Management Agreement - RCI Internet Holdings Inc. and National Telemedia Corp.
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") is made and entered into on this
6th day of July, 2000 (the "Effective Date"), by and between RCI INTERNET
HOLDINGS, INC., a Texas corporation (the "Owner") and NATIONAL TELEMEDIA
CORPORATION, a California corporation (the "Manager").
W I T N E S S E T H :
WHEREAS, the Owner, Rick's Cabaret International, Inc. ("Rick's") and
Voice Media, Inc., an affiliate of the Manager, entered into an Asset Purchase
Agreement (the "Purchase Agreement") of even date herewith pursuant to which the
Owner acquired certain tangible and intangible assets of Voice Media, Inc.,
including but not limited to, the Internet website known as XXXPassword.com (the
"Site"); and
WHEREAS, the Owner, pursuant to the Purchase Agreement, now owns the Site;
and
WHEREAS, the Owner desires to retain the services of the Manager to act as
its exclusive agent in the construction, management, operation, maintenance,
marketing and distribution of the Site; and
WHEREAS, the Manager and its related entities desire and have agreed to
provide advertising and marketing services for the Site, including the use of
its webmaster affiliate programs; and
WHEREAS, the Manager desires to provide such non-exclusive management and
marketing services for the Owner; and
WHEREAS, the Owner and the Manager have agreed upon the terms and
conditions upon which the Manager shall manage and operate the Site, as set
forth below.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
mutually agree as follows:
1. APPOINTMENT AND ACCEPTANCE. The Owner hereby appoints the Manager,
and the Manager hereby accepts appointment, on the terms and conditions
hereinafter provided, as the Owner's exclusive managing agent for the
construction, management, operation, maintenance, marketing and distribution of
the Site.
2. OBLIGATIONS OF MANAGER. The Manager shall render the following
services and shall perform the following duties for the Owner in a faithful,
diligent and efficient manner:
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(a) IN GENERAL. The Manager shall be solely and exclusively responsible
for all management, operational, marketing, maintenance and
distribution activities with respect to the Site, including, but not
limited to, such activities as are more specifically described below.
The Manager shall use its best efforts at all times during the term of
this Agreement to operate and maintain the Site according to the
highest standards achievable consistent with the overall plan of the
Owner. The Manager shall comply with the rules, policies and
procedures promulgated for the Site by the Owner from time to time
following Manager's receipt of written notice of such rules, policies
and procedures. The Manager shall be expected, for the account and at
the expense of the Owner, to perform such other acts and deeds as are
reasonable, necessary and proper in the discharge of its duties under
this Agreement.
(b) CONSTRUCTION. The Manager shall cause the Site to be constructed to
such specifications as the Owner shall direct, including the
engagement of programmers and contractors, for the account of the
Owner, as shall be required to accomplish the construction of the
Site.
(c) ADVERTISING AND MARKETING. The Manager and its affiliates, including
Voice Media, Inc., shall advertise, market, distribute and promote the
Site with the goal of causing public knowledge, awareness and use of
the Site, including the marketing and distribution of the Site through
the use of the webmaster affiliate programs of the Manager and the
affiliates of the Manager, including Voice Media, Inc.
(d) MANAGEMENT. The Manager shall manage, operate, market, and maintain
the Site, including, but not limited to, arranging for and supervising
any and all improvements to the Site which are determined by the
Owner, including but not limited to:
(i) To make or cause to be made in the name of Owner such ordinary
repairs or alterations to the Site as may be necessary;
(ii) To make or cause to be made in the name of Owner such
modifications, improvements or expansions of the Site as may be
necessary or helpful, including technical support and customer
support;
(iii)To request, demand, collect, receive and give receipts for any
and all charges which become due from users of the Site,
including payment processing and reporting, as well as providing
technical support, customer support and online reporting
capability and capacity. All sums of money collected by the
Manager from users of the Site or from the operation of the Site
shall be deposited by the Manager in a bank account to be
designated by the Owner and opened in the name of the Owner upon
which both the Owner and the Manager shall be signatories on the
account, either one acting alone. Manager shall maintain
possession of the checkbook for the bank account;
MANAGEMENT AGREEMENT - PAGE 2
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(iv) The Manager shall maintain a comprehensive system of records,
books and accounts, with respect to the activities and operation
of the Site. All records shall be subject to examination by the
Owner, or its authorized agents, attorneys and accountants as set
forth in Section 7 hereof. No later than the twentieth (20th) day
of each month, with respect to the preceding month, the Manager
shall render a statement of receipts and disbursements, a
schedule of accounts receivable and payable, together with a
reconciled bank statement as of the last day of the month; and
(v) To the extent Manager is lawfully able to do so, Manager shall
take such action as may be necessary to comply promptly with any
and all laws, ordinances, orders or other requirements of any
federal, state, county or municipal authority having jurisdiction
of the Site and affecting the Site.
