EXHIBIT 10.4
September 10, 2001
XXXX
00-000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxx 00000
RE: Follow-Up Agreement to Letter of Intent dated July 12, 2001
Dear Xxxx:
This letter shall set forth our understanding going forward concerning the
Letter Agreement submitted to you dated November 1, 1999 and the
above-referenced Letter of Intent pertaining to the payment obligation of $2.8
million, as indicated and attached hereto as Exhibits "A" and "B", respectively
and both of which are fully integrated and incorporated by reference herein.
As of September 1, 2001, Mannatech will have paid to you the final monthly
payment of $50,000 for a total of $1.2 million. Mannatech has agreed to pay to
you the balance of $1.6 million ("Balance") through royalty payments on two
audiotapes, the content of which will be comprised of material that has been
reviewed by Mannatech legal counsel to ensure compliance with all governmental
laws, rules and regulations in each of the countries in which the audiotapes are
contemplated to be sold (both tapes shall hereinafter be referred to as the
"Tape"). The audiotapes shall be in two formats, one such format to be included
in Associate Business Packs and the other in Associate Consumer/Product Packs.
You agree to fully cooperate with Mannatech's SeniorVice President of
Marketing (or his designee) in the development and any subsequent revisions of
this Tape, as may be required from time-to-time. The Tape will be included in
each Associate Sign-up kit ("Kit") and the equivalent in each country of
operation in which the Tape is included in the Kits). Mannatech shall pay to you
a royalty of $5.00 for each Kit sold (of which the Tape is included) until such
time as the Balance is paid in full. On a monthly basis, commencing on the month
following inclusion of the Tape, Mannatech shall compute the total royalties
earned by you and, on making that determination, shall remit promptly the
royalty payment and a copy of the royalty statement thirty (30) days after the
computation date and on the same date at the end of each month throughout the
term of this Agreement, to you or your appointed agent. If you, for any reason,
object to any royalty statement submitted by Mannatech, you shall set forth the
objection in writing and submit it to the Chief Financial Officer within thirty
(30) days from the date of the statement. Any objection you may have to any
royalty statement shall be deemed waived unless it is transmitted in accordance
with the terms of this paragraph. Royalties will not be paid on those Tapes
retained by Mannatech for promotional or internal usage.
Mannatech has previously reviewed and approved materials that you have
produced for sale through third-party vendors. Mannatech will likewise afford to
you the opportunity to sell the following promotional materials through its
Internet storefront, the sales price, royalties and proceeds of which to be
determined at a later date and governed by a separate written agreement, but in
any event, the agreed proceeds from those Internet storefront sales shall be
applied against the Balance:
Xxxx'x Millionaire University (MT approval Number: MT99004A)
Xxxx'x Millionaire University Handbook (MT approval Number: MT99004B)
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(collectively, "Pre-Approved Materials"). Mannatech will likewise consider
inclusion of other promotional sales materials that you have produced, pending
review and approval of the content in accordance with Mannatech's current
policies and procedures pertaining to third-party vendors and production of
promotional materials. Notwithstanding the foregoing, the provisions of this
paragraph shall not apply if sales of MT99004A and MT99004B should cause you to
breach any prior agreement you may have with a third-party for sales of the
same.
Mannatech will continue to support your efforts to build a Mannatech
business in Japan and will reimburse you for reasonable expenses incurred
subject to the following criteria:
a. Trips to Japan should be pre-approved by the President of
International Operations or the Chief Executive Officer;
b. Expense reimbursement will include round trip business class airfare
plus meals and lodging expenses, not to exceed $ 250.00 per day;
c. All expenses must be documented and submitted for reimbursement
within a reasonable period of time after trips are completed; and
d. Expense reimbursement as contemplated in this paragraph shall cease
on December 31, 2001.
