EXHIBIT 10.27
MANAGEMENT AGREEMENT
This Agreement (the "Agreement") is effective as of April 17, 2003,
(the "Effective Date") by and among VITAL LIVING, INC., a Nevada corporation (or
any affiliate of thereof) (collectively "VL"), and CHRISTOPHER'S ORIGINAL
FORMULAS, INC., ("COMPANY") a Nevada corporation, and is made with reference to
the following facts:
A. Company owns and operates a business developing,
producing and exploiting vitamins and neutraceuticals and related products (the
"Business").
B. VL has special expertise and experience in the
operation, management and marketing of companies engaged in businesses of the
type operated by Company.
C. Company desires to engage VL to manage all aspects of
the Business and VL has agreed to assume management responsibilities for the
operation of the Company for a period of five (5) years (the "Term") subject to
the terms and conditions set forth below.
NOW, THEREFORE, VL and Company agree as follows:
1. Definitions. The following terms when used in this
Agreement shall have the meaning ascribed to them below:
"Company" shall mean CHRISTOPHER'S ORIGINAL FORMULAS, INC. a
Nevada corporation.
"GAAP" means at any particular time generally accepted
accounting principles as in effect at such time. Any accounting term used in
this Agreement shall have the meaning customarily given in accordance with GAAP,
and all financial computations hereunder shall be computed in accordance with
GAAP as consistently applied and using the same method of valuation as used in
the preparation of Company's financial statements.
"Management Fee" shall mean a fee of $100,000 per month for
any 30 days of service during the Term. For the avoidance of doubt, during a
partial month, a pro-rata fee shall be paid.
"Manager's Reimbursement" shall mean the sum of Manager's
Reimbursable Direct Expenses and "Manager's Reimbursable Overhead".
"Manager's Reimbursable Overhead" shall mean the sum of all
directly identifiable expenses incurred by VL in connection with performing its
management duties under this Agreement including, without limitation, brand
managers (to the extent not included in Manager's Reimbursable Direct Expenses)
and allocable overhead for services such as legal and accounting expenses, which
amount shall be no less than $10,000 per month.
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"Manager's Reimbursable Direct Expenses" shall include all
direct expenses incurred by VL in connection with performing its management
duties under this Agreement including, without limitation, costs of goods
acquired or produced, payments to third party vendors, marketing costs, all
labor costs associated with any personnel employed by VL and dedicated to the
Business of Company or allocated to specific activities involving VL's
management of the Company, the cost and maintenance of any equipment, supplies
and software dedicated to the services rendered by VL hereunder.
"VL" shall mean VITAL LIVING, INC., a Nevada corporation.
"VL Acquisition" shall mean the acquisition of the Company as
contemplated by the VL Letter of Intent.
"VL Letter of Intent" means the Letter of Intent, dated
February 28, 2003 by and between Company and VL.
"VL Recoupable Expenses" shall mean (i) all amounts, including
interest, principal and third party fees, as may be outstanding from time to
time under the VL Note, and (ii) all sums attributable to Management
Reimbursement.
"VL Note" shall mean the secured promissory note, dated
February 28, 2003 by the Company in favor of VL, as the same may be amended from
time to time.
"Term" shall mean a period beginning as of the Closing Date
and terminating at the earlier to occur of three years from the date hereof or
the closing of the VL Acquisition.
2. General Management.
VL IS hereby engaged by Company to exclusively provide and
perform for and on behalf of Company all management services reasonably
necessary for the proper and efficient operation of Company and the Business
during the Term of this Agreement. Such services shall include, but shall not be
limited to, those items set forth in this Section 2 and in Sections 3, 4, 5 and
6 of this Agreement. VL is exclusively authorized to provide and perform for and
on behalf of Company all services required of VL pursuant to the terms of this
Agreement in such a manner as ▇▇ ▇▇▇▇▇ reasonable and appropriate in order to
meet the day-to-day requirements of the Company and the Business. In performing
such services for Company, VL may advance or pay on Company's behalf all
necessary or appropriate sums pursuant to this Agreement, including but not
limited to Manager's Reimbursement and the Management Fee. VL may subcontract
with other persons to perform any part of the services required of VL hereunder.
VL hereby accepts such engagement and agrees to furnish to Company all such
management services. Company acknowledges that VL shall only be required to
spend the hours necessary or appropriate to perform its duties hereunder and
shall not be prohibited hereby from undertaking other activities, whether in
Company's service area or otherwise. Company will cooperate with VL's business
arrangements and will not interfere with VL's efficient management of the
day-to-day operations of Company.
