Document:

Exhibit 10.25

 

FIRST AMENDMENT TO

DISTRIBUTION AGREEMENT

 

This
First Amendment to Distribution Agreement (this “Amendment”), is made as of
February      ,2003 between each of the
undersigned and amends that certain Distribution Agreement dated as of August 24,
2000 (the “Distribution Agreement”), by and between DAITO-OSIM HEALTH CARE
APPLIANCES (SUZHOU) CO., LTD.; a Chinese corporation, having its principal
place of business at No. 16 SuTong Rd., Suzhou, Jiangsu, P.R. China 215006
(“Supplier”), and INTERACTIVE HEALTH LLC, a California limited liability
company, having its principal place of business at 3030 Walnut Ave., Long
Beach, CA 90807, United States of America (“Distributor”).  Capitalized terms used but not otherwise
defined herein shall have the respective meanings assigned to them in the
Distribution Agreement.

 

RECITALS:

 

A.            In addition to the Distribution
Agreement which defines “Products”, in part, as massage chairs and “Territory”
as the United States of America and Canada, Supplier and Distributor entered
into three other distribution agreements, one dated as of April 14, 2000
and the other two dated as of August 24, 2000 (collectively, the “Other
Distribution Agreements”).

 

B.            Supplier and Distributor desire to
consolidate, extend, and modify the subject matter of the Distribution
Agreement and the Other Distribution Agreements.

 

C.            Accordingly, Supplier and
Distributor desire to amend the Distribution Agreement as set forth herein and,
upon the effectiveness of such amendment, terminate the Other Distribution
Agreements.

 

AGREEMENT:

 

NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, the parties hereto agree as follows:

 

1.             Definitions.

 

1.1           Section 1 of the Distribution•
Agreement is hereby amended by substituting the following defined terms in lieu
of their previous definitions:

 

“Product”
or “Products” means any and all massage chairs, zero gravity “Perfect Chairs”,
and massage products manufactured or sold by Supplier, whether now or in the
future.

 

“Territory”
means the North America Territory, the Perfect Chair Territory, the Exclusive
International Territory and the Remaining International Territory.

 

1.2           Section 1 of the Distribution
Agreement is hereby further amended by adding ‘the following defined terms:

 

***         Confidential
treatment requested.

 

 

Exclusive
International Territory” means those countries and areas listed on Exhibit A
attached hereto.

 

“Massage
Chair Products” mean any and all massage chairs included within the definition
of Products.

 

“North
America Territory” means the United States of America, Canada and Mexico.

 

“Other
Massage Products” mean any and all Products other than the Massage Chair
Products and Perfect Chair Products.

 

“Perfect
Chair Products” mean any and all zero gravity “Perfect Chairs” included within
the definition of Products.

 

“Perfect
Chair Territory” means the entire world.

 

“Remaining
International Territory” means those countries and areas listed on Exhibit B
attached hereto.

 

2.             Grants.  Section 2.1 is hereby amended and
restated in its entirety to read as follows:

 

2.1           Appointment as Distributor.  Subject to the terms and conditions of this
Agreement, Supplier hereby grants to Distributor, and Distributor hereby
accepts from Supplier, the following rights and licenses:

 

A.            The exclusive right and license to
import, market and distribute the Massage Chair Products in the North America
Territory during the term of this Agreement.

 

B.            The exclusive right and license to
import, market and distribute the Massage Chair Products in the Exclusive
International Territory during the term of this Agreement.

 

C.            The right and license to import,
market and distribute the Massage Chair Products in the Remaining International
Territory during the term of this Agreement.

 

D.            The exclusive right and license to
import, market and distribute the Perfect Chair Products in the Perfect Chair
Territory during the term of this Agreement.

 

E.             The right and license to import,
market and distribute the Other Massage Products in the Perfect Chair
Territory, except Asia, during the term of this Agreement.

 

3.             Exception to Exclusivity.  Section 2,2 is- hereby amended and
restated in its entirety to read as follows:

 

2.2           Exception to Exclusivity.  Distributor hereby agrees that
notwithstanding the exclusive right and license set forth in Section 2.1
(A) & (B) above, Supplier shall reserve a

 

2

 

right
to export and sell Non-IH Massage Chairs (as defined below) to ***.  “Non-IH Massage Chairs” shall refer to any
massage chair manufactured by Supplier that does not contain any technology
owned or designed, in whole or in part, by Distributor and is different in
design from the Products currently purchased by Distributor from Supplier.

 

4.             Termination of Exclusivity.  Section 2 is hereby amended by adding
the following two Subsections to the end of Section 2:

 

2.5           Termination of Exclusivity under
Section 2.1(A).  Supplier may
terminate the exclusivity of the right and license granted pursuant to Section 2.1(A)
upon written notice to Distributor at least ninety (90) days prior to the
effectiveness of such termination upon the occurrence of either of the
following events; provided, however, such written notice must be delivered
within 90 days after the end of the measurement period included within the
triggering event:

 

***

 

2.6           Termination of Exclusivity under
Section 2.1(B).  Supplier may
terminate the exclusivity of the right and license granted pursuant to
Section 2.1(B) upon written notice to Distributor at least ninety (90)
days prior to the effectiveness of such termination upon the occurrence of
either of the following events; provided, however, such written notice must be
delivered within 90 days after the end of the measurement period included within
the triggering event:

 

***

 

5.             Extended Term.  The first sentence of Section 9.1 is
hereby amended to read as follows:

 

Subject
to earlier termination pursuant to Section 9.2. the initial term of this
Agreement shall commence as of the Effective Date and continue through
March 1, 2013.

