EXHIBIT 10.35
ROYALTY AGREEMENT
The Royalty Agreement the "Agreement") is made and is effective February 11,
2000 between Xxxxxxx Xxxx ("Xxxx"), an individual, located at 0 Xxxxx Xxxxx,
Xxxxx 000, Xxx Xxxxx, XX 00000, and Monterey Pasta Company (the "Company"), a
Delaware corporation, located at 0000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000.
1. SERVICES PROVIDED
Naim shall provide the Company input on the product and machinery development
and marketing of a pizza line. Services shall include, but not be limited to
development of machinery and processing methodology, input on recipe
development, flavors to market, marketing strategy, information on the market
conditions and competitive environment, packaging design, and developing
relationships with buyers for major chains.
Naim will provide input to the Company on machinery purchased for the testing
and production of filled pizzas, filled calzones and variations of same items by
size and shape ("the Product"). Naim agrees that he will, at Monterey's request,
repurchase any part or all of the machinery originally recommended by it to the
Company for purchase, at any time up to nine months after Company's purchase.
Repurchase is to be in the form of cash at the Company's initial cost.
2. TERM
Naim shall provide services to Company pursuant to the Agreement commencing on
February 11, 2000 and continuing until project is complete but not later than
eight years from the effective date of this Agreement.
3. CONFIDENTIALITY
During the term of this agreement and thereafter the confidentiality provisions
of this agreement shall remain in full force and effect and shall survive the
termination of this agreement. Xxxx Xxxx, and any agent or representative of
Naim shall not, without prior permission of the Company, disclose any
Confidential Information including any proprietary information such as, but not
limited to, formulas, specifications, manufacturing methods, documentation
produced, business affairs, future plans, process information, customer lists,
and any other information which is a valuable, special and unique asset of the
Company, and which shall include any other information Naim is specifically told
is confidential. Confidential information shall not include information that
becomes publicly available through no act of the other party, is received
rightfully from a third party without duty of confidentiality, is disclosed
under operation of law, or is disclosed with the prior written permission of the
Company.
Naim agrees that he will not at any time or in any manner, either directly or
indirectly, use any such information for Naim's own benefit. Naim will protect
such information and treat it as strictly confidential. A violation of this
paragraph shall be a material violation of this Agreement. If it appears that
Naim has disclosed (or has threatened to disclose) information in violation of
this Agreement, the Company shall be entitled to an injunction to restrain Naim
from disclosing, in whole or in part, such information, or from providing any
services to any party to whom such information has been disclosed or may be
disclosed. The Company shall not be prohibited by this provision from pursuing
other remedies, including a claim for loss and damages.
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4. NON-COMPETE
Naim agrees that he will not directly, engage in own, manage, operate, finance,
participate in, provide services for, have an interest in, or otherwise be
involved with any person, firm, partnership, corporation, or business, whether
as an employee, officer, director, agent, security holder, creditor, consultant,
shareholder, partner, trustee, joint venturer, broker, distributor, sales
representative or in any other capacity, that engages in the production, sale,
or distribution of refrigerated pizzas or similar frozen items for a five year
period commencing on the date of this Agreement, or for so long as Naim or Naim
successors carry on a similar business to the Company, whichever event occurs
first.
5. REFERRALS
During the term of this agreement and for a period of six months subsequent to
the termination of this agreement Consultant agrees to promptly refer to Company
any and all orders and inquiries that he may receive for any refrigerated
pizzas.
6. PAYMENT
Company shall pay Naim a monthly consulting fee ("Monthly Fee") of $4,200
beginning February 28, 2000 for a guaranteed minimum of one month, and
additional monthly payments not to exceed five months, if the Company markets
the Product. If the Product is marketed by the Company, the Company will pay
Naim additional compensation in the form of a royalty based on the following
percents of Net Revenues (net of all discounts and sales allowances and returns)
for each 12 month period beginning with the first month Net Revenues exceed
$50,000.
Twelve month Royalty
NET REVENUES PERCENT
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$1-2 million 4.0%
$2-4 million 3.0%
$4-6 million 2.5%
Above $6 million 2.0%
For Net Revenues below the $6 million level the application of royalty percent
shall be cumulative. For instance, the payment for sales of $5.5 million would
be calculated accordingly:
$2.0 million @ 4.0% = $ 80,000
2.0 million @ 3.0% = 60,000
1.5 million @ 2.5% = 37,500
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Total royalty $177,500
Royalty will be payable within 30 days of the end of each accounting period.