Mannatech shall use its best efforts to arrange a convenient time and
location for the production of the Tape as outlined herein. The Parties agree
that time is of the essence as to the production of the Tape and in any event,
the Tape must be produced for inclusion in the Kits during the first quarter of
fiscal year 2002. The Parties agree to fully cooperate in good faith to ensure
the content of the tape is mutually agreeable as outlined herein.
We expect and you agree that the respective tradename(s), trademarks,
copyrights, marketing plans, identity and related information regarding
Associates and any information relating to the management/operations of
Mannatech ("Confidential Information") is the sole property and trade secret of
Mannatech. The Confidential Information shall not be used, sold, disclosed or
assigned by you for any purpose. Upon termination of this Agreement, you agree
to return to Mannatech all written materials, software,
customer/member/representative lists and other information that contains
Confidential Information and you further agree not to use such Confidential
Information. You agree that Mannatech will suffer irreparable harm in the event
its Confidential Information is disclosed to third-parties for which damages
would be inadequate. In the event of breach or threatened breach of this
Section, Mannatech will be entitled to an injunction restraining you from
disclosing, in whole or in part, any Confidential Information to any person,
firm, Company, association or other entity to whom Mannatech's Confidential
Information, in whole or in part, has been disclosed or threatened to be
disclosed. Nothing contained herein will be construed as limiting Mannatech
from, or prohibiting Mannatech from, pursuing any other remedies available to it
for such breach, or threatened breach, including recovery of damages. This
section shall survive the termination of this agreement.
While you are associated with Mannatech or any of its subsidiaries and for
a period of one year thereafter ("One Year Period") or a shorter period with the
written consent of Mannatech), after you shall cease to be associated with
Mannatech for any reason, you agree not to, directly or indirectly, own an
interest in, operate, join, control or participate in, or be connected as an
officer, employee, agent, independent contractor, partner, shareholder, or
principal of any corporation, partnership, proprietorship, firm, association,
person or other entity producing, designing, providing, soliciting orders for,
selling, distributing, or marketing products, goods, equipment, or services of
any other multi-level marketing or direct selling company any
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country in which Mannatech conducts business, nor shall you develop any products
or goods during such One Year Period which compete with the goods and products
of Mannatech
You agree that the foregoing covenants not to compete shall not be held
invalid or unenforceable because of the scope or the territory or actions
subject thereto or restricted thereby, or the period of time within which such
Agreement is operative; but award or decree in arbitration or any judgment of a
court of competent jurisdiction, as the case may be, may define the maximum
territory and actions subject thereto and restricted by this provision and the
period of time during which the Agreement is enforceable. Any alleged breach of
other provisions of this Agreement asserted by you shall not be a defense for
you to claims arising from Mannatech's enforcement of the provisions of this
paragraph or alternatively, that you have agreed to the broadest restrictive
covenants against competition by you with Mannatech during the One Year Period,
as may construed by a court of competent jurisdiction. Should you violate the
non-competition provision, then the period of time for these covenants shall
automatically be extended for the period of time from which you began such
violation until you permanently cease such violation.
Mannatech expects and you further agree that once the Balance has been
paid in full or in the event that you breach any provision herein for any reason
whatsoever, Mannatech's payment obligations as described hereunder shall
automatically cease and Mannatech shall be under no obligation to continue to
include the Tape and/or offer for sale any of the Pre-approved Materials as
contemplated hereby.
This Letter Agreement embodies and constitutes the entire understanding
between Mannatech and yourself with respect to the transactions contemplated
herein, and all prior or contemporaneous agreements, understandings,
representations and statements (oral or written) of any nature whatsoever,
including agreements for additional compensation, benefits and stock are fully
integrated and merged into this Letter Agreement. The foregoing notwithstanding,
nothing in this Letter Agreement shall be deemed to alter or amend the
obligations created under any Associate Agreement, which creates an Associate
position in the Mannatech downline of which you are a party.