3. EXPENDITURES. Except as provided in Section 2 of this Agreement,
the Manager shall make no expenditure for the account of the Owner without the
prior written approval of the Owner.
4. PAYMENT OF RECEIPTS TO OWNER. No later than the 20th day of each
month the Manager, in addition to rendering a statement of receipts and
disbursements with respect to the collection of charges and fees from the Site,
shall pay to the Owner and the Manager the Free Net Cash Flow (as defined below)
of all Internet commerce generated by the Site during the preceding month in
accordance with this Section 4. For purposes of this Agreement, the term "Free
Net Cash Flow" shall be defined as cash proceeds less variable costs, overhead
costs and payment of income taxes due. Cash Proceeds shall be the aggregate
amount of all cash received from, without limitation, cash sales, credit or
charge card sales, sales on open account or any combination of the same and
other such sources less refunds and customer credits. Variable Costs shall be
the aggregate amount of all charges or reduction of proceeds by the credit card
processor/merchant bank and the cost paid to webmasters as a commission for
traffic sent to the website. Without limitation, such processor/merchant bank
costs shall include discounts, fees, chargebacks, fines and all other such
costs. In the event that the third party processor/merchant bank shall require
a reserve fund, for the purposes of this Agreement, said fund shall be
considered a Variable Cost. To the extent reserve funds are recovered from the
credit card processor/merchant bank and available for distribution, then such
amount shall be deemed Cash Proceeds available for distribution. Overhead Costs
shall be the aggregate amount of all charges for third party content licensing
fees, bandwidth charges and the Management Fee as contemplated by Section 7
hereof. The parties hereto acknowledge that to the extent the specific
identification of third party content costs is impractical, they agree to the
allocation of the actual costs based on the percentage of Password sales to the
combined sales of all websites of Seller benefiting from such third party
content.
MANAGEMENT AGREEMENT - PAGE 3
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With respect to the payment of income taxes due, the parties agree to
retain a reserve in an amount of the Cash Proceeds equal to 35%. In the event
the federal tax liability for the corresponding fiscal year is determined to be
less than the amount held in reserve, then such amount shall become available
for distribution to the Seller and RCI.
Further, Seller agrees that to the extent there are any shortfalls to the
Free Net Cash Flow in any given month that the Seller will pay such shortfall
amount, in an amount not to exceed $50,000, and be reimbursed prior to any
further distribution from the Free Net Cash Flow.
Upon completion of the monthly accounting, 50% of the Free Net Cash Flow
shall be distributed to Voice Media, Inc. as payment for its Earn Out Amount in
accordance with Section 3.1(ii) of the Purchase Agreement and 50% shall be
distributed to RCI. Said distribution shall normally be made prior to the end
of the month in which the accounting is completed, provided however that the
parties hereto, utilizing good business judgment, may determine to delay the
total amount of the distribution for such month until some later date.
5. AGENCY RELATIONSHIP. Everything done by the Manager under the
provisions of this Agreement shall be done as agent of the Owner, and all
obligations or expenses incurred thereunder shall be for the account, on behalf,
and at the expense of the Owner. Any payments to be made by the Manager
hereunder shall be made out of such sums as are made available to the Manager by
the Owner or from the bank account referred to in Section 2(d)(iii), and, except
as set forth in Section 4 above, it is agreed that the Manager shall not be
obligated to expend its own funds for any payments which the Manager is
authorized to make hereunder.
