EXHIBIT 10.2
JOINT DEVELOPMENT, MANUFACTURING,
DISTRIBUTION AND MARKETING AGREEMENT
This Joint Development, Manufacturing, Distribution and Marketing
Agreement (this "Agreement") is made as of July 26, 2010 (the "Effective
Date") by and between Musclepharm Corporation, Inc., a Nevada corporation
located at 4721 Ironton Street, Denver, Colorado, 80239 ("MPC"), and TapouT,
LLC, a California limited liability company located at 21800 Barton Road,
Grand Terrace, CA 92313 ("TapouT"). Each MPC and TapouT are referred to
herein as a "Party" and collectively the "Parties." Brad Pyatt and Cory
Gregory (the "Principals") are Parties to this Agreement for purposes of
Sections 2(b)(i) only.
A. MPC creates, distributes, sells and promotes mixed martial arts-
related sports nutrition/supplement performance products (the "Category")
branded with names, logos and/or marks owned by MPC described on Exhibit "A"
(the "MPC Property").
B. TapouT possesses technology, knowhow and expertise to develop,
manufacture, distribute and market certain Products such as apparel and
accessories bearing the MPC Property alone or with other branded names, logos
and/or marks owned by TapouT ("Products").
C. The Parties and the Principal desire to jointly develop,
manufacture, distribute and market the Products, which MPC does not currently
develop, manufacture, distribute and market as of the Effective Date, on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties and the
Principal hereby agree as follows:
PRINCIPAL TERMS
1. Product Development.
(a) The Parties shall mutually agree in writing upon the
preliminary Specifications for all of the Products to be manufactured,
distributed and marketed under this Agreement. "Specifications" mean the
functional attributes and visceral appearance for the Products to be agreed
to by the parties in accordance with Section 1(a).
(b) TapouT will use good faith and reasonable commercial efforts
to design, develop and prototype the Products in conformance with the
Specifications and in the manner set forth in this Agreement.
(c) MPC and the Principal will use good faith and reasonable
commercial efforts to assist in the design, development and prototyping of
the Products in the manner set forth in this Agreement. In connection
therewith, on or prior to the Effective Date, the Parties each will assign a
coordinator who shall act as the primary contact with the other party.
2. Distribution Services.
Engagement/License Grant. On the terms and subject to the conditions set
forth in this Agreement, MPC hereby engages TapouT, and TapouT hereby accepts
MPC's engagement, to be MPC's exclusive provider of Distribution Services
(defined below) during the Distribution Term and in the Territory.
"Distribution Services" means; (a) coordination of manufacturing and shipment
of the Products; (b) coordination of sales of and fulfillment of orders for
the Products and the related billing and collections from customers; and (c)
consultation and recommendations with respect to product creative, branding,
advertising, marketing and promotion given at TapouT's sole discretion.
"Territory" means worldwide. In furtherance of the foregoing, MPC hereby
grants to TapouT, and TapouT hereby accepts the sole and exclusive, non-
transferable, non-assignable, non-sublicensable right and license, during the
Distribution Term, to manufacture anywhere in the world, and distribute and
sell in the Territory the Products, through the channels of distribution and
retail stores mutually agreed to by the Parties, including through internet
sites mutually acceptable to the Parties.
TapouT acknowledges that as between MPC and TapouT, MPC is the owner of all
right, title and interest in and to the MPC Marks (as defined below) and all
intellectual property provided by MPC to TapouT hereunder for use in
connection with the Products. TapouT and MPC hereby acknowledge that any
goodwill derived from any Products that bear more than one trademark/logo
will inure to the benefit of the owner of each respective trademark/logo.
(a) Exclusivity. TapouT shall have the exclusive right (even as
to MPC) during the Distribution Term and in the Territory, to provide the
Distribution Services (including, without limitation, to provide the services
set forth in this Section 1) for and on behalf of MPC with respect to the
Products. MPC agrees not to directly or indirectly provide, and not to
appoint any other party to provide, such services with respect to the
Products in the Territory during the Distribution Term. Further, MPC shall
not individually approach any target customer for Products, for purposes of
entering into a business relationship with such customer.
(b) Scope and Manner of Services.
(i) Certain TapouT Obligations. TapouT will undertake
commercially reasonable efforts to perform the Distribution Services.
Without limiting the generality of the foregoing, and subject to the other
terms and conditions of this Agreement, in the course of its provision of
Distribution Services, TapouT shall undertake the following:
A. at MPC's reasonable request and at MPC's sole cost
and expense, assist with (1) the design of Products; and (2) consultation
concerning MPC's ideas for advertising, marketing or promotion of Products.
B. (1) arrange for and source the manufacture of
Products, at the times and in the quantities reasonably necessary to fulfill
current and anticipated orders for Products; (2) arrange for the importation
of Products into the Territory; (3) arrange for the timely delivery and
shipment of Products to retail and wholesale customer locations in the
Territory (including, without limitation, retail and wholesale customers
operating on or through the Internet); and (4) arrange for the delivery and
shipment of Products to consumers as a result of Internet sales orders
arising from any World Wide Web site owned or operated by TapouT, or with
which TapouT maintains a resale or wholesale relationship. In this
connection TapouT and MPC will mutually agree on the appropriate e-commerce
sites from which to sell the Products, which may include a MPC-branded site
hosted and operated by TapouT.
