Exhibit 10.1
AMENDMENT TO OPEN-ENDED PRODUCT AGREEMENT
WHEREAS, on March 20, 1998 Xxxx Xxxx Financial Corporation, a Nevada corporation
("WCFC") and/or its assigns and Xxxx X. Xxxx, a resident of Washington State
("Xxxx") and/or his assigns entered into an Open-Ended Product Agreement (the
"Agreement") whereby Xxxx provided WCFC with a non-exclusive worldwide license
to all Xxxx intellectual property as listed in Exhibit A of the Agreement.
Whereas, the Agreement provided for a royalty rate of ten percent (10%) of all
gross sales for Products licensed thereunder.
Whereas, Xxxx is a substantial shareholder in WCFC and Xxxx has a vested
interest in the continuing profitability of WCFC.
NOW THEREFORE, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree that effective as of January 1,
1999 Paragraph 5 of the Agreement shall be deleted in its entirety and replaced
with the following:
5. Royalties
WCFC shall pay Xxxx a minimum yearly royalty that is the greater of
$5,000,000 or five percent (5%) of gross sales revenue received from sales
of Products listed hereunder minus refunds, returns, and sales taxes
collected, if any ("Gross Sales Revenue"). No royalties shall be due on
Products given away for free. Royalties shall be paid quarterly on or
before May 1, August 1, November 1 and February 1 for all Gross Sales
Revenue received in the quarter ending the previous March 31, June 30,
September 30, and December 31, respectively. Xxxx shall be entitled to take
draws against royalties up to a maximum of $1,250,000 per quarter.
Beginning the first quarter of the year 2000, and during the first quarter
of every year throughout the term of this Agreement, WCFC's Compensation
Committee shall meet to determine whether an additional royalty of up to
another five percent (5%) of Gross Sales Revenue shall be paid to Xxxx. In
determining whether to pay such additional royalties, the Compensation
Committee shall consider, among other things, WCFC's audited net income
before royalty expenses for the previous year and WCFC's cash flow
requirements at the time the possible payment of additional royalties is
being considered. The Compensation Committee shall submit its decision
before the end of the first quarter each year to WCFC's Board of Directors.
Additional royalties may be paid only if such payment is approved by a
majority vote of the members of the Board of Directors who have no direct
personal financial interest in the payment of such additional royalties,
which vote shall be held before the end of the first quarter each year.
WCFC may pay any such additional royalties approved by the Board of
Directors as WCFC's cash flow needs allow, but in no event less often than
annually for each year during the term hereof.
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Any capitalized terms not defined herein shall have the same meaning
ascribed to such terms in the Agreement. The other terms and conditions of
the Agreement remain unchanged, binding, and in effect.
EXECUTED in duplicate this 7th day of May, 1999.
XXXX XXXX FINANCIAL CORPORATION,
a Nevada corporation
By: /s/ Xxxxxxx Xxxxx
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Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
/s/ Xxxx X. Xxxx
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Xxxx X. Xxxx
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