<PAGE>2
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10SB
General Form for Registration of Securities Of Small
Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
REDNECK FOODS, INC.
(Exact name of Small Business Issuer in its charter)
DELAWARE 56-203-5983
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
71 Turtle Creek Drive, Asheville, NC 28803
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (704) 277-5577
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
<PAGE>3
ITEM 1. DESCRIPTION OF BUSINESS
A. The Company was incorporated in Delaware on January 31, 1997. The
Company is authorized to issue Twenty Million (20,000,000) Common Shares,
$.001 par value. The Company is also authorized to issue Two Million Five
Hundred (2,500,000) Preferred Shares, $.001 par value. Pursuant to a
Special Meeting of the Shareholders held on July 22, 1997, the Company filed
an amendment to the Articles of Incorporation increasing the authorized
Common Shares of the Company to One Hundred Million (100,000,000).
The Company's executive offices are located at 71 Turtle Creek Drive,
Asheville, NC 28803. These offices consist of 1,800 square feet which are
leased on a five year lease basis at the monthly lease price of $1,800 which
is terminable on a sixty day written notice.
There are presently outstanding 7,931,666 Common Shares and 2,500,000 Class A
Preferred Shares.
Corporate Operations. The Company is a newly formed company, which currently
intends to acquire and operate barbecue restaurants to be known as
"Foxworthy's Smoke House Grill" or "Foxworthy's Backyard Bar-B-Q," The
Company intends initially to acquire existing barbecue restaurants for
conversion to one of the two restaurant concepts. The Company also intends
to produce and distribute barbecue sauces and salsas under trademarks using
the "Foxworthy" name and may also, at a later time, distribute other food
products which are related to the restaurant menu.
License Agreement. On February 4, 1997, the Company entered into a
license agreement with Jeff Foxworthy whereby Mr. Foxworthy licensed the use
of his name and likeness. In consideration for the license agreement, the
Company issued 2,500,000 of its Series A Convertible Preferred Stock under
the terms of a Stock Purchase Agreement. The term of the license agreement
is 50 years unless sooner terminated by the occurrence of any of the
following:
a. a material breach by the Company of the license agreement,
the Stock Purchase Agreement or any of the transaction documents, if the
breach is not cured within 30 days of receipt from Foxworthy of written
notice thereof.
b. at the option of Foxworthy, upon a material breach by David
Womick of his obligations under Mr. Womick's employment agreement within the
first three years after opening of the first restaurant, which breach has
not been cured within 30 days of receipt from Foxworthy of written notice
thereof.
c. Upon receipt of written notice from Foxworthy in the event
the 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 the Company with the licensed material to be detrimental to
the value of the licensed material or to Mr. Foxworthy's image or reputation
as determined by Foxworthy in his sole and absolute discretion.
d. The failure of the 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 the Company and/or Mr. Womick to raise the Investment
Capital, on or before June 30m 1998, and otherwise pursuant to the terms
provided in the Stock Purchase Agreement; or
f. The failure of the Company to comply with any laws and regulations, the
consequences of which are materially adverse to the Company.
Upon termination or expiration of the License Agreement, all license rights
granted to the Company shall terminate and the Company shall immediately
thereafter discontinue all use of the licensed material. Mr. Foxworthy
shall have the right to purchase any inventory of the licensed products in
the Company's possession as of the date of termination. If Mr. Foxworthy
does not purchase all of the Company's existing inventory of the licensed
products, then not withstanding the termination of the license agreement, the
Company shall have the right ot 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 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 the license
agreement.
Development of Corporate Owned Restaurants. The Company intends to develop a
chain of corporate owned restaurants under the name of "Foxworthy's Smoke
House Grill" or "Foxworthy's Backyard Bar-B-Q."
Implementation of Restaurant Franchising Program. The Company intends to
build additional corporate owned restaurants and develop and implement a
restaurant franchising program on a nationwide basis.
Acquisition of Existing Barbecue Restaurants. The Company intends to
acquire existing barbecue restaurants for conversion to either "Foxworthy's
Smoke House Grill" or "Foxworthy's Backyard Bar-B-Q" concepts.
<PAGE>4
Products. The Company's sauces will be produced and marketed under the
"Jeff Foxworthy's Backyard Bar-B-Q Sauce" brand. The first three sauces
are:
Original Redneck. An original mild tomato and molasses based sauce.
Redneck Hot. A hot spicier version of "Original Redneck" sauce.
Tangy Mustard. A tangy mustard based sauce that was developed to be
used as a barbecue sauce, salad dressing and a dipping sauce.
The Company has determined the retail and wholesale prices of its
products, however, the prices vary from store to store.
The Company has retained Harland Adams Spice Company, in addition to other
food brokers, to assist the Company in
the development and distribution of its products. Harland Adams Spice
Company is headed by Douglas Mack Williams and Harland Adams who is the
first grandson of Colonel Harland Sanders.
Marketing. The Company shall rely primarily on print, television and radio
advertising along with sampling at retail outlets to initially attract
customers to buy its products and, in the future, to eat at its restaurants.
The Company may also use distinctive exterior signage and off-site
billboards.
Promotion Agreement. On February 4, 1997, the Company entered into a
promotion agreement with Jeff Foxworthy whereby the Mr. Foxworthy will
provide the Company with certain promotional appearances and services. For
a period of five years, Mr. Foxworthy agrees to serve, without charge, but
subject to applicable union and guild minimums, as the feature actor in four
commercials per year promoting the restaurants and the franchise. The
commercials may be aired on local or national television or radio or both.
During the term of the agreement, Mr. Foxworthy shall not directly or
indirectly provide promotional appearances or services to any business which
competes with the Company's business of owning and managing restaurants that
feature barbecue style as their primary cuisine and marketing and selling
barbecue-related food products. The promotion agreement has the same
termination features as the License Agreement discussed above.
Consulting Agreement. On February 4, 1997, the Company entered into a
consulting agreement with J.P. Williams to provide the Company with
consulting advice and services with respect to the promotion and
merchandising of the Company's proposed restaurants and the food products of
the Company. The Company shall pay J. P. Williams an annual consulting fee
of $10,000, as a base fee. In addition to the base fee plus reasonable
expenses, J.P. Williams may be entitled to a potential bonus, the amount of
which, if any, shall be determined by the Board of Directors of the Company,
in its sole and absolute discretion.
Additionally, Mr. Williams has been granted options to acquire 540,000 shares
of equity stock of the Company. Mr. William's interest in such options shall
vest in equal monthly installments on the first day of each month over the
three year term of the consulting agreement.
Distribution. The Company's products are specifically designed for national
distribution through grocery stores, gift shops, discount outlets and
restaurants.
Buyer-Broker Agreement. On April 16, 1997, the Company entered into a
Buyer-Broker agreement with Business Intermediary Services, Ltd., a business
controlled by Mr. Erich Schmid, a director of the Company, to locate
businesses or properties to be purchased by the Company. The term of the
agreement is twenty four (24) months. Pursuant to the Buyer-Broker
Agreement, the Company shall pay an accomplishment fee based on a percentage
of the total purchase price paid by the Company. The accomplishment fee
structure is:
5% of total purchase price up to $1,000,000; plus
4% of total purchase price between $1,000,000 and $2,000,000; plus
3% of total purchase price between $2,000,000 and $3,000,000; plus
2% of total purchase price between $3,000,000 and $4,000,000; plus
1% of total purchase price in excess of $4,000,000.
Joint Venture Agreement. The Company has entered into a joint venture with
Pigs"R"Us, Inc., a Florida corporation to be called Redneck Pigs Joint
Venture 1. The sole purpose of the joint venture is to create a single
barbecue restaurant on property under lease by Pigs"R"Us. The parties
agreed to convert the venture into a limited liability company as soon as
practicable and to jointly plan, operate and own the pilot restaurant. The
Company will sublicense to the venture certain rights under its license
agreement and contribute capital. The Company has contributed $50,000 to
this joint venture. No additional contributions will be made under the
current agreement. The Company will own a 10% interest in the venture. The
Company shall be paid a consulting fee of 3% of gross sales in addition to
its available distributions based on its ownership interest. Certain
options and rights for both parties in the joint venture are established by
the contractual agreement.
Dependence on One or a Few Major Customers. The Company does not expect
that any single customer will account for more than ten percent of its
business.
<PAGE>5
The Company is a newly formed company, which currently intends to acquire and
operate barbecue restaurants to be known as "Foxworthy's Smoke House Grill"
or "Foxworthy's Backyard Bar-B-Q," The Company intends initially to acquire
existing barbecue restaurants for conversion to one of the two restaurant
concepts. The Company also intends to produce and distribute barbecue
sauces and salsas under trademarks using the "Foxworthy" name and may also,
at a later time, distribute other food products which are related to the
restaurant menu.
Research and Development. The Company has expended in excess of $61,700
for research and development activities. These amounts include $35,000 in
consulting expense and $26,700 in contract services. In the future, the
Company anticipates that a portion of the proceeds from this offering will be
used to conduct additional research and development activities.
Competition. The restaurant and food product industries are highly
competitive with respect to price, service, quality and location and, as a
result, has a high failure rate. There are numerous well-established
competitors, including national, regional and local restaurant chains,
possessing substantially greater financial, marketing, personnel and other
resources than the Company. Furthermore, to the extent that barbecue
restaurants are frequently viewed as "local", the Company may experience
intense competition or lack of consumer acceptance if it expands into areas
with existing barbecue restaurants. There can be no assurance that the
Company will be able to respond to various competitive factors affecting the
restaurant industry. The restaurant and food industries are also
generally affected by changes in consumer preferences, national, regional and
local economic conditions and demographic trends. The performance of
restaurant facilities may also be affected by factors such as traffic
patterns, demographic considerations and the type, number and location of
competing facilities. In addition, factors such as inflation, increased
labor and employee benefit costs, and a lack of availability of experience
management and hourly employees may also adversely affect the restaurant and
food industries in general and the Company's restaurants and food products,
in particular. Restaurant operating costs are further affected by increases
in the minimum hourly wage, unemployment tax rates and similar matters over
which the Company has no control. Finally, by the nature of its business,
the Company would be subject to potential liability from serving contaminated
or improperly prepared food.
Employees. The Company employs eight full time persons. The Company
shall employ additional individuals as required.
Governmental Regulation. The restaurant and food product business is
subject to various federal, state and local government regulations, including
those relating to sanitation, safety, fire and the sale of food and alcoholic
beverages. The failure to maintain food and liquor licenses would have a
material adverse effect on the Company's operating results. in addition,
restaurant and food production operating costs are affected by increases in
the minimum hourly wage, unemployment tax rates, sales taxes and similar
costs over which the Company has no control. Many of the Company's
personnel will be paid at rates based on the federal minimum wage. Recent
increases in the minimum wage are not expected to materially impact the
Company's labor costs. The Company will be subject to "dram shop" statutes
in certain states which generally allow a person injured by an intoxicated
person to recover damages from an establishment that served alcoholic
beverages to such intoxicated person. As appropriate, the Company shall
seek to obtain liability insurance against such potential liability.
