1
EXHIBIT 10.10 PAGE 15
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into this 15th day
of May 1998, by and between ALFIN, INC., a New York corporation, (hereinafter
referred to as "Alfin'"), Alfin's wholly-owned subsidiary, ADRIEN ARPEL, INC., a
New York corporation, and STAR SHOPPE DIRECT, INC., a Florida corporation,
(hereinafter referred to as "Consultant").
WHEREAS, Alfin, by itself and through Arpel, develops, distributes and sells
cosmetics and beauty services and products: and
WHEREAS, Alfin desires to engage Consultant, and Consultant desires to
be engaged, to advise and consult with Alfin on direct and electronic retail
marketing of Alfin's products and services.
NOW, THEREFORE, Alfin and Consultant do hereby covenant and agree as follows:
1. Engagement. During the of this Agreement,
Consultant will render advice to, and otherwise consult with, Alfin and its
subsidiaries regarding direct marketing through means such as catalogue sales
and television direct marketing. During the term of this Agreement, Consultant
will devote as much time as is determined reasonably necessary by Consultant to
enable Consultant to render such services, including whatever time is necessary
to attend meetings reasonably requested by Alfin (including meetings with
representatives of Alfin), but Consultant will not be required to expend more
than 15 hours in any week nor more than 50 hours in any month rendering services
under this Agreement. Subject to the foregoing, Consultant shall use its best
efforts to perform its services herein. Benedict V. White ("White"),
Consultant's President shall provide substantially all of the
non-administrative, services of Consultant hereunder.
2. Term.
(a) Initial Term. The term of this Agreement is
effective as of March 1, 1998 ("Effective Date") and, unless earlier terminated
under Section 6 herein, will end on and include February 28, 1998.
(b) Extensions. Thereafter, this Agreement
shall renew for successive one year periods, each year being a Consulting Year
(as defined herein), unless either party gives written notice of termination at
least ninety (90) days before the end of the Consulting Year.
3. Compensation.
(a) Definitions. As used in this Agreement (a)
the term "Consulting Year(s)" shall mean each twelve month period commencing on
the Effective Date and each additional consecutive twelve month period as
renewed under Section 2(b); (b) the term "Consulting Net Sales" shall mean the
consolidated gross revenues less returns of Alfin and all of its direct and
indirect subsidiaries, including, but not limited to, Arpel, now existing or
hereafter acquired or created, arising out of or in connection with the efforts
of Consulting (whether before the Effective Date or at any time during a
Consulting Year) including, but not limited to, revenues derived from (i)
Spiegel's Reverse Syndication Marketing Program and any other agreements other
relationships with Spiegel, (ii) media placement (ads), (iii) direct marketing
and catalog, (iv) electronic marketing; and (v) licensing agreements to mass
marketers.
(a) Amount of Compensation.
(i) For each Consulting Year, Consultant shall
be entitled to ten percent (10%) of Alfin's Consolidated Net Sales to the extend
that Alfin's Consolidated Net Sales are less than or equal to five million
dollars ($5,000,000).
2
PAGE 16
(ii) For each Consulting year, Consultant shall
be entitled to fifteen percent (15%) of Alfin's Consolidated Net Sales to the
extent that Alfin's Consolidated Net Sales are less than or equal to five
million dollars ($5,000,000).
(iii) If (A) Consultant terminates this Agreement
under Section 2(b) or other wise than for Cause under Section 6(b) or (B) Alfin
properly terminates Consultant for Cause under Section 6(a), then Consultant's
fees under this Section 3(b) shall cease as of the date of such termination.
(iv) If (A) Alfin terminates this Agreement other
than pursuant to Section 2(b) or for Cause under Section 2(b) for Cause under
Section 6(a) or (B) Consultant terminates this Agreement for Cause under Section
6(b), then Consultant shall be entitled to its compensation under Section
3(b) (A) through the end of the Consulting Year of such termination, plus (B)
compensation for the next succeeding twelve month period following the
Consulting Year of termination arising out of services performed by Consultant
during the Consulting Year of termination, and, if any contract is renewed
during that twelve month period, the compensation applicable to such renewal
period, plus (C) compensation during the term of any legally binding agreement
which Alfin or any of its subsidiaries has entered as a result of Consultant's
services performed herein.
