LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement"), dated as of February 4, 1997, is
entered into by and between REDNECK FOODS, INC., a Delaware corporation
("Company"), and XXXX XXXXXXXXX, an individual ("Xxxxxxxxx") with reference
to the following:
A. Simultaneously with the execution and delivery of this Agreement, (i)
Company, Xxxxxxxxx and Xxxxx Xxxxxx ("Xxxxxx") are entering into a Series A
Convertible Preferred Stock Purchase Agreement (the "Stock Purchase
Agreement") providing for, among other things, the acquisition by Xxxxxxxxx
of certain shares of Series A Convertible Preferred Stock (the "Preferred
Stock") of Company upon the terms and subject to the conditions set forth
therein.
B. As partial consideration for the Preferred Stock purchased pursuant to
the Stock Purchase Agreement, Xxxxxxxxx desires to grant to Company a license
to use his name and likeness subject and pursuant to the terms provided
herein.
NOW, THEREFORE, in consideration of the obligations and agreements contained
herein and in the Stock Purchase Agreement and the Transaction Documents, the
parties hereto agree as follows:
1. DEFINITIONS. All capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Stock Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
1.1. Licensed Material. "Licensed Material" shall mean the name "Xxxx
Xxxxxxxxx," servicemarks, copyrights and trademarks owned or controlled by
Xxxxxxxxx and any and all names, symbols, emblems, designs, likenesses,
photographs, images and visual representations of or relating to Xxxxxxxxx
that are approved by Xxxxxxxxx in his sole and absolute discretion.
1.2. Licensed Products. "Licensed Products" shall mean any goods,
products, merchandise or other personal property that (i) have been approved
by Xxxxxxxxx in his sole and absolute discretion, (ii) are manufactured or
produced by or on behalf of Company, (iii) contain, embody, depict, (whether
in the product itself or in the packaging, marketing or promotional
materials) Licensed Material in a manner specifically approved by Xxxxxxxxx
in his sole and absolute discretion, and (iv) are marketed, sold, distributed
or otherwise used by Company in connection with the Restaurants under the
terms of this Agreement. It is currently contemplated that the types of
products that may be approved by Xxxxxxxxx for use as Licensed Products may
include, without limitation, some or all of the following: souvenirs,
memorabilia, clothing, jewelry, beauty supplies, personal effects,
recordings, videos, books, magazines, towels, linens, cooking tools and
utensils, condiments, food supplies and food goods.
1.3. Other Products. "Other Products" shall mean any goods, products,
merchandise or other personal property that are not Licensed Products but
that are manufactured or produced by or on behalf of Xxxxxxxxx. Without
limiting the foregoing, Other Products shall include all products and
merchandise currently made available by Xxxxxxxxx'x affiliate, Club Red.
2. LICENSE.
2.1. Grant of License. Subject to the terms of this Agreement and the
Stock Purchase Agreement, Xxxxxxxxx hereby grants to Company for the Term (as
defined in Section 5 below) a nonexclusive license to utilize the Licensed
Material throughout the world in connection with:
(a) The advertisement, promotion, solicitation and sale of equity and
debt investment in Company;
(b) The design, construction, development, promotion, advertising,
implementation and operation of the Restaurants and the Franchise;
(c) The advertisement, promotion, solicitation and sale of individual
franchises.
(d) The design, manufacture, promotion, advertisement, distribution and
sale of Licensed Products in connection with (i) the Restaurants, (ii) the
provision of food or restaurant services, or (iii) the preparation and
consumption of food products, (iv) backyard, barbecue or open grill cooking.
2.2. Limited Right to Sublicense. Subject to all of the terms and
conditions of this Agreement (including the approval rights of Section 2.3),
the Stock Purchase Agreement and the Transaction Documents, Company may, upon
the prior approval of Xxxxxxxxx, sublicense the rights granted by Xxxxxxxxx
pursuant to Sections 2.1(b),(c) and (d) to franchisees of Company who have
entered into written franchise agreements which are in a form acceptable to
Xxxxxxxxx and which provide that such franchisees are by bound by the terms
hereof.