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3. Bookkeeping and Accounts.
VL (or any outside entity which VL shall supervise and direct
the performance of) shall supervise and direct the performance of the
bookkeeping and accounting services for and on behalf of Company, including but
not limited to, maintenance, custody and supervision of all of business records,
papers, documents, ledgers, journals and reports, prepare or cause to be
prepared federal and state tax filings and all bills and statements for Company;
provided, however, it is understood that all such business records, papers and
documents are the sole property of Company, and shall be available for
inspection by Company at all times. Upon termination of this Agreement all such
business records, papers and documents shall be delivered to a party to be
jointly designated in writing by VL and Company and while in the custody of such
third party VL and Company shall have access thereto for inspection and other
business purposes. If VL and Company do not designate a third party custodian by
the effective date of termination of this Agreement, VL will serve as such
custodian. Company shall provide VL with a complete copy of all such documents,
records, and papers at Company's expense upon termination of this Agreement. As
more fully provided in Section 11 below, Company and its personal shall
cooperate in the creation of any new checking accounts as may be requested by VL
in furtherance of this agreement.
4. Billing and Collection; Accounts.
VL (or any outside entity which VL reasonably believes is
necessary), shall supervise and direct the performance of, on behalf of and for
Company, the billing and collecting of all amounts due to the Company. It is
expressly understood that the extent to which VL will endeavor to collect such
charges, the methods of collecting, the settling of disputes with respect to
charges and the writing off of charges that may be or appear to be uncollectible
shall at all times be within the sole discretion of VL, and that VL does not
guarantee the extent to which any charges billed will be collected. Company or
its duly authorized agent shall have the right at all reasonable times and upon
the giving of reasonable notice to examine, inspect and copy the records of VL
pertaining to such fees, charges, ▇▇▇▇▇▇▇▇ and collections.
5. Marketing and New Products.
(a) VL shall be in charge of all marketing and
distribution activities concerning Company. VL shall be responsible for all
sales activities including determining which products to market, selling prices,
target customers, selecting distribution methods and procedures, and advertising
activities.
(b) The parties further acknowledge and agree that VL
shall have the right to select and introduce any new products for inclusion
under the Company's label, and Company agrees to indemnify and hold VL harmless
relative to any products VL designates for inclusion under the Company's label
or does not so include. The Company further agrees that VL shall be free to
compete against the Company, and nothing herein shall be construed so as to
create an affirmative
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duty or obligation on the part of VL to supply the Company with a new product or
products, or any other business or line of business.
(c) Company acknowledges that VL has made no
representations, either express or implied, as to the relative success of any of
VL's activities hereunder.
6. Administrative Activities.
In addition to the activities described in Section 2, 3, 4 and
5 above, VL shall be responsible for all other administrative functions of the
Company including all personnel matters, compensation arrangements with
employees of the Company, selecting outside advisors and consultants to the
Company, choosing vendors and suppliers, selecting and negotiating banking
relationships and all other normal and customary activities associated with
operating a business.
7. VL's Compensation.
(a) Manager's Reimbursement. VL shall be entitled to
withdraw for its own benefit from the Company Accounts the Manager's
Reimbursements. Manager's Reimbursement shall be calculated and paid on a
monthly basis.
(b) Management Fee. For its services to Company and for
undertaking all of its obligations hereunder to Company, VL shall be paid on a
monthly basis an amount equal to the Management Fee, which may be paid on an
estimated basis. The Management Fee shall be calculated on a monthly basis at
the end of each such period during the Term
8. Loans Provided By VL.
VL has previously loaned to Company the sum of $40,000 (the
"Existing Loan") in accordance with the terms of the VL Note and related
security agreement. VL may make additional loans to Company in such amounts and
on such terms as Company and VL may agree ("Additional Loans"). Company
authorizes VL to use Company funds to repay the Existing Loan and the Additional
Loans in accordance with the repayment terms thereof.
9. Representations and Warranties of Company.
Company makes the following representations and warranties as
an inducement to VL to enter into this Agreement and to manage the Business:
(a) Organization. Company is a corporation which has been
duly incorporated and organized and is validly existing and in good standing
under the laws of the State of Nevada with corporate power and authority to own
and operate the Business and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where such qualifications
is necessary.