(v) If Alfin terminates this Agreement under
Section 2(b), then Consultant shall be entitled to its compensation under
Section 3(b)(A) through the end of the Consulting Year of such termination, plus
(B) compensation during the term of any legally binding agreement which Alfin or
any of its subsidiaries has entered as a result of Consultant's services
performed herein.
(vi) Notwithstanding the foregoing, Consultant
shall be entitled to compensation earned but yet unpaid under Section 3(c),
unreimbursed expenses under Section 3(d), and stock options and back fees under
Sections 18 and 19, respectively.
(c) Method of Compensation. Payments for
compensation earned under Section 3(b) shall be made to Consultant no less
frequently than monthly within the later of fifteen (15) calendar days of the
end of such month or when Alfin or its subsidiaries receives payment for which
Consultant's compensation relates. Alfin agrees that Consultant may enter into
agreements with third parties to assist Consultant in its duties hereunder
solely at Consultant's expense and not otherwise inconsistent with this
Agreement. Alfin agrees to cooperate as reasonably request by Consultant to
assist Consultant in performing its duties hereunder. Consultant may, upon
reasonable notice to Alfin and during normal business hours, have the right to
inspect Alfin's books and records to the extent reasonably necessary ensure
compliance with this Agreement; provided, however, if the right is tot exercised
within sixty (60) days after the end of each calendar quarter, the amount
received by Consultant during such calendar quarter shall be deemed to be
accepted as accepted by Consultant.
(d) Expenses. Alfin will reimburse Consultant
for the reasonable expense, with receipts, incurred by Consultant in performing
its duties under this Agreement, including (i) traveling expenses incurred in
attending meetings outside the New York City Metropolitan area at the request of
Alfin, and (ii) if Consultant informs Alfin in advance that travel is required
from outside the New York City Metropolitan area in order to attend a meeting in
the New York City Metropolitan area at the request of Alfin and Alfin continues
to request that Consultant attend that meeting, the costs of traveling to the
New York City Metropolitan area in order to attend that meeting, provided,
however, expenses incurred during calendar month which exceeds $1,500 must be
preapproved in writing by Alfin.
3
PAGE 17
4. Confidentiality.
(a) By Consultant. Consultant will keep
confidential and will not directly or indirectly divulge to anyone nor use or
otherwise appropriate for Consultant's own benefit, or on behalf of Consultant's
directors, officers, employees, or agents, or any entity which controls, is
controlled by, or under common control with, Consultant, any and all trade
secrets or other confidential information of any kind, nature or description
concerning any matters affecting or relating to the business of Alfin or any
subsidiary which derives economic value, actual or potential, from not being
generally known to the public or to other persons who can obtain economic value
from Its disclosure or use and which is subject to effort by Alfin that are
reasonable under the circumstances to maintain its secrecy, but excluding
information which (i) is or becomes generally available to the public or the
trade other than as a result of a disclosure by Consultant or any of its agents
or representatives, or (ii) was with Consultant's possession prior to its being
furnished to Alfin; provided that the source of such information in the case of
either clause (i) or (ii) was not bound by a confidentiality agreement or other
obligation of confidentiality with respect to such information. Hamilton
(b) By Alfin. Alfin, on behalf of itself and
its subsidiaries and affiliates, will keep confidential and will not directly or
indirectly divulge to anyone nor use or otherwise appropriate for Alfin's own
benefit, or on behalf of Alfin's directors, officers, employees, or agents, or
any entity which controls, is controlled by, or under common control with,
Consultant, any and all trade secrets or other confidential information of any
kind, nature or description concerning any matters affecting or relating to the
business of Consultant or any subsidiary which derives economic value, actual or
potential, from not being generally known to the public or to other persons who
can obtain economic value from its disclosure or use and which is subject to
efforts by Consultant that are reasonable under the circumstances to maintain to
its secrecy, but excluding information which (i) is or becomes generally
available to the public or the trade other than an a result of a disclosure by
Alfin or any of its agents or representatives, or (ii) was within Alfin's
possession prior to its being furnished to Consultant; provided that the source
of such information in the case of either clause (i) or (ii) was not bound by a
confidentiality agreement or other obligation of confidentiality with respect to
such information.