You agree that this Agreement is entered in and under the laws of the
State of Texas and is to be enforced and shall be interpreted under the laws of
the State of Texas. You further agree that any dispute concerning this
Agreement, the obligations or alleged breach of this Agreement, and any other
claim, dispute or other difference which may arise between Mannatech and
yourself regarding this Agreement shall be resolved exclusively by binding
arbitration pursuant to the Commercial Arbitration Rules of the American
Arbitration Association, which arbitration, if necessary, shall be in Dallas,
Texas. You further agree that exclusive jurisdiction and venue to enforce the
arbitration provisions of this agreement shall be in a state or federal court of
appropriate jurisdiction in Dallas County, Texas. You additionally consent to
personal jurisdiction in Dallas County, Texas, for any action to enforce
arbitration including any further rules provided for emergency or extraordinary
relief, as to this Letter Agreement.
From time-to-time, as our relationship evolves, we may reach other
requirements, undertakings or provisions which require additional documentation,
and which may either supplement or amend this letter. Such supplements and
amendments shall be binding Mannatech and you only to the extent that they are
included in a writing signed by both parties.
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The offer as set forth herein shall expire and be automatically revoked
and cancelled unless Mannatech received an executed original of this Agreement
on or before 5:00 p.m. CST, September 25, 2001.
Very Truly Yours,
Mannatech, Inc.
By: Xxxxxx X. Xxxxx
---------------------------------
Xxxxxx X. Xxxxx
Its: Chief Executive Officer
AGREED AS OF THE 20th DAY OF SEPTEMBER, 2001
----
/s/ Xxxx
---------------------------------
XXXX
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ATTACHMENT "A"
FIRST CONSULTANCY AGREEMENT
Effective November 1, 1999
XXXX
00-000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxx 00000
RE: Letter of Understanding Regarding Consultancy
Dear Xxxx:
First, under the terms and conditions stated in this letter, let me
confirm to you your engagement as a consultant and corporate spokesperson
concerning the products and business of Mannatech(TM) Incorporated ("Mannatech")
and its wholly owned subsidiary, Mannatech Japan Incorporated ("MJI")
collectively, the "Corporation". Your engagement, as in the instance of many of
our consultants, is simply at the will of the parties, subject to thirty (30)
days notice in writing by either party of termination but subject to the
continuing payment obligation by Mannatech as outlined in the third paragraph
(up to a total of $2,800,000.00). Both the Corporation and yourself agree to be
governed by all policies and procedures as attached hereto as "Exhibit A -
Policies & Procedures" and including such additional policies & procedures as
may be furnished to you from time-to-time as applicable to representatives of
the Corporation and respecting the presentation of the products, the science and
the results of taking the products, the business and marketing plan and
applicable national or local law(s) in Japan and in any of other countries in
which the performance of this agreement occurs. We welcome you in this role, and
look forward to the exciting developments for our company and the many people
using our products and participating in the Compensation Plan, that your
expertise will undoubtedly bring.
The second purpose of this letter is to outline the financial and legal
terms of your engagement as a consultant for the Corporation.
The Corporation has agreed to pay to you for the first twelve (12) months
of this agreement the monthly sum of $50,000.00 for your services as a
consultant and spokesperson for the Corporation, which amount will be remitted
to you in monthly installments of $50,000.00 on the first day of each month
during which this agreement is in effect and your services are rendered to the
Corporation. The Corporation has further agreed to pay to
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you during the secondary term of this agreement, months 13-24 $50,0000 per month
in addition to commissions derived from the sales of packs or royalties from
certain promotional materials ("Promotional Materials") sold by the Corporation
under terms and with content as the parties shall agree, ("Commissions"). In any
event, such Commissions shall be paid until a total compensation from all
sources reaches $2,800,000.00, or until termination by either party, whichever
occurs first. You agree that you are and will continue to be during the
effective period of this agreement, an independent contractor for federal income
tax and all other purposes, and will, accordingly, file, remit and pay all
required amounts attributable to your income as an independent contractor to any
and all taxing authorities, as required.