C. manage, store and warehouse at TapouT facilities,
inventory of Products;
D. retain a team of experienced salespersons to solicit
purchase orders for Products in the Territory;
E. ensure that all Products are manufactured in
accordance with the quality standards and design direction communicated by
MPC to TapouT from time to time, prior to production of the Products in
question; and
F. meet from time to time with MPC to receive designs
and artwork, and disclose and discuss production costs, for each planned
Product offering.
G. Certain MPC Obligations. MPC shall regularly provide
TapouT with artwork/designs incorporating MPC Property for apparel,
accessories and other goods in a "vector art" format. MPC shall also (A)
cooperate with TapouT in connection TapouT's provision of Distribution
Services, and (B) promptly perform all of its obligations with respect to
advertising, marketing and promotion costs and expenses. Without limiting
the generality of the foregoing, in the course of its cooperation with TapouT
and its performance of its obligations hereunder, MPC shall design, promote,
market, and advertise Products in accordance with marketing budgets to be
determined by MPC in consultation with TapouT. Following TapouT's written
request, MPC shall make available to TapouT, at MPC's sole cost and expense,
reasonable quantities of sales literature to support TapouT's sales efforts.
(ii) Manufacture of the Products. Subject to the terms and
conditions hereof, TapouT shall use commercially reasonable efforts to cause
Manufacturer to supply to MPC such number of Products as may be required
during the term of this Agreement to fill orders for the Products. The
Parties shall use commercially reasonable efforts to enter into a
Manufacturing Agreement with the Manufacturer that includes terms
contemplated in this Agreement, including (among other things): (i)
Manufacturer to provide MPC with a twelve (12) month limited warranty on all
Products purchased by MPC, (ii) any amount payable in connection with such
warranty is limited solely to the price paid by MPC for the related Product,
(v) any defective Product shall be tested by Manufacturer for quality control
and repaired or replaced following conclusion of testing identifying a
defect, (vi) Manufacturer shall complete all such testing, and shall repair
or replace any defective Product within forty-eight (48) hours from the
receipt of defective Product from MPC.
(iii) Marketing and Sales of Products. The Parties agree to
negotiate in good faith and to reach agreement on the following matters
within fifteen (15) days after the Effective Date: the initial List Prices
for the Product, the discounts that will be available to the various sales
channels, the other terms and conditions of the sales of the Product to third
parties, and the terms, conditions and pricing under which MPC will act as
reseller of the Products. The Parties agree to cooperate in the future to
establish different List Prices and discounts as needed to address cost
changes or market conditions. All other terms and conditions of sales of the
Products that are not addressed in the mutually agreed-to terms shall be set
by TapouT. The Parties shall cooperate in marketing and selling the
Products. For each sales lead generated by or becoming known to a Party, the
Parties agree that for a preliminary time period to be agreed upon by the
Parties, each of them will use reasonable best efforts to jointly assign a
sales team consisting of a representative from each Party to pursue such
leads with a view toward generating a sale. Orders for the Products, whether
generated by MPC or TapouT, shall be submitted to TapouT for fulfillment.
TapouT shall have the sole discretion to determine whether to extend credit
to any potential purchaser of a Product. TapouT shall process orders for
shipment in accordance with commercially reasonable standards. TapouT shall
submit invoices to purchasers for Products shipped and shall be responsible
for collection of such invoices. TapouT shall provide to MPC written monthly
reports that describe the identity of the purchasers, the Products sold,
quantities, discounts and prices for all sales of Products. Revenue from
sales of Product shall be considered solely the revenue of TapouT for all
accounting and other purposes. It is expressly understood and agreed that
this Agreement, and any exports, sales, transfers, or any other disposition
of Products, to the extent incorporated in the Product, are subject to the
laws and regulations of the United States. Specifically, contracts and
orders placed for the Product may require advance U.S. Government Export
approval or licensing, and, therefore all such contracts and orders are
subject to the receipt of any necessary approvals and licenses. The Parties
hereto agree to solicit orders, and MPC agrees to process and ship orders, in
accordance with all applicable laws and regulations.
(iv) MPC Insurance. MPC shall obtain and carry in full
force and effect commercial general liability insurance, including
advertising injury liability, which shall protect TapouT with respect to any
claims arising from the MPC Marks and any other intellectual property
supplied by MPC to TapouT for use in connection with the Products. Such
insurance (i) shall be issued by an insurer licensed to practice in the State
of California or an insurer pre-approved by TapouT, such approval not to be
unreasonably withheld, (ii) shall list TapouT as an additional insured
thereunder, and (iii) shall require thirty (30) days written notice to be
given to TapouT prior to any cancellation or material change thereof. The
limits of such insurance shall not be less than One Million Dollars
($1,000,000) per occurrence with an aggregate of Three Million Dollars
($3,000,000). MPC shall provide TapouT with certificates of insurance
evidencing compliance with this section. MPC shall continue to maintain such
insurance after the expiration or termination of this Agreement during any
period in which TapouT continues to sell or distribute the Products under
this Agreement.