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(b) Authority. Company has the legal capability and
authority to enter into and carry out the transactions contemplated by this
Agreement. Neither the execution of this Agreement, nor the consummation of the
transactions contemplated herein violates, conflicts with or results in, or will
violate, conflict with or result in, a breach by Company of the terms,
conditions, or provisions, as applicable, of its incorporating documents or
by-laws or of any security interest, deed of trust, debt instrument or loan
agreement, or any undertaking, to which it is a party or by which it is bound,
or any applicable law, regulation, by-law, ordinance or order of any
jurisdiction where Company carries on the Business.
(c) Legality of Business. Company is conducting the
Business in compliance with all applicable laws, rules and regulations and
orders relating thereto.
(d) Governmental Authorizations. Company holds such
licenses, permits, consents, authorizations and orders of such governmental or
regulatory authorities as are necessary to carry on the Business and such
licenses, permits, consents, authorizations and orders are in full force and
effect and have been and are being fully complied with by Company.
(e) Proceedings. There are no actions, suits, or
proceedings, pending or threatened, before any court or governmental authority
or other administrative agency or any administrative officer which, if
successful, could adversely affect the Business or Company's right to enter into
this Agreement.
(f) Executions. There are no judgments or executions of
any kind outstanding against Company which affect or could affect the Business.
(g) Contracts and Leases. Company is not and but for a
requirement that notice be given or that a period of time elapse or both, would
not be, in default in any respect under the term of any of the contract,
agreement, lease or instrument to which it is a party nor is any other party to
any contract, agreement, lease or other instrument respecting the Business in
default thereunder.
(h) Employees. There are no collective bargaining
agreements, employment contracts or consulting agreements in place with any
employees. Company believes that there has been a satisfactory relationship with
those employees who are engaged in the Business. All obligations of Company,
whether arising by operation by law, by contract or by past custom, for payment
directly to its employees or sales representatives (including commissions and
bonuses) or to trusts or to other funds or to any governmental agency for salary
or wages, unemployment compensation benefits, contributions or taxes, social
security benefits, vacation and holiday pay, bonuses, deferred compensation and
other forms of compensation or any other benefits have been paid with respect to
obligations relating to periods prior to the date of this Agreement.
10. Covenants of Company.
During the Term of this Agreement, Company covenants and
agrees with VL as follows:
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(a) To cooperate with VL and follow all directives,
policies, procedures and guideline established by VL relating to the conduct of
the business.
(b) To deposit into the Company Accounts all funds, in
whatever form, received by Company in connection with the Business.
(c) Not to incur any debts, enter into any agreements, or
incur any expenses, make any commitments relating to the Business, or otherwise
incur obligations unless approved by VL or undertaken pursuant to guidelines and
procedures established by VL.
(d) Not to issue any stock in the Company or rights to
acquire any stock, options, warrants, or securities convertible in to the stock
of the Company without the prior written consent of VL.
11. Company Accounts.
A list of each of the Company's operating accounts is attached
hereto as Exhibit A ("Company Accounts"). VL shall have the right to designate
two employees as a signatory to each of the Company Accounts, whose signature
will be required to transfer to disburse funds over $500. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇ are approved as such designees.
12. Miscellaneous Authority and Duties of the Parties.
Each of the parties agrees to cooperate fully with each other
in connection with the performance of their respective obligations under this
Agreement, and the parties agree to employ reasonable efforts to resolve any
dispute that may arise under or in connection with this Agreement. Subject to VL
maintaining the confidentiality of Company's confidential information, Company
shall provide to VL full and complete access to Company's premises, and to
Company's charts, books, and records, in order that VL can perform its functions
hereunder.
Notwithstanding any other provisions contained herein, VL
shall not be liable to Company, and shall not be deemed to be in default
hereunder, for the failure to perform any of VL's obligations to be performed or
provided by VL pursuant to this Agreement if such failure is a result of a labor
dispute, act of God, or any other event which is beyond the reasonable control
of VL.
13. Term of Agreement.
(a) This Agreement shall remain in effect through the
Term unless mutually terminated or terminated as provided herein.
(b) VL may terminate this agreement at any time.
(c) Company may terminate this Agreement if, and only if,
VL gives written notice that it does not intend to consummate the transaction
contemplated by the VL Letter of Intent
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and the amount of the VL Note is repaid in full, and VL shall have received all
VL Recoupable Amounts.