The federal Americans With Disabilities Act prohibits discrimination on basis
of disability in public accommodations and employment. The Company could be
required to expend funds to modify its restaurants in order to provide
service to or make reasonable accommodations for disabled persons.
Seasonal Nature of Business Activities. The Company's business activities
are not seasonal.
Item 2. Management's Discussion and Analysis or Plan of Operation
Trends and Uncertainties. Demand for the Company's products and restaurants
will be dependent on, among other things, market acceptance of the Company's
concept, the quality of its food products and restaurant operations and
general economic conditions which are cyclical in nature. Inasmuch as a
major portion of the Company's activities is the receipt of revenues from the
sales of its products, the Company's business operations may be adversely
affected by the Company's competitors and prolonged recessionary periods.
Capital and Source of Liquidity. The Company requires substantial capital
in order to meet its ongoing corporate obligations and in order to continue
and expand its current and strategic business plans. Initial working
capital has been obtained by the sale of the Company's Common Shares in July,
1997 for $.75 per Common Share and an offering of 920,000 of its Common
Shares at $1.00 per Common Share pursuant to Regulation D, Rule 504.
Additionally, since inception the Company has issued 2,500,000 Series A
Preferred Shares (valued at $50,000) and 6,516,000 Common Shares for services
with an aggregate value of $248,700.
<PAGE>6
For the period from inception through December 31, 1997, the Company
purchased office equipment valued at $35,111, invested in a joint venture
with Pigs"R"US of $35,000 and had an increase in other assets due to an
escrow deposit of $25,000. As a result, the Company had net cash used by
investing activities of $95,111.
For the period from inception through December 31, 1997, the Company received
proceeds from short-term borrowings of $50,000 which was repaid. The Company
prepaid $9,000 of secondary offering expenses. Additionally, the Company
received net proceeds from the sale of its common stock of $1,015,635. As a
result, the Company had net cash provided by financing activities of
$1,006,635 for the period from inception to December 31, 1997.
On a long term basis, liquidity is dependent on continuation and expansion of
operation and receipt of revenues, additional infusions of capital and debt
financing. The Company believes that additional capital and debt financing
in the short term will allow the Company to increase its marketing and sales
efforts and thereafter result in increased revenue and greater liquidity in
the long term. However, there can be no assurance that the Company will be
able to obtain additional equity or debt financing in the future, if at all.
Results of Operations. For the period from inception through December 31,
1997, the Company had a net loss of $655,592. The Company had amortization
of services received from stock issuance of $235,100, expense recognized for
stock options granted of $625 and depreciation of $1,004. Due to the
preparation for commencement of operations, the Company experienced an
increase in accounts receivable of $98,857, an increase in inventories of
$1,680, an increase in prepaid expenses of $67,122, an increase in other
assets of $149,957 and an increase in accounts payable of $149,992.
Additionally, the Company had an increase in accrued expenses and other
liabilities of $72,087. As a result, for the period from inception through
December 31, 1997, the Company had net cash used by operating activities of
$514,400.
Since inception, the Company has not received any revenues from operations.
To date, the Company has had operating expenses of $692,808 which consisted
of compensation ($189,259), consulting expenses ($102,910), contract
services($149,796), director's fees ($20,626), dues ($3,240), meetings
($683), supplies and postage ($14,149), professional fees ($84,786) telephone
($10,533), travel and meals ($43,012) and miscellaneous ($73,814).
Plan of Operation. The Company is not delinquent on any of its obligations
even though the Company has not yet begun to generate revenue. The Company
intends to market its products utilizing cash made available from the private
and public sale of its securities. The Company is of the opinion that
revenues from the sales of its products and joint venture along with proceeds
of the sale of its securities will be sufficient to pay its expenses.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's executive offices are located at 71 Turtle Creek Drive,
Asheville, NC 28803. These offices consist of 1,800 square feet which are
leased on a month to month basis at the monthly lease price of $1,800.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tabulates holdings of shares of the Company by each person who,
subject to the above, at the date of this prospectus, holds of record or is
known by Management to own beneficially more than 5.0% of the Common Shares
and, in addition, by all directors and officers of the Company individually
and as a group. Each named beneficial owner has sole voting and investment
power with respect to the shares set forth opposite his name.
Shareholdings at Date of
This Prospectus
<TABLE>
<CAPTION>
Percentage of
Number & Class(1) Outstanding
Name and Address of Shares Common Shares
<S> <C> <C>
David Womick(1)(2)0 0 0%
7 Stuyvesant
Asheville, NC 28803
Therese R. Womick(1)(2) 4,822,200 63.52%
7 Stuyvesant
Asheville, NC 28803
John P. Williams 0 0%
c/o Parallel Entertainment
8380 Melrose Avenue, Suite 310
Los Angeles, CA 90069
Erich K. and Marilyn Schmid 200,000 2.63%
40 Spring Hollow Lane
Fairview, NC 28730
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William E. Eskew 100,000 1.32%
6284 Valleyview Drive
Fishers, IN 46038
James E. Scheifley 100,000 1.32%
5299 DTC Boulevard #300
Englewood, CO 80111
Samuel J. Fox(3) 0 0%
c/o Blanc Williams Johnston & Kronstadt, LLP
1900 Avenue of the Stars, 17th Floor
Los Angeles, CA 90067-4403
All Directors & Officers 5,227,200 %
as a group (5 persons)
</TABLE>
(1)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or
shared investment power (including the power to dispose or direct the
disposition) with respect to a security whether through a contract,
arrangement, understanding, relationship or otherwise. Unless otherwise
indicated, each person indicated above has sole power to vote, or dispose or
direct the disposition of all shares beneficially owned, subject to
applicable unity property laws.
(2)Theresa R. Womick is married to David Womick, President and Director of
the Company. Mr. Womick would be deemed to be the beneficial owner of the
Common Shares held by Theresa R. Womick.
(3)Mr. Fox shall be issued 100,000 Common Shares for his services as a
director.
There are currently 2,500,000 Class A Preferred Shares outstanding which are
owned by Jeffrey M. Foxworthy.
There are currently 625,000 options granted and outstanding.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name and address Stock options Exercise Price Expiration Date
John P. Williams 540,000 $.50 July 2007
c/o Parallel Entertainment
8380 Melrose Avenue, Suite 310
Los Angeles, CA 90069
Gary Nuell
c/o AirPlay
5055 Wilshire Blvd.
6th Floor
Los Angeles, CA 90036 10,000 $.50 July 18, 2000
Becky Grier 30,000 $1.00 September 2000
PLS, Inc.
p.o. box 6065
Greenville, SC 29606
Bob Bernstein 55,000 $1.00 July 1999
23901 Calabasas Road
Suite 1065
Calabasas, CA 91302
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Board of Directors. The following persons listed below have been retained to
provide services as director until the qualification and election of his
successor. All holders of Common Stock will have the right to vote for
Directors of the Company. The Board of Directors has primary responsibility
for adopting and reviewing implementation of the business plan of the
Company, supervising the development business plan, review of the officers'
performance of specific business functions. The Board is responsible for
monitoring management, and from time to time, to revise the strategic and
operational plans of the Company. Directors receive no compensation or
fees for their services rendered in such capacity.
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The Executive Officers and Directors are:
Name Position Term(s) of Office
David A. Womick, age 43 President Inception to
and Director present
John P. Williams, age 32 Director Inception
to present
Erich K. Schmid, age 52 Director Inception to
present
William E. Eskew, age 60 Director Feb., 1997
to present
Samuel J. Fox, age 53 Director December 5, 1997
to present
James E. Scheifley, age 49 Secretary April 11, 1998
Treasurer Feb., 1997
Director to present
Resumes:
David A. Womick. Mr. Womick has been President of the Company since
inception. From 1995 to present, Mr. Womick has been President of KRR
Nashonooga, Inc., KRR Knoxville, Inc., KRR Tri-cities, Inc. and Atlanta
Foodquest, Inc., franchisees of Kenny Rogers Roasters restaurants. Mr.
Womick was a Director of Restaurant Services by Arby's International from
1978 to 1982. From 1982 to 1988, Mr. Womick has been a franchise area
developer owning thirteen Arby's, six Denny's and three Del Taco restaurants.
From 1988 to 1995, Mr. Womick pursued his personal interests. Mr. Womick
earned a Bachelor of Applied Science in social science from Elon College in
1976.
John P. Williams. From 1991 to present, Mr. Williams has been Chief
Executive Officer of Parallel Entertainment, a personal management company.
In addition to Jeff Foxworthy, Mr. Williams manages Bill Engvall, Megan
Cavanagh and Chris Spencer. Mr. Williams has been involved in the
entertainment industry since 1983 and has represented talent such as Jay
Leno, Jerry Seinfeld, Damon Wayans, David Alan Grier, Dennis Miller, Jamie
Foxx and others.
Erich K. Schmid. From 1994 to present, Mr. Schmid has been President of
Business Intermediary Services, Ltd., a business brokerage firm he co-founded
specializing in middle-market transactions. From 1985 to 1994, Mr. Schmid
was a Vice President with New South Business Ventures, Inc. and its
predecessor T.C. Wilkinson, Jr. & Associates, Inc., general business
brokerage firms. He is a member of the International Business Brokers
Association, Inc. and is a Certified Business Intermediary. Mr. Schmid
earned a Bachelor of Science in industrial management and a Master of Science
in management from the University of Akron in 1971 and 1996, respectively.
William E. Eskew. From 1996 to the present, Mr. Eskew is a partner and
serves as Chief Executive Officer of Victory Consumer Resources, a start-up
publishing company he founded. From 1992 to 1996, Mr. Eskew was president,
chief executive officer and franchisee of Damon's, Inc., a privately-owned
company operating and franchising full-service, casual theme restaurants
specializing in barbecue. Mr. Eskew earned a Bachelor of Science in
business and a Master of Business Administration from Indiana University in
1959 and 1960 respectively. He was formerly employed in management
positions with three nationally franchised restaurant companies.
James E. Scheifley. Mr. Scheifley has over 25 years experience in
corporate and public accounting. He is the president and majority
shareholder of Winter, Scheifley & Associates, P.C. an Englewood, Colorado
CPA firm which specializes in auditing and financial reporting for emerging
companies that are required to file information with the US Securities &
Exchange Commission. Mr. Scheifley co-founded the firm in 1982. He is a
member of the American Institute of Certified Public Accountants and the
Colorado Society of Certified Public Accountants. Mr. Scheifley received a
Bachelor of Science degree in accounting from La Salle University,
Philadelphia, Pennsylvania in 1969. He was formerly employed as an audit
manager with Coopers & Lybrand and has served as controller or vice-president
of finance for three public companies.