The Corporation will likewise pay the reasonable cost of any travel and
incidental expenses for travel undertaken in pursuit of your consultancy. The
advance approval for travel, and subsequent reimbursement of expenses shall be
made through the Chief Operations Officer - International or myself. All such
approved travel shall be coordinated through the corporate travel department.
The Corporation reserves the right to indicate certain facilities and/or
specific vendors to be utilized by you in furtherance of your duties and
obligations as specified herein.
It is our intention that you, working with others that the Corporation
shall employ or retain on a contract basis, may work with others during the
period in which the Corporation prepares for its official entre into Japan
("Prelaunch") and the period thereafter in which the Corporation is officially
open and conducting business ("Post Launch").
During the Prelaunch period, we expect and you agree to use your best
efforts to:
1. Motivate Mannatech leadership and rank and file Independent
Associates (collectively, "Associates") related to the prospects for
downline expansion into Japan;
2. Continue to identify interested, experienced multilevel marketers
and other recruitment prospects in Japan;
3. Advise the Corporation's marketing team on issues, as requested,
including the development of culturally appropriate marketing
materials and corporate information; and
4. Develop specialized materials for recruitment, training and
motivational use in Japan.
5. Such other activities as you and the Corporation shall agree.
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During the Post Launch period, we expect and you agree to use your best
efforts to:
1. Continue all of the duties and obligations as heretofore described;
2. Continue to recruit and renew motivation of interested individuals,
particularly high-level recruitment;
3. Speak and train at Corporation-sponsored meetings and
Associate-sponsored meetings (collectively, "Events")as held from
time-to-time in Japan; Lend your expertise to the Corporation
regarding recommended approaches and elimination of barriers to
entry into the Japanese marketplace; and
4. Represent the Corporation in marketing from the Associate level with
Japan.
5. Such other activities as you and the Corporation shall agree.
You agree to submit all materials ("Materials") prepared in advance of
personal appearances ("Appearance") at Events and to training by Mannatech
personnel and any department included thereof, including but not limited to
Regulatory and Compliance Training prior to the presentation of Materials at any
Appearance or Event. Such training to include instructions and requirements
related to educational and opportunity meeting guidelines for Japan. All
Materials shall be submitted to Mannatech for review and approval at least one
week prior to any scheduled Appearance or Event. Changes required by Mannatech
must be integrated and implemented in all Materials prior to presentation at the
Event. You further agree to promote only those promotional materials to
Independent Associates and prospects that have been pre-approved by Mannatech.
The requirements of this paragraph shall embrace all training support products
("Training Products") created by you, for profit or otherwise and sold through a
third-party vendor ("Vendor") or through the Corporation's Promotional Materials
progam.
We expect and you agree that the respective tradename(s), trademarks,
copyrights, marketing plans, identity and related information regarding
Associates and any information relating to the management/operations of the
Corporation ("Confidential Information") is the sole property and trade secret
of the Corporation. The Confidential Information shall not be used, sold,
disclosed or assigned by you for any purpose. Upon termination of this
Agreement, you agree to return to the Corporation all written materials,
software, customer/member/representative lists and other information that
contains Confidential Information and you further agree not to use such
Confidential Information. You agree that the Corporation will suffer irreparable
harm in the event its Confidential Information is disclosed to third-parties for
which damages would
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be inadequate. In the event of breach or threatened breach of this Section, the
Corporation will be entitled to an injunction restraining you from disclosing,
in whole or in part, any Confidential Information to any person, firm, Company,
association or other entity to whom the Corporation's Confidential Information,
in whole or in part, has been disclosed or threatened to be disclosed. Nothing
contained herein will be construed as limiting the Corporation from, or
prohibiting the Corporation from, pursuing any other remedies available to it
for such breach, or threatened breach, including recovery of damages. This
section shall survive the termination of this agreement.
