EXHIBIT 10.2
DATE: March 17, 1998
TO: Xxxx Xxxxxxx (Via Fax #000-000-0000)
FROM: Xxxxx Xxxxx
SUBJECT: Endless Youth
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This agreement ("Agreement") is by and among Vendor Services, a California
general partnership ("Vendor") on the one hand and Xxxx Xxxxxxx, a Nevada
resident and owner of certain proprietary rights and Endless Youth Products,
Inc., a Nevada corporation (hereinafter collectively referred to as "Owners")
on the other hand regarding certain services which Vendor shall provide Owner
in connection with Owners' vitamin product ("Product") more specifically
defined on Exhibit "A" attached hereto.
RECITALS
a. Owners own the Product and a direct response commercial
("Infomercial") designed to sell the Product.
b. Owners would like to receive certain vendor services in connection
with the marketing and distribution of the Product.
c. Owners have already conducted successful preliminary tests of the
Infomercial and Product and are choosing between various vendors to provide
it media and other services.
d. Owners desire to cause Vendor to provide them certain services, more
particularly described below.
The parties agree as follows:
1. MEDIA BUYING AND OTHER VENDOR SERVICES. Owners shall provide Vendor
with a master of the Infomercial and cause Vendor to purchase media and test
the Infomercial's ability to sell Product. Vendor shall purchase media for
Owners and shall be entitled to compensation (described below). Vendor shall
also provide Owners other vendor services as more fully described in Exhibit
"B".
2. ROYALTIES. Owners shall be fully responsible for paying royalties
and fees to all third parties related to the sale of the Product and the
airing of the Infomercial (except Xxxxx Xxxxx).
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3. INDEMNITY. Owners shall defend and indemnify Vendor, at Owners'
cost, with legal counsel selected by Vendor, for any liability Vendor may
incur (including, but not limited to, trademark, patent and false advertising
claims) as a result of its sale of the Product, its airing of the Infomercial
or any other matter related to this project; however, Owners shall have no
duty to defend and indemnify Vendor for liability Vendor incurs due to its
own gross negligence or wilful misconduct. To the extent Vendor is required
to pay any amount to a third-party as a result of Owners' breach hereunder,
Vendor may pay such amount directly (or escrow same) in lieu of paying Owners
amounts otherwise due hereunder.
4. INFOMERCIAL AIRINGS.
4.1 INITIAL TEST. Owners hereby grant Vendor the exclusive right to
air the Infomercial for fifteen (15) days as an initial media test. Vendor
shall commence this media test as soon as possible, but in no event later
than March 28, 1998.
4.2 SECOND TEST. If the initial test is deemed successful by
Vendor, Owners shall grant Vendor the exclusive right to air the Infomercial
for another one hundred and one hundred and twenty (120) days.
4.3 ROLL-OUT. If the second test is deemed successful by Vendor,
Owners shall grant Vendor the exclusive right to air the Infomercial during
the "Term".
5. REPRESENTATIONS. Owners represent and warrant that (a) they are the
sole Owners of the Product and Infomercial and all rights related thereto,
(b) the use and sale of the existing Product and Infomercial, and the
titles, logos and references made therein, are permitted and do not infringe
upon the rights of any third-party, (c) the Product and Infomercial comply
with any and all Federal, State, local laws and regulations as well as all
NIMA guidelines, (d) Owners have not entered into any oral or written
contract which would impair the rights granted to Vendor or limit the
effectiveness of this agreement, nor is Vendor aware of any claims or actions
which may limit or impair any of the rights granted to Vendor hereunder, (e)
Owners shall not devise, produce or sell any products or infomercials similar
to the Product or Infomercial during the term (or any renewal) of this
agreement without providing Vendor the right to provide vendors services as
described herein (however, Owners shall sell the Product at Endless Youth
Longevity Centers only), and (f) the full exercise of the rights granted
Vendor hereunder shall not violate or infringe upon any intellectual property
rights or any other right of any third party. Owners recognizes that Vendor
has been presented with a completed Infomercial and has had no responsibility
in its creation, including any and all claims made therein.
6. CUSTOMER LIST. Vendor shall compile and exclusively maintain a
list of names and addresses of those ordering the Product.
