Exhibit 10.23
EXCLUSIVE MANUFACTURING & MARKETING AGREEMENT
The Parties, Thane International, Inc. ("THANE"), a Delaware
corporation with offices located in La Quinta, California, USA, and Optimum
Health Technologies, Inc., ("OWNER"), a California corporation, with offices
located in Rocklin, CA, enter into this Agreement with an "EFFECTIVE DATE" of
May 23, 2001, with reference to the following facts.
RECITALS
Xxxx Xxxxx is the owner and developer of a patented (US 6,102,875)
massage, acupressure and magnetic therapy device known as "Magnassager(R)" and
Optimum Health Technologies, Inc. is the owner of the registered trademark
Magnassager(R)("PRODUCT"). OWNER has produced an infomercial ("INFOMERCIAL") to
better promote the product and desires to have THANE air the Infomercial and
distribute and market the Product worldwide.
THANE is a leading international marketing firm, successful in
production and product development and distribution and desires to air the
Infomercial and exclusively market the Product worldwide.
THANE and OWNER agree to the following terms and conditions in
exchange for the mutual promises and covenants set forth in this Agreement.
AGREEMENT
1. WARRANTIES & COVENANTS.
1.1 THANE. THANE warrants, promises, and covenants that it has the
complete right, power and authority to enter into this Agreement.
1.2 OWNER. OWNER warrants, promises, and covenants that it: (i) has
the present right, power and authority 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 perfect its pending
patent application and will maintain and have the sole and exclusive right
during the Term to defend all intellectual property rights in full force,
including, but not limited to, copyrights, patents, trademarks, and any and all
required governmental approvals that currently exist or may exist for the
Product for the Term of this Agreement; (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.
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1.3 CONFIDENTIALITY AND NON-COMPETITION. The Parties agree not to
disclose confidential information regarding the other Party, their companies,
their products, their operations, or the mechanical construction, technical
information, design drawings, concept, ideas, sketches, wordings, media and
marketing strategies, and chemical composition or formula related to the
Product, or any other company information which may be deemed a trade secret, or
is sensitive in nature and not otherwise known to the public (collectively
"INFORMATION") or use such Information for commercial purpose or disclose such
Information to any one outside of the relevant Party(s') organization without
the prior written consent of the relevant Party and shall treat all such
Information in strict confidence. This Agreement is exclusive and OWNER agrees
not to manufacture, for itself or for third parties, the Product or any product
substantially similar in competition with THANE's marketing efforts hereunder,
during the Term of this Agreement.
2. THE MANUFACTURE AND COST OF THE PRODUCT
2.1 THE PRODUCT. The "PRODUCT"consists of a massage, acupressure and
magnetic therapy device known as "Magnassager(R)", a 24 page illustrated manual,
along with Product packaging ("BASIC UNIT"). The Product also consists of
"ADDITIONAL PRODUCTS"as a defined below.
2.2 ADDITIONAL PRODUCTS. OWNER and THANE may also develop additional
related products, and upon mutual agreement, THANE may market these additional
product(s), individually or in varying product configurations in its sole
discretion along with the Product pursuant to the terms herein. Should THANE
determine not to market an OWNER developed product, OWNER is free to market its
product without regard to this Agreement.
2.3 MANUFACTURE/PRODUCT QUALITY/PURCHASE. Upon "Roll-out" as defined
herein, THANE will have the sole responsibility to control all manufacturing
aspects of the Product and shall be responsible for determining and maintaining
standards of product quality for the manufacture of the Product. OWNER shall
have the right to review and approve the manufacturing quality of the Product
from time to time. During the test period prior to "Roll-out", THANE shall
purchase the Product from OWNER for $[******] per Basic Unit, FOB China, on a
net 30 day basis.
2.4 PRODUCT LIABILITY INSURANCE. The Party responsible for
manufacturing the Product, shall maintain, in full force, comprehensive and
general liability insurance including product liability insurance customarily
maintained by manufacturers with a policy limit of not less than one million
dollars per occurrence and two million dollars in the aggregate, with the other
Party named as an additional insured.
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3.0 PRODUCTION.
