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EXHIBIT 10.11
THE INFOMERCIAL INFOMERCIAL DEVELOPMENT SYSTEMS, INC.
DEVELOPMENT INFOMERCIAL PRODUCT INNOVATORS, INC.
COMPANIES
9245 DOWDY DRIVE, SUITE 213 SAN DIEGO, CA 92121
infomercialdevelopment.com (858) 271-1086 PHONE (858) 271-4425 FAX
November 16, 2000
Daniel Hoyng
Infotopia, Inc. Via Telefax
218 Tearall Road (702) 632-7234
Raynham, MA 02767
Dear Dan:
The purpose of this deal memo (Agreement) is to establish binding terms for
creation of a strategic relationship between The Infomercial Development
Companies (IDC) and Infotopia, Inc. (Infotopia) relating to joint development
of certain infomercial projects currently being managed by IDC.
As you know, IDC has been contracted by various investor partnerships to provide
a package of services related to product sourcing, production coordination,
media testing and roll-out of infomercials that test successfully. To date, IDC
has been involved in the development of 12 infomercial projects and the company
is currently engaged in re-edits and re-tests of six infomercials that have
tested near or above break even media levels. Two other shows are in full
roll-out under contract with other direct response distribution companies. One
show is ready to be media tested for the first time.
Infotopia wishes to enter into an agreement with IDC for the further development
of a certain number of these projects whereby Infotopia would make available to
IDC resources related to product development, product inventory, financial
support, and marketing and distribution services for selected infomercial
projects currently being managed by IDC.
In exchange for the contribution by Infotopia and subject to approval by a
majority vote of partners in each partnership, IDC would grant to Infotopia the
exclusive right to broadcast selected IDC infomercials and engage in the
marketing and distribution of the products presented in the infomercials.
The five (5) IDC infomercial projects that have been selected by Infotopia for
inclusion under the terms of this agreement between IDC and Infotopia are (1)
The Medicus Dual 2000 golf training program with Davis Love, III; (2) Cathi
Graham's Fresh Start weight loss program; (3) Robert Allen's Multiple Streams of
Cash business opportunity program; (4) The Facial Spa skin
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care program; and (5) the Rejuvicare skin care program. For the purposes of
this Agreement, these projects are referred to individually and collectively as
"the selected projects."
Todd Rosenzweig of Total Response Network, Inc. (TRN) has been very involved in
the development of these programs and will be continuing to work with IDC and
Infotopia on the further development of each project. Since the reversion of
all rights to each of these projects from Guthy-Renker Corporation, Todd and
TRN have been intimately involved in revision of the creative elements of each
infomercial and in the logistical elements of marketing each show.
In general terms, the following are the terms of the Agreement between
Infotopia and IDC:
1. For the purposes of this Agreement, The Summary of Terms for the
Infomercial Marketing and Distribution Agreement that I previously provided
to you is attached to this letter as Exhibit A and incorporated by
reference will serve as the basis for the terms of a separate Marketing and
Distribution Agreement which will be signed by Infotopia and IDC for each
selected project.
2. On behalf of each investor partnership involved in each of the IDC
infomercial projects selected by Infotopia, IDC will need to be paid 5% of
the gross receipts (less returns etc.) from all front-end, initial sales of
the products in all marketing environments throughout the world.
3. IDC will continue to manage all aspects of the relationship with all of the
investor partnerships and will participate in the major decisions (i.e.,
media, telemarketing, re-edits, new footage, product changes, etc.) for
each of the selected projects. TRN has a consulting relationship with IDC
and receives a significant portion of the income IDC receives from each
project. For the purposes of the arrangement between Infotopia and IDC, TRN
would be providing all its services through IDC.
4. For each of the selected projects, we would need to establish an action
plan, a budget, a timetable and an allocation of responsibilities between
Infotopia and IDC. We would expect that on the basis of a joint
case-by-case determination, Infotopia would contribute an agreed amount of
funding for re-shoots, re-edits, testing, product development, product
inventory, telemarketing, fulfillment, customer service and other aspects
of the further development of these projects.
5. For each of the selected projects, Infotopia will be required to assume and
pay in a timely manner all advances against royalties and all royalties on
product sales to talent, producers, product owners and others that may be
due under the various agreements with such parties for each of the selected
projects.
