MANAGEMENT SERVICES AGREEMENT

 

BETWEEN

 

OSL HOLDINGS, INC.

 

AND

 

SEAN RIDGLEY

 

DATED AS OF ______________, 2014

 

 

 

 

MANAGEMENT SERVICES AGREEMENT

 

This Management Services Agreement (“Agreement”) is entered into between OSL
Holdings, Inc., a Nevada Corporation (the “Manager”), and Shawn Ridgley, an
individual, (the “Business”).

 

RECITALS:

 

A. The Business is engaged in the operation of a retail business as a sole
proprietor;

 

B. The Manager is a management company engaged in the management of retail
businesses;

 

C. To facilitate the successful operation of a retail business, the Business
desires to delegate management of its business affairs to a company with
business expertise;

 

D. Manager has the ability to manage the business aspects of the Business. The
Business desires to engage the Manager to provide management services, and the
Manager desires to provide such services, on the terms and conditions set forth
herein;

 

E. The Business and the Manager have determined a fair market value for the
services to be rendered by the Manager;

 

F. The Manager is willing to commit significant resources to the Business, based
on the representations of the Business that the Business will continue to
operate a retail business.

 

AGREEMENT:

 

NOW, THEREFORE, the parties agree as follows:

 

ARTICLE I. APPOINTMENT AND AUTHORITY OF MANAGER

 

Section 1.1 Definitions. As used in this Agreement, certain terms will have the
respective meanings set forth in Exhibit 1.1 hereto, unless the context
otherwise requires.

 

Section 1.2 Appointment. On the terms and conditions set forth herein, the
Business hereby appoints the Manager as its sole and exclusive agent for the
management of the business affairs of the Business, and the Manager hereby
accepts such appointment.

 

 

 

 

Section 1.3 General Authority. Consistent with the provisions hereof, the
Manager will have the responsibility and commensurate authority to provide
Management Services for the Business. Subject to the terms and conditions
hereof, the Manager is hereby expressly authorized to provide the Management
Services and to pay and incur expenses in connection therewith to meet the
day-to-day requirements of the Business.

 

Section 1.4 Internal Management of the Business. Except as set forth in this
Agreement, matters involving the internal management, control or finances of the
Business will remain the responsibility of the Business; except as set forth in
this Agreement, all other matters will be included in the Manager’s
responsibilities under this Agreement.

 

ARTICLE III. COVENANTS AND RESPONSIBILITIES OF THE MANAGER

 

Section 2.1 General. During the Term, the Manager will provide all Management
Services as are necessary and appropriate for the day-to-day administration of
the Business’s operations in accordance with all law, rules, regulations and
guidelines applicable to the provisions of Management Services.

 

Section 2.2 Location and Equipment.

 

(a) Location. As necessary and appropriate, taking into consideration the
concerns of the Business, the Manager will arrange for the Business to lease,
acquire or otherwise procure a location reasonably acceptable to the Business.
The Business shall be responsible for any expenses associated with such lease,
acquisition, or procurement.

 

(b) Furniture and Equipment. The Manager will provide all equipment, fixtures,
office supplies, furniture and furnishings deemed reasonably necessary by the
Manager for the operation of the Business. These items shall be provided in
accordance with the Business Furniture and Equipment Lease Agreement executed by
the parties. All leases for such equipment, fixtures, office supplies, furniture
and furnishings shall be through the Manager. In the event the Business is the
lessee of equipment, fixtures, office supplies, furniture and furnishings with
an unrelated and nonaffiliated lessor, the Manager may require the Business to
(and on such request the Business will) assign or sublease such lease to the
Manager upon receipt of consent from the lessor if required by the lease, in
which case, the Business will use its best efforts to assist in obtaining the
lessor’s consent to the assignment or sublease. The Business shall be
responsible for any expenses associated with such equipment.

 

Section 2.3 Support Services. The Manager will provide or arrange for all
printing, stationery, forms, postage, duplication or photocopying services,
payroll, and other support services as are reasonably necessary and appropriate
for the operation of the Business.

 

 

 

 

Section 2.4 Billing and Collection.

 

(a) Collection Agent. The Manager will use its reasonable best efforts to timely
collect on all accounts receivable of the Business. The Manager and the Business
agree that the following procedures will apply with respect to the billing and
collection of payments:

 

(i) The Business will establish an account at a bank approved by the Manager
(the “Collecting Bank”) in the Business’s name (the “Lockbox Account”). Unless
the Business receives the Manager’s prior written approval, the Business will
maintain the Lockbox Account until the Manager collects all amounts billed by
the Manager hereunder. The Collecting Bank may not provide financing to the
Business nor act on the behalf of another party in connection with the provision
of financing to the Business. The Business has sole control of the Lockbox
Account and the Collecting Bank is subject only to the Business’s instructions
regarding the account; the Manager has no right or interest in or control over
the Lockbox Account.

 

(ii) The Business will instruct the Collecting Bank to transfer automatically
all amounts deposited into the Lockbox Account constituting good funds to the
Manager’s account at the Manager’s Bank (the “Manager’s Account”). If the
Business desires to modify or amend in any manner the instructions to the
Collecting Bank regarding the Lockbox Account, the Business will notify Manager
of such desire and the parties will work in good faith to resolve such request
with the Collecting Bank. The Business has no right or interest in or control
over the Manager’s Account.

 

(iii) The Business authorizes the Manager to instruct payors to remit all
payments directly to the Lockbox Account for all collections generated by the
Business or its agents, including employees. The Business will not make any
withdrawals from, the Lockbox Account without the prior written consent of the
Manager. To the extent the Business or the Manager receives any moneys for goods
sold and/or services provided in connection with the Business, the Business and
the Manager will deposit all such revenue into the Lockbox Account within seven
(7) days.