5. Restrictions on Competitive Activities.
(a) By Consultant. Except in connection with
Natural Hairs, neither Consultant nor Benedict V. White thereof ("White") shall
(as stockholder, principal, agent, employee, consultant or otherwise), anywhere
in the United States, directly or indirectly, without the prior written approval
of Alfin, (i) invest in any person, firm, corporation or other business which is
or intends to become engaged in the retail cosmetics business which is in direct
competition with Alfin or Arpel ("Competitive Business"), or (ii) engage in
activities for, or render services to, any person, firm, corporation or other
business in connection with such person's, firm's, corporation's or business'
line of business which is a Competitive Business. Competitive businesses shall
include businesses Alfin or its subsidiaries conduct in the future provided (i)
Consultant does not, at that time, invest in, engage in activities for, or
render services to, another entity which competes with such business, and (ii)
this Agreement or similar agreement is extended and accepted by Consultant as to
such new business. Notwithstanding the foregoing, White may have an interest
consisting of publicly traded securities constituting less than 5% percent of
any class of publicly traded securities in any public company engaged in
Competitive Businesses so long as neither Consultant or White is employed by and
does not consult with, or become a director of or otherwise engaged in any
activities for, such company.
(b) By Alfin. During the term of this
Agreement, neither Alfin or any of its subsidiaries shall engage a consultant or
employee for the purpose of advising or rendering services to Alfin or Alfin's
subsidiaries which is in direct competition with Consultant, including, but not
limited to, direct marketing, electronic marketing, and mass marketing
licensing, without the prior written approval of Consultant.
4
PAGE 18
(c) Solicitation of Employees. During the term
of this Agreement, neither Consultant nor its controlling persons shall solicit
or intentionally induce any employee of Alfin or its subsidiaries to terminate
his or her employment with Alfin or its subsidiaries. For six (6) months after
termination of this Agreement, neither Consultant or its Affiliates shall hire
any Alfin's employee without Alfin's consent.
6 Termination.
(a) Termination by Alfin for Cause. This Agreement
may be terminated at any time by Alfin (i) if any material breach by Consultant
of any agreement or covenant in this Agreement is not cured within 30 days of
notice of such breach, or (ii) if any representation or warranty in Section 10
is materially false as of the date of this Agreement.
(b) Termination by Consultant for Cause. Agreement
may be terminated at any time by Consultant (i) if any material breach by Alfin
or Arpel of any agreement or covenant in this Agreement is not cured within 30
days of notice of such breach, or (ii) if any representation or warranty in
Section 9 is materially false as of the date of this Agreement.
(c) Survival. Upon termination of this Agreement,
whether by termination after the end of the term of this Agreement, termination
by Alfin under Section 6(a) or by Consultant under Section 6(b), each provision
shall be of no further effect, except that Section 3 (to the extent as provided
in Section 3(b)(iii)-(v), inclusive), Section 4, Section 5(c), Section 7,
Section 8, Section 11, Section 12, Section 13, Section 14, Section 15, Section
16, Section 17, Section 18, Section 19, and Section 20 shall survive.
7. Notices. Any notices or other communications under
or with regard to this Agreement must be in writing, and will be deemed given
when delivered in person, when given by facsimile transmission (promptly
confirmed in writing sent by mail) or on the third business day after the date
on which mailed, to the following addresses:
If to Consultant or White: If to Alfin or Arpel;
Star 3001 Executive Drive, Suite 120 Adrien Arpel, Inc.
Clearwater, FL 34622 720 Fifth Avenue
Attn: Benedict V. White New York, NY 10019
Attn: Michael Ficke
with a copy to: with a copy to:
Gersten, Savage, Kaplowitz &Fredericks, LLP Barry Feiner, Esq.
101 East 52nd Street. 9th Floor 1345 Avenue of the Americas,
New York, NY 10022 Suite 2200
Attn: James G. Smith, Esq. New York, NY 10105
8. Work Made For Hire. Any and all works produced by
Consultant exclusively for Alfin shall be deemed work specifically ordered or
commissioned by Alfin and each such work shall be considered a "work made for
hired" within the meaning of 17 U.S.C. Section 101 of the United States
Copyright Act, as amended, and all rights to such work shall belong entirely to
Alfin or any nominee selected by Alfin. All other works produced by Consultant
shall be deemed the exclusive owner of such work.
