Exhibit 10.12
INTERCOMPANY SERVICES AGREEMENT
THIS INTERCOMPANY SERVICES AGREEMENT (this "Agreement") is effective as
of the 1st day of June, 1999 and is entered into by and between D.G. Jewelry
Inc., an Ontario corporation ("D.G. Jewelry") and ▇▇▇▇▇▇▇▇▇.▇▇▇ Inc. a Delaware
corporation ("▇▇▇▇▇▇▇▇▇.▇▇▇").
WHEREAS Xite ▇▇▇▇▇▇▇.▇▇▇ Inc. was incorporated by articles of
incorporation filed on or about the 1st day of January, 1999 which
articles were amendment by articles of amendment filed on or about
the 20th day of August, 1999 changing the name of the corporation
from Xite ▇▇▇▇▇▇▇.▇▇▇ Inc. to ▇▇▇▇▇▇▇▇▇.▇▇▇ Inc. ("NetJewels
Canada");
AND WHEREAS Fifty percent (50%) of the issued and outstanding
common stock of NetJewels Canada is owned by D.G. Jewelry;
AND WHEREAS ▇▇▇▇▇▇▇▇▇.▇▇▇, a wholly owned subsidiary of NetJewels Canada,
is considering an initial public offering of its common stock "IPO";
AND WHEREAS after the IPO, ▇▇▇▇▇▇▇▇▇.▇▇▇ desires to continue to obtain
various corporate, administrative and other services ("Services") from D.G.
Jewelry and D.G. Jewelry desires to continue to provide such Services following
the closing date of the IPO.
NOW THEREFORE in consideration of the sum of Five Dollars ($5.00) the
receipt of which and sufficiency thereof is hereby acknowledged and in
consideration of the mutual terms and covenants contained herein, the parties
hereto hereby agree as follows:
SECTION 1. SERVICES
D.G. Jewelry shall render to ▇▇▇▇▇▇▇▇▇.▇▇▇ the following Services in
accordance with the terms of this Agreement:
(1) CORPORATE SERVICES. D.G. Jewelry shall provide, directly or through its
subsidiaries, the services described on Exhibit A hereto, at the cost
specified and on the other terms and conditions set forth on Exhibit A.
(2) MANUFACTURING AND FULFILLMENT SERVICES. D.G. Jewelry shall provide,
directly or through its subsidiaries, the services described on Exhibit B
hereto, at the cost specified and on the other terms and conditions set
forth on Exhibit B.
(3) SPACE SHARING. D.G. Jewelry will make certain warehouse and office space
available to ▇▇▇▇▇▇▇▇▇.▇▇▇ at the cost specified and the other terms and
conditions set forth on Exhibit C.
(4) In the event that ▇▇▇▇▇▇▇▇▇.▇▇▇ requires services that exceed the scope
or extent of the Services provided for herein, D.G. Jewelry and
▇▇▇▇▇▇▇▇▇.▇▇▇ shall negotiate in good faith the terms and conditions,
including price, under which D.G. Jewelry shall provide such Services;
provided, however, that the fee payable by ▇▇▇▇▇▇▇▇▇.▇▇▇ for such
Services shall be no less favorable to ▇▇▇▇▇▇▇▇▇.▇▇▇ than the charges for
comparable services from unaffiliated third parties.
SECTION 2. COMPENSATION.
▇▇▇▇▇▇▇▇▇.▇▇▇ shall pay to D.G. Jewelry when due a fee for each of the
Services equal to the amount described in the appropriate Exhibit hereto
relating to such Service, provided that in the event ▇▇▇▇▇▇▇▇▇.▇▇▇ terminates
any Service in accordance with Section 3 hereof, the fee for such Service shall
no longer be payable following the effective date of such termination. Late
payments shall accrue interest at a rate equal to the prime rate plus 2 points
published in the Wall Street Journal from time to time.
SECTION 3. TERM.
(a) The term of this Agreement shall begin on the date first written above
(the "Effective Date") and shall continue in full force and effect until
it is terminated in accordance with this Section 3.
(b) D.G. Jewelry shall have the right (but not the obligation) to immediately
terminate this Agreement:
(i) if ▇▇▇▇▇▇▇▇▇.▇▇▇ is in material breach of any of its obligations
or representations hereunder, which breach is not cured within
twenty (20) days of receipt of written notice from D.G. Jewelry of
such breach;
(ii) if ▇▇▇▇▇▇▇▇▇.▇▇▇ files a voluntary petition in bankruptcy or is
the subject of any voluntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of
creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing, or becomes the subject of any
involuntary petition in bankruptcy or any involuntary proceeding
is not dismissed within sixty (60) days of filing;
(iii) if the business of ▇▇▇▇▇▇▇▇▇.▇▇▇ is liquidated or otherwise
terminated for insolvency or any other basis, or
(iv) if ▇▇▇▇▇▇▇▇▇.▇▇▇ becomes insolvent or unable to pay its debts as
they mature or makes an assignment for the benefit of its
creditors.