Accounting period shall be defined as a 4 or 5 week period, which is commonly
part of an accounting year characterized by 8 four week periods and 4 five week
periods, except in the event of a 53 week year which includes 8 four week
periods, 3 five week periods and 1 six week period.
7. ROYALTY PAYMENT TERM
Payment term will begin with the effective date of the first royalty payment as
expressed in Article 6 and continue for a period of seven additional years after
which time payments will cease
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forever. If either party upon the occurrence of an event or events described in
Article 10 terminate agreement, no further Monthly Fees or royalty payments will
be due.
8. NO AUTHORITY TO BIND COMPANY
Naim has no authority to enter into contracts or agreements on behalf of
Company.
9. EXPENSES
Company shall not be liable for any expenses incurred by Naim unless approved by
Company's CEO in writing in advance of expenditure.
10. TERMINATION
Either party shall have the right to terminate this Agreement, prior to the
expiration of the term hereof, upon the occurrence of any of the following
events:
(a) Breach or default of the other of any of the terms, obligations,
convenants, representations of warranties under this Agreement which is not
waived in writing by the non-defaulting party. In such case, the non-defaulting
party shall notify the other of such alleged breach or default and the other
party shall have a period of thirty (30) days to cure the same; or
(b) If the other party is declared insolvent or bankrupt, or makes an
assignment of the benefit of creditors, or a receiver is appointed or any
proceeding is demanded by, for or against the other under any provision of the
Federal bankruptcy Act or any amendment thereof.
c) Within forty-five days of the effective date of this agreement, if the
company decides not to market the Product.
Naim shall return to Company within seven (7) days of the termination of this
Agreement any records, reports, documents or other materials disclosed by
Company.
11. ASSIGNMENT
This Agreement will bind and inure to the benefit of each party's permitted
successors and assigns. Neither party may assign this Agreement, in whole or in
part, without the other party's written consent; PROVIDED, HOWEVER, that Company
may assign this Agreement without such consent to a successor in interest or in
connection with any merger, consolidation, any sale of all or substantially all
of such party's assets or any other transaction in which more than fifty percent
(50%) of such party's voting securities are transferred. Any attempt to assign
this Agreement other than in accordance with this provision shall be null and
void.
12. RECORDS; AUDIT
Upon giving advance written notice of not less than five (5) business days, and
not more frequently than twice in any twelve (12) month period, Company shall
allow the Managers and Members of Naim, or their designated agents, access
during Company's normal business hours to the sales records maintained by
Company regarding its Monthly Net Sales in order to verify the accuracy of
Company's royalty computation. The information contained in such records is
confidential and proprietary to Company. Naim shall maintain the confidentiality
of such information and shall contractually obligate its members and duly
authorized agents to not disclose such information to any third party without
Company's prior consent and to not use such information for any purpose other
than verification of the royalties due. In the event such review
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of Company's records discloses any underpayment of royalties to Naim, Company
shall promptly pay to Naim any underpayment of royalties due under the terms of
this Agreement. Naim shall likewise promptly refund to Company any overpayment
of royalties made to Naim under this Agreement.
13. INDEPENDENT CONTRACTOR
Naim is and throughout this Agreement shall be an independent contractor.
Contractor shall not be entitled to receive any benefits normally provided to
Company's employees, including health insurance benefits, paid vacation, or any
other employee benefits. Company shall not be responsible for withholding income
or other taxes form payments made to Contractor. Contractor shall be solely
responsible for filing all returns and paying any income, social security or
other tax levied upon or determined with respect to the payments made to
Contractor pursuant to this Agreement.
14. NOTICES
All notices required or permitted under this Agreement shall be in writing and
shall be deemed delivered when delivered in person or deposited in the United
States mail, postage prepaid, addressed as follows:
To Company:
Monterey Pasta Company
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention : R. Xxxxx Xxxxxx
Chief Executive Officer
Phone:(000) 000-0000
Fax:(000) 000-0000
To Naim:
Xxxxxxx Xxxx
0 Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Phone:(000) 000-0000
Fax:(000) 000-0000
15. ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties and there are no
other promises or conditions in any other Agreement whether oral or written.
This agreement supersedes any prior written or oral agreements between the
parties.
16. AMENDMENT
This Agreement may be modified or amended if the amendment is made in writing
and is signed by both parties.
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17. SEVERABILITY
If any provision of this Agreement shall be held to be invalid or unenforceable
for any reason, the remaining provisions shall continue to be valid and
enforceable. If a court finds that any provision of this Agreement is invalid or
unenforceable, but that by limiting such provision it would become valid and
enforceable, then such provision shall be deemed to be written, construed, and
enforced as so limited.