5
PAGE 19
9. A1fin Representations and Warranties.
(a) Corporate Existence. Each of Alfin and each of
Alfin's subsidiaries is a corporation duly organization, validly existing and in
good standing under its jurisdiction of organization and has full corporate
power and authority to conduct its business as presently conducted by it and to
perform this Agreement and to carry out the transactions contemplated by this
Agreement. Each of Alfin and Arpel is duly qualified to do business as a foreign
corporation doing business in the states where it does business requiring such
qualification.
(b) Authority. The execution, delivery, and
performance of this Agreement by Alfin has been duly authorized by all necessary
corporate action, and this Agreement constitutes a valid and binding obligation
of Alfin enforceable against it in accordance with its terms, except that (i)
such enforcement may be subject to bankruptcy or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defense and to the discretion of the court before which any
proceeding therefor may be brought.
(c) No Conflicts. The execution, delivery and
performance of this Agreement by Alfin, will not violate any provisions of law,
any order of any court or other agency of government, conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both) a default
under, any agreement to which Alfin is bound.
(d) Intellectual Property. Alfin reasonably believes
that it and/or its subsidiaries has good title to all material copyrights,
patents, trademarks, trade names and trade secrets, or adequate licenses and
rights to use patents, trademarks, copyrights, trade names and trade secrets of
others necessary for the conduct of its business as conducted or as proposed to
be conducted. The business of Alfin and its subsidiaries is being presently
conducted and as proposed to be conducted without known conflicts with patents,
licenses, trademarks, copyrights, trade names and trade secrets of others and to
the best of Alfin's knowledge, no other persons are conducting their businesses
in conflict with patents, licenses, trademarks, copyrights, trade names and
trade secrets used by Alfin and/or its subsidiaries. Notwithstanding the
foregoing, no representations are made herein in connection with the pending
litigation Adrienne Newman v. Alfin, Inc. New York Supreme Court No. 600405.
10. Consultant's Representations and Warranties.
(a) Corporate Existence. Consultant is a corporation
duly organized, validly existing and in good standing under its jurisdiction of
organization and has full corporate power and authority to conduct its business
as presently conducted by it and to perform this Agreement and to carry out the
transaction contemplated by this Agreement.
(b) Authority. The execution, delivery, and
performance of this Agreement by Consultant has been duly authorized by all
necessary corporate action, and this Agreement constitutes a valid and binding
obligation of Consultant enforceable against it in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy or other similar
laws now or hereafter in effect relating to creditors' rights, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) No Conflicts. The execution, delivery and
performance of this Agreement by Consultant will not violate any provisions of
law, any order of any court or other agency of government, conflict with, result
in a breach of, or constitute (with due notice or lapse of time or both) a
default under, any agreement to which Consultant is bound.
6
PAGE 20
11. Indemnification
(a) Obligation to Indemnify. Any party to this
Agreement (the "Indemnitor") shall indemnify, defend and hold harmless the other
party to this Agreement (the "Indemnitee") and its assigns from and against any
losses, liabilities, damages or deficiencies, including interest, penalties and
reasonable attorneys' fees, but net of any related benefits, ("Losses") arising
out of or due to a breach of any representation, warranty, covenant or agreement
of the Indemnitor contained herein.
(b) Notice to Indemnitor. If any Indemnitee receives
of any claim or the commencement of any action or proceeding with respect to
which the Indemnitor is obligated to provide indemnification under this Section,
the Indemnitee shall promptly give the Indemnitor notice thereof. Such notice
shall be a condition precedent to any of the Indemnitor under the provisions for
indemnification contained in this Agreement provided that such Indemnitor shall
be relieved of its obligation hereunder only to the extent of the detriment
suffered by the Indemnitor as a result of of Indemnitee's failure to give prompt
notice. If such event involves a claim by a third party, the Indemnitor shall
have the right at its sole expense to control and assume the defense of the
matter giving rise to such indemnification with counsel reasonably satisfactory
to the Indemnitee and to compromise or settle any such matter, provided that
such compromise or settlement entirely and unconditionally releases the
Indemnitee from all liability with respect thereto. If the Indemnitor shall
assume the defense of the Indemnitee, the Indemnitee shall have the right to
participate in such defense but only at its own expense and the Indemnitor shall
not be obligated to pay the fees of counsel to the Indemnitee incurred after
such assumption. If the Indemnitor does not assume the defense of such matter
within a reasonable time after notice thereof, the Indemnitee may defend, settle
and/or compromise such matter for the account and the expense of the Indemnitor.