 

(b) Exclusive Special Power of Attorney. In connection with the billing and
collection services to be provided hereunder, and throughout the Term (and
thereafter as provided in Section 5.3 hereof), the Business hereby grants to the
Manager an exclusive special power of attorney and appoints the Manager as the
Business’s exclusive true and lawful agent and attorney-in-fact, and the Manager
hereby accepts such special power of attorney and appointment, for the following
purposes:

 

(i) Collection of Receivables. To collect and receive, in the Business’s name
and on the Business’s behalf, all accounts receivable, to administer such
accounts including: (A) extending the time of payment of any such accounts for
cash, credit or otherwise; (B) discharging or releasing the obligors of any such
accounts; (C) suing, assigning or selling at a discount such accounts to
collection agencies; or (D) taking other measures to require the payment of any
such accounts; provided, however, that all accounts receivable shall be
deposited by the Manager into the Lockbox Account.

 

 

 

 

(ii) Deposit. To deposit all amounts in the Business’s name and the Business’s
behalf into the Lockbox Account. The Business covenants to transfer and deliver
to the Manager for deposit into the Lockbox Account (or itself to make such
deposit of) all funds received by the Business. Upon receipt by the Manager of
any funds, the Manager will immediately deposit those funds into the Lockbox
Account.

 

(iii) Endorsement. To take possession of, endorse in the name of the Business,
and deposit into the Lockbox Account any notes, checks, money orders, insurance
payments, and any other instruments received in payment for products and/or
items sold or services rendered.

 

(c) Revocable Power of Attorney. The special power of attorney granted herein
will be revocable upon 180 days prior written notice from the Business to the
Manager. In the event the special power of attorney is revoked by the Business,
then the parties will work in good faith so that the Business will grant the
Manager a successor special power of attorney on substantially similar terms.

 

(d) Further Instruments. Upon request of the Manager, the Business will execute
and deliver to the financial institution wherein the Lockbox Account is
maintained, such additional documents or instruments as may be necessary to
evidence or effect the special power of attorney granted to the Manager by the
Business pursuant to this Section or Section 2.9 hereof. If the Manager assigns
this Agreement in accordance with its terms, then the Business will execute a
power of attorney in favor of the assignee and in the form of Exhibit 2.8
attached hereto.

 

Section 2.5 Priority of Payments. The Manager will apply funds transferred to
the Manager’s Account from the Lockbox Account in the following order of
priority:

 

(a) Operations Center Expenses – Third Parties. Payment of Operations Center
Expenses that are payable to third parties other than the Manager.

 

(b) Operations Center Expenses – Manager. Payment of Operations Center Expenses
that are payable to the Manager, except the Management Fee.

 

(c) Management Fee. Payment to the Manager of the Management Fee.

 

(d) Manager’s Corporate Overhead. Payment to the Manager of the Business’s share
of Manager’s Corporate Overhead. Business’ share of Corporate Overhead will be
based on the Business’ revenue as a percentage of the revenue of all businesses
managed by Manager and affiliates. Manager’s Corporate Overhead may be
calculated monthly or at such other interval as reasonably determined by the
Manager.

 

(e) Balance. The remaining balance will be paid as directed by the Business.

 

 

 

 

Section 2.6 Business Compensation Pool Budget.

 

(a) Monthly Budget. Each month the Manager, in consultation with the Business,
will allocate to the Business Compensation Pool the Budget Percentage of the
Business Collections received during the prior month, less any shortfalls
carried forward from previous allocations as described in Section 2.6(b). The
Budget Percentage will be set forth by the Manager from time to time on Exhibit
2.6.

 

(b) Budget Adjustments. The Manager will make such adjustments as may be
reasonably necessary from time to time to ensure that the Business Collections
is applied as set forth in Section 2.5.

 

Section 2.7 Fiscal Matters.

 

(a) Payroll. The Manager will provide all payroll services for the Business.

 

(b) Accounting and Financial Records. The Manager will establish and administer
accounting procedures, controls and systems for the development, preparation and
safekeeping of administrative or financial records and books of account relating
to the business and financial affairs of the Business and the provision of
Medical Services. Such books and records will be prepared and maintained in
accordance with applicable laws and regulations. The Manager will prepare and
deliver to the Business, within ninety (90) days of the end of each fiscal year,
a balance sheet and a profit and loss statement reflecting the financial status
of the Business in regard to the provision of Medical Services as of the end of
such fiscal year, all of which will be prepared in accordance with GAAP
consistently applied. In addition, the Manager will prepare or assist in the
preparation of any other financial statements or records as the Business may
reasonably request.

 

(c) Tax Matters.

 

(i) In General. The Manager will prepare (or arrange for the preparation by an
accountant who is selected by the Manager with Business Consent of) all
appropriate tax returns and reports required of the Business.

 

(ii) Sales and Use Taxes. The Manager and the Business acknowledge and agree
that to the extent that any of the services to be provided by the Manager
hereunder may be subject to any State sales and use taxes, the Manager may have
a legal obligation to collect such taxes from the Business and to remit same to
the appropriate tax collection authorities. The Business agrees to pay in
addition to the payment of the Management Fee, the applicable State sales and
use taxes in respect of the portion of the Management Fees attributable to such
services.

 

Section 2.12 Reports and Records.