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7. CONTROL. Subject to this agreement, Owners shall own and maintain
all rights in and to the Infomercial and the Product; however, Owners grants
Vendor the exclusive right to act as Owners's agent to air the Infomercial and
sell the Product, including the right to provide vendor services on any
sequel project on terms no less favorable than set forth herein. Owners
further agrees that once it has granted an approval to Vendor on a particular
matter, such approval shall not be required by Vendor thereafter.
8. INSURANCE. Owners shall obtain errors and omissions and general
commercial and product liability insurance with policy limits of not less
than one million dollars ($1,000,000) per occurrence and two million dollars
($2,000,000) in the aggregate customarily maintained by Product Owners. The
parties agrees that (i) the deductible on any insurance policy acquired
hereunder shall not exceed ten thousand dollars ($10,000), (ii) the other
party shall be named as an additional insured on the applicable insurance
policies, (iii) the insurance policies shall be endorsed to provide no less
than ten (10) days notice to all named insureds if any insurance benefit
decreases, and (iv) all insurances shall have no less than an "A" rating (or
equivalent thereof) in the Best Guide.
9. PAYMENTS.
9.1 TESTING PAYMENTS. Upon agreement of the fulfillment process for
the initial test phase of the Infomercial and the full execution of this
Agreement, Owners shall receive fifteen thousand dollars ($15,000). If the
initial test is deemed successful, Vendor shall, at its election, on the
first day of each month of this second test phase either (i) cause Owner to
receive thirty thousand dollars ($30,000) as an advance applied against
Owners' Gross Receipts, or (ii) purchase twenty thousand dollars ($20,000)
worth of registered and immediately tradeable stock from Owners at $.22 per
share and cause Owners to receive ten thousand dollars ($10,000) which ten
thousand dollars ($10,000) shall be treated as an advance applied against
Owners's Gross Receipts. This test period shall continue for up to one
hundred twenty (120) days. Vendor may terminate the test upon five (5) days
written notice.
9.2 OWNERS. Owners shall cause Vendor to be paid for the services it
provides hereunder out of Product revenues. Vendor, on behalf of Owners,
shall collect all revenues in trust. Owners shall be remitted "Gross
Receipts" which is defined as nine percent (9%) of "unadjusted sales
revenue". provided, however, that once Owners have retained $2,250,000 in one
year, then Owners shall thereafter be able to retain an additional one
percent (1%) of Unadjusted Sales Revenue until the end of such year.
"Unadjusted Sales Revenue" is defined as the revenue collected from Product
sales, less returns/refunds, credit card fees (not to exceed two and one-half
percent (2 1/2%)) and chargebacks, declines, cancellations, bad debt and sales
taxes and shall not include costs and revenues associated with shipping and
handling.
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9.3 VENDOR'S EXCLUSIVITY. Vendor shall maintain its rights hereunder
so long as Vendor pays Owners at least one hundred thousand dollars
($100,000) per quarter year beginning after the second test marketing Period;
however, if Vendor has paid Owners an average of over $100,000 over any two
(2) consecutive quarters, then this quota shall be deemed satisfied for the
applicable two (2) quarters (by way of example, if Vendor pays Owners
$125,000 in quarter one and $75,000 in quarter two, the quota shall be deemed
satisfied for quarter one and quarter two). If this quota is not met, then
Owners may give Vendor notice of same and Vendor shall have the right to
either (i) cure by paying Owners the difference between what was actually
paid and the minimum amount within thirty (30) days, or (ii) maintain all
rights described hereunder to continue to provide Vendor services, but on a
non-exclusive basis only.
10. INDEPENDENT. Owners and Vendor are dealing with the other as
independent contractors, and each shall be responsible, without liability to
the other, for the timely payment of all taxes and other withholdings,
deductions and payments required by law with respect to its own operations
and employees.
11. LAW. This agreement shall be governed by the laws of the State of
California, applicable to agreements made and to be performed entirely within
such State.
12. FIDUCIARY. Not withstanding anything to the forgoing, no fiduciary
duty obligations shall be created as a result of this Agreement.
13. TERM. The term of this Agreement shall be so long as Owners receive
at least (i) $400,000 in year one, (ii) $600,000 in year 2, (iii) $700,000 in
year 3 and (iv) $800,000 thereafter. If Owners fail to receive such minimum
amounts in any full year, then Owners may give Vendor notice of same and
Vendor shall have thirty (30) days to cure by paying Owners the difference
between what was actually paid and the minimum amount. If Owners do not
receive such amount from Vendor after such thirty (30) day period, then
Owners may terminate Vendor's exclusive rights hereunder. Upon termination
of this Agreement, Vendor may sell off any remaining Product it has in
inventory and honor any commitments made prior to termination.
14. ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes in
their entirety all prior agreements and understandings between the parties
with respect to the subject matter hereof, whether oral or written, which
shall have no further force or effect. Each party has executed this
Agreement without reliance upon any promise, representation or warranty other
than those expressly set forth herein. Each party acknowledges that (i) it
has carefully read this Agreement; (ii) it has had the assistance of legal
counsel of its choosing (and such other professionals and advisors as it has
deemed necessary) in the review and execution hereof; (iii) the meaning and
effect of the various terms and provisions hereof have been fully explained
to it by such counsel; (iv) it has conducted such investigation, review and
analysis as it has been necessary to understand the provisions of this
Agreement and the transactions contemplated hereby; and (v) it has executed
this Agreement of its own free will.
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If the terms described herein are acceptable to you, please sign your
name below, keep one original for your files and return the other to me.
Vendor Services, a general partnership
By: /s/ [ILLEGIBLE]
--------------------------------
AfterMarket, Inc.,
a California corporation, its
general partner
AGREED AND ACCEPTED THIS
17 DAY OF MARCH, 1998
Xxxx Xxxxxxx, a Nevada resident
By: /s/ Xxxx X. Xxxxxxx
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An Individual
Endless Youth Products, Inc., a
Nevada corporation
By: /s/ Xxxx X. Xxxxxxx
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Its: President
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EXHIBIT "A"
Product Definition
For purposes of this agreement, Product shall be defined as:
Endless Youth Vitamins and herbal supplements provided by Owners
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EXHIBIT "B"
1. RESPONSIBILITIES OF EACH PARTY
RESPONSIBLE PARTY
VENDOR OWNERS ITEM
------ ------ ----
-- X Write, finance and produce completed
Infomercial (including generic end tag,
applicable credit card notations, shipping
and handling, taxes and addresses),
Product and Product "welcome letter"
-- X Provide master of Products and edited
Infomercial
-- X Payment of actually owed royalties to
third parties other than Xxxxx Xxxxx
X -- Purchase all media and receive and
process mail orders; obtaining direct
response phone numbers and causing
order fulfillment to occur.
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FIRST AMENDMENT
This "First Amendment" is by and among Vendor Services, Inc., a Delaware
corporation ("Vendor") on the one hand and Xxxx Xxxxxxx, a Nevada resident
and owner of certain propriety rights and Endless Youth Products, Inc., a
Nevada corporation (collectively, "Owner"), on the other hand.
RECITALS
A. Owner and Vendor entered into a certain agreement dated March 1, 1998
("Agreement"); and
B. Owner and Vendor desire to amend certain portions of the Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. ASSIGNMENT. Vendor Services, a California general partnership has
transferred all of its rights, obligations, opportunities and
liabilities to Vendor Services, Inc., a Delaware corporation.
2. PARAGRAPH 9.2 Paragraph 9.2 of the Agreement is hereby deemed deleted
and replaced with the following:
"Owners shall cause Vendor to be paid for the services it provides
hereunder out of Product sale revenues. Vendor, on behalf of
Owners, shall collect all sales revenues in trust. Owners shall be
remitted "Gross Receipts" which is defined as revenues collected in
trust by Vendor less payments to Vendor for required services,
which shall be in an amount equal to ninety-one percent (91%) of
such collected revenues; provided, however, that once Owners have
retained $2,250,000 in one year, then Owners shall thereafter be
able to retain an additional one percent (1%) of Unadjusted Sales
Revenue until the end of such year. Further, revenue collected by
Vendor from Product sales is an amount equal to all revenues
collected by Vendor less returns/refunds, credit card fees (not to
exceed two and one-half percent (2 1/2%)), chargebacks, declines,
cancellations, bad debts and sales taxes, and shall not include
cost and revenues associated with shipping and handling."
3. CONFLICT. Any conflict between this First Amendment and the Agreement
shall be controlled by this First Amendment.
If the terms described herein are acceptable to you, please sign your name
below, keep one original for your files and return the other to me.
Vendor Services, Inc., a Delaware corporation
/s/ B. Van xx Xxxx
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By: Ben Van xx Xxxx
Its Corporate Secretary
AGREED AND ACCEPTED THIS DECEMBER 28, 1998.