(v) TapouT Insurance. TapouT shall obtain and carry in full
force and effect commercial general liability insurance, including product
liability and errors and omissions insurance, which shall protect MPC with
respect to any claims arising from the Products as well as from TapouT's
performance of the Distribution Services, except for claims arising from MPC
Marks and any other intellectual property supplied by MPC to TapouT for use
in connection with the Products. Such insurance (i) shall be issued by an
insurer licensed to practice in the State of California or an insurer pre-
approved by MPC, such approval not to be unreasonably withheld, (ii) shall
list MPC as an additional insured thereunder, (iii) shall be endorsed to
include product liability coverage, and (iv) shall require thirty (30) days
written notice to be given to MPC prior to any cancellation or material
change thereof. The limits of such insurance shall not be less than One
Million Dollars ($1,000,000) per occurrence with an aggregate of Three
Million Dollars ($3,000,000) for bodily injury including death; One Million
Dollars ($1,000,000) per occurrence with an aggregate of Three Million
Dollars ($3,000,000) for property damage; and One Million Dollars
($1,000,000) per occurrence with an aggregate of Three Million Dollars
($3,000,000) for errors and omissions. TapouT shall provide MPC with
certificates of insurance evidencing compliance with this section. TapouT
shall continue to maintain such insurance after the expiration or termination
of this Agreement during any period in which TapouT continues to sell or
distribute the Products under this Agreement.
(c) Designated Customers
(i) MPC shall have the right to approve of the channels of
distribution and of retail store customers who will carry the Products, which
approval shall not be unreasonably denied. During the Term, MPC shall not be
permitted to contact, negotiate or otherwise initiate sales from any existing
customer during the Distribution Term and in the Territory.
(d) Administrative Services.
(i) TapouT shall provide MPC, in addition to the Distribution
Services, such other services as may be mutually agreed in writing (the
"Admin Services") during the Distribution Term, which will include, at a
minimum, the services set forth below. TapouT may also create, prepare, and
file such additional reports and records as are reasonably necessary and
appropriate in connection with the Admin Services. In connection with the
Admin Services to be provided hereunder, and throughout the Distribution
Term, TapouT may provide such services in its own name and under its own
billing and collection accounts, or in the name and under accounts
established for and on behalf of MPC, in each case as determined by mutual
agreement of the Parties. In the event that TapouT, with MPC's agreement,
provides such services in the name and under accounts established for and on
behalf of MPC, then, pursuant to standing instructions reasonably necessary
to carry out the terms of this Agreement issued by MPC, to the financial
institution(s) whereby MPC's account(s) is/are maintained, MPC, upon mutual
agreement of the Parties via a separate written instrument e.g. Limited Power
of Attorney, shall appoint TapouT as MPC's true and lawful agent for the
following purposes including, but not limited to:
A. to provide for the collection and receipt in MPC's
name and for MPC's account of accounts receivable of MPC, to deposit such
collections in an account in the name of MPC, and generally to administer
such accounts receivable, including, but not limited to, (i) extending the
time of payment of any such accounts; (ii) discharging or releasing the
obligors of any such accounts; (iii) providing for credits, refunds,
chargebacks, adjustments, or other modifications to the terms of such
accounts, including, without limitation, in connection with the return or
exchange of Products; (iv) suing, assigning or selling at a discount such
accounts to collection agencies; or (v) taking other measures to require the
payment of any such accounts; and
B. to take possession of, endorse in the name of MPC,
and deposit into MPC's account any notes, checks, money orders and any other
instruments received on behalf of MPC in payment for goods or services.
(ii) Notwithstanding the manner in which the Admin Services
are provided (i.e., in the name of TapouT, or in the name of MPC, for and on
behalf of MPC), MPC hereby acknowledges and agrees that except for issues
pertaining to the design of the Products, prices to be charged for the
Products, the timing and volume of close-outs and discounted sales, customer
service with respect to the Products, and except as otherwise provided in
this Agreement, any and all decision making made by TapouT with respect to
the sale of Products, the return of Products, the billing, collection and
administration of accounts receivable, and the credits, refunds, chargebacks,
adjustments, reimbursements or other terms (or concessions) provided to
customers, including Designated Customers, shall be in TapouT's sole and
absolute discretion, shall not be subject to challenge by MPC, and shall be
binding on MPC in all events and circumstances. Without limiting the
foregoing, the Parties expressly acknowledge and agree that TapouT shall be
permitted to, in its sole and absolute discretion, among other matters, (i)
extend the time of payment of any accounts receivable; (ii) discharge or
release the obligors of any accounts receivable; (iii) provide for credits,
refunds, chargebacks, adjustments, or other modifications to the terms of
such accounts receivable, including, without limitation, in connection with
the return or exchange of Products; (iv) sue, assign or sell at a discount
such accounts receivable to collection agencies; or (v) take other measures
to require the payment of any such accounts receivable.
(iii) Upon mutual agreement of the Parties, MPC shall
reimburse TapouT for one hundred percent (100%) of all costs incurred,
directly or indirectly by TapouT, in connection with the provision of the
Admin Services and outside accounting services and outside licensing services
including, but not limited to, licensing software solutions, provided,
however, those costs shall not include personnel or allocation of overhead in
connection therewith.
(e) Payment Obligations; Revenue Share.
A. Independent Payment Obligations. TapouT will be
solely responsible for all of its internal, overhead costs and expenses
incurred while performing the Distribution Services, except that commissions
payable to independent sales agents solely related to sales of Products shall
be included as part of the costs to be deducted from Gross Revenues as
described in sub-section B below. TapouT is not obligated to make any third
party payments with respect to the Distribution Services nor with respect to
the design, advertising, marketing or promotion of the Products that TapouT
itself did not agree to pay, and it is contemplated that MPC will contract
for same in its own name and make such payments directly for design,
advertising, marketing and promotion of the Products. MPC, and not TapouT,
will be responsible for all costs and expenses incurred before the Effective
Date of this Agreement. MPC, and not TapouT, will also be responsible for
all costs and expenses, incurred both before and after the Effective Date of
this Agreement, related to advertising, marketing and promotion, relating to
the Products.