 

(a) Records. The Manager will establish, monitor and maintain procedures and
policies for the timely creation, preparation, filing and retrieval of all
records generated by the Business in connection with the Business. Subject to
applicable law, the Manager will ensure that records are promptly available to
the appropriate persons. All records will be retained and maintained in
accordance with all applicable State and federal laws. Except as otherwise
provided by law, all records will be and remain the joint property of the
Business and the Manager.

 

 

 

 

(b) Other Reports and Records. The Manager will timely create, prepare and file
such additional reports and records as are reasonably necessary and appropriate
for the Business. The Manager will be prepared to analyze and interpret such
reports and records upon the request of the Business.

 

Section 2.9 Recruitment for the Business. The Manager will perform all services
reasonably necessary and appropriate to recruit potential personnel to become
employees of the Business. The Business will employ all such personnel recruited
by the Manager, pursuant to the terms and conditions negotiated by the Manager.
The Manager will provide the Business with, and the Business will utilize, model
agreements to document the Business’s employment, retention or other service
arrangements with such individuals with final determination of hiring made by
the Business.

 

Section 2.10 Outside Consultants, Affiliates and Advisors. The Manager may
perform the Management Services through the use of outside consultants,
affiliates and advisors.

 

Section 2.11 Confidential and Proprietary Information.

 

(a) Confidentiality.

 

(i) General. Except as set forth in this Agreement, the Manager will not
disclose any Confidential Information of the Business to other persons without
the Business’s express written authorization. Such Confidential Information will
not be used in any way directly or indirectly detrimental to the Business. The
Manager will keep such Confidential Information confidential.

 

(ii) Manager Representatives. The Manager will ensure that its employees,
consultants, affiliates and advisors who have access to such Confidential
Information comply with these nondisclosure obligations. The Manager may
disclose Confidential Information to those of its Representatives who need to
know Confidential Information for the purposes of this Agreement. Such
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section, and will be directed by the
Manager not to disclose to any other person any Confidential Information. The
Manager agrees to be responsible for any breach of this Section by its
affiliates, advisors, or Representatives.

 

(iii) Compliance with Legal Process. If the Manager is requested or required (by
oral questions, interrogatories, requests for information or documents,
subpoenas, civil investigative demands, or similar processes) to disclose or
produce any Confidential Information furnished in the course of its dealings
with the Business or its affiliates, advisors, or Representatives, the Manager
will (A) provide the Business with prompt notice thereof and copies, if
possible, and, if not, a description, of the Confidential Information requested
or required to be produced so that the Business may seek an appropriate
protective order or waive compliance with the provisions of this Section and (B)
consult with the Business as to the advisability of the Business’s taking of
legally available steps to resist or narrow such request. The Manager further
agrees that, if in the absence of a protective order or the receipt of a waiver
hereunder the Manager is nonetheless, in the written opinion of its legal
counsel, compelled to disclose or produce Confidential Information concerning
the Business to any tribunal legally authorized to request and entitled to
receive such Confidential Information or to stand liable for contempt or suffer
other censure or penalty, the Manager may disclose or produce such Confidential
Information to such tribunal without liability hereunder. The Manager will give
the Business written notice of the Confidential Information to be so disclosed
or produced as far in advance of its disclosure or production as is practicable.
The Manager will use its best efforts to obtain, to the greatest extent
practicable, an order or other reliable assurance that confidential treatment
will be accorded to such Confidential Information so required to be disclosed or
produced.

 

 

 

 

Section 2.12 No Warranty. The Business acknowledges that the Manager has not
made and will not make any express or implied warranties or representations that
the services provided by the Manager will result in any particular amount or
level of income to the Business.

 

ARTICLE III. COVENANTS AND RESPONSIBILITIES OF THE BUSINESS

 

Section 3.1 Organization. The Business, as a continuing condition of the
Manager’s obligations hereunder, will at all times during the Term be and remain
legally organized and operated in a manner consistent with all State, local, and
federal laws.

 

Section 3.2 The Business Personnel.

 

(a) Personnel.

 

(i) Number. The Business will retain the number of employees or independent
contractors reasonably necessary and appropriate for the operation of the
Business. The Manager may make recommendations regarding the employment or
termination of employment of any personnel.

 

(ii) Compensation. The Business will be responsible for paying the compensation
and fringe benefits, as applicable, for all personnel, and for withholding (as
required by law) any sums for income tax, unemployment insurance, social
security, or any other withholding required by applicable law. The Manager may,
on behalf of the Business, establish and administer the compensation with
respect to such individuals in accordance with the written agreement between the
Business and each individual.

 

Section 3.3 The Business’s Insurance.

 

(a) Types. The Business will, as an Operations Center Expense, obtain and
maintain with commercial carriers reasonably acceptable to the Manager
appropriate worker’s compensation coverage for the Business’ employed personnel,
if any, and comprehensive general liability and vicarious liability insurance
covering the Business. The comprehensive general liability and vicarious
liability coverage will be in the minimum amount of One Million Dollars
($1,000,000). The amounts of such insurance coverage may be increased from time
to time as reasonably determined by the Business in consultation with the
Manager.

 

 

 

 

(b) Cancellation. The insurance policy or policies will provide for at least
thirty (30) days advance written notice to the Manager and the Business from the
insurer as to any alteration of coverage, cancellation, or proposed cancellation
for any cause. The Business will cause to be issued to the Manager by such
insurer or insurers a certificate reflecting such coverage and will provide
written notice to the Manager promptly upon receipt of notice of the
cancellation or proposed cancellation of such insurance for any cause.

 

Section 3.4 Confidential and Proprietary Information.

 

(a) General. The Business will not disclose any Confidential Information of the
Manager without the Manager’s express written authorization. Such Confidential
Information will not be used in any way directly or indirectly detrimental to
the Manager. The Business will keep such Confidential Information confidential.