6. TERM OF AGREEMENT. This Agreement shall effective for a period of
one year from the Effective Date (the "Term") and shall be renewable for
successive additional one year terms, unless terminated in writing by either
party thirty (30) days prior to the end of the respected year. Notwithstanding
the foregoing, this Agreement shall be subject to cancellation by either the
Manager or the Owner in the event of a material breach by the other party, which
breach is not cured within thirty (30) days of the party seeking to cancel the
Agreement providing written notice of such material breach to the other party
and such other party failing to cure the breach within said period. The written
notice shall provide specific details of the breach which resulted in the
sending of the written notice of cancellation.
7. COMPENSATION OF MANAGER. The Manager shall be entitled to receive
as compensation for its management services of the Site pursuant to this
Agreement a fixed fee in the amount of $22,500 per month, which management fee
includes all costs of managing and operating the Site except as otherwise stated
in this Agreement or the Purchase Agreement (the "Management Fee"). The Manager
and Owner agree that if the expenses included in the Management Fee increase or
decrease they will review and adjust the Management Fee in good faith, but in no
event less frequently than once a year. The Manager shall be entitled to pay
such fees to itself from the funds on deposit in the account referred to in
Section 2(d)(iii) hereof.
MANAGEMENT AGREEMENT - PAGE 4
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At Owner's election and cost, Owner shall have the right to inspect and
audit the books and records of the Manager as they relate to the Site. Manager
agrees to make such books and records available to Owner at the Manager's place
of business or such other reasonable location during normal business hours. In
the event a determination is made that there has been a misstatement of reported
net cash receipts equal to or greater than 10%, the Manager shall reimburse
Owner for such cost of audit and such cost shall not be considered or included
in the operating expenses of the Site. Owner agrees to provide at least three
days notice before conducting such audit. For purposes of ascertaining the
amount payable under this Paragraph 7, if any, Manager and the Owner shall keep,
for a period of not less than three (3) years immediately following the close of
each fiscal year, all pertinent original records, accounts and daily receipts
from all sales and other transactions conducted with respect to the Site during
such three (3) year period. Any portion of the books and records of Manager that
have been audited pursuant to this Section shall not be audited again, unless
required or necessary to comply with any securities or other regulatory
requirements. Such audit shall be deemed conclusive once disputes, if any, with
respect to such portions of the books and records have been resolved.
8. INDEMNIFICATION.
(a) The Manager shall indemnify, defend and hold harmless the Owner
from and against any and all claims, demands, liabilities, costs
(including, without limitation, the cost of litigation and
attorney's fees), damages and causes of action, of any nature
whatsoever which arise out of or are incidental to the management
of the Site by the Manager and which are based on or attributable
to the Manager's (i) negligence, fraud, deceptive practices,
deceit or willful misconduct, or (ii) breach of any provision of
this Agreement or any fiduciary duty. The indemnification rights
herein contained shall be cumulative of, and in addition to, any
and all rights, remedies and recourse to which the Owner shall be
entitled, whether pursuant to some other provision of this
Agreement, at law or in equity.
(b) The Owner shall indemnify, defend and hold harmless the Manager
from and against any and all claims, demands, liabilities, costs
(including, without limitation, the cost of litigation and
attorney's fees), damages and causes of action, of any nature
whatsoever which arise out of or are incidental to the management
of the Site by the Owner and which are based on or attributable
to the Owner's (i) negligence, fraud, deceptive practices, deceit
or willful misconduct, or (ii) breach of any provision of this
Agreement or any fiduciary duty. The indemnification rights
herein contained shall be cumulative of, and in addition to, any
and all rights, remedies and recourse to which the Manager shall
be entitled, whether pursuant to some other provision of this
Agreement, at law or in equity.
9. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall inure to the
benefit of and constitute a binding obligation upon the contracting parties and
their respective successors, assigns and legal representatives, but this
Agreement and the rights and obligations may not be assigned or delegated
without the prior written consent of the parties hereto and any permitted
assignee hereunder must agree to assume and discharge the duties and obligations
of his assignor hereunder.