Xxxx Xxxxxxx, a Nevada resident
/s/ Xxxx Xxxxxxx
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By: Xxxx Xxxxxxx
Endless Youth Products, Inc., a Nevada corporation
/s/ Xxxx Xxxxxxx
--------------------------
By: Xxxx Xxxxxxx
Its Chairman and President
SECOND AMENDMENT
This "Second Agreement" dated March 19, 1999 is by and among Vendor
Services, Inc., a Delaware corporation ("Vendor") on the one hand and Xxxx
Xxxxxxx, a Nevada resident and owner of certain proprietary rights and
Endless Youth Products, Inc., a Nevada Corporation (hereinafter collectively
referred to as "Owner"), on the other hand.
RECITALS
A. Vendor and Owners are parties to an Agreement dated March 17, 1998
("Agreement") and a First Amendment dated December 28, 1998 ("First
Amendment").
B. The parties wish to modify the terms of the Agreement upon the
terms described below.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS. All capitalized words herein shall be defined herein as in
the Agreement and First Amendment.
2. TERM OF AGREEMENT. The parties agree that the Term of the Agreement is
deemed to have started on August 15, 1998. The parties further agree
that if Vendor pays Owner at least four hundred thousand dollars
($400,000) between August 15, 1998 and August 14, 1999, then the minimum
amount Vendor was required to pay to cause the Agreement to be renewed
for a second year will have been met pursuant to paragraph 13 of the
Agreement, however, the parties agree that any advances which are paid
by VS to Owner prior to August 14, 1999 but are recouped after August
14, 1999 will not apply to the annual minimum requirements to renew the
Term for the next one (1) year period.
3. NEW ADVANCES. Beginning on August 15, 1999 and for the entire second
year, Vendor shall pay to Owner a monthly advance of fifty thousand
dollars ($50,000). So long as Vendor desires to renew the Agreement
thereafter, it shall continue to pay Owner this fifty thousand dollar
($50,000) per month advance. Except for the one hundred thousand dollar
($100,000) advance described in paragraph 6 below, which will be
recouped as described in paragraph 6, any and all other advances paid by
Vendor to Owner shall be applied against amounts remitted to Owner
("Remitted Amount"), as described in Paragraph 9.2 of the First
Amendment.
4. ADDITIONAL STOCK. Prior to August 15, 1998, Vendor paid Owner one
hundred thirty-five thousand dollars ($135,000). In exchange, Owner
agrees to provide Vendor additional warrants to purchase Owner's stock
based on the amount of media Vendor purchases, in its sole discretion,
for the Endless Youth infomercial during the 1999 calendar year.
Specifically, Owner shall provide Vendor warrants to purchase the
following shares of stock:
4.1 Thirty thousand (30,000) shares of Owners' publicly traded stock at
one dollar and seventy-five cents ($1.75) per share if Vendor
purchases two million two hundred fifty thousand ($2,250,000) or
more dollars of media between January 1, 1999 and April 30, 1999;
4.2 Thirty thousand (30,000) shares of Owners' publicly traded stock at
two dollars and twenty-five cents ($2.25) per share if Vendor
purchases one million five hundred thousand ($1,500,000) or more
dollars of media between May 1, 1999 and August 31, 1999; and
4.3 Thirty thousand (30,000) shares of Owners' publicly traded stock at
two dollars and seventy-five cents ($2.75) per share if Vendor
purchases two million two hundred fifty thousand ($2,250,000) or
more dollars of media between September 1, 1999 and December 31,
1999.
5. EXERCISE OF WARRANTS. If Vendor elects to execute the warrants
described in paragraph 4.1-4.3 within one hundred and eighty days (180)
from the date of its grant which shall be May 1, 1999, September 1, 1999
and January 1, 2000. The shares Vendor receives will be held a 120 day
trading restriction following this period, the shares shall be freely
transferable by Vendor.
6. TREATMENT OF PRIOR ADVANCES. The parties agree that as of March 15,
1999 for sales through January 1999, Vendor has paid Owner $266,666
(i.e., $33,333 for each of the eight months of August 15, 1998 through
March 15, 1999). The parties agree that $141,494 of this amount shall
be treated as an advance against future Remitted Amounts due Owner under
the Agreement for the period ending August 14, 1999. Owner has
requested, and Vendor has agreed, to cause this $141,494 to be recouped
in four equal payments of $35,373 each. Specifically, Remitted Amounts
otherwise payable to Owner on April 15, May 15, June 15 and July 15,
1999 (for sales with respect to February, March, April, and May 1999,
respectively) shall be reduced by $35,373 each month, as long as the
minimum monthly Remitted Amount is equal to or greater than $33,333. To
the extent Remitted Amounts during these months are insufficient to
cause Vendor to recoup any portion of these $35,373 payments, then
Vendor shall apply any unrecouped payments toward subsequent months
Remitted Amounts.