6. Infotopia will also be required to meet all of the other terms of the
existing agreements with talent, producers, product owners and others for
each of the selected projects in regard to insurance, indemnification,
books & records, accounting, statements, etc.
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7. Attached to this deal memo as Exhibit B is a Project Summary for each of
the selected projects that contains (i) a project summary, (ii) media test
information; (iii) information regarding the cost and availability of
goods; (iv) a current budget and timetable for corrective action and/or
media tests and (v) a current plan of action for each project. Exhibit B is
incorporated into this Agreement by reference.
8. Infotopia agrees to make available to IDC for the selected projects all of
Infotopia's strategic relationships with key vendors in the direct response
industry.
9. For each of the selected projects, IDC and TRN will continue to play a
major role in the designation of producers, telemarketing companies, media
buyers, club providers, marketing environments and all other important
aspects of the continuing development of the selected projects. All such
decisions shall be made jointly by Infotopia and IDC.
10. In consideration for the contribution made by Infotopia to each selected
project, IDC agrees to provide the following to Infotopia: (i) a
recommendation to each investor partnership to grant Infotopia exclusive
marketing and distribution rights to the selected projects, (ii) production
coordination services for all continuing development of the projects, (iii)
ongoing consulting and project coordination services of IDC, TRN and
companies affiliated with IDC, (iv) introductions to IDC's strategic
relationships with direct response product and service providers and (v)
continuing assistance with the administrative, legal and project management
aspects of the selected projects.
11. In addition to the ongoing direct response consulting services to be
provided to Infotopia by IDC, TRN and other companies affiliated with IDC,
Infotopia will receive services from IDC related to preparation of press
releases, provision of ongoing information regarding the progress of each
of the selected projects, interaction with public relations and investor
relations companies employed by Infotopia and other similar services
related to exchange of timely and accurate information regarding the
continuing development of the selected projects.
12. For each of the selected projects, Infotopia would have a reasonable period
of time (not to exceed 15 days) after receipt of complete information from
IDC regarding each project in which to make an election as to whether a
particular project will be picked-up by Infotopia under the terms of this
Agreement. Upon election by Infotopia to include one of the IDC project's
as a selected project, Infotopia and IDC will execute a separate Marketing
and Distribution Agreement for that project.
13. In exchange for the grant of rights and ongoing services of IDC and the
individuals and companies affiliated with IDC, the following compensation
will be delivered to IDC as specified for each of the selected projects and
each such element of compensation is to be allocated as directed by IDC:
(i) upon execution of this letter agreement, Infotopia shall cause the
immediate issuance of 800,000 shares of Infotopia S8 stock to the
individual or individuals designated by IDC; for ongoing management
consultants until such time as each project terminates.
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(ii) upon the "roll-out" of any of the selected projects (i.e., the airing
of at least $50,000 in gross media), Infotopia will pay IDC $12,500
in cash;
(iii) cash payments equal to 10% of the gross revenue from "continuity"
product sales from each of the selected projects (for the purposes of
this section, "continuity" product sales are any sales of product,
upsell product and/or services made to an existing product buyer
after the initial, front-end sale),
(iv) participation, as agreed, in other sources of revenue and/or economic
advantage resulting from the selected projects (i.e., product license
fees, sequel projects, spin-off products, etc.).
(v) all payments shall be made on a quarterly basis and will be
accompanied by a statement containing complete information regarding
the payment calculation.
14. In recognition of the proprietary information that will be provided by each
party to the other, Infotopia and IDC each agree that, during the term of
any agreement between the two companies and for a period of 12 months
thereafter, they will take all reasonable actions required to prevent the
unauthorized disclosure, use or appropriation of any information or
materials designated as "Confidential" by the other party.
15. Each of the undersigned parties represents and warrants that they have the
required approval and authority from their respective companies to enter
into and fully perform this Agreement and that the full performance of this
Agreement will not cause the breach or violation of any other agreement to
which their respective companies are a party.
16. The term of this Agreement shall be for a period of 90 days and shall
automatically terminate unless extended in writing in the form of a
Marketing and Distribution Agreement signed by both parties for each of the
selected projects.