(c) ▇▇▇▇▇▇▇▇▇.▇▇▇ hall have the right (but not the obligation) to immediately
terminate this Agreement:
(i) if D.G. Jewelry is in material breach of its obligations,
specifically, but not limited to, its obligation to manufacture
quality merchandise which conforms to the order and specifications
of ▇▇▇▇▇▇▇▇▇.▇▇▇, or representations hereunder, which breach is
not cured within twenty (20) days of receipt of written notice
from ▇▇▇▇▇▇▇▇▇.▇▇▇ of such breach;
(ii) if D.G. Jewelry is the subject of a voluntary petition in
bankruptcy or any voluntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of
creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing;
(iii) if the business of D.G. Jewelry is liquidated or otherwise
terminated for insolvency or any other basis, or
(iv) if D.G. Jewelry becomes insolvent or unable to pay its debts as
they mature or makes an assignment for the benefit of its
creditors.
(d) D.G. Jewelry shall have the right (but not the obligation to terminate
this Agreement and the rights granted to ▇▇▇▇▇▇▇▇▇.▇▇▇ hereunder, upon
twenty (20) days prior written notice to ▇▇▇▇▇▇▇▇▇.▇▇▇, following the
acquisition of the direct or beneficial ownership of 20% or more of the
voting power represented by the voting securities of ▇▇▇▇▇▇▇▇▇.▇▇▇ by
persons other than D.G. Jewelry, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
or its affiliates, for purposes of this Agreement, (i) the term
"beneficial ownership" shall have the meaning set forth in Section 13 (d)
of the Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder, and (ii) the term "voting securities" shall mean
the common stock of ▇▇▇▇▇▇▇▇▇.▇▇▇ and any other securities issued by
▇▇▇▇▇▇▇▇▇.▇▇▇ having the power to vote in the election of directors of
▇▇▇▇▇▇▇▇▇.▇▇▇, including without limitation any securities having such
power only upon the occurrence of a default or any other extraordinary
contingency. This subsection shall not be applicable to an initial public
offering of ▇▇▇▇▇▇▇▇▇.▇▇▇'s common stock.
(e) A party may exercise its right to terminate pursuant to this Section 3 by
giving twenty (20) days prior written notice to the other party. No
exercise by a party of its rights under this Section 3 will limit is
remedies by reason of the other party's other rights.
SECTION 4. RECORDS AND ACCOUNTS.
D.G. Jewelry shall maintain accurate books, records and accounts of all
transactions relating to the Services performed by it pursuant to this
Agreement. ▇▇▇▇▇▇▇▇▇.▇▇▇ may, at its own expense, examine and copy those books
and records as provided in this Section 4. Such books, records and accounts
shall be maintained separately from D.G. Jewelry's own records and accounts.
▇▇▇▇▇▇▇▇▇.▇▇▇ may make those examinations only during D.G. Jewelry's business
hours, and at the place where it keeps the books and records. ▇▇▇▇▇▇▇▇▇.▇▇▇ will
be required to notify D.G. Jewelry's at least ten (10) days before the date of
planned examination.
SECTION 5. DIRECTORS AND OFFICERS OF D.G. JEWELRY
Nothing in this Agreement shall limit or restrict the right of any of
D.G. Jewelry's directors, officers or employees to engage in any other business
or devote their time and attention in part to the management or other aspects of
any other business or to render services of any kind to any corporation, firm,
individual, trust or association.
SECTION 6. INDEPENDENT CONTRACTOR.
D.G. Jewelry is an independent contractor and when its employees act
under the terms of this Agreement, they shall be deemed at all times to be under
the supervision and responsibility of D.G. Jewelry; and no person employed by
D.G. Jewelry and acting under the terms of this Agreement shall be deemed to be
acting as agent or employee of ▇▇▇▇▇▇▇▇▇.▇▇▇ or any customer of ▇▇▇▇▇▇▇▇▇.▇▇▇ or
any purposes whatsoever.
SECTION 7. OTHER AGREEMENTS.
From time to time, ▇▇▇▇▇▇▇▇▇.▇▇▇ may find it necessary or desirable
either to enter into agreements covering services of the type contemplated by
this Agreement to be provided by parties other than D.G. Jewelry or to enter
into other agreements covering functions to be performed by D.G. Jewelry
hereunder. Nothing in this Agreement shall be deemed to limit in any way the
right of ▇▇▇▇▇▇▇▇▇.▇▇▇ to acquire such services from others to enter into such
other agreements.