3.1 INFOMERCIAL. OWNER has produced an Infomercial. OWNER warrants
that all claims made in the Infomercial shall have appropriate substantiation as
required by governmental agencies. OWNER warrants that it has or shall pay all
production and any other costs related to the production of the Infomercial,
including any and all talent royalties unless agree in writing otherwise. Upon
execution of this Agreement, OWNER shall provide THANE with a textless unmixed
master and a mixed Beta master with graphics and text and all testimonial
release forms or other licensing contracts, any and all existing claims
substantiation as required by governmental agencies.
3.2 THANE MATERIALS. THANE will have the sole discretion to determine
if it will produce print advertisements, collateral materials, and/or tweak the
Infomercial ("THANE MATERIALS"). OWNER shall provide collaboration in the
production of Thane Materials by providing upon request all existing Infomercial
footage and all existing print, art work and studies that OWNER may own or
control for the collateral support materials for the Product. OWNER will have
the right, ability and responsibility to give its written approval of all Thane
Materials, to the extent that they express the benefits, elements, and claims of
the Product accurately and place OWNER in an accurate light, not to be
unreasonably withheld, nor delayed.
3.3 OWNER APPROVAL RESPONSIBILITY. Before finalizing Thane Materials,
OWNER will have the right, ability and responsibility to give its written
approval to the extent that Thane Materials express the benefits, elements, and
claims of the Product accurately and place OWNER in an accurate light. OWNER
agrees that it will not unreasonably withhold its approval, nor delay its
approval for an unreasonable period of time ("OWNER APPROVAL"). Any request for
Owner Approval shall be submitted in writing along with all applicable
information and materials. If OWNER does not respond within three days from the
day of receipt of request, then such request shall be deemed approved.
4. MARKETING PLAN.
4.1 THE MARKETING PLAN. THANE will have the sole discretion to
determine the marketing plan. THANE will be responsible during the Term of this
Agreement for paying for, and managing directly, or through the use of agents or
sub-contractors, all functions necessary for the worldwide marketing and
distribution of the Product and Infomercial or Infomercial, including without
limitation, the management of: (i) in-bound fulfilment; (ii) out-bound
fulfilment; (iii) credit card processing; (iv) accounting; (v) inventory
control; (vi) customer service; (vii) media planning and buying; (viii)
out-bound telemarketing; (ix)customer list database; (x) after-market sales;
and, (xi) foreign distribution. THANE shall put forth its best efforts to
maximize the financial success
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of the marketing campaign for the sale of the Product. Thane may contract with a
current or future subsidiary company to provide any of the above services
provided that such services are of like quality and at or below market price.
The Parties shall mutually agree on the pricing of the Product.
4.2 SALES ADMINISTRATION FEE. THANE and OWNER agree that THANE shall
receive a Sales Administration Fee to cover the administration costs of THANE's
responsibilities pursuant to this Agreement including in-bound and out-bound
fulfilment, customer service, credit card processing, credit card disputes and
charge backs, check order processing and accounting. The Sales Administration
Fee will equal [*****] percent ([*****]%) of all revenue from all THANE sales of
the Product during the Term of this Agreement.
4.3 CUSTOMER LIST. THANE and OWNER agree that all customer names,
addresses and phone numbers generated by THANE from the marketing of the Product
shall be solely owned by THANE ("CUSTOMER LIST").
5. MARKET TEST PERIOD.
5.1 MARKET TEST. Upon receipt of all materials outlined in Section 3.1
herein, THANE shall conduct project set-up and purchase media for test
marketing. THANE shall test the Infomercial for a period of two months or so
long as THANE continues to tweak and re-test the Infomercial ("MARKET TEST").
THANE will determine in its sole discretion the actual amount of capital
provided according to the availability of cost-effective media, the success or
failure of the Infomercial, and the financial requirement to pay for all media
expenses. THANE shall provide to OWNER media results and analyses and sales
counts regularly.
5.2 FAILURE OF MARKET TESTS. Should THANE cease tweaking or re-testing
of the Infomercial or determine that the results of the Market Test do not
warrant further effort, THANE shall notify OWNER in writing within five (5) days
and this Agreement shall terminate and all rights granted herein shall revert to
OWNER, excepting that THANE shall retain the right to exclusively market to
customers then existing due to its test marketing efforts for the remainder of
the Term. THANE shall provide to OWNER any and all media results and analyses
and sales counts not previously provided. Should Thane determine in its sole
discretion that the Market Tests warrant the marketing of the Product, it shall
"Roll-out" the Product. "ROLL-OUT" shall be defined as the first week that Thane
expends more than [*****] dollars ($[*****]) on the purchase of media.