 

(b) Business Representatives. The Business will ensure that its affiliates and
advisors who have access to such Confidential Information comply with these
nondisclosure obligations. The Business may disclose Confidential Information to
those of its Representatives who need to know Confidential Information for the
purposes of this Agreement. Such Representatives will be informed of the
confidential nature of the Confidential Information, will agree to be bound by
this Section, and will be directed by the Business not to disclose to any other
person any Confidential Information. The Business agrees to be responsible for
any breach of this Section by its affiliates, advisors, or Representatives.

 

(c) Legal Process. If the Business is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demands, or similar processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with the
Manager or its affiliates, advisors, or Representatives, the Business will (i)
provide the Manager with prompt notice thereof and copies, if possible, and, if
not, a description, of the Confidential Information requested or required to be
produced so that the Manager may seek an appropriate protective order or waive
compliance with the provisions of this Section and (ii) consult with the Manager
as to the advisability of the Manager’s taking of legally available steps to
resist or narrow such request. The Business further agrees that, if in the
absence of a protective order or the receipt of a waiver hereunder the Business
is nonetheless, in the written opinion of its legal counsel, compelled to
disclose or produce Confidential Information concerning the Manager to any
tribunal or to stand liable for contempt or suffer other censure or penalty, the
Business may disclose or produce such Confidential Information to such tribunal
legally authorized to request and entitled to receive such Confidential
Information without liability hereunder. The Business will give the Manager
written notice of the Confidential Information to be so disclosed or produced as
far in advance of its disclosure or production as is practicable. The Business
will use its best efforts to obtain, to the greatest extent practicable, an
order or other reliable assurance that confidential treatment will be accorded
to such Confidential Information so required to be disclosed or produced.

 

 

 

 

Section 3.5 Noncompetition.

 

(a) Acknowledgements. The Business hereby recognizes and acknowledges that the
Manager will incur substantial costs in providing the equipment, support
services, personnel, management, administration, and other items and services
that are the subject matter hereof and that in the process of providing services
hereunder, the Business will be privy to financial and Confidential Information,
to which the Business would not otherwise be exposed. The parties also recognize
that the services to be provided by the Manager will be feasible only if the
Business operates an active business to which the individuals associated with
the Business devote their full professional time and attention. The Business
agrees and acknowledges that the noncompetition covenants described hereunder
are necessary for the protection of the Manager, and that the Manager would not
have entered into this Agreement without the following covenants.

 

(b) No Competing Business. During the Term of this Agreement and except for its
obligations pursuant hereto, the Business will not establish or operate another
retail business without Manager’s prior written approval.

 

(c) No Competing Management Company. Except as specifically agreed to by the
Manager in writing, the Business covenants and agrees that during the Term and
for a period of two (2) years from the date this Agreement is terminated, the
Business will not directly or indirectly own (excluding ownership of less than
five percent (5%) of the equity of any publicly traded entity), manage, operate,
control or maintain any interest whatsoever in any enterprise (i) having to do
with the provision, distribution, promotion, or advertising of any type of
management or administrative services or products to third parties in
competition with the Manager; and/or (ii) offering any type of service(s) or
product(s) to third parties similar to those offered by the Manager to the
Business. Notwithstanding the above restriction, nothing herein will prohibit
the Business or any of its shareholders from providing management and
administrative services to its or their own retail businesses after the
termination hereof.

 

(d) Enforcement. The parties understand and acknowledge that the provisions of
Section 3.4 and this Section are designed to preserve the goodwill of the
Manager and the goodwill of the individual the Business. Accordingly, if the
either party breaches any obligation of Section 3.4 or this Section, then in
addition to any other remedies available under this Agreement, at law or in
equity, and notwithstanding Section 6.6 hereof, the other party will be entitled
to enforce this Agreement by injunctive relief and by specific performance
hereof. Such relief will be available without the necessity of posting a bond,
cash or otherwise. Additionally, nothing in this paragraph will limit a party’s
right to recover any other damages to which it is entitled as result of the
other party’s breach. If any provision of the covenants is held by a court of
competent jurisdiction or an arbitrator to be unenforceable due to an excessive
time period, geographic area or restricted activity, the covenant will be
reformed to comply with such time period, geographic area, or restricted
activity that would be held enforceable.

 

Section 3.6 Name, Trademark and Intellectual Property. The Business represents
and warrants that, during the term of this Agreement, the Business will conduct
its professional business under the name of, and only under the name of The
Natural Way of LA.

 

 

 

 

(a) Service Mark. The Manager and its parent and its affiliates own certain
common law mark rights to the “The Natural Way of LA” word mark, including, but
not limited to, any and all corresponding logos or similar marks and all usage
of the “The Natural Way of LA” word mark (collectively, the “Service Mark”).
Except as set forth in this Agreement, the Business has no statutory or common
law rights in or to the Service Mark.

 

(b) Grant. On the terms and subject to the conditions of this Section 3.10, the
Manager hereby grants to the Business, and the Business hereby accepts, a
non-assignable, non-transferable license (the “License”) (without the right to
sublicense) solely to use the Service Mark, consistent with the terms and
conditions of this Agreement and solely as approved by Manager in each instance.

 

(c) Use. The Business may use the Service Mark for the following purpose and no
other: as a mark to identify, advertise and otherwise promote a retail business
within the geographic territory of the State of California (the “Territory”).

 

(d) Transferability. The Business may not effect or allow or cause to occur any
sale, conveyance, sub-license, security interest, encumbrance, mortgage, lien or
other voluntary or involuntary transfer, whether by operation of law or
otherwise, of any beneficial, collateral or other interest in or to the License.