SECTION 8. CONFIDENTIALITY
D.G. Jewelry agrees to hold in strict confidence, and to use reasonable
efforts to cause its employees and representatives to hold in strict confidence
(a) all confidential information concerning ▇▇▇▇▇▇▇▇▇.▇▇▇ furnished to or
obtained by D.G. Jewelry in the course of providing the Services except to the
extent that such information has been in the public domain through no fault of
D.G. Jewelry (b) disclosure or release is compelled by judicial or
administrative process, or (c) in the opinion of counsel to D.G. Jewelry,
disclosure or release is necessary pursuant to requirements of the law or the
requirements of any governmental entity including, without limitation,
disclosure requirements under the Securities Exchange Act of 1934, as amended.
SECTION 9. MISCELLANEOUS.
(a) Neither party may assign this Agreement, or their respective rights and
obligations hereunder, in whole or in part, without the other party's
prior written consent. Any attempt to assign this Agreement without such
consent shall be void and no effect ab initio. Notwithstanding the
foregoing, either party may assign this Agreement or any of its rights
and obligations hereunder to any entity controlled by it or to any entity
that acquires it by purchase of stock or by merger or otherwise, or by
obtaining substantially all of its assets (a "Permitted Assignee"),
provided that any such Permitted Assignee, or
any division thereof, thereafter, succeeds to all of the rights and is
subject to all of the obligations of their respective assignor under this
Agreement.
(b) This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York applicable to agreements made and
to be performed entirely within such State, without regard to the
conflicts of law principles of such State.
(c) All legal proceedings brought in connection with this Agreement shall be
brought only in the state or federal court located within the State of
New York.
(d) If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any person
or circumstances shall be held invalid, illegal, or unenforceable in any
respect by a court of competent jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision hereof (or the
remaining portion thereof) or the application of such provision to any
other persons or circumstances.
(e) All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable
overnight courier service and shall be deemed given when so delivered by
hand, or if mailed, three days after mailing (one business day in the
case of express mail or overnight courier service), as follows:
(i) if to Net ▇▇▇▇▇▇.▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(ii) if to D.G. Jewelry
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(f) The provisions of Section 9 hereof shall survive any termination of this
Agreement.
(g) There is no relationship of partnership, joint venture, employment,
franchise, or agency between the parties. Neither party shall have the
power to bind the other or incur obligations on the other's behalf
without the other's prior written consent.
(h) No failure of either party to exercise or enforce any of its rights under
this Agreement shall act as a waiver of such right.
(i) This Agreement, along with the Exhibits hereto, contains the entire
agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter. Neither party shall be
liable or bound to any other party in any manner by any representations,
warranties or covenants relating to such subject matter except as
specifically set forth herein.
(j) This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become
effective when one or more such counterparts have been signed by each of
the parties and delivered to each of the other parties.
(k) This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
(l) This Agreements for the sole benefit of the parties hereto and nothing
herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto any legal or equitable rights
hereunder.
(m) The headings contained in this Agreement or in any Exhibit hereto are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Exhibits annexed hereto or referred
to herein are hereby incorporated in and made apart of this Agreement as
if set forth in full herein. Any capitalized terms used in any Exhibit
but not otherwise defined therein, shall have the meaning as defined in
this Agreement. When a reference is made in this Agreement to a Section
or an Exhibit, such reference shall be to a Section of, or an Exhibit to,
this Agreement unless otherwise indicated.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
D.G. JEWELRY INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
EXHIBIT A
CORPORATE SERVICES
D.G. Jewelry shall provide general corporate services to ▇▇▇▇▇▇▇▇▇.▇▇▇,
including, but not limited to the following: accounting services, management
information services, telecommunications, human resources administration and
services, including but not limited to, benefits administration, maintenance of
insurance (property and casualty, medical, dental and life) and payroll
processing, including the withholding of taxes, employment insurance and Canada
pension plan payments, preparation and filing of tax returns and all necessary
and desirable services which may be necessary or desirable in the operation of a
business such as ▇▇▇▇▇▇▇▇▇.▇▇▇. For such services D.G. Jewelry will be paid a
monthly fee of $5,000, plus actual costs incurred.
EXHIBIT B
MANUFACTURING AND FULFILLMENT SERVICES
(1) D.G. Jewelry shall act as a manufacturer of jewelry products (the
"Jewelry Products") for ▇▇▇▇▇▇▇▇▇.▇▇▇. In such capacity D.G. Jewelry and
▇▇▇▇▇▇▇▇▇.▇▇▇ shall decide on products to be manufactured including but
not limited to, design, number of units to be manufactured and the price
per unit. D.G. Jewelry shall, at its sole cost and expense, provide all
information and assistance necessary to ensure that all Jewelry Products
purchased from D.G. Jewelry are merchandised in a first class and top
quality manner.
(2) D.G. Jewelry shall be responsible for maintaining an inventory of Jewelry
Products which is customary in the industry and which allows
▇▇▇▇▇▇▇▇▇.▇▇▇ to conduct its business without undue delay or
restrictions.