2.3. Xxxxxxxxx'x Right to Approve Use of the Licensed Material.
(a) Right of Approval. Notwithstanding the provisions of Section 2.1,
Xxxxxxxxx shall have the right to approve in advance each proposed use of any
of the Licensed Material pursuant to this Agreement as to form, content,
period of use and intended purpose, which approval may be withheld by
Xxxxxxxxx in his sole and absolute discretion for any reason; provided,
however, that, except with respect to a usage pursuant to Section 2.1(a),
once a particular usage of the Licensed Material has been approved by
Xxxxxxxxx, Company may continue such particular usage throughout the approved
period of use. However, if Company modifies the form, content or intended
purpose of an approved usage in any way, such modification shall be
considered a new usage of the Licensed Material once again requiring
Xxxxxxxxx'x approval pursuant to the provisions of this Section 2.2.
(b) Submission of Samples. To ensure full compliance with the
provisions of this Section 2.2, prior to each new exercise of the rights
granted to Company hereunder, Company shall provide Xxxxxxxxx with copies of
the advertisements, promotional materials, press releases, products,
recordings, logos, designs, written or visual materials or other materials
that are to contain any of the Licensed Material. With respect to Licensed
Products, prior to the manufacture or promotion of such Licensed Products,
Company shall provide Xxxxxxxxx with samples of such Licensed Products, any
packaging therefor, and any advertisements devoted thereto. Xxxxxxxxx shall
have the right to approve such Licensed Product in all respects, including as
to type, quality, style, color, and cost. Xxxxxxxxx shall notify Company of
his approval or disapproval of such materials or Licensed Products within
thirty (30) days of receipt. In the event Xxxxxxxxx does not notify Company
of his approval or disapproval within such thirty (30) day period, the
materials or Licensed Products shall be deemed disapproved.
2.4. Rights of Third Parties. Company acknowledges that third parties
may have, or may subsequently be granted or may acquire, rights in and to
some or all of the Licensed Material. Accordingly, Company acknowledges that
it may be necessary in some circumstances to acquire additional permissions,
consents and/or licenses from such third parties to accomplish the uses of
the Licensed Material contemplated by this Agreement. Xxxxxxxxx agrees to
use his reasonable efforts to assist Company in acquiring such permissions,
consents or licenses.
3. MERCHANDISING.
3.1. Licensed Products. During the Term, Company may sell and distribute
for sale the Licensed Products in and through the Restaurants and the
Franchise and, subject to the prior approval of Xxxxxxxxx, through other
channels of distribution or sale. Xxxxxxxxx shall have a right of prior
approval over all means employed by Company to sell the Licensed Products,
including without limitation displays, advertisements, promotions, prices,
locations and venues. In addition, Xxxxxxxxx shall have the right to
purchase reasonable quantities of Licensed Products from Company at Company's
cost of production; provided that Xxxxxxxxx shall not, without Company's
prior written approval which shall not be unreasonably withheld, offer such
items for resale.
3.2. Other Products. In all venues and channels of distribution through
which Company or any franchisee advertises, markets, promotes, makes
available for sale or distributes Licensed Products (including the
Restaurants), Company or such franchisee shall be obligated, at Xxxxxxxxx'x
request, to similarly advertise, market, promote, make available for sale or
distribute the Other Products. In so doing, Company or such franchisee shall
give the Other Products positioning, prominence and promotion that is at
least as favorable as that given to the Licensed Products. Company or such
franchisee shall purchase the Other Products from Xxxxxxxxx, Club Red or such
other third parties, as appropriate, at standard wholesale prices and in
sufficient volumes to fulfill the obligations hereunder. Xxxxxxxxx shall
have the right to determine the method and terms of sale upon which Company
or any franchisee make the Other Products available for sale and neither
Company nor any franchisee shall sell the Other Products at "distress" or
"close-out" prices without the prior approval of Xxxxxxxxx.