(d) Unless otherwise terminated during the Term,
or unless either party gives the other party one hundred twenty (120) days
advance written notice of its intention not to renew, the Term shall
automatically renew for successive one year periods following the expiration of
the Term. If either party gives a non-renewal notice, they will meet to discuss
whether there is any other basis to continue the relationship.
14. Default; Remedies on Default.
(a) Except as otherwise provided herein, upon the Default
of a party, in addition to all other rights and remedies, the non-defaulting
party may terminate this Agreement upon delivery of thirty (30) days prior
written notice to the other party. A "Default" shall be deemed to occur as set
forth below in Section 14(b).
(b) In the event of a party's commitment of a breach of
any material term, covenant, or condition of the Agreement ("Material Breach"),
no Default may be declared by the non-breaching party and no remedy provided
hereunder may be undertaken until the provisions of this paragraph 14 have been
complied with fully and in good faith. If the party to whom a notice Material
Breach ("Notice of Breach") is delivered fails to respond in writing to said
Notice of Breach and fails to cure or to undertake the cure of the alleged
Material Breach within thirty (30) days after delivery of the said Notice of
Breach, such party shall be deemed to be in Default and the other party may
pursue any and all remedies available to such party hereunder. If, however, the
party to whom the Notice of Breach is delivered within thirty (30) days after
delivery of such Notice of Breach notifies the other party in writing that the
Notice of Breach is rejected and that no Material Breach has occurred or (with
or without an admission that a Material Breach has occurred) proposes a cure
which is not reasonably acceptable to the other party, the parties shall be
required to meet and consult with one another and exercise all reasonable
efforts to resolve the dispute.
(c) The parties agree that during the consultation period
they will meet at least monthly and take other reasonable good faith measures to
resolve the dispute. If the parties are unable to resolve the dispute within
sixty (60) days after either party has delivered written notice to the other of
its election to initiate such consultation then, within the following thirty
(30) days, either party may elect to submit the dispute to non-binding
mediation.
(d) Each party will select a mediator and the two
mediators will select a third mediator. Each party will present to the mediators
their respective arguments in support of their positions. The parties agree to
meet with the mediators and use all reasonable good faith efforts to resolve the
dispute through mediation. If the mediators and the parties are unable to
resolve the dispute within one hundred twenty (120) days of the appointment of
the mediators, the party who delivered the Notice of Breach may, but is not
required to, seek whatever remedies are available under California law,
including initiating proceedings in law or in equity.
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(e) VL agrees that until such dispute is resolved, or if
not resolved, until the mediation process is completed, whichever first occurs,
that VL will continue to provide Company the services as required by this
Agreement.
(f) The various rights and remedies herein provided shall be
cumulative and in addition to any other rights and remedies the parties may be
entitled to pursue under applicable NEVADA LAW. The exercise of one or more of
such rights or remedies shall not impair the rights of either party to exercise
any other right or remedy at law or in equity. Termination of this Agreement
shall not release or discharge any party from any obligation, debt or liability
which shall have previously accrued, and remain to be performed as of the
effective date of termination. THE PARTIES HEREBY CONSENT TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF NEVADA, AND IRREVOCABLY
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. THE PARTIES ACCEPT THE EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM
NON-CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT.
15. Confidential Information and Trade Secrets.
Each party hereto recognizes that due to the nature of this
Agreement, the other party will have access to information of a proprietary
nature owned by VL including, but not limited to, any and all computer programs
(whether or not completed or in use) and any and all operating manuals or
similar materials, policies and procedures, and methods of doing business
developed by the other. Consequently, each party acknowledges and agrees that
they respectively have a proprietary interest in all such information and that
all such information constitutes confidential and proprietary information and is
the trade secret property of each such party. Each party hereby waives any and
all right, title and interest in and to such trade secrets and confidential
information and agrees to return all copies of such trade secrets and
confidential information related thereto to the other, at the other's expense,
upon the termination of the Agreement.
Each party further acknowledges and agrees that the other is
entitled to prevent its competitors from obtaining and utilizing their
respective trade secrets and confidential information. Therefore, each party
agrees to hold the other party's trade secrets and confidential information in
strictest confidence and not to disclose them or allow them to be disclosed,
directly or indirectly, to any person or entity other than those persons or
entities who are employed by or affiliated with VL or Company, as the case may
be, without the prior written consent of the other. Each party shall not, either
during the term of this Agreement, or at any time after the expiration or sooner
termination of this Agreement, disclose to anyone other than persons or entities
who are employed by or affiliated with the other any confidential or proprietary
information or trade secret information obtained by either of them, except as
otherwise required by law.