Samuel Fox. Mr. Fox is of counsel to the law firm of Blanc Williams
Johnston & Kronstradt, a Los Angeles law firm representing companies and
individuals in the entertainment, business and intellectual property areas.
His specialization includes entertainment law and licensing and he has been
personal counsel to Jeff Foxworthy for several years. He is a member of the
California and New York bars. Mr. Fox received a Bachelor of Arts degree
from Cornell University School of Law in 1969.
ITEM 6. EXECUTIVE COMPENSATION
Remuneration. Pursuant to the employment agreements described below, Mr.
Fitzpatrick and Mr. Sneeden began to receive salaries as of August 1, 1997.
The Company has entered into an employment agreement with David Womick for a
term of five years. Pursuant to the agreement, Mr. Womick serves as Chief
Executive Officer. Mr. Womick shall receive an annualized base salary of
$150,000 and may be entitled to a potential bonus of up to $100,000, the
exact amount of which, if any, shall be determined by the Board of Directors
in its sole and absolute discretion. Mr. Womick is not entitled to receive
any salary or bonus until such time as the Company has successfully obtained
all of the $2,500,000 investment capital discussed in Section 5.1(a) of the
Stock Purchase Agreement. Mr. Womick's salary will begin to accrue effective
July 22, 1997.
<PAGE>9
Pursuant to the Employment Agreement, Mr. Womick agreed that 1,700,000 of the
5,100,000 Common Shares currently beneficially owned by Mr. Womick are
subject to forfeiture only upon an early termination of the Employment
Agreement that is caused by a breach of such agreement by Mr. Womick. The
number of shares subject to forfeiture shall be reduced 147,444 shares
monthly, on the first day of each month, over the first 3 years of the
Employment Agreement. Mr. Womick's interest in the Common Shares shall
fully vest and no longer be subject to forfeiture upon an change of control
of the Company.
The Company had entered into an employment agreement with prior vice
president, Al Sneeden for a term of three years. Pursuant to the agreement,
Mr. Sneeden received 108,000 Common Shares and was paid 68,536.92. prior to
termination. The agreement was terminated by the Company on April 10, 1998.
The Company had entered into an employment agreement with prior secretary and
chief counsel, E. Joseph Fitzpatrick, Jr. for a term of three years beginning
June 1, 1997. Pursuant to the agreement, Mr. Fitzpatrick received 108,000
Common Shares and was paid $57,461.59 prior to termination. The
agreement was terminated by the Company on April 10, 1998.
Board of Directors Compensation. Members of the Board of Directors may
receive an amount yet to be determined annually for their participation and
will be required to attend a minimum of four meetings per fiscal year. To
date, the Company has paid $15,001 in directors' expenses. Additionally, Mr.
Scheifley and Mr. Eskew received 100,000 Common Shares each vested
ratably over twelve months. Mr. Samuel Fox received 100,000 Common Shares
pursuant to a Board of Directors vote on December 5, 1997. All expenses for
meeting attendance or out of pocket expenses connected directly with their
Board representation will be reimbursed by the Company. Director liability
insurance may be provided to all members of the Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stock Purchase Agreement. On February 4, 1997, the Company and David
Womick, an officer and director of the Company entered into a Stock Purchase
Agreement with Jeff Foxworthy. Pursuant to the Stock Purchase Agreement, Mr.
Foxworthy purchased 2,500,000 Series A Preferred Shares valued at $50,000 for
the consideration of entering into the License Agreement and Promotion
Agreement. The 2,500,000 Series A Preferred Shares (and underlying Common
Shares) have registration rights.
Pursuant to the Stock Purchase Agreement, Mr. Foxworthy agreed that 833,333
of the Series A Preferred Shares are subject to forfeiture only upon an early
termination of the Promotion Agreement that is caused by a breach of such
agreement by Mr. Foxworthy. The number of shares subject to forfeiture shall
be reduced 13,889 monthly, on the first day of each month, over the 5 year
term of the Promotion Agreement. Mr. Foxworthy's interest in the Series A
Preferred Shares shall fully vest and no longer be subject to forfeiture upon
an change of control of the Company.
Pursuant to the Stock Purchase Agreement, as a condition subsequent to the
obligations of Mr. Foxworthy, the Company and Mr. Womick are obligated to
obtain equity investments in the Company totaling at least $2,500,000 in
gross capital less applicable, reasonable commissions from third party
investors by November 1, 1997. This date has been verbally extended until
March 1, 1998.
Contractual Obligations. The Company has entered into a consulting contract
with Shannon/Rosenblum (an unaffiliated entity) to provide services relating
to the capitalization and promotion of the Company. Shannon/Rosenblum was
issued 500,000 Common Shares as payment for these services.
The Company has entered into a consulting agreement with Little Pond
Enterprises, Inc. ("Little Pond") to assist the Company in its capitalization
and the obtainment of additional financing. As partial payment for
consulting services, the Company issued Little Pond 300,000 Common Shares.
Additionally pursuant to the consulting agreement, 200,000 Common Shares were
issued Erich Schmid, who subsequently became a director of the Company. In
addition, Little Pond received cash compensation of $20,000.
ITEM 8. DESCRIPTION OF SECURITIES
Qualification. The following statements constitute brief summaries of the
Company's Certificate of Incorporation and Bylaws, as amended. Such
summaries do not purport to be complete and are qualified in their entirety
by reference to the full text of the Certificate of Incorporation and Bylaws.
The Company's articles of incorporation authorize it to issue up to
100,000,000 Common Shares, $.001 par value per Common Share. The Common
Shares purchased in this Offering will be fully paid and non-assessable.
Common Stock. The Company's articles of incorporation authorize it to issue
up to 100,000,000 Common Shares, $.001 par value per Common Share. All
outstanding Common Shares are legally issued, fully paid and non-assessable.
<PAGE>10
Liquidation Rights. Upon liquidation or dissolution, each outstanding
Common Share will be entitled to share equally in the assets of the Company
legally available for distribution to shareholders after the payment of all
debts and other liabilities.
Dividend Rights. There are no limitations or restrictions upon the
rights of the Board of Directors to declare dividends out of any funds
legally available therefor. The Company has not paid dividends to date and
it is not anticipated that any dividends will be paid in the foreseeable
future. The Board of Directors initially may follow a policy of retaining
earnings, if any, to finance the future growth of the Company. Accordingly,
future dividends, if any, will depend upon, among other considerations, the
Company's need for working capital and its financial conditions at the time.
Voting Rights. Holders of Common Shares of the Company are entitled to
cast one vote for each share held at all shareholders meetings for all
purposes.
Other Rights. Common Shares are not redeemable, have no conversion
rights and carry no preemptive or other rights to subscribe to or purchase
additional Common Shares in the event of a subsequent offering.
Preferred Stock. The Corporation is authorized to issue Two Million Five
Hundred Thousand (2,500,000) Series A Preferred Shares, par value $.001 per
share. The rights, preferences, privileges and restrictions granted to and
imposed on the Common Shares and the Preferred Shares are identical in all
respects, except that the holders of the Preferred Shares have certain
conversion rights and a liquidation preference as set forth below.
A. Liquidation Preference.
1. In the event of any liquidation, dissolution or winding up of
this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of the Company to the holders of Common
Stock b y reason of their ownership thereof, an amount per share equal to the
price for which such share was originally issued, as adjusted for any stock
dividends, combination or splits with respect to such shares. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of Series A Preferred Shares shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of this corporation legally available for
distribution shall be distributed ratably among the holders of Series A
Preferred Shares in proportion to the number of shares of Series A Prefers
Stock owned by such holder.
2. After payment has been made to the holders of the Series A
Preferred Shares of the full amounts to which they shall be entitled, then
the entire remaining assets and funds of the corporation legally available
for distribution, if any, shall be distributed as follows: Two thirds (2/3)
to the holders of the Common Shares and one third (1/3) to the holders of the
Series A Preferred Shares.
B. Conversion. The Series A Preferred Shares shall be automatically
convertible upon the effective date (the date on which the amount of
additional capital first equals or exceeds $2,500,000) into the number of
converted shares that shall constitute thirty-three and one third percent of
the outstanding shares of Common Stock on an as-converted basis (that is,
assuming the concurrent conversion into Common Stock of all outstanding
Shares (excluding the Series A Preferred Shares). The Series A Preferred
Shares are convertible into classes or series of stock based on what classes
or series of stock are outstanding at the time of conversion.
Transfer Agent. Florida Atlantic Stock Transfer shall act as the Company's
transfer agent.
<PAGE>11
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market and
listed on the NASDAQ Bulletin Board under the symbol "RDNK.
The following table sets forth the range of high and low bid quotations
for the Company's common stock for each quarter since commencement of
trading (December 1997, as reported by the OTC Bulletin Board. The
Company's market makers are Olsen Payne, Hill, Thompson, Magib & Co.;
Paragon; Sharpe Capital, Inc.; GZR Company; Security Investment Company of
Kansas City; Herzog, Heine, Geduld; J. Alexander Securities; North American
Institutional Brokers; William V. Frankel & Company. The quotations represent
inter-dealer prices without retail markup, markdown or commission, and may
not necessarily represent actual transactions.
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
<S> <C> <C>
12/31/97 3.25 1.18
3/31/98 2.63 2.44
</TABLE>
The Company has never paid any cash dividends nor does it intend, at this
time, to make any cash distributions to the its shareholders as dividends in
the near future.
As of April 1, 1998, the number of holders of Company's common stock is forty
one.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings nor is the Company aware
of any disputes which may result in legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
During the Company's two most recent fiscal years or any later interim
period, there have been no changes in or disagreements with the Company's
principal independent accountant or a significant subsidiary's independent
accountant.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In February 1997, the Company entered into an agreement for the use of Jeff
Foxworthy's name and character. In consideration for this agreement, the
Company issued 2,500,000 shares of Class A convertible preferred stock at
$.02 per preferred share to Mr. Foxworthy.
In February 1997, the Company entered into an agreement to sell 5,100,000
shares of founders stock to David Womick, president of the Company which was
assigned a value of $.02 per share. This sale was made pursuant to an
exemption from registration pursuant to Section 4(2) of the Securities Act of
1933.
In June 1997, the Company entered into two consulting contracts that provided
for the issuance of 1,000,000 shares of common stock in lieu of cash for
consulting services at the price of $.10 per share. Of these, 800,000 shares
were issued pursuant to the offering under Rule 504 that closed in October
1997 to Shannon/Rosenbloom Marketing, Inc.(500,000) and Little Pond
Enterprises, Inc.(300,000).
In June 1997, the Company also issued 416,000 restricted stock valued at $.10
per Common Share pursuant to the Act in consideration for directors fees and
services in accordance with various employment contracts.