12. No Agency. Nothing contained in this agreement
shall be construed as creating an agency relationship between Alfin or any of
its subsidiaries or affiliates and Consultant or any of its affiliates and,
without Alfin's prior written consent. Consultant shall have no authority
hereunder to bind Alfin or any of its subsidiaries or affiliates or make any
commitments on Alfin's or any of its subsidiaries or affiliate's behalf.
Consultant shall be deemed to be an independent contractor for all purposes
hereunder and shall be responsible for all of its applicable faxes.
13. Further Assurances. Each of the parties shall
execute such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby.
14 . Entire Agreement. This Agreement contains the
entire agreement among the parties with respect to the transactions contemplated
hereby and supersedes all prior agreement, written or oral, with respect
thereto.
15. Waivers and Amendments. This Agreement may be
amended, Modified, superseded, canceled, renewed or extended, and terms and
conditions hereof may be waived, by the only by a written instrument signed by
the parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party of any right, power or privilege hereunder, nor any single or partial
exercise of any right, power or privilege hereunder, preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any party may otherwise have at law or
in equity.
16. Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York.
7
PAGE 21
17. Assignment. This Agreement is not assignable by
either Alfin or Consultant, whether by operation of law or otherwise, without
the prior written consent of the other. For purposes of this Section 17, an
assignment, as to Alfin or Arpel or Consultant, shall include, but not be
limited to, (i) the change in control of more than fifty percent (50%) of the
voting securities of Alfin or Arpel or Consultant, respectively, or (ii) the
sale of all or substantially all of the assets of Alfin or Arpel or Consultant,
respectively. Consultant consents to (i) the change in control of more than
fifty percent of the voting securities of Alfin or Arpel, or (ii) sale of all
or substantially all of the assets of Alfin or Arpel provided that the entity
acquiring control of the assets shall expressly assume in writing the
obligations of this Agreement. Alfin and Arpel consent to the change in control
of more than fifty percent (50%) of the voting securities of Consultant, or (ii)
sale of all or substantially all of the assets of Consultant provided that White
shall continue to provide substantially all of the non-clerical,
non-administrative services of Consultant as provided in Section 1.
18. Stock Options. As soon as practicable but in no
event later than thirty (30) days after the date this Agreement is executed,
Alfin shall, in the form of a stock option agreement ("Option Agreement"), (i)
grant White the Option to acquire 50,000 shares of Alfin common stock
exercisable at $0.68 per share, (ii) for the first Consulting Year only, grant
White the option to acquire 25,000 shares exercisable upon Consolidated Net
sales for such Consulting Year equaling or exceeding $5,0000,000, at $0.68 per
share, and (iii) for the first Consulting Year only, grant White the option to
acquire 25,000 shares exercisable upon Consolidated Net Sales for such
Consulting Year equaling or exceeding $10,000,000, at $0.68 per share. The
Option Agreement shall provide that the options are exercisable for five years
from the date of grant, shall provide for antidilution protection including
stock splits, stock dividends, recapitalizations, and stock issuances below the
lesser of market or exercise price, shall be registered as soon as practicable
upon grant, and shall contain such other terms and conditions mutually
acceptable to Alfin and Consultant.
19. Back Fees. Alfin agrees to pay Consultant for
services rendered prior to the Effective Date in the following amounts (i)
$5,000 by February 17,1998, receipt of which is acknowledged by Consultant, (ii)
$5,000 by March 17, 1998, receipt of which is acknowledged by consultant, (iii)
$10,000 by April 17, 1998 receipt of which is acknowledged by Consultant, (iv)
$10,000 by June 1, 1998, (v) $10,000 by June 17, 1998, (vi) $10,000 by July 17,
1998, and (viii) $7,019,34 by August 17, 1998, plus 5% of the gross receipts
derived by Alfin or Arpel from Spiegel for the month of February 1998 by August
17, 1998.
20. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(Signatures on following page)
8
PAGE 22
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date set forth above.
STAR SHOPPE DIRECT, INC.
By: /s/______________________________
Benedict V. White
President
ALFIN, INC.
By: /s/______________________________
Name: Michael D. Ficke
Title: Chief Financial Officer
ADRIEN ARPEL, INC.
By: /s/______________________________
Name: Michael D. Ficke
Title: Chief Financial Officer
Solely as to obligations of White specified
herein under Section 1,5 and 18:
By: /s/______________________________
Benedict V. White
President