 

(e) Retention and Protection of Rights. The Business acknowledges that the
Manager retains exclusive title to and ownership of the Service Mark and any and
all derivative works thereto. The Manager does not grant to the Business any
right, title or interest in or to the Service Mark, other than the rights
granted hereby, or any right to engage in an activity which, absent a License,
would constitute, induce or contribute to infringement of the right, title or
interest of the Manager in or to the Service Mark. The Business will not
challenge anywhere in the United States the validity or enforceability of the
Service Mark. The Business will immediately notify the Manager in writing if it
obtains knowledge of any use or intended use by any third party of any name,
mark, logo or design identical to or confusingly similar to the Service Mark.
The Business will not at any time during or after the term of the License, claim
any right, title or interest in or to the Service Mark, except such rights as
are provided hereby.

 

(g) Term and Termination. The License will be effective upon the execution of
this Agreement and will terminate upon the termination of this Agreement;
provided that, the Manager may still bill and collect under the Service Mark for
items and/or products sold, or for services rendered, by the Business before the
termination of this Agreement.

 

(h) Intellectual Property. The Manager and its parent, affiliates and licensors
are the owners of certain unique intellectual property (the “Works”), including
but not limited to retail software, brand names, process documents, SOP
handbooks, retail management training, business operations training,
merchandising, document creation, marketing planning, and media planning. The
Works shall remain the Manager’s and its parent’s, affiliates’ and/or licensors’
sole and exclusive intellectual property. No transfer of the Works is
contemplated hereby. Any data, information, creation, software, hardware,
concept, idea, process, patentable material, copyrightable material, trademark
or service mark or other information, developed by or worked on by the Business,
whether in conjunction with the Manager or with third parties or working alone,
during the term of this Agreement, along with any modification, appendage,
change, improvement or creation of derivative works of the Works shall
immediately upon creation be the sole and exclusive property of the Manager.

 

 

 

 

ARTICLE IV. FINANCIAL ARRANGEMENT

 

Section 4.1 Management Fee. The Business and the Manager agree to the
compensation set forth herein as being paid to the Manager in consideration of a
substantial commitment made by the Manager hereunder and that such fees are fair
and reasonable. Each month, in the priority established by Section 2.9 hereof,
and in addition to reimbursement or payment to the Manager of Operations Center
Expenses as provided in Section 2.9 hereof, the Manager will be paid the
Management Fee.

 

Section 4.2 Reasonable Value. The Management Fee shall be $75,000 per month. The
Management Fee is acknowledged as the parties’ negotiated agreement as to the
reasonable fair market value of the contract analysis and support, other support
services, purchasing, personnel, office space, management, administration,
strategic management and other items and services furnished by the Manager
pursuant hereto, considering the nature and volume of the services required and
the risks assumed by the Manager. The Business and the Manager recognize and
acknowledge that: (i) the Manager’s administrative expertise will contribute
great value to the Business’s performance, (ii) the Manager will incur
substantial costs and business risks in arranging for the Business’s use of the
location and in providing the equipment, support services, personnel, office
space, management, administration, and other items and services that are the
subject matter hereof, and (iii) certain of such costs and expenses can vary to
a considerable degree according to the extent of the Business’s business and
services. It is the intent of the parties that the Management Fee reasonably
compensate the Manager for the value to the Business of the Manager’s
administrative expertise, given the considerable business risk to the Manager in
providing the items and services that are the subject hereof.

 

Section 4.3 Payment of Management Fee. To facilitate the payment of the
Management Fee, the Business hereby expressly authorizes the Manager to retain
the Management Fee from the funds that are transferred to the Manager’s Account
from the Lockbox Account, as such fee becomes due and payable during the Term in
accordance with Section 2.9 hereof, and after termination as provided in Section
5.3 hereof.

 

ARTICLE V. TERM AND TERMINATION

 

Section 5.1 Initial and Renewal Term. The Term of this Agreement will be for an
initial period of five (5) years after the effective date. Thereafter, the Term
hereof will be automatically renewed for three (3) successive five (5) year
periods, provided that the Agreement has not been terminated as provided in
Section 5.2 hereof.

 

 

 

 

Section 5.2 Termination.

 

(a) Termination By the Manager. The Manager may immediately terminate this
Agreement upon the occurrence of any one of the following events, which will be
deemed to be “for cause”:

 

  (i)Illegal Activity. The violation of any state, federal, or local law by the
Business, including but not limited to notification from any government body
that the Business is engaged in illegal activity.

 

  (ii)Dissolution or Bankruptcy. The dissolution of the Business or the filing
of a petition in voluntary bankruptcy, an assignment for the benefit of
creditors, or other action taken voluntarily or involuntarily under any state or
federal statute for the protection of debtors.

 

  (iv)Default. The Business materially defaults in the performance of any of its
material duties or obligations hereunder, and such default continues for fifteen
(15) days after the Business receives written notice describing in reasonable
detail the nature and circumstances of the default.

 

(b) Termination By the Business. The Business may terminate this Agreement upon
any of the following occurrences, which will be deemed to be “for cause”:

 

  (i)Default. The Manager materially defaults in the performance of any of its
material duties or obligations hereunder, and such default continues for ninety
(90) days after the Manager receives written notice describing in reasonable
detail the nature and circumstances of the default.

 

(c) Termination by Agreement. In the event the Business and the Manager will
mutually agree in writing, this Agreement may be terminated on the date
specified in such written agreement.