In July 1997, the Company sold 156,000 Common Shares to various individuals
for cash at $.75 per Common Share to raise start-up capital.
In October 1997, the Company completed an offering of 920,000 under Rule 504
of Regulation D of the Securities Act of 1933 at $1.00 per Common Share to
the following:
Name # of Common Shares
Charles R. Caraway 55,000
Herman R. Loeb
for further credit Charles R. Caraway 55,000
David Adams 5,000
Karen M. Adams 10,000
Valerie I. Moore 10,000
William G. Osler 5,000
<PAGE>12
Kevin Robinson 6,500
Robert L. Watson II I5,000
Dale R. & Karen F. Benson 5,000
Hal Morrison 24,000
John D. McDonald 15,000
John D. King 7,500
Wilhelm Sumser 10,000
Louise & Allen Jensen 35,000
William Wolfe 5,000
Judith Gottschalk 50,000
Norbert H. Sumser 45,000
Robert Gottschalk 140,000
Jeffrey L. Hutchinson 10,000
Robert Ichikaw a7,000
Ofelia Albarran & Maurilio Serrano 10,000
Jeff Knepp 30,000
Timothy John Cecconi & Kelly Cecconi 20,000
Dennis Knepp 5,000
Donald Anthony 25,000
Maurice Bledsoe 5,000
Timothy A. Leugers 33,000
Jeff E. Fuqu a5,000
Thomas Demid 5,000
Robert Amodeo 5,000
William F & Elene D. Boyd 20,000
Monica N. Galea 10,000
Brian Gentile 6,000
Francesco Di Marco 10,000
Harry Faddis 15,000
Scott A. Artz 20,000
Fred Glazer 20,000
Robert A. Baydale 10,000
Ginger Tracey 5,000
Stuart Kordonowy 20,000
Ali Steinbach 20,000
Randall K. Kopelman 10,000
Robert L. Kazaros 10,000
Timothy B. Shannon 10,000
Patrick V. Casey 10,000
Deborah N. Fischbach 10,000
Mary Ann Lang 61,000
Thomas V.N. Bass 5,000
These sales were made pursuant to an exemption from registration pursuant to
Section 504 of Regulation D. The offering was approved and/or exempted by
the required states and the appropriate Form D was filed with the Securities
and Exchange Commission.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Indemnification. The Company shall indemnify to the fullest extent permitted
by, and in the manner permissible under the laws of the State of Delaware,
any person made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the Company, or
served any other enterprise as director, officer or employee at the request
of the Company. The Board of Directors, in its discretion, shall have the
power on behalf of the Company to indemnify any person, other than a director
or officer, made a party to any action, suit or proceeding by reason of the
fact that he/she is or was an employee of the Company.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceedings) is asserted by such director, officer, or controlling person in
connection with any securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE AGAINST
PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS THEREFORE
UNENFORCEABLE.
<PAGE>13
PART F/S
The following financial statements required by Item 310 of Regulation S-B are
furnished below
Independent Auditor's Report
Balance Sheet as of March 31, 1998
Statement of Operations for the Period from Inception to March 31, 1998.
Statement of Cash Flows for the Period from Inception to March 31, 1998.
Statement of Changes in Stockholder's Equity for the Period
From Inception to March 31, 1998.
Notes to Financial Statements
<PAGE>14
Crisp
Hughes
Evans Certified Public Accountants and Consultants
Independent Auditors' Report
Board of Directors
Redneck Foods, Inc.
Asheville. North Carolina
We have audited the balance sheet of Redneck Foods. Inc. (A Development
Stage Company) as of December 31. 1997, and the related statements of
operations changes in stockholders' equity and cash flows for the period
from inception (January 31, l997) through December 31.1997. These
financial statements are the responsibility of the Company's management.
Our responsibility is to issue an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free from material misstatement. An audit includes examining, on a
test basis. evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and the significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Redneck
Foods, Inc. (A Development Stage Company) as of December 31. 1997 and
the results of its operations and its cash flows for the period from
inception (January 31, 1997) through December 31. 1997, in conformity
with generally accepted accounting principles.
Crisp Hughes Evans LLP
Asheville. North Carolina
March 24, 1998
<PAGE>15
REDNECK FOODS. INC
(A Development Stage Company)
Balance Sheet
December 31.1997
Assets
Current assets:
Cash and cash equivalents $ 397,124
Accounts receivable 98,857
Inventories 1,680
Prepaid expenses 67,122
Total current assets 564,783
Office equipment,
net of accumulated depreciation of $l.004 34,107
Other assets:
Investment in joint venture 35,000
Prepaid expenses and other assets 183,957
Total other assets 218,957
Total assets $ 817,847
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payables $ 149,992
Accrued expenses and other liabilities 72,087
Total Current Liability $ 222,079
Stockholders' equity:
Convertible Preferred stock ($.00l par value,
2,500,000 shares authorized; 2,500,000 outstanding
at December 31, 1997) 2,500
Common stock ($.001 par value, 100,000,000 shares
authorized; 7,592,000 shares issued and outstanding
at December 31.1997) 7,592
Paid-in capital 1,299,768
Deficit accumulated during development stage (655,592)
Unearned services (58,500)
Total stockholders equity 595,768
Total liabilities and stockholders' equity $ 817,847
See accompanying notes to financial statements.
<PAGE>16
REDNECK FOODS, INC.
(A Development Stage Company)
Statement of Operations
For the Period from Inception (January 31, 1997) through
December 31. 1997
Net Sales $ 98,857
Cost of goods sold 67,153
Gross profit 31,7O4
Expenses:
General and administrative 692,808
Loss from Operations (661,104)
Other income (expenses:):
Interest income, net 5,512
Loss before income tax benefit (655,592)
Income tax benefit --
Net loss (655,592)
Basic net loss per common share $.12
Weighted average common shares outstanding 5,693,000
See accompanying notes to financial statements.
<PAGE>17
REDNECK FOOD, INC.
(A Developmental State Company
Statement of Changes in Stockholders' Equity
For the Period from Inception (January 31, 1997 through December 31,
1997
Convertible Preferred Stock
Number of
Shares Amount
Issuance of convertible preferred $
Stock for services, February 1997
At $.02 per share 2,500,000 2,500
Balance at December 31, 1997 2,500,000 2,500
Common Stock
Number of Paid-in
Shares Amount Capital
Issuance of common stock $ $
For services, February
1997 at $.02 per share 5,100,000 5,100 96,900
Issuance of common stock
For services, June 1997
at $.10 per share 1,000,000 1,000 99,000
Issuance of common stock
For services, June 1997
at $.10 per share 416,000 416 41,184
Proceeds from sale of
Common stock, July 1997
At $.75 per share 156,000 156 116,844
Net proceeds from sale of
common stock, October 1997
at $1.00 per share 920,000 920 897,715
Services earned for stock
Options granted at below
Market value -- - 625
Balance at December 31,
1997 7,592,000 7,592 1,229,768
Deficit
Accumulated
during
Development Unearned
Stage Services Total
Issuance of convertible $ $ $
Preferred Stock for
services, February 1997
At $.02 per share (50,000)
Issuance of common stock
For services, February
1997 at $.02 per share (102,000)
Issuance of common stock
For services, June 1997
at $.10 per share (100,000)
Issuance of common stock
For services, June 1997
at $.10 per share (41,600)
Proceeds from sale of
Common stock, July 1997
At $.75 per share 117,000
Net proceeds from sale of
common stock, October 1997
at $1.00 per share 898,635
Services earned for stock
Options granted at below
Market value 625
Net Loss (655,592) - (655,592)
Amortization of unearned
Services 235,100 235,100
Balance at December 31,
1997 (655,592) (58,500) 595,768
<PAGE>18
REDNECK FOODS. INC.
(A Development Stage Company)
Statement of Cash Flows
For the Period from Inception (January 31,1997) through December 31, 997
Operating activities;
Net loss $ (655,592)
Adjustments to reconcile net loss to net cash
used by operating activities:
Amortization of services received from
stock issuance 235,l00
Expense recognized for stock options granted 625
Depreciation l,004
Changes in operating assets and liabilities:
(Increase) in accounts receivable (98,857)
(Increase) in inventories (1,680)
(Increase) in prepaid expenses (67,122)
(Increase) in other assets (149,957)
Increase in accounts payable 149,992
Increase in accrued expenses and
other liabilities 72,087
Net cash used by operating activities (514,400)
Investing activities:
Purchase of office equipment (35,111)
Investment in joint venture (35,000)
Increase in other assets, escrow deposit (25,000)
Net cash used by investing activities (95,111)
Financing activities:
Proceeds from short-term borrowings 50,000
Repayment of short-term borrowings (50,000)
Prepayment of secondary offering expenses (9,000)
Proceeds from sale of common stock, net 1,015,635
Net cash provided by financing activities 1,006,635
Increase in cash and cash equivalents 397,124
Cash and cash equivalents at inception -
Cash and cash equivalents at end of period $ 397,124
Noncash investing and financing transactions:
Stock issued for services $ 58,500
See accompanying notes to financial statements.
<PAGE>19
REDNECK FOODS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1 997
1. Organization
Nature of Operations - Redneck Foods. Inc. (the "Company") is a development
stage company that was incorporated on January 31, 1997 in the state of
Delaware. The Company currently intends to acquire and operate barbecue
restaurants to be known as "Foxworthy's Smoke House Grill" or "Foxworthy's
Backyard Bar-B-Q". It plans to initially acquire existing barbecue
restaurants for conversion to one of the two restaurant concepts. The Company
also intends to produce, market, and distribute food products using the
"Foxworthy" name. Operations to date have consisted of the efforts to
negotiate agreements with Jeff Foxworthy and raise the initial capital
necessary to fund sales and marketing efforts, research and development of
food products, inventory and initial start-up expenses. The Company has
elected to end its fiscal year on December 31.
2. Summary of Significant Accounting Policies
The following is a summary of the more significant accounting policies used
in the preparation of the accompanying financial statements.
Basis of Presentation - The accounting principles followed by the Company and
the methods of applying these principles conform with the generally accepted
accounting principles (GAAP) and with general industry practices.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements. Estimates also affect the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and Cash Equivalents - Cash includes cash on hand and deposits at
financial institutions with an initial maturity of three months or less. At
time the Company has cash and cash equivalents which are not covered by
federal deposit insurance. The Company believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Inventories - Inventories are stated at cost determined by the first-in
first-out (FIFO) method.
Office equipment - Office equipment is carried at cost less accumulated
depreciation. Depreciation is provided for financial reporting purposes
principally on the straight-line basis over the estimated useful lives of the
respective assets.
Repairs and maintenance are charged to earnings as incurred. Expenditures
for renewals and betterments are capitalized. The assets and accumulated
depreciation accounts are relieved of the gross amounts with respect to items
replaced, retired or disposed of otherwise. Gains and losses from disposals
are reflected in operations.
