EXCLUSIVE LICENSE AGREEMENT
THIS
EXCLUSIVE LICENSE AGREEMENT ("agreement") is made and entered into as of January
1, 2005, by and between NETWORD PUBLISHING, INC., a California corporation
("LICENSOR"), XXXXXXX ENTERPRISES, INC., a California corporation and a
shareholder of LICENSOR ("LICENSEE"), and THE XXXXXXX XXX XXXXXXX 2004 TRUST
DATED JULY 31, 2004 and a shareholder of LICENSOR (the "Xxxxxxx
Trust").
RECITALS
A. LICENSOR
is the proprietor or licensee of a variety of intellectual property, including
without limitation the service xxxx and trade name "VERBAL ADVANTAGE" and the
other intellectual property to be licensed to LICENSEE hereunder as listed and
described in EXHIBIT A attached hereto and incorporated herein by this
reference, and as such EXHIBIT A may be subsequently amended by the parties
hereto from time to time in writing (collectively the "licensed property").
B. LICENSEE
wishes to conduct business as VERBAL ADVANTAGE and otherwise apply the licensed
property to various educational and learning aids and other materials
(individually a "product" and collectively the "products") made in accordance
with specifications adopted by LICENSOR from time to time (the
"specifications"). In addition, LICENSEE wishes to retain LICENSOR for certain
limited marketing consultations in connection therewith.
C. The
parties hereto hereby acknowledge and confirm that, effective as of December 31,
2004, they have terminated that certain Exclusive License Agreement dated August
22, 2003 between LICENSOR and LICENSEE; provided, however, that LICENSEE remains
obligated thereunder for, and hereby reiterates its promise to promptly pay to
LICENSOR, all remaining amounts of the royalty still owing thereunder.
D. In
further consideration of and concurrently with the execution of this agreement,
LICENSEE and the Xxxxxxx Trust have entered into a Stock Purchase Agreement
dated as of January 1, 2005 (the "stock purchase agreement") (together with a
Secured Promissory Note dated as of January 1, 2005 in the amount of $451,106.91
executed by LICENSEE in favor of the Xxxxxxx Trust [the "stock purchase note"])
and a Shareholders Agreement dated as of January 1, 2005 (the "shareholders
agreement") (together with a Secured Promissory Note dated as of January 1, 2005
in the amount of $89,520.32 executed by LICENSEE in favor of LICENSOR [the
"shareholders agreement note"]) and LICENSOR and Xxxx Xxxxxxx have entered into
an Employment Agreement dated as of January 1, 2005 (the "employment
agreement"). The stock purchase agreement, the stock purchase note, the
shareholders agreement, the shareholders agreement note, and the employment
agreement are collectively referred to herein as the "other transaction
documents."
GRANTS
1. In
consideration of the foregoing recitals, LICENSOR hereby grants to LICENSEE a
license to use the licensed property throughout the world (the "territory") on
the products distributed or sold in the territory, and to conduct business
throughout the territory as VERBAL ADVANTAGE, said license being subject to the
provisions hereof (the "license"). During the term of this agreement, the
license is exclusive to LICENSEE, is personal to LICENSEE, and is
non-transferable except as may otherwise be specifically stated herein. In this
regard, LICENSOR shall not grant any other license with respect to the licensed
property during the term of this agreement.
TERMS
AND CONDITIONS
2. In
exchange for the license, LICENSEE shall pay a royalty to LICENSOR under this
agreement (the "royalty" or "royalties") as described in EXHIBIT B attached
hereto and incorporated herein by this reference, and as such EXHIBIT B may be
subsequently amended by the parties hereto from time to time in writing, and
LICENSEE shall timely and fully spend not less than $20,000.00 per week on
direct advertising expenses to promote the VERBAL ADVANTAGE and related products
that are subject to the royalties payable under this agreement.
3. LICENSOR
agrees to be retained for certain limited marketing consultations during the
term hereof in exchange for additional compensation (the "consulting
compensation") and other payments as described in EXHIBIT C attached hereto and
incorporated herein by this reference, and as such EXHIBIT C may be subsequently
amended by the parties hereto from time to time in writing.