17. Any dispute arising from this Agreement will be resolved by binding
arbitration under the rules of the American Arbitration Association and
conducted in Los Angeles, California. The prevailing party shall be
entitled to the recovery of attorney's fees and costs from the other party.
Sincerely,
/s/ Ben Gage
Ben Gage, President
The Infomercial Development Companies
AGREED AND ACCEPTED AS OF THE DATE
FIRST ABOVE WRITTEN
By: /s/ Daniel Hoyng
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Daniel Hoyng, President
Infotopia, Inc.
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EXHIBIT A
SUMMARY OF TERMS FOR
INFOMERCIAL MARKETING AND DISTRIBUTION AGREEMENT
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SUMMARY OF TERMS
INFOMERCIAL MARKETING AND DISTRIBUTION AGREEMENT
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Nature of Relationships. Funding for the production of an Infomercial for the
Product will be raised through a partnership consisting of individual investors.
The Infomercial Development Companies (IDC) will enter into an agreement with
the partnership to provide services related to the sourcing of product for
partner selection, the coordination of the production of infomercials for the
products chosen by the partners, the management of the marketing campaign
related to the partnership infomercials and collection and distribution of
income from the sale of Products. The Product Owner provides the Product and
grants IDC the exclusive right to produce the Infomercial and to market the
Product in all environments related to the Infomercial. The Marketing and
Distribution (M&D) company will be responsible for coordinating and bearing the
cost of all activities related to the marketing, distribution and sale of the
Products through all marketing environments.
Ownership of Product. At all times, the Product Owner will remain the owner of
all of the worldwide patent, trademark and other intellectual property rights
related to the Product. Pursuant to a Product Marketing Agreement between IDC
and the Product Owner, IDC will be granted the exclusive right to market and
sell the Product in all media, worldwide, during the term of the Product
Agreement.
Product Pricing. To successfully support an Infomercial campaign, the product
must be able to be sold at a 5:1 selling price to cost ratio. The most typical
arrangement for Product Owners to receive compensation from an Infomercial
campaign is for the Product Owner to get paid some or all of the difference
between the actual manufactured cost of the Product and the price IDC pays for
the Product while maintaining at least the required 5:1 ratio. As an alternative
to this method of compensation of the Product Owner, the Product can be
purchased by IDC at actual cost with a royalty paid to the Product Owner on each
sale of the Product. These terms are usually determined on a case-by-case basis.
Rights Granted to IDC. For the entire term of the marketing of the Product,
the Product Owner grants to IDC the right to take all action reasonably
necessary to produce an Infomercial for the Product and to incorporate visual
and text images of such names, logos, packaging and other intellectual property
of the Product Owner as is required to produce the Infomercial in a manner
reasonably acceptable to IDC. Additionally, subject to the payment of a minimum
annual royalty, IDC shall have the exclusive worldwide right to broadcast the
infomercial for the marketing, distribution and sale of the Product in all
direct response media, including television, home shopping, print, credit card
inserts, catalogs, the Internet and retail.
Term of the M&D Agreement. The M&D Agreement shall remain in force and
effect from the time it is executed and during (i) the term of the broadcast of
the Infomercial produced under this Agreement; (ii) the term of the broadcast
of any Sequel Infomercial or (iii) the term of the marketing of the Product or
any Sequel Product.
Production of Infomercial. IDC shall be responsible for the coordination of
all activities and the payment of all costs related to the production of the 30
minute infomercial or other form(s) of direct response television commercial(s)
promoting the Product ("the Infomercial"). IDC shall have full creative control
over the production of the Infomercial.
Ownership of Infomercial and Marketing Materials. IDC shall be the sole
owner or exclusive licensee of all testimonials, raw footage and all other
elements of the Infomercial and all other promotional and/or marketing
materials related to the Product or the Infomercial which are created or paid
for by IDC.
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Infomercial Testing and Roll Out Upon completion of the production and editing
of the Infomercial, IDC shall schedule, coordinate and/or pay for a media test
of the Infomercial to test the effectiveness of the Infomercial for the sale of
the Product. The media test shall be in the minimum amount of $10,000 and for
not less than three (3) days nor more than one hundred twenty (120) days on
such cable and broadcast television networks and stations and at such times as
IDC believes will draw favorable response rates for sale of the Product.