Organizational Cost- The organizational cost will be amortized on a straight-
line basis over five years after the first store commences Operations.
Income Taxes - The Company utilizes the liability method of computing income
taxes in accordance with Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes" (SFAS 109). Under the liability method,
deferred tax liabilities and assets are established for future 'ax return
effects of temporary differences between the stated value of assets and
liabilities for reporting purposes and their tax basis adjusted for tax rate
changes. The focus is on accruing the appropriate balance sheet deferred tax
amount, with the statement of operations effect being the result of changes
in balance sheet amounts from period to period. Current income tax expense is
provided upon actual tax liability incurred for tax return purposes.
Stock-Based Compensation - Transactions in which goods or services are the
consideration received for the issuance of equity instruments have been
accounted for based on the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably
measurable. Transactions with employees and non-employee directors have been
accounted for within the scope of APB Opinion 25.
Net loss per Common Share - Basic net loss per common share was computed by
dividing the net loss by the weighted average number of common shares
outstanding during the period in accordance with Statement of Financial
Accounting Standards No. 128. "Earnings Per Share" (SFAS 128). Net loss
available to the common stockholders for the basic 1055 per share computation
is the net loss report in the statement of operations. The conversion of the
convertible preferred stock and stock equivalents for the stock options would
have no dilutive effect, therefore only the basic net loss per share has been
presented.
<PAGE>20
Impact of New Accounting Pronouncement - During 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 provides
accounting and reporting standards for displaying comprehensive income and
components of comprehensive income n a complete set of financial statements.
SFAS 130 addresses reporting and display only and is effective for fiscal
years beginning after December 15, 1997. The adoption of SEAS 130 is not
expected to have a material impact on the Company's financial statements.
3. Prepaid Expenses
Prepaid expenses consist of the following:
Prepaid insurance $ 17,122
Prepaid consulting 50,000
Total 67,122
Prepaid consulting is cash payments on two consulting agreements for which
services are anticipated to be provided during the next twelve months. The
portion of these prepayments for services which will be fulfilled after that
time have been classified as other assets.
4. Investment in Joint Venture
The Company has entered into a joint venture with Pigs "R" Us, Inc. (A
Florida Corporation) to be called 'Redneck Pigs Joint Venture l". The sole
purpose of the joint venture is create a single barbecue restaurant on
property under lease by Pigs "R" Us. The parties agreed to convert the
venture into a limited liability company as soon as practicable and to
jointly plan, operate and own the pilot restaurant. The Company will
sublicense to the venture certain rights under its license agreement and
contribute capital. The Company has contributed $35,000 to this joint
venture. The Company will own a 10% interest in the venture and therefore
the investment will be accounted for using the cost method. The Company
shall be paid a consulting fee of 3% of gross sales in addition to its
available distributions based on its ownership interest. Certain options and
rights for both parities in the joint venture are established by the
contractual agreement.
5. Other Assets
Included in other assets are prepaid expenses and other assets consist of the
following:
Escrow deposit $ 25,000
Organization cost 3,000
Product/Restaurant design expenses 99,853
Prepaid offering expense 9,000
Prepaid consulting 45,000
Deposits and other prepaid expenses 2,104
Total 183,957
The escrow deposit was made in connection with negotiations with a barbecue
restaurant chain which the Company is currently seeking to acquire.
6. Accrued expenses and other liabilities
Salaries and wages have been accrued for certain executives of the Company
under their employment agreements. These accrued salaries and wages will be
paid upon the acquisition of $2.5 million in initial capital. Currently, the
Company has included in accrued expenses and other liabilities approximately
$59,000 in unpaid salaries and related payroll taxes under these agreements.
7. Income Taxes
The Company plans to file its federal and State income tax returns on a
calendar year basis. No provision for income tax benefit has been provided
for in the accompanying statement of operations because of the Company's
uncertainty regarding the utilization of its operating losses. Accordingly,
a valuation allowance for the deferred tax asset has been recognized at
December 31, 1997.
The difference between actual income tax benefit and the amount computed by
applying the federal statutory income tax rate of 34% to loss before income
tax benefit is reconciled as follows:
Computed income tax benefit $ (223,000)
(Increase) decrease resulting from:
Nondeductible compensation cost recognized for
financial statement purposes 36,000
Valuation allowance for net operating losses 187,000
Actual income tax benefit $ -
At December 31, 1997, deferred tax assets consist primarily of net operating
losses accumulated since inception. The following summarizes the expected
tax consequences of future taxable events due to differences in bases of
assets and liabilities for financial reporting and income tax purposes as of
December 31, 1997.
Gross deferred tax asset $ (187,000)
Less valuation allowance 187,000
Net deferred tax asset $ -
<PAGE>21
At December 31, 1997, the Company has net operating losses of approximately
$545,000 which will expire 2012.
8. Stockholder' Equity
During the periods covered by these financial statements the Company issued
securities in reliance upon an exemption from registration with the
Securities and Exchange Commission. Although the Company believes that the
sales did not involve a public offering and that it did comply with the
exemptions from registration, it could be liable for rescission of said sales
if such exemption was found not to apply. The Company has not received a
request for rescission of shares nor does it believe that is probable that
its stockholders would pursue rescission nor prevail if such action were
undertaken.
Convertible Preferred Stock - In February 1997, the Company entered into an
agreement which was contractually valued at $50,000 for the use of Jeff
Foxworthy's name and character. The agreement contains a license agreement
as well as a promotional agreement. The license agreement allows the Company
to use his character and name in its marketing efforts. This agreement has a
term of fifty (50) years. The promotional agreement states that Mr.
Foxworthy will provide a certain number of promotional appearance over a five
year period. The entire value of the contract has been assigned to the
promotional agreement and is currently reflected as unearned services in
stockholders equity on the accompanying balance sheet.
In consideration for this agreement, the Company issued 2,500,000 shares of
Class A convertible preferred stock to Mr. Foxworthy. These shares are
convertible into common stock once initial capitalization of $2.5 million is
reached. The conversion ratio is equal to twenty-five percent of the
outstanding shares of common stock on an as converted basis. Upon the
execution of the agreement 1,666,667 shares of the preferred stock were non-
forfeitable by Mr. Foxworthy and the residual 833,333 shares shall become
non-forfeitable ratably over the next five years as the promotional agreement
is satisfied. The convertible preferred stock issued was valued at S.02 per
share.
Common Stock - In February 1997, the Company entered into an agreement to
sell 5,100,000 shares of founders stock to David Womick which was assigned a
value of $.02 per share. In lieu of cash payment and in consideration for
the stock purchased by him from the Company, Mr. Womick agreed to be the
Company's Chief Executive Officer for a period of five years. The employment
services to be rendered have been valued at $102,000 and will be recognized
as compensation in the accompanying statement of operations as earned. Of
the total 5.1 million shares issued, 3.4 million shares are not subject to
forfeiture and the remaining 1.7 million shares subject to forfeiture are
reduced ratably on the first day of each month over a three year period.
In June 1997, the Company entered into two consulting contacts that provided
for the issuance of 1,000,000 shares of common stock in lieu of cash for
consulting services to be rendered. The consulting contracts established a
fair market value conversion rate for the services at $.10 per share. One of
the parties to the consulting contracts subsequently became a director of the
Company. The 200,000 shares issued to this director have been earned and is
restricted common stock pursuant to Rule 144 of the Securities and Exchange
Act of 1933 (the "Act").
In June 1997, the Company also issued restricted stock pursuant to the Act in
consideration for directors fees and services in accordance with various
employment contracts. The aggregate shares issued under these agreements
constituted 416,000 shares of common stock and were valued at $.10 per share
commensurate with the external consulting contracts.
In July 1997, the Company sold 156,000 shares of stock to various individuals
for cash at $.75 per share to raise start-up capital. All of the shares of
stock sold have been classified as restricted stock. There was no cost
associated with raising this start-up capital.
The Company has issued in aggregate 772,000 shares of common stock which are
restricted for two years pursuant to Rule 144 of the Act. These restricted
shares allowed the Company to qualify for an exemption from the registration
requirements of the Act and thus file an offering under Rule 504 of
Regulation D as noted below.
In October 1997, the Company completed an offering under Rule 504 of
Regulation D of the Act and sold 920,000 shares of common stock at $1.00 per
share. The costs associated with raising this capital was approximately
$21,000.
9. Stock Options
The Board of Directors has from time to time decided at its discretion to
issue stock options to various individuals who are not employees or non-
employee directors of the Company. As of the balance sheet date, the Company
has granted and outstanding 875,000 options to purchase stock with various
expiration dates ranging from two to ten years. These Options to purchase
stock can be exercised at various prices ranging from $.50 to $1.00 per share
and can be exercise at any time before the expiration date No options to
purchase shares were exercised in 1997. The following table details the
composition of the Options to purchase shares at December 31, 1997.
<PAGE>22
Stock options granted and outstanding Exercise price Exp. date
55,000 shares $1.00 July 1999
30,000 shares 1.00 September 2000
250,000 shares .85 December 2002
540,000 shares .50J July 2007
The Company has not adopted any plans as of December 31, 1997 to grant
options to employees or non-employee directors. In accordance with Statement
of Financial Accounting Standard No. 123 (SFAS 123) "Accounting for Stock-
Based Compensation", the Company has elected to continue to measure employee
compensation cost for the accompanying statement of operations using APB
Opinion No. 25, "Accounting for Stock Issued to Employees". See Note 7 for
discussion of common shares issued to employees and non-employee directors
for services in 1997.
10. Commitments and Contingencies
The Company has entered into employment contracts with certain of its key
employees as well as a license and promotional agreement with Mr. Foxworthy.
These contacts vary in length from three to fifty years in duration.
All contracts with the key employees are considered void if the $2.5 million
of initial capital is not obtained. In the event full initial capital has
not been raised by June 30, 1998, Mr. Foxworthy has the right to withdraw the
use of his name and likeness. Should this event happen, the Company would be
required to discontinue the use of all licensed material. This would require
changing the name of the any restaurants and products. The Company has
limited operating history and the sales of its products and revenues from its
proposed restaurants are currently dependent on the use of the licensed
material.
The Company's operations is also dependent on its ability to raise additional
capital through an anticipated SB-2 registration offering. This additional
capital will be necessary for restaurant acquisitions, marketing and product
development, and general operations.
The Company leases its administrative office facilities under a short-term
operating lease. Rent expense for the period ending December 31, 1997 was
approximately $8,900.