B. Revenue Share. In consideration of its Distribution
Services, TapouT will be entitled to receive or retain, as applicable, fifty
percent (50%) of Gross Revenues (the "TapouT Revenue Share"). "Gross
Revenues" means any and all revenue received by or on account of MPC, or by
or on account of TapouT, in connection with the sale of Products to customers
during the Distribution Term or thereafter. With respect to Gross Revenues
received during a given calendar month, TapouT will retain an amount equal to
the product of (A) fifty percent (50%), multiplied by (B) the difference of
(i) the amount of Gross Revenues received during such calendar month, less
(ii) all manufacturing costs, price allowances, shipping, trade discounts,
return credits, refunds, chargebacks, independent sales agent commissions,
applicable withholding taxes (if any), freight amounts, and other customary
and documented adjustments, reimbursements or concessions provided to
customers in writing and incurred during such calendar month, and will pay to
MPC the balance of any remaining amounts, if any, which payment will be made
within thirty (30) days of each month, and will be accompanied by an
accounting statement explaining the basis thereof. For example purposes
only, in the event that TapouT sells one Product for $36.00 online in a given
calendar quarter, and the cost to manufacture, print and produce that t-shirt
is $6.00, MPC will be entitled to 50% of $30.00 (which represents the gross
revenue received less the cost, and accordingly, MPC will be entitled to
$15.00 in connection with the sale of that t-shirt). Unless otherwise
agreed in writing by the Parties, any and all Gross Revenues shall be
collected by TapouT.
(ii) Audit. During the Term and during any period in which a
Party is receiving Gross Revenues, and for one (1) year thereafter, each
Party shall have the right to cause its independent auditor to review and
audit the other Party's books and records relating to this Agreement, not
more than once per calendar year and only upon ten (10) business days prior
written notice, and if any such review or audit establishes any underpayment,
the audited Party shall immediately pay such underpaid amount upon demand
thereof by the auditing Party, and if there exists a variance of more than
ten percent (10%) for the accounting period audited, the audited Party will
reimburse the auditing Party its reasonable auditing, review and collection
costs and expenses excluding any legal fees. For the avoidance of doubt, all
books and records of the audited Party shall be deemed the Confidential
Information of such Party, and shall only be used by the relevant independent
auditor on the premises of the audited Party solely for the purpose of
conducting the audit hereunder, and may not be shared, used or disclosed to
the auditing Party under any circumstances. Any independent auditor utilized
by a Party hereunder shall be required to sign a confidentiality agreement
reasonably acceptable to the audited Party. Any dispute arising from an
individual audit must be brought within a period of one (1) year from the
date of any applicable audit, and/or the date of any applicable receipt or
deposit of any applicable payment arising therefrom, as applicable.
(iii) Taxes. The Parties are solely responsible for payment
of any and all of their respective local, state and federal taxes in
connection with any and all Gross Revenues received hereunder or otherwise.
If the Parties, for any reason, are required to pay any such tax on account
of the other Party in connection with this Agreement, the non-paying Party
shall promptly reimburse the paying Party for such taxes. Additionally, the
Parties will defend, indemnify and hold the other Party, and its affiliates
and distributors, and each of their members, equity holders, officers,
directors, employees, harmless from and against all claims, liability,
damages and costs and expenses (including, without limitation, attorneys fees
and costs) arising from or in connection with its respective tax obligations
or any matters arising in connection therewith.
(f) Indemnification Obligations. MPC will be solely responsible
for, and will defend, indemnify and hold TapouT, and its affiliates and
distributors, and each of their members, equity holders, officers, directors,
employees, harmless from and against all claims, liability, damages and costs
and expenses (including, without limitation, attorneys fees and costs)
arising out of or related to (i) the MPC Marks and other intellectual
property matters (including, without limitation, any claims that the Products
or any names, trademarks or logos therein, infringe the intellectual property
or other proprietary rights of any third party), and compliance with law
related thereto; supplied by MPC for use by TapouT in connection with the
Products, or (ii) any breach by MPC of its obligations, covenants,
agreements, representations and warranties under this Agreement. Except to
the extent MPC owes TapouT any indemnity obligation hereunder, TapouT will
solely responsible for, and will defend, indemnify and hold MPC harmless from
and against all claims, liabilities, damages and costs and expenses
including, without limitation, attorneys fees and costs, arising out of or
related to (w) the manufacturing of the Products and TapouT's provision of
the Distribution Services, and (x) any breach by TapouT of its obligations,
covenants, agreements, representations and warranties under this Agreement.
The Party claiming indemnification pursuant to this Section 2(f) (the
"Indemnified Party") shall promptly notify the other Party (the "Indemnifying
Party") of any such claim of which it becomes aware and shall: (y) at the
Indemnifying Party's expense, provide reasonable cooperation to the
Indemnifying Party in connection with the defense or settlement of any such
claim, and (z) at the Indemnified Party's expense, be entitled to participate
in the defense of any such claim. The Indemnified Party agrees that the
Indemnifying Party shall have sole and exclusive control over the defense and
settlement of any such third party claim. However, the Indemnifying Party
shall not acquiesce to any judgment or enter into any settlement that
adversely affects the Indemnified Party's rights or interests without prior
written consent of the Indemnified Party
(g) Term and Termination.