Partnership Royalties On behalf of the partnership, IDC has the
responsibility to collect royalty payments from the "Gross Receipts" from the
sale of the Product in all direct response media. The royalty is 5% of all
income received from sale of the Products in all media. "Gross Receipts" is
defined as all revenue or cash equivalents received for sales of Product and
upsell products, less only returns, refunds, credit card chargebacks and fees,
declines, cancels, bad debt and sales taxes which are directly related to the
Product and upsell product(s) and shall be unaffected by shipping and handling
revenues and costs.
Product Manufacture, Packaging and Delivery The Product Owner is
responsible for all aspects of the manufacture, packaging and delivery of
sufficient quantities of Product to meet the needs of the initial marketing
campaign. In the event the media test of the Infomercial is successful, IDC
would assist the Product Owner with sourcing of alternative manufacturing
supply to meet the increased needs of the full roll-out of the Infomercial and
other direct response marketing media. During the media test and roll-out of
the Infomercial, IDC would be responsible for coordinating the fulfillment of
Product purchases. In the event of a "roll-out" of the Infomercial, the M&D
company would assume all responsibility and expenses related to the management
of the campaign, including product manufacturing, media placement,
telemarketing, product distribution, order fulfillment and customer service.
Insurance In the event "roll out" of the Infomercial occurs, during the Term
of this Agreement IDC, the Product Owner and the M&D company will be expected
to maintain liability insurance coverage related to their respective
activities. Each such policy of insurance shall be in an amount of no less than
$1 million per occurrence and $2 million in the aggregate and shall have the
following conditions: (i) a deductible not exceeding $10,000; (ii) a rating of
no less than "B+" in the Best Guide; (iii) each party shall be named as an
additional insured on the other party's policy; (iv) no less than ten (10) days
written notice to the other party shall be required to decrease the policy
benefits or cancel the policy and (v) each party shall provide the other party
with a copy of a certificate evidencing compliance with these requirements
within thirty (30) days of the date of this Agreement.
Independent Contractors The Product Owner, IDC and the M&D company are
independent contractors and each party shall be solely responsible, without
liability to the other, for the timely reporting and payment of all taxes and
other withholdings, deductions and payments required by law with respect to its
own operations and employees.
Dispute Resolution In the event of any dispute regarding the M&D Agreement
or the respective rights of the parties under the M&D Agreement, the parties
agree to submit such dispute to mediation before a trained, neutral
third-party mediator. If the parties cannot resolve the dispute through
mediation within thirty (30) days of notice of the dispute, then the dispute
shall be submitted and resolved by binding arbitration in San Diego County,
California before a professional arbitrator selected by the parties or, if the
parties cannot agree on an arbitrator, appointed by the court. Any such
arbitration shall be commenced within fifteen (15) days and completed within
forty-five (45) days of selection of the arbitrator and the discovery rules
contained in the California Code of Civil Procedure shall apply to all
such proceedings. The arbitrator shall have the right to order all remedies and
award attorney's fees and costs to the prevailing party; and any such orders
may be entered in a court of competent jurisdiction. The M&D Agreement shall be
governed by and construed under the laws of the State of California.
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EXHIBIT B
SELECTED PROJECT SUMMARIES
WITH CURRENT STATUS, BUDGETS AND TIMETABLES
1. MEDICUS DUAL 2000 WITH DAVIS LOVE, III:
Project Summary - The Medicus is a golf swing training device comprised of
a golf club having a shaft that is hinged to articulate about two distinct
axes. The training device allows the detection of multiple common swing
faults through the novel hinge design. Davis Love, III and his swing coach,
Jack Lumpkin appear in the show.
Media test: 8/4-8/6/00. $10K budget. 3 payments of $33.00 + 14.95 s/h. =
1.4 media ratio with a 75% order conversion ratio.
COG: US inventory/min.quantity = $35/FOB Taiwan = $21-$23(5k unit min
order).
Third Party Royalties: 4% to Medicus/$1.50 to Davis Love/1% to Producer.