4. CONSIDERATION AND ROYALTIES.
4.1. Preferred Stock. As partial consideration for the rights granted by
Xxxxxxxxx hereunder, Company has issued the Preferred Stock to Xxxxxxxxx
pursuant to the terms of the Stock Purchase Agreement.
4.2. Royalties. As additional consideration for the rights granted by
Xxxxxxxxx hereunder, Company hereby agrees to pay Xxxxxxxxx the following
royalty payments:
(a) Ten percent (10%) of the gross royalties, franchise fees and other
consideration received by Company from franchisees of the Franchise, which
amount shall in no event be less than one-half percent (0.5%) of the gross
sales realized by such franchisees on an annual (calendar) basis. For
purposes of the foregoing, "gross royalties, franchise fees and other
consideration" shall not include amounts or assessments received from
franchisees as reimbursement for actual, specific costs of Company (i.e.,
payments for actual, specific Company costs that are passed through to the
franchisees).
(b) Eight percent (8%) of all gross revenues actually received by
Company from wholesale sales of Other Products by Company to franchisees
pursuant to this Agreement.
(c) One-half percent (0.5%) of the gross sales received by Company in
connection with the operation of Restaurants owned by Company. For purposes
of the foregoing, the term "gross sales" shall mean one hundred percent
(100%) of all revenues actually received by Company from all sources,
including without limitation from retail sales of food, services and
merchandise (including both Licensed Products and Other Products), and
excluding only revenue upon which a royalty is payable pursuant to Section
4.2(b).
4.3. Quarterly Statements; Maintenance of Records. Within forty-five
(45) days after each calendar quarter, Company shall, through its Chief
Financial Officer, furnish Xxxxxxxxx with a complete and accurate statement
of all royalty payments due him hereunder for such calendar quarter, along
with a check for full payment of such amounts, if appropriate. All payments
hereunder shall be in US Dollars. Acceptance by Xxxxxxxxx of such statements
and payments for any period shall not preclude Xxxxxxxxx from thereafter
questioning the accuracy thereof. During the Term and for a period of five
(5) years thereafter, Company will keep and maintain at Company's principal
place of business true and accurate records of all transactions relating to
or affecting this Agreement or any provision hereof, which books and records,
together with supporting vouchers, shall be open for inspection and the
making of copies and extracts by Xxxxxxxxx or Xxxxxxxxx'x duly authorized
representative once with respect to each period during regular business hours
and upon seventy-two (72) hours written notice. In the event an examination
of such books reveals a deficiency in sums owed to Xxxxxxxxx in excess of ten
percent (10%) for the period audited then Company shall bear the cost of
reasonable accountants' fees related to the conduct of such audit; provided,
however, that such costs shall not exceed the amount of the audit claim.
5. TERM AND TERMINATION.
5.1. Term. The term of this agreement (the "Term") shall be fifty (50)
years unless sooner terminated by the occurrence of any of the following:
(a) A material breach by Company of this Agreement, the Stock Purchase
Agreement or any of the Transaction Documents breach has not been cured
within thirty (30) days of receipt from Xxxxxxxxx of written notice thereof;
(b) At the option of Xxxxxxxxx, upon a material breach by Xxxxx Xxxxxx
of his obligations under the Xxxxxx Employment Agreement within the first
three (3) years after the opening of the first Restaurant which breach has
not been cured within thirty (30) days of receipt from Xxxxxxxxx of written
notice thereof;
(c) Upon receipt of written notice from Xxxxxxxxx in the event Company
commits any act or omission, is subject to any claim or occurrence or is
involved in any circumstances that would cause the continued association of
Company with the Licensed Material to be detrimental to the value of the
Licensed Material or to Xxxxxxxxx'x image or reputation as determined by
Xxxxxxxxx in his sole and absolute discretion;
(d) The failure of Company to continually operate the Restaurants and
manage the Franchise according to the policies, practices and standards
agreed to by the parties pursuant to the terms of the Stock Purchase
Agreement;
(e) The failure of Company and/or Xxxxxx to raise the Investment Capital
pursuant to the terms provided in the Stock Purchase Agreement; or
(f) The failure of Company to comply with any laws and regulations, the
consequences of which are materially adverse to Company.