<PAGE>23
PART III
ITEM 1. INDEX TO EXHIBITS
(2) Charter and By-Laws
(3) Instruments defining the rights of security holders
(5) Voting Trust Agreement - Not Applicable
(6) Material Contracts
(7) Material Foreign Patents - Not Applicable
(12) Additional Exhibits
ITEM 2. DESCRIPTION OF EXHIBITS
(2.1) Articles of Incorporation
(2.2) Bylaws
(3.1) Common Stock Certificate
(3.2) Preferred Stock Certificate to be filed by amendment
(6.1) License Agreement with Jeff Foxworthy
(6.2) Stock Purchase Agreement with Jeff Foxworthy
(6.3) Promotion Agreement with Jeff Foxworthy
(6.4) Extension with Jeff Foxworthy
(6.5) Consulting Agreement with J.P. Williams
(6.6) Consulting Agreement with Little Pond Enterprises, Inc.
(6.7) Joint Venture Agreement with Pigs"R"Us
(6.8) Marketing Agreement with Shannon/Rosenbloom Marketing, Inc.
(6.9) Buyer-Broker Agreement with Business Intermediary Services
(6.10) Arbitration Agreement
(6.11) Berstein Employment Agreement
(6.12) Proprietary Rights and Confidentiality Agreement
(6.13) Registration Rights Agreement
<PAGE>24
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
REDNECK FOODS, INC.
David Womick
Date: April 23, 1998 --------------------------------
By: David Womick, President
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 9:00 AM 0173171997
971034397 - 2713292
CERTIFICATE OF INCORPORATION
OF
REDNECK FOODS, INC.
The undersigned, in order to form a corporation for the purposes set forth
below, under and pursuant to the provisions of the General Corporation Law of
the State of Delaware, does hereby certify as follows:
FIRST: The name of this corporation is:
Redneck Foods, Inc.
SECOND: The registered price of the corporation and place of business in the
State of Delaware is to be located at 15 East North Street, in the city of
Dover 19901 County of ~t. The name of its registered agent at that address is
Incorporating Services, Ltd.
THIRD: The nature of the business, and the objects and purposes proposed to
be transacted, promoted and carried on, arc to do any and all things herein
mentioned, as fully and to the same extent as natural persons might or could
do, and in any part of the world, including without limitation:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which this corporation is authorized to issue is Twenty Two
Million Five Hundred Thousand (22,500,000). The number of shares of Common
Stock which the corporation is authorized to issue is Twenty Million
(20,000,000), par value $0.001 per share. The number of shares of Preferred
Stock which the corporation is authorized to issue is Two Million Five
Hundred Thousand (2,500,000)), par value $0.001 per share, all of which shall
be designated Series A Preferred Stock (the "Series A Preferred").
The rights, preferences, privileges and restrictions granted to and imposed
on the Common Stock and the Preferred Stock are identical in all respects,
except that the holders of the Preferred Stock have certain conversion rights
and a liquidation preference as set forth below.
A. Liquidation Preference.
1. In the event of any liquidation, dissolution or winding up of this
corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assists of this corporation to the holders of
Common Stock by reason of their ownership thereof, an amount per share equal
to the price for which such share was originally issued, as adjusted for any
stock dividends, combination or splits with respect to such shares. If upon
the occurrence of such event, the assets and funds thus distributed among the
holders of Series: A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid potential amount, then the
entire assets and funds of this corporation legally available for
distribution shall be distributed ratably among the holders of Series A
Preferred Stock in proportion to the number of share: of Series A Preferred
Stock owned by such holder.
2. After payment has been made to the holders of the Series A Preferred of
the full amounts to which they shall be entitled as set forth in Section A. 1
above, then the entire remaining assets and funds of the corporation legally
available for distribution, if any, shall be distributed as follows: Two
thirds (2/3) to the holders of the Common Stock and one third (1/3) to the
holders of the Series A Preferred Stock.
B. Conversion. The Series A Preferred Stock shall be convertible as follows:
1. General Definitions. For purposes of this Section B, the following
definitions shall apply:
a. "Additional Capital" shall mean all Contributed Capital in
excess of the Founder's Capital.
b. "Additional Shares" shall mean all Shares issued in respect of Additional
Capital.
C. "Contributed Capital" shall mean all contributions of cash or property
received by the corporation in respect of the issuance of any Shares.
d. "Converted Shares" shall mean the Shares issuable in conversion of the
Series A Preferred Stock, pursuant to Section 2 below.
e. "Designated Percentage" shall mean thirty-three and one third percent (33
1/3%) of the outstanding shares of the Common Stock on an as-converted basis
(that is, assuming the concurrent conversion into Common Stock of all
outstanding Shares (excluding the Series A Preferred).
f. "Effective Date shall mean the date on which the amount of Additional
Capital first equals or exceeds Two Million Five Hundred Thousand U.S.
Dollars ($2,500,000.00).
g. "Founders'Capital" shall mean all contributions of cash or property
received by the corporation in respect of the issuance of the Founders'
Shares.
h. "Founder's Shares" shall mean all shares of Series A Preferred Stock and
the first Five Million One Hundred Thousand (5,100,000) shares of Common
Stock issued by the corporation. I. "Shares" shall mean the shares of
capital stock of the corporation, of any class or series.
2. Automatic Conversion. Upon the Effective Date, all outstanding shares of
Series A Preferred Stock shall automatically convert into the number of
Converted Shares that shall, as of such date, constitute the Designated
Percentage. The class or classes of stock which shall constitute the
Converted Shares shall be determined a: follows: If the Additional Share:
shall consist solely of Common Stock, then the Converted Shares shall consist
of Common Stock; if the Additional Shares shall consist solely Of some other
as yet unauthorized class or series of stock, then the Converted Shares shall
consist solely of such class or series, and lastly, if the Additional Shares
shall consist of some combination of classes or series of shares (including
Common Stock), then the Converted Shares shall consist of such classes or
series of stock, apportioned according to the percentage of the Additional
Capital for which each such Class of stock was issued.
3. Example. Assume the Additional Capital is contributed to the corporation
in exchange for the issuance of 900,000 shares of Common Stock for $1,500,000
and 3,000,000 shares of a newly authorized Series B Preferred Stock (which is
convertible into Common Stock on a 2:1 basis) for S1,000,000.
As of the Effective Date, on an as converted basis, and not including the
Series A Preferred, there would then be 7,500,000 Shares outstanding
(5,100,000 Founders' Shares, plus 2,400,000 Additional Shares, consisting of
the 900,000 shares of Common Stock and the 3,000,000 shares of Series B
Preferred converted to 1,500,000 shares of Common).
The Designated Percentage would therefore equal 2,500,000 Converted Shares
(7,500,000 Shares x 33 1/3%).
The Converted Shares must then be apportioned among the Common and Series B
Preferred, in proportion to the Additional Capital attributable to each class
of stock:
Total Additional Capital: $2,500,000
Additional Capital attributable to Common: $1,500,000
Percentage of Total Additional Capital attributable to Common Stock 60%
60% of 2,500,000 Converted Shares = l,500,000 shares Of Common Stock issuable
on conversion
Plus 1,000,000 remaining Converted Shares x 2 (the Series B conversion ratio
reversed) = 2,000,000 shares of Series B Preferred Stock issuable on
conversion
4. Mechanics of Conversion. The conversion described in Section 2 above
shall occur automatically, upon the Effective Date, and without the need of
any action on the part of the holder of the Series A Preferred or of the
corporation or Of any holder of any other shares of corporation's stock.
This corporation shall, as soon as practicable after the automatic conversion
provided for above, issue and deliver to the holder of the Series A Preferred
Stock, a certificate or certificates for the number of shares of Stock to
which such holder shall be entitled as aforesaid, upon surrender of the
certificate or certificates representing the shares of Series A Preferred
Stock.
FIFTH: The name and mailing address of the incorporator are as follows:
Kathryn Ellen Barton
Paralegal
Blanc Williams Johnston & Kronstadt
1900 Avenue of the Stars, Suite 1700
Los Angeles, California 90067
SIXTH: In furtherance and not in limitation of the power conferred by the
laws of the State of Delaware:
A. The Board of Directors of the corporation is expressly authorized to
adopt, amend or repeal the Bylaws of the corporation.
B. Elections of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
C. The books of the corporation may be kept at such place within or without
the State of Delaware as the Bylaws of the corporation may provide or as may
be designated from time to time by the Board of Directors of the corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of
equitable: jurisdiction within the State of Delaware may, on the application
of a summary way of this corporation or of any creditor or stock thereof or
on the application of any receiver or receivers appointed for this
corporation under the provisions of Section 291 of Title 8 of the Delaware
Code or on the application of trustees in dissolution or of any receiver or
receivers appointed for this corporation under the provisions of Section 279
of Title S of the Delaware Code, order a meeting of the creditors or class of
creditors and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise
or arrangement and to any reorganization of this corporation as consequence
of such compromise or arrangement, the said compromise or arrangement and the
said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and or on all the stockholders or class of stockholders of this
corporation as the case any be, and also on the: corporation.
EIGHTH: The corporation reserves the right to amend or repeal any provision
contained in this certificate of incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
NINTH: The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permitted by paragraph (7)of subsection (b)
of Section 102 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation this 31st day of January, 1997.
Kathryn Ellen Barton, Incorporator
ACTION OF INCORPORATOR
OF
REDNECK FOODS, INC.
The undersigned, being the incorporator of Redneck Foods, Inc., a Delaware
corporation (this "Corporation") hereby adopts the following resolutions
pursuant to the authority of the Delaware Corporation Law:
ADOPTION OF BYLAWS:
RESOLVED, that the Bylaws of this corporation in the form attached hereto are
adopted as the Bylaws of this corporation.
ELECTION OF DIRECTORS:
RESOLVED, the following persons are elected as the initial directors of this
corporation:
David Womick
J.P. Williams
Robert H. Bernstein
Eric Schmid
Jim Scheifly
Howard Branson
Dated: as of January 31, 1997
Kathryn Ellen Barton
BYLAWS
of
REDNECK FOODS, INC.
a Delaware corporation
ARTICLE I
OFFICES
Section 1.01 Registered Office. The registered office of Redneck Foods, Inc.
(hereinafter called the "Corporation') shall be at the following place in the
State of Delaware, or at such other place in the State of Delaware as shall
be designated by the Board of Directors (hereinafter called the "Board") from
time to time:
c/o Incorporating Services, Ltd.
15 East North Street
Dover, Delaware 19903
Section 1.02 Principal Office. The principal office for the transaction of
the business of the Corporation shall be located at such place as is
designated by the Board from time to time.
Section 1.03 Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of
the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01 Annual Meetings. Annual meetings of the stockholders
of the Corporation for the purpose of electing directors and for the
transaction of such other proper business as may come before such meetings
may be held at such time, date and place as the Board shall determine by
resolution. In the absence of any such resolution by the Board, the annual
meeting of the stockholders of the Corporation shall be held at the principal
office of the Corporation, on the 15th day of October, at the hour of 10:00
a.m.