 

(d) Legislative, Regulatory or Administrative Change. In the event there will be
a material change in any state, local, or federal law, case law, regulations or
general instructions, the interpretation of any of the foregoing, or the
adoption of new federal or state legislation, any of which are reasonably likely
to materially affect the manner in which either party may perform or be
compensated for its services hereunder or which will make this Agreement
unlawful, the parties will immediately enter into good faith negotiations
regarding a new service arrangement or basis for compensation for the services
furnished pursuant to this Agreement that complies with the law, regulation, or
policy. If good faith negotiations cannot resolve the matter, it will be
submitted to arbitration as referenced in Section 6.6 hereof.

 

 

 

 

Section 5.3 Effects of Termination.

 

(a) General Effect. Upon termination of this Agreement in accordance with the
terms hereof, neither party will have any further obligations hereunder except
for (i) obligations accruing prior to the date of termination, including,
without limitation, payment of the Management Fee and the Operations Center
Expenses relating to services provided prior to the termination of this
Agreement, (ii) obligations, promises, or covenants set forth herein that are
expressly made to extend beyond the Term, including, without limitation,
indemnities and noncompetition provisions (other than noncompetition by the
Business after termination of this Agreement by the Business for cause), which
provisions will survive the expiration or termination of this Agreement.

 

(b) Post-Termination Matters. In effectuating the provisions of this Section,
the Business specifically acknowledges and agrees that the Manager will continue
to collect and receive on behalf of the Business all cash collections from
accounts receivable in existence at the time this Agreement is terminated. Such
cash collections will represent, in part, compensation to the Manager for
Management Services already rendered.

 

ARTICLE VI. MISCELLANEOUS

 

Section 6.1 Administrative Services Only.

 

(c) Compliance With Law. Nothing herein is intended or will be construed to
allow the Manager to engage in any conduct that would constitute a violation of
state, local, or federal law.

 

(d) Purpose. The services to be rendered to the Business by the Manager are
solely for the purpose of providing management and administrative services to
the Business, so as to enable the Business to devote its full time and energies
to the operation of the Business and not to administration or management.

 

Section 6.2 Status of Contractor. It is expressly acknowledged that the parties
hereto are “independent contractors.” Nothing herein is intended, and nothing
will be construed, to create an employer/employee, partnership or joint venture
relationship, or to allow either to exercise control or direction over the
manner or method by which the other performs the services that are the subject
matter of this Agreement. The services to be provided hereunder, however, will
be furnished in a manner consistent with the standards governing such services
and the provisions hereof. Each party understands and agrees that (i) the other
will not be treated as an employee for federal tax purposes, (ii) neither will
withhold on behalf of the other any sums for income tax, unemployment insurance,
social security, or any other withholding pursuant to any law or requirement of
any governmental body or make available any of the benefits afforded to its
employees, (iii) all of such payments, withholdings, and benefits, if any, are
the sole responsibility of the party incurring the liability, and (iv) each will
indemnify and hold the other harmless from any and all loss or liability arising
with respect to such payments, withholdings, and benefits, if any.

 

Section 6.3 Notices. Any notice, demand, consent, or communication required,
permitted, or desired to be given hereunder will be in writing and will be
served on the parties at the following respective addresses:

 

 

 

 

  The Business: Sean Ridgley                     The Manager: OSL Holdings, Inc.
    60 Dutch Hill Road, Suite 13     Orangeburg NY 10962         With a copy to:
Nelson Hardiman, LLP     11835 W. Olympic Blvd., Suite 900     Los Angeles, CA
90064     Attention: Aaron Lachant     alachant@nelsonhardiman.com

 

or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted, or desired to be given hereunder will be sent
either (a) by hand delivery, in which case notice will be deemed received when
actually delivered, (b) by prepaid certified or registered mail, return receipt
requested, in which case notice will be deemed received five calendar days after
deposit, postage prepaid in the United States Mail, or (c) by a nationally
recognized overnight courier, in which case notice will be deemed received one
business day after deposit with such courier.

 

Section 6.4 Governing Law. This Agreement will be governed by the laws of the
State of California applicable to agreements to be performed wholly within the
State of California. Subject to Section 6.6 hereof, the federal and state courts
of Los Angeles County, California will be the exclusive venue for any
litigation, special proceeding, or other proceeding between the parties that may
arise out of, or be brought in connection with or by reason of, this Agreement.

 

Section 6.5 Assignment. Except as may be herein specifically provided to the
contrary, this Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors, and
assigns; provided, however, the Business may not assign this Agreement without
the prior written consent of the Manager, which consent may be withheld in its
sole and absolute discretion; provided, further, that the Manager may assign,
transfer or convey this Agreement without the consent of the Business. Any
breach of this provision, whether or not void or voidable, will constitute a
material breach of this Agreement, and in the event of such breach, the Manager
may terminate this Agreement upon twenty-four (24) hours, notice to the
Business. The parties agree that Manager may assign and/or delegate all of its
rights and obligations under this Agreement. Upon such assignment, the person to
which the Manager assigned this Agreement will then become the Manager
hereunder, and the Manager will have no further liabilities, duties or
obligations hereunder. In addition, the Manager or the transferee will have the
right to (i) assign and delegate its rights and obligations hereunder to any
third party and (ii) collaterally assign its interest herein and its right to
collect Management Fees hereunder to any financial institution or other third
party without the consent of the Business. The Business acknowledges that the
Manager’s interest herein and the Manager’s right to collect Management Fees
hereunder may be collaterally assigned as security for obligations owed by
Manager to third parties.