(i) Term. The term of this Agreement will commence on the
Effective Date and will continue for a period of three (3) years following
the Effective Date, unless terminated earlier as set forth herein (the
"Initial Term"). The term may be renewed at the request of TapouT for
successive periods of three (3) years each provided that (A) it requests
renewal no later than 90 days prior to the expiration of the Initial Term or
each renewed term, as the case may be, (B) at the time it requests renewal,
and at the time the renewal term begins, it is not in breach of any material
obligation hereunder, (C) it agrees to reasonable minimum net sales
obligations for each renewal term and (D) MPC approves the renewal request.
(collectively, the Initial Term and any renewal terms are referred to herein
as the "Distribution Term").
(ii) Voluntary Termination. Notwithstanding any portion of
this Agreement to the contrary, this Agreement may be terminated by TapouT
for its convenience, upon ninety (90) calendar days prior written notice
thereof.
(iii) Immediate Termination for Certain Acts. In addition to
the right to terminate for breach described below, MPC shall have the right
to terminate this Agreement immediately, and without being obligated to allow
for a cure period, under the following circumstances: (A) if TapouT fails to
achieve US$1.5 million dollars in gross sales within 12 months after the
Effective Date; or (B) if TapouT willfully engages in any activity to harm
the value or reputation of the MPC Marks; or (C) if an audit reveals an
underpayment of MPC's share of revenue share greater than 25%, or (D) if
TapouT breaches a material obligation of this Agreement for the 3rd time in
any calendar year during the Term. Any of the foregoing events shall
constitute a material breach by TapouT of this Agreement.
(iv) Termination for Breach. Without limitation to the
foregoing, in the event either Party is in material breach or default of its
obligations under this Agreement, the other Party may give a detailed notice
of default with an explanation of what is required to cure and the defaulting
Party shall have thirty (30) days to cure. In the event the defaulting Party
so fails to timely cure, or commence efforts reasonably designed to cure
within a reasonable period of time, within such thirty (30) day period, the
other Party may terminate the Distribution Term upon written notice.
(v) Insolvency/Bankruptcy. In the event that: (a) either
Party becomes insolvent or enters into any arrangement or composition with
creditors, or makes an assignment for the benefit of creditors; (b) there is
a dissolution, liquidation or winding up of either Party's business; or (c) a
trustee in bankruptcy of the assets of either Party is appointed, the other
Party may terminate this Agreement immediately by giving written notice of
termination to the first Party.
(vi) No Waiver. The termination or expiration of this
Agreement shall not act as a waiver of any breach of this Agreement and shall
not act as a release of either Party for any liability or obligation incurred
under this Agreement, or at any time thereafter, as applicable.
(vii) Effect of Termination. The expiration or termination
of this Agreement shall not cancel the sale and delivery of any Products
scheduled prior to the effective date of expiration or termination for sale
and delivery thereafter, rather, any and all such sales and deliveries shall
be consummated as scheduled. Additionally, notwithstanding the expiration or
termination of this Agreement, unless termination was due to TapouT sale of
defective or harmful Product, or goods that violated MPC's intellectual
property rights, TapouT shall be permitted to continue to distribute and sell
its existing on-hand inventory of Products, on a non-exclusive basis, for a
period of twelve (12) months following the date of such expiration or
termination (the "Sell-Off Period"), provided that upon the effective date of
termination or expiration, TapouT delivers to MPC a true and correct
inventory list, and provided further that MPC does not elect to re-purchase
such inventory (or portion thereof), which re-purchase price shall be at
TapouT's direct cost to produce the Product. NEITHER MPC NOR TAPOUT SHALL
HAVE THE RIGHT TO CLAIM ANY INDEMNITY, REIMBURSEMENT OR COMPENSATION FOR
ALLEGED LOSS OF CLIENTELE, GOODWILL, LOSS OF PROFITS ON ANTICIPATED SALES OR
THE LIKE OR HAVE ANY OTHER RIGHT TO COMPENSATION FOR LOSSES OR DAMAGES
RESULTING FROM THE EXPIRATION OR TERMINATION OF THIS AGREEMENT, BOTH PARTIES
ACKNOWLEDGING THAT EACH HAS DECIDED AND WILL DECIDE ON ALL INVESTMENTS,
EXPENDITURES AND COMMITMENTS IN FULL AWARENESS OF THE POSSIBILITY OF ITS
LOSSES OR DAMAGES RESULTING FROM SUCH EXPIRATION OR TERMINATION AND IS
WILLING TO BEAR THE RISK THEREOF.
(viii) Survival. The Parties agree that their respective
rights, obligations and duties which, by their nature, extend beyond the
termination or expiration of this Agreement, will survive any termination or
expiration of this Agreement. For the avoidance of doubt, it is the Parties'
express intention hereunder that (i) each Party shall be entitled to receive,
and that such party shall actually receive, its respective Revenue Share
resulting from the sale of Products to Designated Customers, whether by
TapouT, or MPC or any third party designated thereby, or otherwise, during
the Distribution Term and during the Sell-Off Period, and (ii) neither Party
shall take any action, or omit to take action, or otherwise act to interfere
with or circumvent the rights of the other Party.
(ix) Upon the occurrence of any event of default entitling a
Party to terminate this Agreement, the non-defaulting party shall send notice
of default, specifying the nature of the default, to the other party. The
non-defaulting party will permit thirty (30) days following the date of such
notice to enable the other party to cure the problem to the non-defaulting
party's reasonable satisfaction. Failure to cure the problem will result in
termination without further notice by the non-defaulting party, unless such
non-defaulting party extends the cure period by written notice or withdraws
the default notice.