MANAGEMENT AGREEMENT - PAGE 5
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10. SOLE AGREEMENT; AMENDMENT. This Agreement contains all of the oral
and written agreements and all of the representations and arrangements between
the parties hereto, and any rights which the parties may have had under any
previous contracts or oral arrangements are hereby cancelled and terminated, and
no representations or warranties are made or implied other than those expressly
set forth herein. This Agreement may only be modified by the written agreement
signed by or on behalf of all of the parties hereto.
11. TIME. Time shall be deemed to be of the essence of this Agreement
whenever time limits are imposed herein for the performance of any obligations
by any of the parties hereto, or whenever the accrual of any rights to either of
the parties hereto depends on the passage of time.
12. REMEDIES CUMULATIVE. The rights, options, elections and remedies
of any of the parties contained in this Agreement shall be cumulative; and no
one of them shall be construed as excluding any other or any right, priority or
remedy provided by this Agreement or law.
13. NO WAIVER. None of the terms, conditions, covenants, or provisions
of this Agreement can be waived by either party except by appropriate written
instruments. The waiver by either party of any breach of any term, condition,
covenant or provision herein contained shall not be deemed a waiver of the same
of any other term, condition, covenant or provision herein contained, or of any
subsequent breach of the same or any other term, condition, covenant or
provision herein contained.
14. GOVERNING LAW; VENUE. This Agreement shall be governed by, and its
provisions construed to be in compliance with, the laws of the State of Texas.
The parties agree that venue for purposes of construing or enforcing this
Agreement shall be proper in Harris County, Texas, if a claim is brought by the
Manager against the Owner and is proper in Los Angeles, California, if a claim
is brought by the Owner against the Manager.
15. NOTICES. All notices and other communications provided for herein
shall be in writing and shall be delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid, or overnight air
courier guaranteeing next day delivery:
a. If to the Manager, addressed to:
National Telemedia Corporation
Attn: Guy Mizrachi
5000 North Parkway Calabasas, Ste. 205
Calabasas, California 91302
Fax: (818) 591-3434
MANAGEMENT AGREEMENT - PAGE 6
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With a copy to:
Howard Rosoff
Rosoff, Schiffres & Barta
Suite 1450
11755 Wilshire Blvd.
Los Angeles, California 90025
Fax: (310) 478-1439
b. If to the Owner, addressed to:
RCI Internet Holdings, Inc.
Attn: Eric Langan, President
505 North Belt, Suite 630
Houston, Texas 77060
With a copy to:
Robert D. Axelrod
Axelrod, Smith & Kirshbaum
5300 Memorial Drive, Ste. 700
Houston, Texas 77007
All notices and communications shall be deemed to have been duly given: at the
time delivered by hand, if personally delivered; three days after being
deposited in the mail, postage prepaid, sent certified mail, return receipt
requested, if mailed; and the next day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery. If a notice or
communication is mailed in the manner provided above within the time prescribed,
it is duly given, whether or not the addressee receives it.
16. INVALIDITY OF PROVISIONS. The invalidity or an enforceability of
any particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
17. MISCELLANEOUS.
(a) Any words used herein in the singular shall be deemed to include
the plural, any words used herein in the plural shall be deemed
to include the singular, as the context requires. Pronouns used
herein, whether masculine, feminine or neuter, shall be
interpreted as the context requires.
(b) This Agreement shall not be construed to have created any rights
or benefits for, or be deemed to inure to the benefit of, any
person or entity not a party hereto. Further, this Agreement
shall not be deemed to have made the Owner and the Manager
partners for any purposes. The rights and powers of the Manager
hereunder are to be strictly construed and limited to the
specific matters hereinabove set forth.
MANAGEMENT AGREEMENT - PAGE 7
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(c) This Agreement may be executed in multiple counterparts on the
day and date first hereinabove written, and each executed
counterpart hereof shall be deemed to be an original for all
purposes.
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MANAGEMENT AGREEMENT - PAGE 8
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IN WITNESS WHEREOF, the parties hereto have executed this Management
Agreement effective as of the date first above written.
OWNER:
RCI INTERNET HOLDINGS, INC.
By: /s/ Eric Langan
Name: Eric Langan
Title: President
MANAGER:
NATIONAL TELEMEDIA CORPORATION
By: /s/ Paul Lesser
Name: Paul Lesser
Title: President
MANAGEMENT AGREEMENT - PAGE 9