While you are associated with the Corporation or any of its subsidiaries
and for a period of one year thereafter ("One Year Period") or a shorter period
with the written consent of the Corporation), after you shall cease to be
associated with Mannatech for any reason, you agree not to, directly or
indirectly, own an interest in, operate, join, control or participate in, or be
connected as an officer, employee, agent, independent contractor, partner,
shareholder, or principal of any corporation, partnership, proprietorship, firm,
association, person or other entity producing, designing, providing, soliciting
orders for, selling, distributing, or marketing products, goods, equipment, or
services that directly or indirectly compete with the Corporation's products or
its business in any country in which the Corporation conducts business, nor
shall you develop any products or goods during such One Year Period which
compete with the goods and products of the Corporation
You agree that the foregoing covenants not to compete shall not be held
invalid or unenforceable because of the scope or the territory or actions
subject thereto or restricted thereby, or the period of time within which such
Agreement is operative; but award or decree in arbitration or any judgement of a
court of competent jurisdiction, as the case may be, may define the maximum
territory and actions subject thereto and restricted by this provision and the
period of time during which the Agreement is enforceable. Any alleged breach of
other provisions of this Agreement asserted by you shall not be a defense for
you to claims arising from the Corporation's enforcement of the provisions of
this paragraph or alternatively, that you have agreed to the broadest
restrictive covenants against competition by you with the Corporation during the
One Year Period, as may construed by a court of competent jurisdiction. Should
you violate the non-competition provision, then the period of time for these
covenants shall automatically be extended for the period of time from which you
began such violation until you permanently cease such violation.
We expect and you agree to use best efforts to promote Mannatech and
assist Mannatech's existing leadership as they
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expand into the Japanese market by conducting meetings, training sessions and
support focusing on the areas of productivity, personal and leadership
development. You further agree to refrain from making disparaging comments
and/or behavior toward the Corporation, its executives, employees, Independent
Associates and/or its proprietary products in any manner during the term of this
agreement and thereafter after the agreement terminates, for any reason, and
further agree to conduct yourself in accordance with the national and local laws
and regulations of Japan or wherever your appearance takes place. You agree to
act in a manner, which shall not be in contravention of any directives from the
Corporation and/or its representatives and in a manner consistent with favorable
advancement and promotion of the Corporation and its products. This covenant
shall survive the termination of this agreement.
We expect, and you agree, that you shall not, at any time during this
consultancy, without the prior written consent of Xxxxxx Xxxxxx, President,
either alone or jointly with or as agent, director, manager, consultant,
employee or partner of any other person, firm, company or organization, directly
or indirectly be engaged or concerned in any business or activity which competes
directly with any business carried on by the Corporation and distributed by
direct selling methods, including multi-level marketing. Further, you agree that
in relation to any business carried on by the Corporation, you shall not
canvass, solicit, or endeavor to take away from the Corporation the business or
custom of any person, firm, company or organization who or which was, during the
term of this agreement, a customer, client or Independent Associate of the
Corporation.
You agree that this agreement is strictly confidential. In the event that
this agreement is made public or discussed with Associates or others who are not
a party hereto, the Corporation reserves the right to enjoin such action as may
be permitted by law. You acknowledge and agree that this confidentiality
provision was material to Mannatech's willingness to enter this agreement and
provide the funds being paid to you by Mannatech hereunder.
This agreement supersedes all prior oral and written agreements between
the Corporation and you of any and every nature whatsoever, including agreements
for additional compensation, benefits and stock except as embodied in this
agreement and as set forth in any Mannatech Associate Agreement to which you or
any entity with which you are affiliated is a party (including the Associate
Policies and Procedures from time-to-time in effect, which are incorporated into
such Agreement(s) by reference,).
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You agree that this Agreement is entered in and under the laws of the
State of Texas and is to be enforced and shall be interpreted under the laws of
the State of Texas. Each party hereto further agrees that any dispute concerning
this Agreement, the obligations or alleged breach of this Agreement, and any
other claim, dispute or other difference which may arise between any of them
regarding this Agreement shall be resolved exclusively by binding arbitration
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association, which arbitration, if necessary, shall be in Dallas, Texas. The
parties further agree that exclusive jurisdiction and venue to enforce the
arbitration provisions of this agreement shall be in a state or federal court of
appropriate jurisdiction in Dallas County, Texas. Each party consents to
personal jurisdiction in Dallas County, Texas, for any action to enforce
arbitration including any further rules provided for emergency or extraordinary
relief, as to this agreement.