3. Supply Agreement.
(a) During the term of the Supply Agreement, MPC shall buy its
full requirement of Products from TapouT;
(b) TapouT will sell the Products to MPC at twenty-five (25)
percent below TapouT's wholesale price; and
(c) TapouT may, with reasonable MPC approval and qualification not
to be unreasonably withheld, conditioned or delayed, utilize one or more
third-party manufacturers in connection with the manufacture of the Products.
TapouT will enter into appropriate intellectual property licensing and
confidentiality agreements with any third-party manufacturer to permit the
manufacture of the Products and with respect to the non-disclosure of any
licensed intellectual property by such manufacturer to third parties.
(d) MPC represents it has existing relationships with various
vendors and distributors it uses to provide apparel solely for promotional
and marketing purposes that does not conflict with this Agreement. The
Parties agree that TapouT shall have first opportunity to manufacture apparel
for MPC to be used only for promotional and marketing purposes at twenty-five
percent (25%) above TapouT's cost. In the event that TapouT is unable to
provide the promotional apparel within the requisite time parameters set
forth by MPC, MPC shall have the right to use its own manufacturing
relationships to any order TapouT could not fulfill. . MPC shall make a
commercially reasonably effort to provide adequate notice to TapouT for all
orders of marketing and promotional goods.
4. Intentionally Omitted.
5. Representations and Warranties.
(a) Mutual General Representations and Warranties.
(i) Organization and Qualification. Each Party represents
and warrants that it is duly organized and existing in good standing under
the laws of the jurisdiction in which it is organized, is duly qualified and
in good standing as a foreign corporation or company in every state in which
the character of its business requires such qualifications, and has the power
to own its property and to carry on its business as now being conducted.
(ii) Authorized Agreement. Each Party represents and
warrants that the execution and delivery of this Agreement, and the
performance of the transactions contemplated by this Agreement, are within
its powers, have been duly authorized by all necessary action, do not require
any consent or other action by and in respect of or filing with any third
party or governmental body or agency and do not, and shall not, contravene,
violate or conflict with or constitute a default under any agreement, or any
provision of applicable law, regulation, or published interpretive guidance
or ruling.
(b) TapouT's Specific Representations and Warranties. TapouT
represents and warrants that it has the resources and capacity to adequately
perform its obligations under this Agreement.
(c) MPC's Specific Representations and Warranties. MPC represents
and warrants that (i) MPC has the resources and capacity to adequately
perform its obligations under this Agreement, (ii) title to all Products
shall be free and clear of all liens, encumbrances, interests, obligations,
duties, or claims of third parties including, but not limited to, any kind or
type of distribution agreement(s) in any country(ies) including, but not
limited to, Canada, (iii) MPC solely and exclusively owns, free and clear of
all liens, encumbrances or third party obligations, the rights to the MPC
Property, (iv) MPC has no indebtedness for borrowed money, and (v) to the
best of its knowledge, the MPC Property and the Products are an original work
of authorship, prepared without reliance on any third-party works, (vi) it is
the sole and exclusive owner of all right, title and interest in the MPC
Property and all intellectual property rights associated with them, the MPC
Property and the intellectual property rights associated with them are free
and clear of all encumbrances, including, without limitation, security
interests, liens, encumbrances, charges or other restrictions, (vii) to the
best of its knowledge, the MPC Property and the Products and their
production, modification and distribution do not and will not violate the
patent, copyright, trade secret and similar rights of any third parties, and
(viii) it is a corporation duly organized and validly existing under the laws
of the state of Nevada and that the execution, delivery and performance of
this Agreement has been duly and validly authorized by it, and all necessary
corporate action has been taken to make this Agreement legal, valid and
binding agreements of MPC in accordance with their respective terms.
(d) EXCEPT AS SET FORTH IN THIS SECTION 5, NEITHER PARTY HERETO
MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, OR FITNESS FOR A
PARTICULAR PURPOSE. SPECIFICALLY, AND NOT TO LIMIT THE FOREGOING, TAPOUT
MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE QUANTITY OF SALES OF
PRODUCTS TO BE MADE HEREUNDER, THE COMMERCIAL SUCCESS OF THE PRODUCTS IN
CONNECTION THEREWITH, OR THE AGGREGATE U.S. DOLLAR VALUE OF SALES TO BE MADE
BY MPC AS A RESULT OF PRODUCT PURCHASE ORDERS.
(e) Neither Party shall solicit the employees of the other Party
during the Term and for twelve (12) months thereafter. It is understood that
TapouT and MPC are and may remain in competition with each other, and with
the exception of TapouT's obligations hereunder with respect to performance
of the Distribution Services, neither shall have an obligation to consider
the interests of the other when making decisions relating to its own business
and shall have no obligation to present business opportunities to the other.
It is understood and acknowledged that both Parties are materially relying on
this Section 3(d) in entering into this Agreement, and any breach hereof by a
Party is likely to cause the other Party irreparable harm such that money
damages alone will be insufficient and the non-breaching Party shall, in
addition to its other rights and remedies, be entitled to injunctive and
other equitable relief with no obligation to post bond of surety.
(f) Each Party and the Principal hereby covenant and agree not to
take any action that would cause the foregoing representations to become
untrue during the term of this Agreement.