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6. GRANT OF RIGHTS.
6.1 OWNERSHIP OF PROPERTY AND COPYRIGHTS. THANE acknowledges and
agrees that OWNER is the owner of the Product rights including patents,
trademarks and copyrights for the Product, the Infomercial, and the Product
name. Thane is the sole owner of all rights, including copyrights and trademarks
for any and all Thane Materials and the Customer List.
6.2 EXCLUSIVE BROADCAST AND MARKETING RIGHTS. Subject to the terms and
conditions of this Agreement, OWNER hereby grants to THANE the exclusive right,
worldwide, to air the Infomercial and to market and sell the Product. THANE's
exclusive marketing rights shall include all possible market areas available
today, and those that will be available in the future throughout the world.
These areas will include, but will not be limited to: print; retail; radio;
television; cable; satellite cable and television; catalog; the Internet; home
shopping networks.
6.3 EXCLUSIVITY MINIMUM. The exclusive marketing rights granted to
THANE shall remain exclusive for two years (1) from Roll-out ("INITIAL TERM OF
EXCLUSIVITY"). Thereafter, the exclusivity of the rights granted shall extend
automatically for additional one year periods, if OWNER receives a minimum of
$[*****] in Net Revenue by the end of the Initial Term of Exclusivity or any
yearly period thereafter. If OWNER receives less than the minimum in Net Revenue
to automatically extend exclusivity, then upon written notice to THANE from
OWNER, THANE's rights hereunder shall become non-exclusive for the duration of
the Term, excepting that THANE shall retain the right to exclusively market to
existing customers. THANE may advance Net Revenue compensation to meet the
exclusivity minimums in any given year, on a non-refundable but recoupable
basis.
7. ACCOUNTING AND NET REVENUE.
7.1 DISBURSEMENT OF NET REVENUE. THANE shall determine, account, and
pay to OWNER, "NET REVENUE" equal to [******] percent ([*****]%). THANE will
maintain an operating account and shall prepare accurate accounting statements
according to general accepted accounting principals consistently applied,
setting forth all sales, returns, taxes, and Net Revenue. The accounting
statements shall accompany the Net Revenue to be disbursed monthly within 30
days of the end of each month, or at other times determined by mutual agreement.
OWNER shall have the ability and right to inspect and audit all books and
records concerning the Product, including unit sales, returns, taxes, and Net
Revenue from the sale of all Product. OWNER, 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.
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7.2 DEFINITION OF NET REVENUE. "NET REVENUE" shall mean for this
Agreement the sum remaining from any and all revenue, received by THANE, from
the sale of all Product, during the Term of this Agreement, after the deduction
for the following expenses incurred by THANE: (i) a reasonable amount to create
and maintain a rolling reserve fund, initially at [*****]% of gross revenue but
to be adjusted to reflect actual return rate when such becomes known; (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 costs and advances
against gross media/advertising costs, including standard media commissions paid
to third parties and/or paid in-house depending on media buying and management
services provided; (v) actual cost to refurbish return merchandise for resale;
(vi) all product purchase and manufacturing costs; (vii) payment of all
producer and talent royalties, if any; (viii) payment of all costs and expenses
for viewing cassettes and broadcast dubs for television stations and cable
networks; (ix) mutually agreed upon public relations fees and costs; (x) sales
administration fee; (xi) payment for reasonable costs for development,
production and distribution of Thane Materials and additional Thane collateral
support materials including order forms, stick letters, and inquiry packages, if
any; (xii) mutually agreed upon costs of Internet development; (xiii) actual
credit card and non-credit card returns; (xiv) payment for foreign export,
documentation and clearance costs; (xv) payment for retail commissions, ad
allowances and other retail costs; and (xvi) payment for legal, travel and
entertainment as mutually agreed upon.
7.3 NET REVENUE ADVANCE UPON ROLL-OUT. Upon Roll-out as defined in
Section 5.2 herein, THANE shall pay to OWNER [*****] dollars ($[*****]) as an
advance on Net Revenue compensation. This Advance shall be on a non-refundable
but recoupable basis. Any and all Net Revenue compensation due and payable to
OWNER hereunder shall be first offset by the advance at a rate of [*****] cents
($[*****]) on the dollar.