From time-to-time, as our relationship evolves, we may reach other
requirements, undertakings or provisions which require additional documentation,
and which may either supplement or amend this letter. Such supplements and
amendments shall be binding on the Corporation and you only to the extent that
they are included in a writing signed by both parties.
If the foregoing terms and conditions are agreeable to you, please execute
and return a duplicate of the original of the letter, such to constitute the
agreement between us.
Very Truly Yours,
MANNATECH INCORPORATED
Xxxxxxx X. Xxxxxxxx
Chairman and Chief Executive Officer
ACCEPTED AND AGREED:
_________________________________
Xxxx
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Exhibit "B"
July 12, 2001
XXXX
00-000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxx 00000
RE: Letter of Intent regarding Consultancy Agreement dated November 1, 1999
Dear Xxxx:
Subsequent to our telephone conversation of 7/11/2001, I want to confirm that
Mannatech, Inc. is prepared to honor the terms and conditions contained in the
"Letter of understanding regarding Consultancy" dated November 1, 1999 (as
attached hereto as Attachment "A" - "First Consultancy Agreement"), provided you
agree to sign a new Consultancy Agreement Letter which shall include these
amendments:
1. Mannatech will make two more payments of $50,000 each corresponding
to installment #23 on August 1, 2001 and installment #24 on
September 1, 2001 to complete the total amount of $1.2 million as
agreed upon in the First Consultancy Agreement.
2. Mannatech will continue to support your efforts to build a Mannatech
business in Japan and will reimburse you for reasonable expenses
incurred in Japan subject to the following criteria:
a. Trips to Japan should be pre-approved by the Mannatech
President of International Operations or the CEO.
b. Expense reimbursement will include round trip business class
airfare plus meals and lodging expenses for up to $250.00 per
day
c. All expenses should be documented and submitted for
reimbursement within a reasonable period of time after trips
are completed.
d. Expense reimbursement will end December 31, 2001.
3. The balance owed of the original $2.8 million payment obligation
(that being $1.6 million) indicated in the First Consultancy
Agreement will be paid as follows:
a. Mannatech will incorporate in the Mannatech Associate Sign-up
Kit ("Kit"), not later than the second quarter 2002, a series
of training audiotapes produced by Xxxx ("Audiotape"). Each
Kit sold by Mannatech will generate a royalty of approximately
$5.00 per Kit.
b. Royalties will be paid to you on a monthly basis after
computing the total amount of kits sold during that particular
month and in accordance with Mannatech's standard royalty
payment procedures. Royalties will be paid only on those
Audiotapes contained in the Kit and will not be paid on
those Audiotapes retained by Mannatech for promotional or
internal purposes.
c. The payment will continue on a monthly basis until the $1.6
million is paid in its entirely, unless and until we reach a
subsequent written agreement pertaining to this payment
obligation.
4. You understand that as a public corporation Mannatech was required
to disclose the First Consultancy Agreement (see Mannatech 1999
annual report). Therefore, any other payment arrangement different
to that indicated in this Agreement will require Mannatech to make a
public disclosure through SEC filings; thus creating a difficult
situation vis-a-vis other top leaders in the company as this will be
perceived as a new agreement with you.
Please let me know if you have any questions regarding the above
terms and conditions. If you are agreeable to these I will immediately
instruct our legal department to prepare a new Agreement Letter.
Sincerely yours,
C. Xxxxxxx Xxxxxxxxx
President of International Operations
Cc: Xxx Xxxxx, CEO
Xxx Xxxxxx, Co-chairman
Xxxxx Xxxxxxxxx, President
Xxxxxx Xxxxxxxxxxxx, CFO