6. Confidential Information.
(a) Confidential Information. For the purposes of this Agreement,
"Confidential Information" means any information that a Party designates as
confidential or which the receiving Party knows or has reason to know is
confidential. Without limiting the foregoing, Confidential Information
includes financial, business and technical plans and strategies, inventions,
new products, services or technology. Confidential Information does not
include information which is: (a) already known by the receiving Party at
time of disclosure; (b) or becomes, through no act or fault of the receiving
Party, publicly known; (c) received by the receiving Party from a third party
without a restriction on disclosure or use; or (d) independently developed by
the receiving Party without reference to the disclosing Party's Confidential
Information. The receiving Party may disclose Confidential Information to
the extent required to be disclosed by a court or governmental agency
pursuant to a statute, regulation or valid order including, but not limited
to, the rules of the United States Securities Exchange Commission and any
stock exchange or quotation system (e.g., Nasdaq) on which the securities of
a Party are listed or quoted; provided that the receiving Party first
notifies the disclosing Party and gives it the opportunity to seek a
protective order or to contest such required disclosure.
(b) Restrictions. Each Party shall hold the disclosing Party's
Confidential Information in confidence and shall not use such information
except as permitted under this Agreement. Each Party shall use the same
precautions to prevent disclosure to third parties of such information as it
uses with its own confidential information, but in no case less than
reasonable efforts.
(c) Additional Obligations. Each Party agrees to notify the other
Party of the circumstances surrounding any possession, use or knowledge of
the Confidential Information by any person or entity other than those
authorized by this Agreement.
7. Restrictive Covenants.
(a) During the Term and for 12 months following the expiration or
termination of this Agreement, MPC shall not contract with or otherwise
benefit from the services of TapouT's manufacturing, marketing or advertising
vendors and suppliers, without the express written consent of TapouT. This
restriction shall not apply to any vendors or suppliers who were already
known to MPC as of the Effective Date.
(b) During the Term and for a period of one 1 year thereafter,
each Party agrees that it shall not, directly or indirectly, (a) hire any
employee of the other Party or solicit, induce or entice any employee of the
other Party to leave such employment or cause anyone else to do so, or (b)
except with respect to serving on the board of directors of the other Party,
or holding or making an investment in the other Party, enter into business or
work with any current employee of the other Party in any business,
partnership, limited liability company, firm, corporation or other entity
then in competition with such Party as long as such employee is still
employed by such other Party.
(c) Each Party and the Principal agrees that any violation of the
terms and conditions of this Agreement would cause irreparable injury for
which it would have no adequate remedy at law. Consequently, the Parties and
the Principal agree that the non-breaching party shall be entitled to
temporary and permanent restraining orders, preliminary injunctions and
permanent injunctions to enforce such terms and conditions without the
necessity of proving actual damages in connection therewith. This provision
with respect to injunctive relief shall not, however, diminish either party's
right to claim and recover damages or enforce any of its other legal and/or
equitable rights or defenses.
8. Miscellaneous.
(a) Force Majeure. Neither Party shall be liable for failure or
delay in performance under this Agreement due to causes such as an act of
God, strike, lockout or other labor dispute, civil commotion, sabotage,
terror, fire, flood, explosion, acts of any government, any other causes not
within the reasonable control of the Party affected (a "Force Majeure
Event"). In the event either Party is unable to perform any of its
obligations hereunder due to a Force Majeure Event, such Party shall promptly
notify the other Party. Performance hereunder shall be promptly resumed
after the applicable Force Majeure Event has been remedied.
(b) Subcontractors. TapouT shall have the right, in connection
with the performance of its obligations hereunder, to engage any third
parties, including, without limitation, contract manufacturers, shipping
agents, import companies, customs agents, or resellers reasonably acceptable
to MPC to assist in the performance of TapouT's obligations hereunder.
TapouT may appoint sub-distributors or resellers but only with MPC's prior
written approval, which approval shall not be unreasonably denied. TapouT
shall take commercially reasonable steps to monitor its manufacturing
contractors and to ensure that its manufacturing contractors comply with all
applicable laws, including, without limitation, wage and hour and workplace
safety laws, and that its subcontractors do not hire underage children to
engage in the manufacture of Products. TapouT shall immediately stop using
any contractors that are found to have violated applicable laws regarding
wage and hour or workplace safety, or hiring underage children.
(c) Limitation of Liability. EXCEPT WITH RESPECT TO EACH PARTY'S
INDEMNIFICATION OBLIGATIONS TO THE OTHER, TO THE MAXIMUM EXTENT PERMISSIBLE
UNDER APPLICABLE LAW, NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY OR ANY
THIRD PARTY FOR ANY LOSS OF BUSINESS OR NET REVENUES, OR FOR ANY
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR SPECIAL DAMAGES, REGARDLESS OF THE
FORM OF ACTION, WHETHER IN CONTRACT OR IN TORT, INCLUDING NEGLIGENCE, EVEN IF
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EACH PARTY
ACKNOWLEDGES THAT THIS LIMITATION OF LIABILITY REFLECTS AN INFORMED,
VOLUNTARY ALLOCATION BETWEEN THE PARTIES OF THE RISKS (KNOWN AND UNKNOWN)
THAT MAY EXIST IN CONNECTION WITH THIS AGREEMENT.
(d) Assignment. Neither Party may assign, transfer and/or convey
this Agreement, by operation of law or otherwise, and/or any of its rights,
licenses, privileges, and/or obligations hereunder, in whole or in part, to
any third party or entity without the express and prior written consent of
the other Party, which consent may be denied in its sole and subjective
discretion. This Agreement will inure to the benefit of the Parties and
their respective successors, and permitted assigns, licensees, sublicensees,
and distributors, if any.