4. LICENSEE
shall cause it and its shareholders, directors, officers and employees (i) to
use their best efforts in the promotion, marketing and sale of the products
within the territory; and (ii) not to promote, market or sell, or have any more
that a five percent (5%) interest in any other enterprise that promotes, markets
or sells, anything that competes, directly or indirectly, with the licensed
property. In this regard, when LICENSEE conducts business as VERBAL ADVANTAGE
LICENSEE shall do so in a manner that is in harmony with applicable law and
otherwise only apply the licensed property to products which meet the
specifications.
5. In order
to maintain and promote a high standard of quality and appearance for the
products sold hereunder, the products authorized to be marketed under the
licensed property shall meet the specifications, and all elements and processes
of quality control, standards, and procedures relating to the products shall be
subject to a fifteen (15) day review and approval period by LICENSOR's Chairman
or CEO only (and not by LICENSOR's president or any other officer). If written
disapproval is not submitted within the fifteen (15) days after receipt of the
submittal by LICENSOR, the submittal shall be assumed to be approved on the
sixteenth (16th) day. LICENSEE shall provide LICENSOR with samples of its
products to be marked with the licensed property periodically on request, in
order that LICENSOR may ascertain compliance herewith.
6. LICENSEE
shall not distribute any product marked with the licensed property, which
product has not previously been so marked, until (i) it has furnished LICENSOR
with a fair sample out of the first lot of the product produced by it hereunder;
and (ii) it has received the written approval thereof by LICENSOR's Chairman or
CEO only (and not by LICENSOR's president or any other officer). Any sample not
disapproved in writing within thirty (30) days after receipt of the submittal by
LICENSOR shall be assumed to be approved on the thirty-first (31st)
day.
7. LICENSEE
agrees that nothing herein shall give to LICENSEE any right, title or interest
in the licensed property, except the right to use the licensed property in
accordance with the terms of this agreement, and that any and all uses by
LICENSEE of the licensed property shall inure to the benefit of
LICENSOR.
8. LICENSEE
shall keep complete and accurate books and records, in accordance with generally
accepted accounting standards, of its manufacture, use and sale of the products
marketed under the licensed property or otherwise, and such books shall be
available to be inspected and copied by or audited at any time during regular
business hours by LICENSOR, the Xxxxxxx Trust or their respective designated
agent or agents. If LICENSOR or the Xxxxxxx Trust shall determine that royalties
and/or consulting compensation were underpaid by an amount over $500.00, then
LICENSEE shall immediately pay to LICENSOR, Attn: Xxxx Xxxxxxx, any royalties
and consulting compensation owing plus LICENSOR's and the Xxxxxxx Trust's
expenses incurred in connection with such inspection or audit.
9. Unless
sooner expired or otherwise terminated as herein provided, this agreement shall
extend for the period of time during which the products marked by LICENSEE are
sold in the territory.
10. The term
of this agreement commences on January 1, 2005 and expires on December 31, 2009.
LICENSEE shall have an option to extend the term of this agreement for an
additional one (1) year until December 31, 2010; provided, however, that
LICENSEE must provide LICENSOR with at least one hundred eighty (180) days'
written notice of its intention to exercise its option to extend the term of
this Agreement until December 31, 2010.
11. If
LICENSEE defaults in the timely payment of any royalty, consulting compensation
or other amount required by this agreement and continues in such default for a
period of fifteen (15) days after receipt of written notice from LICENSOR or the
Xxxxxxx Trust of such default, or if LICENSEE conducts business as VERBAL
ADVANTAGE in a manner that is not in harmony with applicable law and continues
in such default for a period of fifteen (15) days after receipt of written
notice from LICENSOR or the Xxxxxxx Trust of such default, or if LICENSEE
applies the licensed property to any of the products which does not meet the
specifications and continues in such default for a period of fifteen (15) days
after receipt of written notice from LICENSOR or the Xxxxxxx Trust of such
default, or if LICENSEE otherwise defaults under this agreement or under any of
the other transaction documents and such default continues for a period of
fifteen (15) days after receipt of written notice from LICENSOR or the Xxxxxxx
Trust of such default, then LICENSOR or the Xxxxxxx Trust shall have the right
to terminate this agreement at any time thereafter by giving written notice of
the intention to do so, and this agreement shall terminate one (1) business day
after LICENSEE receives said written notice of termination. Without
VERBAL
ADVANTAGE EXCLUSIVE LICENSE AGREEMENT
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limitation
of the foregoing, any default by LICENSEE under any of the other transaction
documents shall be considered a default under this agreement.