Each party acknowledges and agrees that a breach of this
Section 15 will result in irreparable harm to the other which cannot be
reasonably or adequately compensated in damages, and
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therefore VL shall be entitled to injunctive and/or equitable relief to prevent
a breach and to secure enforcement thereof, in addition to any of the relief or
award to which such party may be entitled.
16. Indemnification.
(a) Indemnification of VL. Company shall indemnify,
defend and hold harmless VL, its agents, representatives, employees, officers,
directors, and representatives from and against any and all losses, liabilities,
claims, damages, deficiencies, and expenses including interest; penalties, court
costs and reasonable attorneys' fees ("Losses") which may be incurred by or
suffered by such persons or entities and which arise out of or result from any
breach of any representation, warranty, covenant or agreement of Company
contained in this Agreement or which related to the operation of the Business
prior to the date hereof, or to the operation of the Business after the date
hereof unless arising from VL's gross negligence, willful misconduct or any
breach of fiduciary duty.
(b) Indemnification of Company. VL shall indemnify,
defend and hold harmless Company, its agents, representatives, employees,
officers, directors, and representatives from and against any and all Losses
which may be incurred by or suffered by such persons or entities relating to the
breach by VL of any of its obligations under this Agreement or the gross
negligence or intentional misconduct of VL in the performance of its duties
hereunder.
17. Assignment.
This Agreement and the rights and obligations created
hereunder shall not be assigned or subcontracted by Company, either voluntarily
or by operation of the law, without the express prior written consent of VL. Any
assignment without such consent shall be null and void. In addition to its
rights to delegate its duties hereunder as set forth above, VL may only assign,
transfer, pledge or hypothecate this Agreement and VL's rights, interests and
benefits hereunder to any entity which has beneficial ownership of a majority of
VL's outstanding equity securities or to any entity in which VL owns such
beneficial ownership.
19. Governing Law.
This Agreement shall be governed by and construed under the
laws of the State of Nevada.
20. Waiver.
The waiver of any covenant, condition or duty hereunder by
either party shall not prevent that party from later insisting upon full
performance of the same.
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21. Amendment.
No amendment to the terms of this Agreement shall be binding
on any party unless in writing and executed by the duly authorized
representatives of each party.
22. Entire Agreement.
This Agreement constitutes the entire agreement of the parties
in connection with the subject matter hereof, and supersedes all prior
agreements, whether written or oral, and whether explicit or implicit, which
have been entered into before the execution hereof. Should any litigation arise
among the parties, no party shall (and each party hereby waives the right to)
introduce any parol evidence which would tend to contradict or impeach any of
the express written terms, conditions, and covenants of this Agreement.
23. Notice.
Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed or sent by facsimile, or sent by certified, registered or
express mail, postage prepaid, and shall be deemed given when so delivered
personally, telegraphed or telexed or sent by facsimile, or if mailed, two days
after the date of mailing, as follows:
If to VL: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to Company: Christopher's Original Formulas, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ (▇▇▇▇▇) ▇▇▇▇▇
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With a copy to:
25. Miscellaneous Provisions.
(a) Partial Invalidity. If any one or more of the terms,
provisions, promises, covenants or conditions of the Agreement or the
application thereof to any person or circumstance shall be adjudged to any
extent invalid, unenforceable, void or voidable for any reasons whatsoever by a
court of competent jurisdiction, each and all of the remaining terms,
provisions, promises, covenants and conditions of this Agreement or their
application to other persons or circumstances shall not be affected thereby and
shall be valid and enforceable to the fullest extent permitted by law.
(b) Headings, Titles. The headings appearing herein are
for convenience and reference only and shall not be deemed to governed, limit,
modify or in any manner affect the scope, meaning or intent of the provision of
this Agreement.
(c) Binding Effect. Subject to the provisions contained
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and upon their respective successors.
(d) Covenants and Conditions. Each covenant hereof is a
condition, and each condition hereof is as well a covenant by the parties bound
thereby unless waived in writing by the parties hereto.
(e) Approval and Consent. Whenever in this Agreement an
approval or consent is required by one of the parties, the same shall not be
unreasonably withheld.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the Effective Date.
VITAL LIVING, INC.
By: ______________________
Its: ______________________
CHRISTOPHER'S ORIGINAL FORMULAS, INC.
By: ______________________
Its: ______________________
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