 

 

 

 

Section 6.6 Mediation and Arbitration. Any dispute, controversy or claim
(including without limitation tort claims, requests for provisional remedies or
other interim relief, and whether any matter is subject to arbitration) arising
out of or relating to this Agreement, or the breach thereof, that cannot be
settled through negotiation will be settled (a) first, by the parties trying in
good faith to settle the dispute by mediation under the Commercial Mediation
Rules of the American Arbitration Association (“AAA”) (such mediation session to
be held in Los Angeles County, California and to commence within 15 days of the
appointment of the mediator by the AAA), and (b) if the controversy, claim or
dispute cannot be settled by mediation, then by arbitration administered by the
AAA under its Commercial Arbitration Rules (such arbitration to be held in
Orange County, California before a single arbitrator selected by the parties and
to commence within 15 days of the appointment of the arbitrator by the AAA), and
judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. If the parties fail to select an arbitrator within
15 days as required herein, the then Presiding Judge of the Orange County
Superior Court will appoint an arbitrator. The arbitrator will render a decision
within sixty days after his appointment and will conduct all proceedings
pursuant to the Rules of the American Arbitration Association governing
commercial transactions then existing, to the extent that the rules are not
inconsistent with the Statutes and this Agreement. The cost of the arbitration
procedure will be borne by the losing party or, if the decision is not clearly
in favor of one Party or the other, then the costs will be borne as determined
by the arbitration proceeding. The arbitration procedure provided in this
Section will be the sole and exclusive remedy to resolve any controversy or
dispute arising under this Agreement. If it becomes necessary for either party
to enforce an arbitral award by legal action and/or additional arbitration of
any kind, the party contesting enforcement shall pay all reasonable costs
incurred by the party seeking to enforce the award.

 

Section 6.7 Waiver of Breach. The waiver by either party of a breach or
violation of any provision hereof will not operate as, or be construed to
constitute, a waiver of any subsequent breach of the same or another provision
hereof.

 

Section 6.8 Enforcement. In the event either party resorts to legal action to
enforce or interpret any provision hereof, the prevailing party will be entitled
to recover the costs and expenses of such action so incurred, including, without
limitation, reasonable attorneys’ fees.

 

Section 6.9 Gender and Number. Whenever the context hereof requires, the gender
of all words herein will include the masculine, feminine, and neuter, and the
number of all words herein will include the singular and plural.

 

Section 6.10 Additional Assurances. Except as may be herein specifically
provided to the contrary, the provisions hereof will be self-operative and will
not require further agreement by the parties. At the request of either party,
the other party will execute such additional instruments and take such
additional acts as are reasonable and as the requesting party may deem necessary
to effectuate this Agreement.

 

 

 

 

Section 6.11 Consents, Approvals, and Exercise of Discretion. Whenever this
Agreement requires any consent or approval to be given by either party, or
either party must or may exercise discretion, and except where specifically set
forth to the contrary, the parties agree that such consent or approval will not
be unreasonably withheld or delayed, and that such discretion will be reasonably
exercised.

 

Section 6.12 Force Majeure. Neither party will be liable or deemed to be in
default for any delay or failure in performance hereunder or other interruption
of service deemed to result, directly or indirectly, from acts of God, civil or
military authority, acts of public enemy, war, accidents, fires, explosions,
earthquakes, floods, failure of transportation, strikes or other work
interruptions by either party’s employees, or any other similar cause beyond the
reasonable control of either party unless such delay or failure in performance
is expressly addressed elsewhere herein.

 

Section 6.13 Severability. The parties hereto have negotiated and prepared the
terms hereof in good faith with the intent that each and every one of the terms,
covenants and conditions herein be binding upon and inure to the benefit of the
respective parties. Accordingly, if any one or more of the terms, provisions,
promises, covenants or conditions hereof or the application thereof to any
person or circumstance will be adjudged to any extent invalid, unenforceable,
void or voidable for any reason whatsoever by a court of competent jurisdiction
or an arbitration tribunal, such provision will be as narrowly construed as
possible, and each and all of the remaining terms, provisions, promises,
covenants and conditions hereof or their application to other persons or
circumstances will not be affected thereby and will be valid and enforceable to
the fullest extent permitted by law. To the extent this Agreement is in
violation of applicable law, then the parties agree to negotiate in good faith
to amend this Agreement, to the extent possible consistent with its purposes, to
conform to law.

 

Section 6.14 Divisions and Headings. The division hereof into articles,
sections, and subsections and the use of captions and headings in connection
therewith is solely for convenience and will not affect in any way the meaning
or interpretation hereof.

 

Section 6.15 Amendments and Execution. This Agreement and amendments hereto will
be in writing and executed in multiple copies. Each multiple copy will be deemed
an original, but all multiple copies together will constitute one and the same
instrument.

 

Section 6.16 Entire Agreement. With respect to the subject matter hereof, this
Agreement supersedes all previous contracts and constitutes the entire agreement
between the parties. Neither party will be entitled to benefits other than those
specified herein. No prior oral statements or contemporaneous negotiations or
understandings or prior written material not specifically incorporated herein
will be of any force and effect. No changes in or additions hereto will be
recognized unless incorporated herein by amendment as provided herein, such
amendment(s) to become effective on the date stipulated in such amendment(s).
The parties specifically acknowledge that, in entering into and executing this
Agreement, the parties rely solely upon the representations and agreements
contained herein and no others.

 

Section 6.17 Representation by Counsel. Each of the parties has been represented
by or has had the opportunity to be represented by legal counsel of its own
choice.

 

 

 

 

Section 6.18 Indemnification.