8. INDEMNIFICATION. OWNER agrees to hold THANE, its successors, assigns,
licensees, agents, associates, 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 OWNER makes about the
Product, from any infringement of OWNER on the intellectual property rights of
another, from Product liability and Product defects for Product it manufactures,
and from the breach by OWNER of any of its representations, warranties,
covenants, obligations, agreements or duties under this Agreement. THANE agrees
to hold OWNER, its successors, assigns, licensees, agents, associates, 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,
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statement, promise, warranty, and presentation that THANE makes about the
Product in any Thane Materials, or by any of THANE's representatives, sales
people, public relations people, agents, and marketing people which OWNER has
not approved, or ratified their use, from Product liability and Product defects
for Product it manufactures, and from the breach by THANE of any of its
representations, warranties, covenants, obligations, agreements or duties under
this Agreement.
9. INDEPENDENT AND SEPARATE COMPANIES. THANE and OWNER enter into this
Agreement as separate and independent corporations, businesses and companies.
THANE and OWNER 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 OWNER and THANE. THANE and OWNER 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.
10. TERM. Subject to the terms and conditions of this Agreement, the Term of
this Agreement shall be for five (5) years from the Effective Date of this
Agreement. The Term of this Agreement may be extended or terminated only by
mutual written agreement.
11. ENTIRE AGREEMENT. This Agreement contains the entire understanding between
THANE and OWNER that supersedes any prior agreements, written or oral,
respecting the subject matter of this Agreement.
12. 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 a conflict of laws principle. A court will
consider the terms and conditions of this Agreement to be severable so that any
of its terms, conditions, or clauses shall not invalidate, or render
unenforceable the entire agreement. The exclusive venue and jurisdiction for any
actions related to this Agreement shall be in the state courts in Riverside
County, Indio Branch, California, and to the extent that federal courts have
exclusive jurisdiction, the US District Court for the Central District. If any
party to this Agreement retains the services of an attorney, or files a law
suit, to enforce the terms and conditions of this Agreement, a court may award
the prevailing party costs and expenses, including attorney's fees.
13. ASSIGNMENT OF RIGHTS. THANE shall have the complete power, right and
authority to assign any and all rights granted under this Agreement to any
parent or subsidiary company.
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THANE agrees to notify OWNER of any such assignment and THANE agrees to remain
liable for its obligations to OWNER as set forth in this Agreement. Xxxx Xxxxx
hereby assigns any and all rights to its Patent US 6,102,875 to Xxxx Xxxxx of
Seattle, Washington, should he die during the Term herein. The Parties intend
that this Agreement, and all of its obligations and rights, shall be binding
upon assignees and successors of OWNER, whether such succession is by gift,
will, or sale, to the fullest extent as if such successors and assignees were
Parties hereto.
14. NOTICES. Any notice given under this Agreement shall be in writing and
shall only be deemed proper notice if served personally, or by registered or
certified first class mail with return receipt requested, and addressed to the
party to whom the notice is intended at the following addresses. Any change of
address must be in writing and properly delivered to the other Party pursuant to
the requirements of notice set forth in this paragraph.
a) OWNER: Optimum Health Technologies, Inc.
XX Xxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx, Xxxxxxx Xxxxxxx
(000) 000-0000 Phone
(000) 000-0000 Fax
E-Mail: xxxx@xxxxxxxxxxx.xxx
and to: Xxxx Xxxxx
0000 Xx Xxx #0000
Xxxxxxx, XX 00000
Tel: (000) 000-0000
b) THANE: Thane International, Inc.
00-000 Xxxxx Xxxxxxx
Xx Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx and Legal Department
000 000-0000 Phone
000 000-0000 Fax
E-Mail: xxxxxx@xxxxxxxx.xxx
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IN WITNESS HEREOF, the Parties hereto have executed this Agreement as
of the Effective Date herein.
Optimum Health Technologies, Inc.
/s/ Xxxx X. Xxxxx
---------------------------------
By: Xxxx X. Xxxxx, President
/s/ Xxxx X. Xxxxx
---------------------------------
By: Xxxx Xxxxx in his individual capacity
Thane International, Inc.
/s/ Xxxxx Xxxxx
---------------------------------
By: Xxxxx Xxxxx, Corporate Secretary
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