12. If, for
whatever reason, this agreement is terminated: (i) LICENSEE shall not have any
right to conduct business as VERBAL ADVANTAGE or xxxx, market or sell the
products with the licensed property subsequent to the date of such termination,
(ii) LICENSEE hereby agrees and warrants that, upon such termination, it will
not thereafter conduct business as VERBAL ADVANTAGE or make any use of the
products or licensed property, and (iii) LICENSEE shall pay as and when provided
under this agreement all unpaid royalties and consulting compensation accrued as
of the termination date.
13. All
notices and other communications under this agreement shall be in writing and
shall be deemed given upon receipt through personal delivery, overnight courier,
facsimile transmission, or U.S. first class mail, return receipt requested, to
the parties at the following addresses and facsimile numbers (or at such other
address or facsimile number for a party as shall be specified by like notice):
If to
LICENSEE: If to
LICENSOR or the Xxxxxxx Trust:
Xxxxxxx
Enterprises, Inc. Netword
Publishing, Inc. or The Xxxxxxx
00
Xxxxxxxx, Xxxxx 000 Xxx
Xxxxxxx 0000 Xxxxx
Xxxxx
Xxxxx, XX 00000 c/o
Carlsmith Ball LLP
Attention:
Xxxxxxx X. Xxxxxxx 000
Xxxxx Xxxxxx Xxxxxx, 0xx
Xxxxx
and J.
Xxxx Xxxxx Xxx
Xxxxxxx, XX 00000
Title:
President and General Counsel Attn:
Xxxxx Xxxxxxxx
Facsimile:
(000) 000-0000
Facsimile: (000) 000-0000
14. This
agreement shall be governed, interpreted and enforced pursuant to the internal
laws of the State of California, without reference to its conflicts of law
principles. The parties hereto consent to the personal and subject matter
jurisdiction of the Courts of the State of California and consent to venue, for
all purposes, to be held in and for the County of Los Angeles.
15. LICENSEE
shall not encumber or assign this agreement in whole or in part, whether
voluntarily or involuntarily; provided, however, that LICENSEE may assign the
rights and burdens contemplated hereunder to any affiliate, parent or
subsidiary, or pursuant to a merger or acquisition with any affiliate, parent or
subsidiary.
16. This
agreement shall be binding upon and shall inure to the benefit of the parties
hereto and, so far as the same may be assignable, to their successors and
assigns.
17. This
agreement shall be binding upon and shall inure to the benefit of any person or
entity which controls or is controlled by a party hereto.
18. No
failure or delay on the part of the LICENSOR in insisting upon or enforcing or
resorting to any of its powers, rights, remedies or options hereunder, and no
partial or single exercise thereof, shall constitute a waiver of any such
powers, rights, remedies or options unless such waiver be in writing signed by
LICENSOR.
19. The
non-prevailing party in any judicial proceeding arising out of or relating to
this agreement, including for breach, interpretation, or enforcement, shall be
fully responsible for and pay the prevailing party's reasonable attorneys' fees,
costs, and expenses, including, without limitation, those incurred preliminary
to the institution of any such action or proceeding, which attorneys' fees,
costs, or expenses awarded hereunder shall be included as part of any ruling,
award or judgment, which sums, if desired by the prevailing party and
permissible, shall be deemed items of cost. The parties hereto specifically
agree that the determination of any attorney fee, cost or expense award
permitted hereunder shall not be limited by any attorney fee schedule or method
of computation of fees or definition of recoverable costs established by statute
or court rule.
20. Full and
timely payment of the royalties and consulting compensation owing from LICENSEE
to LICENSOR hereunder as well as LICENSEE's compliance with the other terms and
conditions of this agreement and the other transaction documents are secured
under that certain Stock Pledge Agreement from LICENSEE to the Xxxxxxx Trust of
even date herewith.
21.
If any
portion of this agreement is determined to be invalid or unenforceable by a
court of competent jurisdiction, the validity, legality, and enforceability of
the remaining provisions shall not be
VERBAL
ADVANTAGE EXCLUSIVE LICENSE AGREEMENT
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affected.
Additionally, that portion of this agreement that is determined to be invalid or
unenforceable shall be adjusted, rather than voided, to achieve the intent of
the parties under this agreement.
