, and of no force or effect; provided, however, that Thane shall have the
right to assign this Agreement to any person or entity acquiring substantially
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all of Thane's assets or into which or with which Thane might merge or
consolidate, provided that the purchaser of assets assumes in writing all
obligations under this Agreement. Biozhem shall have the right to terminate this
Agreement if Thane attempts to assign this Agreement in violation of this
Section 11.
12. NOTICES. Any and all notices and demands by any Party shall be in writing
and shall be validly given or made only if personally delivered or deposited in
the United States mail, certified or registered, postage prepaid, return receipt
requested, or if made by Federal Express or other similar delivery service, with
proof of delivery, or confirmed receipt e-mail or facsimile. Service shall be
conclusively deemed made upon: receipt if personally delivered; or two (2) days
after having been mailed; or twenty-four (24) hours after being delivered by an
overnight delivery service, whichever is sooner. Notices shall be addressed as
follows:
Biozhem: Biozhem Cosmeceuticals
00000 Xxxxx Xxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxx, CEO
Tel: 000-000-0000
Fax: 000-000-0000
Xxx.Xxxxxx@Xxxxxxx.xxx
----------------------
Thane: Thane International, Inc.
00-000 Xxxxx Xxxxxxx, #000
Xx Xxxxxx, XX 00000
Attention: Legal Department
Fax:(000) 000-0000
Tel: (000) 000-0000
Xxxxxx@xxxxxxxx.xxx
-------------------
Xxxxxxx@xxxxxxxx.xxx
13. SEVERABILITY. In the event any part of this Agreement is held by the final
order of any court, arbitration panel, tribunal or administrative agency having
jurisdiction over this Agreement or the subject matter hereof, to be invalid,
contrary to law, public policy or otherwise unenforceable, such part or parts
will be severed here from and will not affect any other part or parts of this
Agreement. The Parties will promptly negotiate substitute provisions for those
rendered or declared unlawful, retaining as much of the intent of the original
provisions as is practicable without the defects which caused them to be
unlawful.
14. WAIVERS. Delay or failure by either Party to enforce any right or remedy
available to it under this Agreement or at law or in equity, on account of the
other Party's breach or repeated failure to perform a duty or an obligation
under this Agreement will not constitute a waiver by such Party of such right or
remedy in respect to the same or any subsequent breach or failure by the other
Party. Any waiver must be in writing and signed by the Party to be charged.
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15. BINDING EFFECT. The rights and obligations of the Parties under this
Agreement shall inure to the benefit of and be binding on their respective
successors and permitted assigns.
16. FURTHER ASSURANCES. The undersigned represent and warrant that they shall do
all acts and execute and deliver all documents necessary, convenient or
desirable to further the provisions and purposes of this Agreement.
17. NO PRESUMPTION. It shall be presumed that each party jointly drafted this
Agreement, and no other presumption of any kind shall inure or apply with regard
thereto or concerning the interpretation or construction of this Agreement in
the event of any ambiguities.
18. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together shall be
deemed to be one and the same instrument. All counterparts so executed shall
constitute one agreement binding upon all parties, notwithstanding that all
parties are signatory to the original or the same counterpart.
19. SURVIVABILITY. Sections 1, 2.3, 3.7, 3.11 and 6 shall survive the
Termination of this Agreement.
20. FACSIMILE SIGNATURES. Facsimile signatures shall be deemed original
signatures for purposes of this Agreement, with such facsimile signatures having
the same legal effect as original signatures.
21. TITLES, HEADINGS AND CAPTIONS. All titles, headings, and captions used in
this Agreement have been included for administrative convenience only and do not
constitute matters to be construed in interpreting this Agreement.
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IN WITNESS HEREOF, the parties hereto have executed this Agreement as
of the Effective Date herein.
BIOZHEM COSMECEUTICALS THANE INTERNATIONAL, INC.
/s/ Xxxxx Xxxxxx /s/ Xxxx Xxxxxx
--------------------------- ------------------------------
By: Xxxxx Xxxxxx, CEO Xxxx Xxxxxx, President and COO
EIN: _____________________
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