Current Status: International sales of product currently being coordinated
through Mercury Media, International. Infomercial ready to begin airing in
early Spring 2001.
Budget/Timetable: This show has had new footage produced and a re-edit
completed for the second media test at the time listed above. Filming of
additional direct-to-camera footage of Davis Love, III at a golf tournament
in Los Angeles is being planned for late November with an immediate re-edit
to prepare for a re-test and broadcast of the show at the start of the 2001
golf season. The budget for this corrective action is $10,000.
2. CATHI GRAHAM'S FRESH START:
Project Summary - Created by Cathi Graham after she personally experienced
the loss of 186 lbs. through this system, the product consists of a weight
loss program that includes 2 workbooks, 2 video tapes, 2 audio tapes, a
fat-burning recipe book and a personal manual/journal with focus on
increasing metabolism to burn fat faster. Top selling product at Canadian
home shopping. (new product/show to also include digestive enzymes as a
continuity element).
Media test: 2/5-2/8/00. $8,250 budget. Two Offers: 1 x $29.95 + s/h = 1.01
media ratio with no upsells or continuity product and 1 x $79.95 + s/h =
1.16 media ratio with no upsells or continuity product.
COG: $9.50-$11.00 (new offer to include digestive enzymes as continuity /
add $3.00)
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Third Party Royalties: 5% to Fresh Start/talent/1.5% to producer.
Budget/Timetable: $20,000 budget contracted for filming of new footage
currently scheduled for early December 2000 with a second media test to
occur in early first quarter 2001.
3. ROBERT ALLEN'S MULTIPLE STREAMS OF CASH:
Project Summary Business opportunity package from best selling author
Robert Allen. Original product included workbooks and audio tapes. New
offer to include 6 hour telecoaching program w/Robert Allen and his
"Millionaire Maker Team", 4-6 audio tapes, 2-3 special money making
reports, CD, newsletter and Robert's hardcover book; "Multiple Streams of
Income". New offer to test at 3 x $29.95 and lower, if needed for marketing
of Allen's "back-end" seminar/coaching programs. Allen organization to
participate in costs of re-edit, new footage, creation of product and media
budget to run show as a lead generation for Allen's seminars and coaching
programs.
Media test: 8/19-8/26/00. $10K budget. 3 x $39.95 = s/h = .93 (cable) .78
(broadcast)
COG: new product = $13-16.00.
Third Party Royalties: 1% to producer/reverse royalty to be determined
w/Robert Allen.
Budget/Timetable: $20,000 budget contracted for new footage and re-edit of
show to create $99.00 product offer and lead generation to be completed by
end of 2000 with media test to be conducted during first quarter 2001.
4. FACIAL SPA SKIN CARE DEVICE:
Project Summary Hand held home facial unit. Works w/rechargeable ni-cad
battery technology. Unit emits low heat, vibration and electrical pulse
stimulation (three settings; including all at once). Can be used with the
consumers existing skin care products. The consumer will use heat to open
the pores, vibration to massage the cream deep into the skin and electrical
pulse to exercise facial muscles. The combined effect is the benefit of a
professional facial in your own home. Before and after testimonials show
effectiveness of benefits. Upsell to include continuity based
cleanser/conditioner and/or skin care products.
Media test: 9/25-9/28/99. $4,975 budget. 3 x $29.95 + s/h = .72 ratio
COG: $16.45 FOB Taiwan. Bonus items not included (add = $3.50)
Third Party Royalties: 1.5% to producer/1% to talent.
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Budget/Timetable: $24,000 budget contracted for new footage and re-edit to
be completed by end of 2000 for media test in first quarter of 2001.
5. REJUVICARE SKIN CARE PROGRAM:
Project Summary A 30 day skin care system which includes day cream,
night cream, antioxidant serum and skin care supplement tablets. Very
successful on QVC. Positioning is to improve your skin from the inside out
(tablets) and from the outside in (creams). Most skin care products are
creams only. Upsells to include skin care continuity programs.
Media test: Show has not tested. 1 x $49.95. Media test scheduled for
November 2000.
COG: $11.50
Third Party Royalties: 1% to producer/1% to talent.
Budget/Timetable: Media test ($10,000 minimum) scheduled for November 2000.