(e) Injunctive Relief. It is understood and acknowledged that
TapouT is materially relying on MPC's obligations, covenants, agreements,
representations and warranties set forth in this Agreement, and any breach
hereof is likely to cause TapouT irreparable harm such that money damages
alone will be insufficient and TapouT will, in addition to its other rights
and remedies, be entitled to injunctive and other equitable relief with no
obligation to post a bond or surety.
(f) Notices. All notices and other communications between the
Parties to this Agreement shall be given by United States mail or a
nationally recognized overnight delivery service to the address of the
applicable Party set forth above, unless a Party has previously given notice
hereunder of a change of notice address.
(g) Headings. The headings in this Agreement are for purposes of
reference only, and shall not limit or otherwise affect the meaning hereof.
(h) Independent Contractors. In accordance with the mutual
intentions of the Parties hereto, TapouT is performing services for MPC as an
independent contractor, and all of the terms and conditions of this Agreement
shall be interpreted in light of such relationship. The Parties further
agree that each Party is an independent contractor acting for their own
account and that their relationship shall not constitute a joint venture,
partnership, or agency. Except as contemplated herein, neither Party is
authorized on behalf of the other Party to make any statements,
representations or warranties, or to enter into any contracts or commitments,
or otherwise act on the other's behalf unless authorized in writing.
(i) Amendment; Waiver. This Agreement and any term hereof may be
amended, waived, discharged or terminated only by an instrument in writing
signed by the Party against whom enforcement of such amendment, waiver,
discharge or termination is sought. No waivers of any term, condition or
provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term,
condition or provision.
(j) Attorney's Fees. Should either Party hereto initiate a legal
or administrative action or proceeding (an "Action") to enforce any of the
terms or conditions of this Agreement, the prevailing Party (as determined by
the court or other fact-finder) shall be entitled to recover from the losing
Party all reasonable costs of the Action, including without limitation
attorneys' fees and costs.
(k) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original. For purposes
hereof, a facsimile or photocopy of this Agreement, including the signature
pages hereto, shall be deemed to be an original.
(l) Severability. In the event any provision of this Agreement is
held by a court or other tribunal of competent jurisdiction to be
unenforceable, the other provisions of this Agreement shall remain in full
force and effect.
(m) Governing Law; Jurisdiction. This Agreement shall be
construed and interpreted according to the laws of the State of California,
without giving effect to any of the conflict of law or choice of law
provisions thereof that would compel the application of the substantive laws
of any other jurisdiction. The Parties shall undertake all commercially
reasonable efforts to resolve in an amicable manner any controversy arising
out of or in connection with this agreement for a period of twenty (20) days
following the date of notice by one Party to the other regarding such
controversy. All disputes, controversies, or differences arising between the
Parties out of or in connection with this Agreement, or the breach thereof,
which cannot be resolved amicably, shall be subject to the exclusive
jurisdiction of the state and federal courts located in Los Angeles,
California, and the Parties expressly agree to and submit to the jurisdiction
of such courts.
(n) Entire Agreement. This Agreement, including the exhibit
attached hereto and any addendums executed by the Parties, constitute the
entire agreement and understanding between the Parties, and integrate all
prior discussions between the Parties related to its subject matter. Any
term of provision of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity of unenforceability without rendering invalid and
unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of the any of the terms or
provisions of this Agreement in any other jurisdiction. This Agreement
supersedes and replaces all prior and contemporaneous warranties,
representations and agreements, whether written or oral, and whether made by
the Parties themselves or their agents. This Agreement may be executed in
counterparts, which together will constitute the Agreement. Facsimile and
photo copies may be used for all purposes as an original.
(o) ADR. Except as may otherwise be expressly provided in this
Agreement, all disputes relating to this Agreement shall be exclusively
resolved by binding arbitration before a single American Arbitration
Association arbitrator in Los Angeles, CA using the Commercial Dispute Rules
in effect as of the Effective Date. The terms of California Civil Code
Sections 1283 and 1283.05 pertaining to pre-hearing discovery are
incorporated herein and shall apply to the arbitration. Each Party to the
arbitration will be responsible for an equal share of the arbitrator's fees
and costs, regardless of outcome. The arbitrator will have the authority to
award the substantially prevailing Party its costs and expenses, including
attorneys' fees and costs. The arbitrator's decision shall be enforceable by
any court or tribunal with jurisdiction over the Parties. Except as
specifically provided in Section 7(g), this Agreement and the rights granted
to TapouT hereunder cannot be terminated or rescinded and MPC irrevocably
waives any right to equitable or injunctive relief and shall be limited to
claims for money damages.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
effective as of the Effective Date.
MUSCLEPHARM CORPORATION TAPOUT, LLC TAPOUT, LLC
By: /s/ Brad Pyatt By: /s/ Marc Kreiner
Name: Brad Pyatt Name: Marc Kreiner
Title: CEO Title: President & Chairman
FOR PURPOSES OF SECTION 2(b)(i) ONLY:
/s/ Brad Pyatt
Name: Brad Pyatt
/s/ Cory Gregory
Name: Cory Gregory
EXHIBIT A
MPC MARKS
MusclePharm Assault
MusclePharm Battle Fuel
MusclePharm Combat Powder
MusclePharm BulletProof Nightime Recovery Matrix
MusclePharm Recon
MusclePharm Shred Matrix
MusclePharm MuscleGel
MusclePharm Energel
MusclePharm
Fuel the Athlete Inside
The Athletes Company
Confidence Built Here
Strong is the New Sexy
We Are the Future
Protein on the Go
MusclePharm Logo with example "FUEL THE ATHLETE INSIDE".