 

6.             Termination.  Section 9.2(c) is hereby amended and
restated in its entirety to read as follows:

 

3

 

***

 

7.             Effective Amendment.  Except as specifically amended hereby, the
Distribution Agreement shall remain unmodified and in full force and effect.

 

8.             Termination of Other
Distribution Agreements.  Upon, and
in consideration of, the effectiveness of this Amendment, the parties hereto
hereby terminate the Other Distribution Agreements in accordance with the early
termination provisions contained in each of those agreements, including
Consequences of Termination and Survival

 

9.             Governing Law.  This Amendment shall be governed by and
construed in accordance with the laws of the State of California without
reference to its principles of conflicts of laws.

 

10.           Counterparts.  This Amendment may be executed in
counterparts each of which shall be an original but all of which shall together
constitute one and the same agreement.

 

IN
WITNESS WHEREOF, the undersigned have executed this Amendment as of the date
and year above first written.

 

	
   

  	
  DAITO-OSIM
  HEALTHCARE APPLIANCES

  (SUZHOU) CO., LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  S. Shimizu

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Shinichi
  Shimizu

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTERACTIVE
  HEALTH LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Craig P. Womack

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Craig
  P. Womack

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  

 

4

 

EXHIBIT A

 

***

 

 

 

EXHIBIT B

 

***Exhibit 10.26

 

Dear
Shimizu-san:

 

Thank
you for taking the time to explain to us the corporate relationships between
Daito-Osim Health Care Appliances (Suzhou) Co., Ltd. (“Daito-Osim”), a Chinese
corporation, and Daito Denki Kogyo K.K.(“Daito Denki”), a Japanese Kabushiki
Kaisha, also doing business as Daito Electric Machine Industry Co. Ltd.  As you know, Interactive Health LLC (“IH”)
is currently seeking third party financing, and your assistance in stating in
this letter the understandings and agreements that our companies’ have always
had will be important to our ability to obtain such financing.

 

It
is our understanding that Daito Electric Machine Industry Co. Ltd, is merely an
English-language pseudonym for Daito Denki, as opposed to a separate legal entity.  We further understand that all
massage-related patents used by Daito-Osim are owned solely by Daito Denki and
any Japanese Patent Office records should not reflect joint ownership between
Daito Denki and Daito Electric Machine Industry Co. Ltd. (since they are merely
different names for the same legal entity).

 

We
also understand that you own the controlling equity and management interests in
Daito-Osim as well as Daito Denki and have full and complete authority to enter
into agreements for both entities.

 

We
appreciate your explanation that while Daito-Osim is the joint venture entity
with whom IH has its agreements, you consider Daito Denki to be bound equally
in the patent section section of the agreements.  In particular, in connection with the Distribution
Agreement dated as of August 24, 2000, by and between Daito-Osim and IH,
as amended by the First Amendment to Distribution Agreement dated
February 2003 (collectively, the “Distribution Agreement”), it is
understood and agreed that:

 

(a)                                  Daito-Osim
possesses and has always possessed the full power and authority to enter into
the Distribution Agreement and to give IH the rights set forth therein,
including without limitation, the full power and authority to grant any and all
sublicenses under patents pied by Daito Denki necessary for IH to enjoy the
exclusive and non-exclusive licenses granted to IH in the Agreement; and

 

(b)                                 For purposes of
the exclusive rights in Section 2 of the Distribution Agreement, the
definition of “Products” (and related definitions of Massage Chair Products,
Perfect Chair Products, and Other Massage Products) shall include any and all
massage chairs, zero gravity “Perfect Chairs”, and massage products
manufactured or sold by Daito-Osim, Daito Denki or any affiliate, subsidiary or
successor thereof (including any entity that obtains ownership of the patents
covering Massage Chair Products currently held by Daito Denki), whether now or
in the future.

 

If
the foregoing is an accurate statement of our understandings and agreements, I
would appreciate an executed copy of this letter at your earliest
convenience.  We will treat a fully

 

 

 

executed
copy of this letter as an amendment to the Distribution Agreement to the extent
that it may be read otherwise.

 

Thank
you again Shimizu-san, for your attention to this matter and the continuing
excellent relationship that our two companies share,

 

Sincerely,

 

 

Craig
P. Womack, CEO.

the
foregoing accepted and agreed on behalf of Interactive Health LLC

 

ACCEPTED
AND AGREED:

 

	
  DAITO-OSIM
  HEALTH CARE APPLIANCES (SUZHOU) CO., LTD.

  
	
   

  
	
  By:

  	
  /s/
  Shimizu Shinichi

  	
   

  
	
   

  
	
  Name:

  	
  SHIMIZU,
  SHINICHI

  
	
   

  
	
  Title:

  	
  Director

  
	
   

  
	
  Dated:

  	
  June 12,
  2003

  
	
   

  
	
   

  
	
  DAITO
  DENKI KOGYO K.K.

  
	
   

  
	
  By:

  	
  /s/
  Shimizu Shinichi

  	
   

  
	
   

  
	
  Name:

  	
  SHIMIZU,
  SHINICHI

  
	
   

  
	
  Title:

  	
  President

  
	
   

  
	
  Dated:

  	
  June 12,
  2003

  
	
   

  
	
   

  
	
  [FULL
  NAME] SHIMIZU, SHINICHI

  
	
   

  
	
  By:

  	
  /s/
  Shimizu Shinichi

  	
   

  
	
   

  
	
  Dated:

  	
  June 12,
  2003

  

 

2

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