5.2. Consequences of Termination. Upon termination or expiration of this
Agreement, all license rights granted to Company hereunder shall terminate
and Company shall immediately thereafter discontinue all use of the Licensed
Material. Xxxxxxxxx shall have the right to purchase any inventory of
Licensed Products in Company's possession as of the date of termination. If
Xxxxxxxxx does not so purchase all of Company's existing inventory of
Licensed Products, then, notwithstanding the termination of this Agreement,
Company shall have the right to continue to use the Licensed Material in
connection with the advertisement, distribution, and sale of its existing
inventory of Licensed Products for a period of one hundred twenty (120) days
after termination; provided that such advertisement, distribution and sale is
done only by means of and through then-existing distribution channels and in
all other respects in accordance with all the terms and conditions contained
in this Agreement.
6. REPRESENTATIONS AND WARRANTIES.
6.1. Representations and Warranties of Company. Company represents and
warrants to Xxxxxxxxx as follows:
(a) Company has the corporate power to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by its Board of Directors and no other corporate
proceedings on the part of Company are necessary to authorize this Agreement
and the transactions contemplated herein.
(b) This Agreement has been executed and delivered by Company and is the
valid and binding obligation of Company enforceable in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy laws or
similar laws affecting creditors' rights generally, and except in so far as
the availability of equitable remedies may be limited by applicable law from
time to time in effect.
6.2. Representations of Xxxxxxxxx. Xxxxxxxxx represents and warrants to
Company as follows:
(a) Xxxxxxxxx hereby has the right and power to grant to Company the
rights described herein and is free to enter into this Agreement and to carry
out his obligations hereunder.
(b) Xxxxxxxxx warrants that, during the Term, he will not commit any act
which brings Company into public disrepute or scandal, or which shocks,
insults or offends a substantial portion or group of the community or
reflects unfavorably on Company.
7. INDEMNIFICATION.
7.1. Indemnification Obligation. Company shall indemnify, defend and
hold harmless Xxxxxxxxx from and against any and all claims arising out of
the use or possession of and out of any claims by third parties with respect
to any Licensed Products manufactured, advertised, distributed, or sold
during the Term.
7.2. Indemnification Procedure. Promptly after receipt by Xxxxxxxxx of
notice of the commencement of any action involving a claim referred to in
Section 7.1, Xxxxxxxxx will give written notice to Company of the
commencement of such action. If any such action is brought against
Xxxxxxxxx, Company will be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to Xxxxxxxxx, and after
notice from Company to Xxxxxxxxx of its election to assume the defense
thereof and to pay any and all costs relating thereto, Company shall not be
responsible for any legal or other expenses subsequently incurred by
Xxxxxxxxx if Xxxxxxxxx engages separate counsel in connection with the
defense thereof; provided, however, that Xxxxxxxxx shall have the right to
retain his own counsel, with the reasonable fees and expenses to be paid by
Company, if Xxxxxxxxx shall have reasonably concluded that representation of
Xxxxxxxxx by the counsel retained by Company would be inappropriate due to
actual or potential differing interests between Company and Xxxxxxxxx in such
proceeding.
7.3. Product Liability Insurance. Company shall obtain and maintain
throughout the Term an insurance policy for products liability in a form and
substance acceptable to Xxxxxxxxx and with insurance companies approved by
Xxxxxxxxx, and shall name Xxxxxxxxx as an additional named insured thereon.