18. WAIVER OF CONTRACTUAL RIGHT
The failure of either party to enforce any provision of this Agreement shall not
be construed as a waiver or limitation of that party's right to subsequently
enforce and compel strict compliance with every provision of this Agreement.
19. APPLICABLE LAW
This Agreement shall be governed by the laws of the State of California.
20. MEDIATION OF DISPUTES
Any controversy arising out of the performance of this Agreement or regarding
the interpretation of this Agreement is subject to a good faith effort at
resolution through non-binding mediation before any complaint (whether a civil
complaint in court or a implant in arbitration) may be filed. Mediation is a
process in which parties attempt to resolve a dispute by submitting it to an
impartial neutral mediator who is authorized to facilitate the resolution of the
dispute, but who is not empowered to impose a settlement on the parties. The
mediation fee, if any, shall be divided equally among the parties involved. The
parties agree to limit the admissibility in any subsequent litigation or
proceeding of anything said, any admissions made, and any documents prepared, in
the course of mediation, consistent with California Evidence Code section
1152.5.
IF ANY PARTY COMMENCES A COURT ACTION OR AN ARBITRATION PROCEEDINGS BASED
ON A DISPUTE OR CLAIM TO WHICH THIS SECTION APPLIES WITHOUT FIRST
ATTEMPTING TO RESOLVE THE MATTER IN GOOD FAITH THROUGH MEDIATION, THEN THAT
PARTY SHALL NOT BE ENTITLED TO RECOVER ATTORNEY'S FEES EVEN IF THEY WOULD
OTHERWISE BE AVAILABLE TO THAT PARTY IN A SUBSEQUENT COURT ACTION OR
ARBITRATION PROCEEDING.
21. ARBITRATION OF DISPUTES FOLLOWING MEDIATION
Any controversy or claim arising out of or relating to this Agreement, or the
making, performance, or interpretation thereof, which is not resolved through
the mediation process required by the preceding Section shall be resolved by
arbitration in accordance with the Rules of the American Arbitration Association
then existing, and judgment on the arbitration award may be entered in any court
having jurisdiction over the subject matter of the controversy. Such award may
be appealed to any appellate court having jurisdiction over the matter to the
same extent that an appeal would be permissible from a civil judgment. The
Arbitrators selected shall be persons experienced in general corporate matters
or general business agreements, and shall
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make their awards based upon the principles of California law. The parties shall
have the right to discovery and the Arbitration proceeding shall be reported by
a certified court order.
BY THEIR EXECUTION OF THIS AGREEMENT, THE PARTIES ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THIS "ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION. ADDITIONALLY, THE
PARTIES ARE HEREBY GIVING UP ANY RIGHTS THEY MIGHT OTHERWISE HAVE POSSESSED
TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL; PROVIDED, HOWEVER,
THE PARTIES ARE NOT GIVING UP THEIR JUDICIAL RIGHTS TO APPEAL OF THE
DECISION OF THE ARBITRATION(S). IF ANY PARTY REFUSES TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, SUCH PARTY MAY BE COMPELLED
TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE.
THE PARTIES' AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. THE
PARTIES HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
22. TIME
Time is of the essence herein.
23. AUTHORITY
Each individual executing this Agreement on behalf of a corporation hereto
represents and warrants that he or she is duly authorized to execute and deliver
this Agreement on behalf of such corporation in accordance with a duly adopted
resolution of the Board of Directors in accordance with the Bylaws of the
corporation, and this Agreement is binding upon said corporation.
24. NO PARTNERSHIP OR JOINT VENTURE
This Agreement does not constitute and shall not be construed as constituting a
partnership or joint venture between Company and Naim. Neither party shall have
any right to obligate or bind the other party in any manner whatsoever, and
nothing continued in this Agreement shall give or is intended to give, any
rights of any kind to any third parties.
25. INTERPRETATION
Naim has been given the opportunity to retain counsel of his own choosing for
purposes of this transaction and has either done so or has elected not to do so,
as Naim sees fit. This Agreement shall be construed according to the fair
meaning of its language. The rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be employed in
interpreting this Agreement.
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In witness whereof, the parties have executed this Agreement effective as of the
date set forth above.
Monterey Pasta Company
By: /s/ R. Xxxxx Xxxxxx Date: March 22, 2000
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Name: R. Xxxxx Xxxxxx
Title:Chief Executive Officer
Xxxxxxx Xxxx
By: /s/ Xxxxxxx Xxxx Date: March 22, 2000
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Name: Xxxxxxx Xxxx
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Schedule A
List of Pizzas
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