7. ADVANCES. On April 15, 1999 and through July 15, 1999, Vendor agrees to
pay Owner, each month, the greater of (a) a thirty-three thousand three
hundred thirty-three dollars ($33,333) advance, or (b) the nine percent
(9%) Remitted Amount described in paragraph 9.2 of the First Amendment
agreement. All such payments made shall be treated as fully recoupable
advances, as long as minimum quarterly Remitted Amounts are paid to
Owner, pursuant to paragraphs 9.3 and 13 of the Agreement as clarified
below in paragraph 9 of this Second Amendment. (For example, in month
12 of year 2 the minimum monthly
Retained Amount of $50,000 is greater than the 9% Remitted Amount
based on sales Vendor has already paid Owner $1 million in the prior
eleven months of year 2 and Vendor has the right to renew the Agreement
for year 3. Vendor can treat such portion of the $50,000 it paid to
Owner in month 12 of year 2 which is greater than the 9% Remitted Amount
that would have been owing based on sales as an advance in year 3
against Remitted Amounts. This advance shall not apply against the
minimum quarterly amounts payable pursuant to paragraphs 9.3 and 13 of
the Agreement.)
8. BANK ACCOUNT. Vendor hereby confirms that it has set up a separate bank
account for the Endless Youth infomercial project and shall not
co-mingle funds from other projects in the Endless Youth account. In
addition, Vendor shall pay and provide Endless Youth with financial
statements within, approximately, forty-five days (45) of the closing of
a month. By way of example, if Vendor closes its financial books for
January at the end of February, then it shall send its royalty payments
and financial statements within fifteen days (15) from the end of such
month, or on or around March 15th.
9. CLARIFICATION. Pursuant to paragraphs 9.3 and 13 of the Agreement, the
parties agree that Owner shall continue to have the right to convert
this Agreement into a non-exclusive agreement, pursuant to paragraphs
9.3 and 13 of the Agreement, if Vendor fails to pay Owner an average of
at least $100,000 during year ending August 14, 1999 and $150,000 for
year ending August 14, 2000 (and subsequent minimums based on paragraph
13 of the Agreement), either through a 9% Remitted Amount or advance,
for any two consecutive quarters. Two consecutive quarters is clarified
in paragraph 9.4 of the Agreement which provided that as long as in the
first quarter payments exceed the required minimum amount, then the
quarters can be averaged. The first quarter amounts, not second quarter
payments, must be greater than the minimum for this formula to have
application. (For example, if $150,000 is paid in quarter three of the
year ending August 14, 1999, then for Vendor to retain exclusive rights
$50,000 is required to meet the minimum of the exclusivity clause.) If
Vendor fails to make these minimum payments to Owner, then Owner shall
give Vendor notice of same and Vendor shall have the right to either
cure by paying to Owner the difference between what was actually paid
and the minimum amount to retain exclusivity, or maintain all its rights
hereunder, but on a non-exclusive basis only.
10. OTHER ISSUES. The parties are currently unaware of any issue which
would cause one party to pursue a legal action against the other.
Notwithstanding the foregoing, nothing in this paragraph 10 shall limit
the legal rights of either party to pursue a legal claim in the future.
11. OTHER TERMS. Any conflict between this Second Amendment, the First
Amendment and the Agreement shall be interpreted to reflect the terms
described herein. All other terms of the Agreement and First Amendment
shall remain in full force and effect. The parties agree to sign this
Second Amendment in counterparts, all of which together shall constitute
one and the same executed agreement.
The parties have reflected their agreement to the terms described herein by
signing below.
VENDOR SERVICES, INC., a
Delaware corporation
By:/s/ B. Van xx Xxxx
-------------------------
Ben Van xx Xxxx, its
Corporate Secretary
ENDLESS YOUTH PRODUCTS, INC., a
Nevada corporation
By:/s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx, its President
XXXX X. XXXXXXX, a Nevada resident
By:/s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