Such policy or policies shall have the following minimum limits: (i) basic
coverage in the amount of $500,000 per occurrence without limitation as to
the number of occurrences covered by such policy, and (ii) umbrella coverage
in the amount of $5,000,000. Such insurance shall insure Xxxxxxxxx and any
persons, firms, or corporations with whom Company has contractual
arrangements with respect to Licensed Products against any claims, suits,
losses, damages, or liabilities arising out of any use or possession of any
Licensed Product hereunder. Each such policy shall contain a provision
requiring the insurance company to furnish Xxxxxxxxx with a minimum of ten
(10) days' notice prior to any revision, modification, or cancellation
thereof.
8. Ownership of Licensed Property. As between the parties, the
Licensed Material shall be and remain the exclusive and complete property of
Xxxxxxxxx. Company shall affix appropriate copyright, trademark and/or other
protective notices (hereinafter "Notices") as may be designated reasonably by
Xxxxxxxxx from time to time on any materials or products that are marketed or
sold by Company pursuant to this Agreement, including the Licensed Products,
that incorporate or include some or all of the Licensed Material. Xxxxxxxxx
shall, in his sole discretion, take any and all steps necessary to secure
world-wide copyright and/or trademark protection for the Licensed Material.
The expense of securing copyright and/or trademark protection for the
Licensed Material in North America shall be borne solely by Xxxxxxxxx. The
expense of securing copyright and/or trademark protection for the Licensed
Material in countries or locations where Company operates or is engaged in
business outside of North America shall be borne by Company. Company agree
to assist Xxxxxxxxx to the extent necessary in the procurement of any
protection or to protect any of Xxxxxxxxx'x rights to the Licensed Material.
Xxxxxxxxx may, in his discretion, commence or prosecute any claims or suits
with respect to the Licensed Material and may join Company as a party
thereto. Company shall promptly notify Xxxxxxxxx in writing of any knowledge
it may have of infringements or imitations by others of the Licensed
Materials on products or materials similar to those covered by this
Agreement.
9. Miscellaneous.
9.1. Effectiveness of Agreement. This Agreement shall become effective
on and as of the date of execution of the Stock Purchase Agreement.
9.2. Successors and Assigns. This Agreement shall bind and inure to the
benefit of Company and Xxxxxxxxx and their respective successors, permitted
assigns, heirs and legal representatives (as the case may be) of Company and
Xxxxxxxxx.
9.3. Further Assurances. The parties shall duly acknowledge, execute,
deliver, and/or procure the due execution and delivery of any and all further
assignments and other instruments which may be appropriate, necessary, or
expedient to carry out, confirm, or effectuate the purpose and intent of this
agreement and the grant of rights made hereunder.
9.4. Assignment. Company may not assign its rights under this Agreement
to any purchaser or transferee without the prior written consent of
Xxxxxxxxx. Xxxxxxxxx may freely assign his rights hereunder without
Company's consent to any party. Xxxxxxxxx agrees to notify Company of any
such assignment within fifteen (15) days of such assignment.
9.5. Entire Agreement. This Agreement, the Stock Purchase Agreement and
the other Transaction Documents (as defined in the Stock Purchase Agreement)
contain the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements or
understandings with respect thereto.
9.6. Notices. All notices and other communications pursuant to this
Agreement shall be made in accordance with the Stock Purchase Agreement at
the address set forth therein for the Company and Xxxxxxxxx.
9.7. Amendment and Modification; Waiver. Except as otherwise provided
herein, this Agreement may be amended, modified and supplemented and the
application of any provision of this Agreement or any rights or obligations
of any party hereunder may be waived (either retroactively or prospectively)
only by written agreement of the parties hereto affected by such amendment,
modification, supplement or waiver. Further, any waiver shall be effective
only in the specific instance and for the specific purpose stated in such
writing.
9.8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.
9.9. Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed
to be a part of this Agreement.
9.10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
9.11. Arbitration. Any and all disputes arising hereunder shall be
subject to resolution by arbitration as provided in the Arbitration
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this License Agreement to
be executed and delivered as of the date first above written.
REDNECK FOODS, INC.,
a Delaware corporation
By _____________________________
Name: ______ XXXX XXXXXXXXX
Title: ________________________