(3) D.G. Jewelry shall be solely responsible for all matters relating to the
distribution and fulfillment of orders received by ▇▇▇▇▇▇▇▇▇.▇▇▇,
including but not limited to, shipping, packaging and insuring of the
Jewelry Product and the payment of any and all freight costs, custom
fees, duties, taxes or tariffs. D.G. Jewelry shall distribute and fulfill
all orders through the D.G. Jewelry distribution centres located in
Toronto, Canada and in Cedar Knolls, New Jersey. D.G. Jewelry shall
provide ▇▇▇▇▇▇▇▇▇.▇▇▇ access to the distribution centres and shall assist
▇▇▇▇▇▇▇▇▇.▇▇▇ in the tracking of all orders submitted to D.G. Jewelry.
(4) Subject to paragraph 5 of this Schedule "B", all Jewelry Products will be
sold to ▇▇▇▇▇▇▇▇▇.▇▇▇ by D.G. Jewelry at a price equal to the lower of:
(i) D.G. Jewelry's cost plus 15%; and (ii) the lowest price paid, or
which may be paid to D.G. Jewelry by any other party in respect of the
same or reasonable similar Jewelry Products within a period of six (6)
months of the date ▇▇▇▇▇▇▇▇▇.▇▇▇ purchases the Jewelry Products from D.G.
Jewelry (the "Purchase Price").
(5) In the event that ▇▇▇▇▇▇▇▇▇.▇▇▇ offers any of the Jewelry Products for
sale through a third party auction site, such as (and by way of example
only) ebay, ubid or ▇▇▇.▇▇▇ (the "Auction Site"), D.G. Jewelry will amend
the Purchase Price by reducing the Purchase Price to an amount equal to
eighty-five percent (85%) of the final amount actually received by
▇▇▇▇▇▇▇▇▇.▇▇▇ in connection with the purchase of a Jewelry Product
through the Auction Site, such that the profit of ▇▇▇▇▇▇▇▇▇.▇▇▇ for
Jewelry Products sold on an Auction Site shall be at least fifteen
percent (15%) of the amount actually received by ▇▇▇▇▇▇▇▇▇.▇▇▇ from the
consumer/purchaser for the Jewelry Product(s) net of all costs, charges,
commissions and expenses paid or payable by ▇▇▇▇▇▇▇▇▇.▇▇▇ to the Auction
Site in respect of such purchase and sale.
(6) D.G. Jewelry shall be solely responsible for all product returns,
complaints and breaches of any express or implied warranties with respect
to the Jewelry Products.
EXHIBIT C
SPACE SHARING
(a) License to Use Space. During the term of this Agreement, D.G. Jewelry
shall permit ▇▇▇▇▇▇▇▇▇.▇▇▇ to use a portion of D.G. Jewelry's warehouse
office for the purposes permitted under the lease agreements pursuant to
which D.G. Jewelry leases such space (to the extent such offices are
leased), subject to the terms and conditions set forth in this Agreement.
The space to be used by ▇▇▇▇▇▇▇▇▇.▇▇▇ shall be as mutually agreed by the
parties from time to time. ▇▇▇▇▇▇▇▇▇.▇▇▇'s right to use a portion of D.
G. Jewelry's Premises shall terminate on the earlier of: (i) 90 days
after ▇▇▇▇▇▇▇▇▇.▇▇▇ notifies D.G. Jewelry's that ▇▇▇▇▇▇▇▇▇.▇▇▇ no longer
desires to use any portion of D.G. Jewelry's Premises, or (ii) 90 days
after D.G Jewelry notifies ▇▇▇▇▇▇▇▇▇.▇▇▇ that ▇▇▇▇▇▇▇▇▇.▇▇▇ may no longer
use any portion of D.G. Jewelry's Premises.
(b) Consideration. So long as ▇▇▇▇▇▇▇▇▇.▇▇▇ uses any portion of D.G.
Jewelry's Premises, ▇▇▇▇▇▇▇▇▇.▇▇▇ shall pay to D.G. Jewelry on the first
day of each calendar month an amount equal to all expenses related to
D.G. Jewelry Premises (e.g. Rent, CAM, Tax, Utilities). Payments for any
partial calendar month shall be prorated on a per diem basis.
(c) Compliance with Leases. ▇▇▇▇▇▇▇▇▇.▇▇▇ hereby agrees not to take any
action or fail to take any action in connection with its use of any
portion of D.G. Jewelry Premises, a result of which would be D.G.
Jewelry's violation of any of the terms and conditions of any lease or
other restriction on D.G. Jewelry's use of D.G Jewelry Premises.
▇▇▇▇▇▇▇▇▇.▇▇▇ agrees to comply with the terms and provisions of any such
leases for D.G. Jewelry Premises in which it uses.