 

(a) Indemnification by the Manager. The Manager will defend, indemnify, protect
and hold the Business harmless for, from and against all third party liability,
harm, damages, fees, penalties, lawsuits, proceedings, costs and expenses
(including, without limitation, any and all attorneys’ fees and costs and costs
of investigation) arising solely from or related solely to: (i) a breach of the
representations, warranties, covenants or obligations hereunder, or (ii) any
liability arising out of the Manager’s provision of services hereunder; so long
as: (i) the Business notifies the Manager in writing within 30 days of the
claim; (ii) the Manager has sole control of the defense and all related
settlement negotiations; and (iii) the Business provides the Manager with the
assistance, information, and authority necessary to perform the above.

 

(b) Indemnification by the Business. The Business will defend, indemnify,
protect and hold the Manager harmless for, from and against all third party
liability, harm, damages, fees, penalties, lawsuits, proceedings, costs and
expenses (including, without limitation, any and all attorneys’ fees and costs
and costs of investigation) arising solely from or related solely to: (i) a
breach of the representations, warranties, covenants or obligations hereunder,
or (ii) any liability arising out of the Business’s provision of Medical
Services; so long as: (i) the Manager notifies the Business in writing within 30
days of the claim; (ii) the Business has sole control of the defense and all
related settlement negotiations; and (iii) the Manager provides the Business
with the assistance, information, and authority necessary to perform the above.

 

[Signature blocks appear on the following page.]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first above written.

 

The Business: Sean Ridgley                 The Manager: OSL Holdings, Inc., a
Nevada Corporation         By:       Robert Rothenberg     President

 

 

 

 

EXHIBIT 1.1

 

DEFINITIONS

 

“Confidential Information” means any information belonging to or in the
possession of the Manager or the Business, respectively, whether written or
oral. Confidential information includes all notes, studies, patient lists,
information, forms, business or management methods, fee schedules, or trade
secrets of the Manager or of the Business, respectively. Confidential
Information also includes any information that is disclosed or otherwise made
available to one party by the other party pursuant hereto. Confidential
Information also includes the terms and provisions of hereof and any transaction
or document executed by the parties pursuant hereto. Confidential Information
does not include any information that

 

(a) is or becomes generally available to and known by the public (other than as
a result of an unpermitted disclosure directly or indirectly by the receiving
party or its affiliates, advisors, or Representatives);

 

(b) is or becomes available to the receiving party on a nonconfidential basis
from a source other than the furnishing party or its affiliates, advisors, or
Representatives, provided that such source is not and was not bound by a
confidentiality agreement with or other obligation of secrecy to the furnishing
party of which the receiving party has knowledge at the time of such disclosure;
or

 

(c) has already been or is hereafter independently acquired or developed by the
receiving party without violating any confidentiality agreement with or other
obligation of secrecy to the furnishing party.

 

“Contract Revenue” means all collections actually recorded each month on a cash
basis that is not revenue from retail, including collections from:

 

  (a) directorships and other administrative or committee positions,         (b)
teaching,         (c) conferences,         (d) billing services,         (e)
grants,         (f) collection income,         (g) consulting fees,

 

 

 

 

  (h) interest income and other investment income,         (i) medico-legal
services,         (j) research and clinical study services, and         (k)
other non-professional medical services (e.g., royalties).

 

“includes” and “including” denote partial definitions.

 

“Management Fee” means the greater amount of $75,000 or __ % of the Business’
revenue

 

“Management Services” means the business, administrative and management services
described in Article II hereof.

 

“Management Services Agreement” or “Agreement” means this Management Services
Agreement between the Business and the Manager, as amended from time to time.

 

“Manager” means OSL Holdings, Inc, a Nevada corporation, or any entity that
succeeds to the interests thereof and to whom the obligations of the Manager are
assigned and transferred in accordance with Section 6.5 hereof.

 

“Manager Consent” means the consent granted by the Manager’s Representatives (or
either Representative) to the Business or the Operations Committee. When any
provision hereof requires Manager Consent and does not specify a different
standard, such consent will not be unreasonably withheld and will be binding on
the Manager.

 

“Manager’s Corporate Overhead” means the Business’s allocable portion of all of
the Manager’s expenses that are performed for businesses managed by the Manager
and its affiliates and not directly included as an Operations Center Expense.
Manager’s Corporate Overhead will not include: any up-charge or cost additions
beyond the Manager’s actual cost; intellectual property expenses; or any other
mutually agreed expenses that are not incurred for the sole benefit of a
business under management.

 

“Operations Center Expense” means all operating and nonoperating expenses paid
or incurred by the Manager or the Business in the provision of Management
Services to the Business, including those expenses set forth on Exhibit 2.9
hereto. Operations Center Expenses will not include Manager’s Corporate Overhead
or Business Compensation Pool allocations pursuant to Section 2.9(e).

 

“Business Compensation Pool” means a percentage of Business Collections that is
allocated each month for the purpose of paying budgeted compensation to the
Business.

 

 

 

 

“Business” means the general retail business operated by Sean Ridgley as a sole
proprietor or any subsequently created business entity.

 

“Business Collections” means the sum of all revenues less adjustments.

 

“Business Consent” means the consent granted by the Business’s Representatives
(or either Representative) to the Manager or the Operations Committee. When any
provision hereof requires Business Consent and does not specify a different
standard, such consent will not be unreasonably withheld and will be binding on
the Business.

 

“Representatives” means a party’s officers, directors, employees, consultants,
affiliates, advisors or other agents or representatives.

 

“State” means the State of California unless another state is specifically
referenced herein.

 

“Term” means the initial and any renewal periods of duration hereof as described
in Section 5.1 hereof.