Section 2.02 Special Meetings. Special meetings of the stockholders of the
Corporation for any purpose or purposes may be called at any time by the
Board or by a committee of the Board which has been duly designated by the
Board and whose powers and authority, as provided in a resolution of the
Board or in the Bylaws, include the power to call such meetings, but such
special meetings may not be called by any other person or persons; provided,
however, that if and to the extent that any special meeting of stockholders
may be called by any other person or persons specified in any provisions of
the Certificate of Incorporation or any amendment thereto or any certificate
filed under Section 151(g) of the General Corporation Law of Delaware (or its
successor statute as in effect from time to time hereafter), then such
special meeting may also be called by the person or persons, in the manner,
at the time and for the purposes so specified.
Section 2.03 Place of Meetings. All meetings of the stockholders shall be
held at such places, within or without the State of Delaware, as may from
time to time be designated by the person or persons calling the respective
meetings and specified in the respective notices or waivers of notice
thereof.
Section 2.04 Notice of Meetings. Except as otherwise required by law, notice
of each meeting of the stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid
envelope, directed to him at his address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his address last known to the
Secretary, or by transmitting a notice thereof to him at such address by
telegraph, telecopy, cable or wireless. Except as otherwise expressly
required by law, no publication of any notice of a meeting of the
stockholders shall be required. Every notice of a meeting of the
stockholders shall state the place, date and hour of the meeting, and, in the
case of a special meeting shall also state the purpose or purposes for which
the meeting is called. Except as otherwise expressly required by law, notice
of any adjourned meeting of the stockholders need not be given if the time
and place thereof are announced at the meeting at which the adjournment is
taken.
Section 2.05 Quorum. The holders of record of a majority in voting interest
of the shares of stock of the Corporation entitled to be voted, present in
person or by proxy, shall constitute a quorum for the transaction of business
at any meeting of the stockholders of the Corporation or any adjournment
thereof. The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. In the absence of a quorum at any meeting or any adjournment
thereof, a majority in voting interest of the stockholders present in person
or by proxy and entitled to vote thereat or, in the absence therefrom of all
the stockholders, any officer entitled to preside at or to act as secretary
of such meeting may adjourn such meeting from time to time. At any such
adjourned meeting at which a quorum is present any business may be transacted
which might have been transacted at the meeting as originally called.
Section 2.06 Voting.
(a) At each meeting of the stockholders, each stockholder shall be entitled
to vote in person or by proxy such share or fractional share of the stock of
the Corporation which has voting rights on the matter in question and which
shall have been held by him and registered in his name on the books of the
Corporation:
(I) on the date fixed pursuant to Section 6.05 of these Bylaws as the record
date for the determination of stockholders entitled to notice of and to vote
at such meeting; or
(ii) if no such record date shall have been so fixed, then (A) at the close
of business on the day next preceding the day on which notice of the meeting
shall be given, or (B) if notice of the meeting shall be waived, at the close
of business on the day next preceding the day on which the meeting shall be
held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall
be entitled to vote, unless in the transfer by the pledgor on the books of
the Corporation he shall have expressly empowered the pledgee to vote
thereon, in which case only the pledgee, or his proxy, may represent such
stock and vote thereon. Stock having voting power standing of record in the
names of two or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise, or
with respect to which two or more persons have the same fiduciary
relationship, shall be voted in accordance with the provisions of the General
Corporation Law of Delaware.
Any such voting rights may be exercised by the stockholder entitled thereto
in person or by his proxy appointed by an instrument in writing, subscribed
by such stockholder or by his attorney thereunto authorized and delivered to
the secretary of the meeting; provided, however, that no proxy shall be voted
or acted upon after three years from its date unless said proxy shall provide
for a longer period. 'Me attendance at any meeting of a stockholder who may
theretofore have given a proxy shall not have the effect of revoking the same
unless he shall in writing so notify the secretary of the meeting prior to
the voting of the proxy. At any meeting of the stockholders all matters,
except as otherwise provided in the Certificate of Incorporation, in these
Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to
vote thereat and thereon. The stockholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum. The vote at any meeting of the stockholders on any
question need not be by ballot, unless so directed by the chairman of the
meeting. On a vote by ballot, each ballot shall be signed by the stockholder
voting, or by his proxy if there be such proxy, and it shall state the number
of shares voted.
Section 2.07 List of Stockholders. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the entire duration thereof, and may
be inspected by any stockholder who is present.
Section 2.08 Inspector of Election. If at any meeting of the stockholders a
vote by written ballot shall be taken on any question, the chairman of such
meeting may appoint an inspector or inspectors of election to act with
respect to such vote. Each inspector so appointed shall first subscribe an
oath faithfully to execute the duties of an inspector at such meeting with
strict impartiality and according to the best of his ability. Such
inspectors shall decide upon the qualification of the voters and shall report
the number of shares represented at the meeting and entitled to vote on such
question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of the inspectors shall be in writing
and subscribed and delivered by them to the Secretary of the Corporation.
Inspectors need not be stockholders of the Corporation, and any officer of
the Corporation may be an inspector on any question other than a vote for or
against a proposal in which he shall have a material interest.
Section 2.09 Stockholder Action Without Meeting. Any action required by the
General Corporation Law of Delaware to be taken at any annual or special
meeting of the stockholders, or any action which may be taken at any annual
or special meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing setting forth the
action so taken shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01 General Powers. The property, business and affairs of the
Corporation shall be managed by or under the direction of the Board, which
may exercise all of the powers of the Corporation, except such as are by the
Certificate of Incorporation, by these Bylaws or by law conferred upon or
reserved to the stockholders.
Section 3.02 Number. The authorized number of directors of the Corporation
shall be seven until changed by an amendment to this Section made pursuant to
the provisions of Article VIII, Section 8.05 of these Bylaws, subject to the
provisions of the General Corporation Law of Delaware. Directors need
not be stockholders in
the Corporation.
Section 3.03 Election of Directors. The directors shall be elected by the
stockholders of the Corporation, and at each election the persons receiving
the greatest number of votes, up to the number of directors then to be
elected, shall be the persons then elected. The election of directors is
subject to the provisions contained in the Certificate of Incorporation and
relating thereto, including any provisions for a classified board.
Section 3.04 Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, it shall take effect immediately
upon its receipt; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 3.05 Vacancies. Except as otherwise provided in the Certificate of
Incorporation or the Shareholders Agreement, any vacancy in the Board,
whether because of death, resignation, disqualification, an increase in the
number of directors, or any other cause, may be filled by vote of the
majority of the remaining directors, although less than a quorum, or by a
sole remaining director. Each director so chosen to fill a vacancy shall
hold office until his successor shall have been elected and shall qualify or
until he shall resign or shall have been removed. No reduction of the
authorized number of directors shall have the effect of removing any director
prior to the expiration of his term of office.
Upon the resignation of one or more directors from the Board, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have the power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall
become effective, and each director so chosen shall hold office as provided
hereinabove in the filling of other vacancies.
Section 3.06 Place of Meeting, Telephone Conference Meeting. The Board may
hold any of its meetings at such place or places within or without the State
of Delaware as the Board may from time to time by resolution designate or as
shall be designated by the person or persons calling the meeting or in the
notice or waiver of notice of any such meeting. Directors may participate in
any regular or special meeting of the Board by means of conference telephone
or similar communications equipment pursuant to which all persons
participating in the meeting of the Board can hear each other, and such
participation shall constitute presence in person at such meeting.
Section 3.07 First Meeting. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting
shall not be required.
Section 3.08 Regular Meetings. Regular meetings of the Board may be held at
such times as the Board shall from time to time by resolution determine. If
any day fixed for a meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and
place on the next succeeding business day which is not a legal holiday.
Except as provided by law, notice of regular meetings need not be given.
Section 3.09 Special Meetings.
(a) Special meetings of the Board may be called at any time by either
Co-Chairman of the Board or the President or the Chief Executive Officer or
any Vice President or the Secretary or by any two (2) directors, to be held
at the principal office of the Corporation, or at such other place or places,
within or without the State of Delaware, as the person or persons calling the
meeting may designate.
(b) Notice of the time and place of special meetings shall be given to
each director either: (I) by mailing or otherwise sending to him a written
notice of such meeting, charges prepaid, addressed to him at his address as
it is shown upon the records of the Corporation, or if it is not so shown on
such records or is not readily ascertainable, at the place in which the
meetings of the directors are regularly held, at least seventy-two (72) hours
prior to the time of the holding of such meeting; or (ii) by orally
communicating the time and place of the special meeting to him at least
forty-eight (48) hours prior to the time of the holding of such meeting.
Either of the notices as above provided shall be due, legal and personal
notice to such director.
Whenever notice is required to be given, either to a stockholder or a
director, under any provision of the General Corporation Law of Delaware, the
Certificate of Incorporation or these Bylaws, a written waiver thereof,
signed by the person entitled to notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person
at a meeting, whether in person or by proxy, shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted nor the purpose of any
regular or special meeting of directors or committee of directors need be
specified in any written waiver of notice. All such waivers shall be filed
with the corporate records or made a part of the minutes of the meeting.
Section 3. 10 Quorum and Action. Except as otherwise provided in these
Bylaws or by law, the presence of all of the authorized number of directors
shall be required to constitute a quorum for the transaction of business at
any meeting of the Board, and all matters shall be decided at any such
meeting, a quorum being present, by the affirmative votes of all of the
directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have
no power as such.
Section 3.11 Action by Consent. Any action required or permitted to be taken
at any meeting of the Board or of any committee thereof may be taken without
a meeting if a written consent thereto is signed by all members of the Board
or of such committee, as the case may be, and such written consent is filed
with the minutes of proceedings of the Board or such committee. Such action
by written consent shall have the same force and effect as the unanimous vote
of such directors.
Section 3.12 Compensation. No stated salary need be paid to directors, as
such, for their services but, as fixed from time to time by resolution of the
Board, the directors may receive directors' fees, compensation and
reimbursement for expenses for attendance at directors' meetings, for serving
on committees and for discharging their duties; provided that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 3.13 Committees.
(a) The Board may, by its unanimous resolution, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. Any such committee, to the extent provided in the resolution of
the Board, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have any power or authority in
reference to, amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the Bylaws of the
Corporation; and unless the resolution of the Board expressly so provides, no
such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Any such committee shall keep written
minutes of its meetings and report the same to the Board when required.
(b) The presence of all of the members of any such committee shall
constitute a quorum for the transaction of business. Every act or decision
done or made by said committee shall be authorized by unanimous resolution of
the members thereof
Section 3.14 Officers of the Board. The Board may have a Chairman of the
Board. The Chairman of the Board may be appointed from time to time by the
Board and the powers and duties of such Chairman shall be co-equal with those
of the President and/or Chief Executive Officer or, if otherwise provided by
the Board, as so provided from time to time.