22. This
agreement (including, without limitation, the recitals and exhibits hereof and
hereto) contains the entire agreement between the parties hereto in connection
with subject matter hereof and supersedes all prior agreements or understandings
or communications (including, without limitation, any faxed or e-mailed
communications) that they may have had regarding this agreement or such subject
matter, either oral or in writing. In this regard, the parties hereto
specifically disavow and repudiate any other purported license agreement
document which Xxxx Xxxxxxx may have signed as a representative of Vision Direct
Publishing, Inc. as a purported party to that document. No variations,
modifications, supplements, waivers, or changes shall be binding upon any party
hereto unless set forth in a written agreement duly executed and delivered by
such party.
23. The
parties agree that irreparable damage would occur in the event that any of the
provisions of this agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in
equity.
IN
WITNESS WHEREOF, the parties have executed this agreement the day and year first
above written.
"LICENSOR"
NETWORD
PUBLISHING, INC.
By:_____________________________
Xxxx
Xxxxxxx, Chairman & CEO
"LICENSEE"
XXXXXXX
ENTERPRISES, INC.
By:_____________________________
Xxxxxxx
X. Xxxxxxx, President
By:_____________________________
Xxxxxx
Xxxx Xxxxx, Secretary
"Xxxxxxx
Trust"
THE
XXXXXXX XXX XXXXXXX 2004 TRUST DATED JULY 31,
2004
By:_____________________________
Xxxxxxx
Xxx Xxxxxxx, Trustee
The
undersigned hereby disavows and repudiates as of January 1, 2005 any other
purported license agreement document that Xxxx Xxxxxxx may have signed as a
representative of the undersigned:
Vision
Direct Publishing, Inc.
By:_______________________
Xxxxxxx
X. Xxxxxxx, President
VERBAL
ADVANTAGE EXCLUSIVE LICENSE AGREEMENT
of
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EXHIBIT
A
As of
January 1, 2005
LICENSED
PROPERTY
The
licensed property under this agreement includes LICENSOR's proprietary or
license rights in and to each of the products listed for sale on the
xxx.xxxxxxxxxxxxxxx.xxx website
as of January 1, 2005, and as such products may change from time to time with
LICENSOR's advance written approval pursuant to paragraph 6 of this agreement,
together with any and all associated trade names, domain name (including but not
limited to xxx.xxxxxxxxxxxxxxx.xxx),
service marks (including, without limitation, nos. 2691092, 2446166, 1591849
& 2417682), copyrights, logos, designs, toll free telephone numbers, and
other intellectual property, including without limitation, VERBAL ADVANTAGE and
CONVERSATION CONFIDENCE.
THIS
EXHIBIT A TO THE EXCLUSIVE LICENSE AGREEMENT DATED AS OF JANUARY 1, 2005 IS
ACKNOWLEDGED AND AGREED TO BY THE UNDERSIGNED AS OF JANUARY 1,
2005:
"LICENSOR"
NETWORD
PUBLISHING, INC.
By:_____________________________
Xxxx
Xxxxxxx, Chairman & CEO
"LICENSEE"
XXXXXXX
ENTERPRISES, INC.
By:_____________________________
Xxxxxxx
X. Xxxxxxx, President
"Xxxxxxx
Trust"
THE
XXXXXXX XXX XXXXXXX 2004 TRUST DATED JULY 31,
2004
By:_____________________________
Xxxxxxx
Xxx Xxxxxxx, Trustee
VERBAL
ADVANTAGE EXCLUSIVE LICENSE AGREEMENT
of
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EXHIBIT
B
As of
January 1, 2005
ROYALTIES
During
the term of this agreement, LICENSEE shall pay monthly royalties to LICENSOR
consisting of (i) $8,000.00, which shall be paid no later than the fifth (5th)
day of each month, with payments commencing on or before January 5, 2005, plus
(ii) two percent (2%) of "net receipts" from the products, with "net receipts"
defined as the
aggregate of all receipts from the products without making any exclusions or
deductions except for returns, which shall be paid from the
previous month's total net receipts no later than the fifteenth (15th) day of
each month, with payments commencing on or before February 15, 2005 based on
January 2005 net receipts and ending on or before January 15, 2010 based on
December 2009 net receipts. With each such net receipts royalty payment,
LICENSEE shall furnish a written report showing LICENSEE's total net receipts
from the products for the prior month.
If
LICENSEE should opt to extend this agreement for one additional year through
December 31, 2010 pursuant to paragraph 10 of this agreement, LICENSEE shall pay
monthly royalties to LICENSOR of $15,000.00, which shall be paid as provided
hereinabove, commencing on or before January 5, 2010, plus two and one-half
percent (2.5%) of net receipts, which shall be paid as provided hereinabove,
commencing on or before February 15, 2010 based on January 2010 net receipts and
ending on or before January 15, 2011 based on December 2010 net receipts.
THIS
EXHIBIT B TO THE EXCLUSIVE LICENSE AGREEMENT DATED AS OF JANUARY 1, 2005 IS
ACKNOWLEDGED AND AGREED TO BY THE UNDERSIGNED AS OF JANUARY 1,
2005:
"LICENSOR"
NETWORD
PUBLISHING, INC.
By:_____________________________
Xxxx
Xxxxxxx, Chairman & CEO
"LICENSEE"
XXXXXXX
ENTERPRISES, INC.
By:_____________________________
Xxxxxxx
X. Xxxxxxx, President
"Xxxxxxx
Trust"
THE
XXXXXXX XXX XXXXXXX 2004 TRUST DATED JULY 31,
2004
By:_____________________________
Xxxxxxx
Xxx Xxxxxxx, Trustee
VERBAL
ADVANTAGE EXCLUSIVE LICENSE AGREEMENT
of
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EXHIBIT
C
As of
January 1, 2005
LIMITED
CONSULTATIONS
During
the term of this agreement (provided that LICENSOR is reasonably available as
described hereinbelow), LICENSOR agrees to provide comments to LICENSEE from
time to time when reasonably requested to do so based on LICENSOR's experience
in the area of marketing development, including with respect to development and
implementation of marketing strategy, management of outside media vendors,
creative development, and other areas in which LICENSOR may agree to provide
comments from time to time. Such consultations shall be provided on an
as-needed, on-call basis. LICENSEE understands and agrees that the comments from
LICENSOR hereunder shall be provided in whatever manner deemed appropriate by
LICENSOR and shall not be rendered for a specific amount of time. LICENSOR shall
be entitled to communicate its comments via telephone, facsimile transmission,
e-mail or other reasonable means, at its discretion. LICENSOR shall be required
to be reasonably available by such reasonable means for a period not to exceed
ten (10) hours per week. LICENSEE acknowledges and agrees that LICENSOR makes no
representations or warranties regarding its comments provided hereunder and that
LICENSOR shall provide them as an independent contractor of
LICENSEE.
In
exchange for the above-referenced consulting services, LICENSEE shall pay
consulting compensation to LICENSOR consisting of (i) $3,000.00 per month, which
shall be paid no later than the fifth (5th) day of each month, with payments
commencing on or before January 5, 2005; and (ii) $3,000.00 per calendar
quarter, which shall be paid no later than the twenty-fifth (25th) day of April,
July, October and January, with payments commencing on or before April 25, 2005,
provided not less than 1.5% of those that actually received direct mail
solicitations during the previous calendar quarter, and for which solicitations
LICENSOR provided its comments, contacted LICENSEE or any affiliate, subsidiary
or parent of LICENSEE, on or before the twentieth (20th) day following the end
of such previous calendar quarter. With each such quarterly payment, LICENSEE
shall furnish a written report itemizing the applicable total direct mail
solicitations and the responses thereto for the relevant quarter. In addition,
LICENSEE shall timely and fully pay not less than $5,000.00 to LICENSOR on or
before the fifth (5th) day of each month of the term of this agreement
commencing March 5, 2005, to be used by LICENSOR to cover some of the costs of
retaining and compensating Xxxxxx Xxxxxxx as LICENSOR's assistant marketing
director to assist with LICENSOR's marketing development work. Without
limitation on any of its other rights to terminate Xx. Xxxxxxx, LICENSOR shall
terminate Xx. Xxxxxxx for any of the following actions with respect to LICENSOR:
(a) habitual neglect of duty; (b) material insubordination; (c) fraud,
embezzlement or theft; or (d) death.
"LICENSOR"
NETWORD
PUBLISHING, INC.
By:_____________________________
Xxxx
Xxxxxxx, Chairman & CEO
"LICENSEE"
XXXXXXX
ENTERPRISES, INC.
By:_____________________________
Xxxxxxx
X. Xxxxxxx, President
"Xxxxxxx
Trust"
THE
XXXXXXX XXX XXXXXXX 2004 TRUST DATED JULY 31,
2004
By:_____________________________
Xxxxxxx
Xxx Xxxxxxx, Trustee