ARTICLE IV
OFFICERS
Section 4.01 Officers. The officers of the Corporation shall be a Chief
Executive Officer or President, a Secretary and a Treasurer. The Corporation
may also have ' at the discretion of the Board, a Chairman of the Board, one
or more Vice Presidents, one or more Assistant Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers and such other
officers as may be appointed in accordance with the provisions of Section
4.03 of these Bylaws. One person may hold two or more offices. The salaries
of all officers of the Corporation shall be fixed by the Board.
Section 4.02 Election. The officers of the Corporation, except such officers
as may be appointed in accordance with the provisions of Section 4.03 or
Section 4.05 of these Bylaws, shall be chosen annually by the Board, and each
shall hold his or her office until he or she shall resign or shall be removed
or shall be otherwise disqualified to serve, or until his or her successor
shall be elected and qualified.
Section 4.03 Subordinate Officers. The Board may appoint, or may authorize
the Chief Executive Officer, President or Chairman of the Board to appoint,
such other officers as the business of the Corporation may require, each of
whom shall have such authority and perform such duties as are provided in
these Bylaws or as the Board or the Chief Executive Officer, President or
Chairman of the Board from time to time may specify, and shall hold office
until he or she shall resign or shall be removed or otherwise disqualified to
serve.
Section 4.04 Removal and Resignation.
(a) Any officer may be removed, with or without cause, by a majority of
the directors at the time in office, at any regular or special meeting of the
Board, or, except in case of an officer chosen by the Board, by the Chief
Executive Officer, President or Chairman of the Board upon whom such power of
removal may be conferred by the Board.
(b) Any officer may resign at any time by giving written notice to the
Board, the Chairman of the Board, the Chief Executive Officer, the President
or the Secretary of the Corporation. Any such resignation shall take effect
at the date of the receipt of such notice or at any later time specified
therein; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.05 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in these Bylaws for the regular appointments to such
office.
Section 4.06 President and/or Chief Executive Officer. Subject to such
supervisory powers, if any, as may be given by the Board to the Chairman of
the Board, if there be such an officer, the President and/or the Chief
Executive Officer shall, subject to the control of the Board, have general
super-vision, direction, and control of the business and the officers of the
Corporation. If the Board elects different persons to the positions of
President and Chief Executive Officer, the powers and duties of each shall be
co-equal or, if otherwise provided by the Board, as so provided from time to
time. The President and/or Chief Executive Officer shall preside at all
meetings of the stockholders and, in the absence of the Chairman of the
Board, at all meetings of the Board. The President and/or the Chief
Executive Officer shall have the general powers and duties of management
usually vested in the office of President of a Corporation, and shall have
such other powers and duties as may be prescribed by the Board or the Bylaws.
Section 4.07 Vice President The Vice President(s), if any, shall exercise
and perform such powers and duties with respect to the administration of the
business and affairs of the Corporation as from time to time may be assigned
to each of them by the President, by the Chief Executive Officer, by the
Board or as is prescribed by these Bylaws. In the absence or disability of
the President, the Vice Presidents, in order of their rank as fixed by the
Board, or if not ranked, the Vice President designated by the Board, shall
perform all of the duties of the President and when so acting shall have all
of the powers of and be subject to all the restrictions upon the President.
Section 4.08 Secretary.
(a) The Secretary shall keep, or cause to be kept, a book of minutes at
the principal office for the transaction of the business of the Corporation,
or such other place as the Board may order, of all meetings of directors and
stockholders, with the time and place of holding, whether regular or special,
and if special, how authorized and the notice thereof given, the names of
those present at directors' meetings, the number of shares present or
represented at stockholders' meetings and the proceedings thereof.
(b) The Secretary shall keep, or cause to be kept, at the principal
office for the transaction of the business of the Corporation or at the
office of the Corporation's transfer agent, a share register, or a duplicate
share register, showing the names of the stockholders and their addresses,
the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
(c) The Secretary shall give, or cause to be given, notice of all the
meetings of the stockholders and of the Board required by these Bylaws or by
law to be given, and he shall keep the seal of the Corporation in safe
custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board or these Bylaws. If for any reason the
Secretary shall fail to give notice of any special meeting of the Board
called by one or more of the persons identified in Section 3.09 of these
Bylaws, or if he shall fail to give notice of any special meeting of the
stockholders called by one or more of the persons identified in Section 2.02
of these Bylaws, then any such person or persons may give notice of any such
special meeting.
Section 4.09 Treasurer.
(a) The Treasurer, who may be referred to as the "Chief Financial
Officer', shall keep and maintain or cause to be kept and maintained,
adequate and correct accounts of the properties and business transactions of
the Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, surplus and shares. Any surplus,
including earned surplus, paid-in surplus and surplus arising from a
reduction of capital, shall be classified according to source and shown in a
separate account. The books of account at all reasonable times shall be open
to inspection by any director.
(b) The Treasurer shall deposit all moneys and other valuables in the
name and to the credit of the Corporation with such depositories as may be
designated by the Board. He shall disburse the funds of the Corporation as
may be ordered by the Board, shall render to the President, to the Chief
Executive Officer and to the directors, whenever they request it, an account
of all of his transactions as Treasurer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties
as may be prescribed by the Board or these Bylaws.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 5.01 Execution of Contracts. The Board, except as otherwise provided
in these Bylaws, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name and on behalf
of the Corporation, and such authority may be general or confined to specific
instances. Unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation
by any contract or engagement or to pledge its credit or to render it liable
for any purpose or in any amount.
Section 5.02 Checks, Drafts, Etc. All checks, drafts or other
orders for payment of money, notes or other evidence of indebtedness, issued
in the name of or payable to the Corporation, shall be signed or endorsed by
such person or persons and in such manner as, from time to time, shall be
determined by resolution of the Board. Each such person shall give such
bond, if any, as the Board may require.
Section 5.03 Deposit. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, attorney or attorneys, of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, the President, the
Chief Executive Officer, any Vice President or the Treasurer (or any other
officer or officers, assistant or assistants, agent or agents, or attorney or
attorneys of the Corporation who shall be determined by the Board from time
to time) may endorse, assign and deliver checks, drafts and other orders for
the payment of money which are payable to the order of the Corporation.
Section 5.04 General and Special Bank Accounts. The Board may from time to
time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
select or as may be selected by an officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to
whom such power shall have been delegated by the Board. The Board may make
such special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 6.01 Certificates for Stock. Every owner of stock of the Corporation
shall be entitled to have a certificate or certificates, in such form as the
Board shall prescribe, certifying the number and class of shares of the stock
of the Corporation owned by him. The certificates representing shares of
such stock shall be numbered in the order in which they shall be issued and
shall be signed in the name of the Corporation by the Chairman of the Board,
the President or a Vice President and by the Secretary or an Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any or all of the
signatures on the certificates may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon any such certificate shall thereafter have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such officer, transfer agent
or registrar at the date of issue. A record shall be kept of the respective
names of the persons, firms or corporations owning the stock represented by
such certificates, the number and class of shares represented by such
certificates, respectively, and the respective dates thereof, and in case of
cancellation, the respective dates of, cancellation. Every certificate
surrendered to the Corporation for exchange or transfer shall be canceled,
and no new certificate or certificates shall be issued in exchange for any
existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 6.04 of these Bylaws.
Section 6.02 Transfer of Stock. Transfer of shares of stock of the
Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary, or with a transfer
clerk or a transfer agent appointed as provided in Section 6.03 of these
Bylaws, and upon surrender of the certificate or certificates for such shares
properly endorsed and the payment of all taxes thereon. The person in whose
name shares of stock stand on the books of the Corporation shall be deemed
the owner thereof for all purposes as regards the Corporation. Whenever any
transfer of shares shall be made for collateral security, and not absolutely,
such fact shall be stated expressly in the entry of transfer if, when the
certificate or certificates shall be presented to the Corporation for
transfer, both the transferor and the transferee request the Corporation to
do so.
Section 6.03 Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue, transfer and registration of certificates for shares of the stock of
the Corporation. The Board may appoint, or authorize any officer or officers
to appoint, one or more transfer clerks or one or more transfer agents and
one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
Section 6.04 Lost, Stolen, Destroyed and Mutilated Certificates. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft,
destruction, or mutilation and upon the giving of a bond of indemnity to the
Corporation in such form and in such sums as the Board may direct; provided,
however, that a new certificate may be issued without requiring any bond
when, in the judgment of the Board, it is proper to do so.
Section 6.05 Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any other change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board may fix, in
advance, a record date, which shall not be more than sixty (60) nor ' less
than ten (10) days before the date of such meeting, nor more than sixty (60)
days prior to any other action. If, in any case involving the determination
of stockholders for any purpose other than notice of or voting at a meeting
of stockholders, the Board shall not fix such a record date, the record date
for determining stockholders for such purpose shall be the close of business
on the day on which the Board shall adopt the resolution relating thereto. A
determination of stockholders entitled to notice of or to vote at a meeting
of stockholders shall apply to any adjournment of such meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
Section 6.06 Representation of Shares of Other Corporations. The Chief
Executive Officer or President or any Vice President and the Secretary or any
Assistant Secretary of this Corporation are authorized to vote, represent and
exercise on behalf of this Corporation all rights incident to all shares of
any other corporation or corporations standing in the name of this
Corporation. The authority herein granted to said officers to vote or
represent on behalf of this Corporation any and all shares held by this
Corporation in any other corporation or corporations may be exercised either
by such officers in person or by any person authorized so to do by proxy or
power of attorney duly executed by said officers.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 7.01 Agents, Proceedings. and Expenses. For the purposes of this
Article: (I) "agent" means any person who is or was a director, officer,
employee, or other agent of this Corporation, or is or was serving at the
request of this Corporation as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee, or agent of a foreign
or domestic corporation which was a predecessor corporation of this
Corporation or of another enterprise at the request of such predecessor
corporation; "proceeding" means any threatened, pending or completed action
or proceeding, whether civil, criminal, administrative, or investigative; and
(ii) 'expenses" includes, without limitation, attorneys' fees and any
expenses of establishing a right to indemnification under Sections 7.02 or
7.03 of this Article.
Section 7.02 Indemnification. Except where and to the extent prohibited by
the Delaware General Corporation Law or by the Certificate of Incorporation,
this Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any proceeding by reason of the fact that
such person is or was an agent of this Corporation, against expenses,
judgments, fines, settlements and other amounts, including attorney fees and
costs, actually and reasonably incurred in connection with such proceeding
regardless of whether the proceeding is brought by any third party or by or
in the right of this Corporation, to the broadest extent permissible by
Delaware law. Further, this Corporation eliminates the personal liability of
each member of its Board and each officer to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty, to the
fullest extent permitted by Section 145 of the General Corporation Law of
Delaware, as the same may be amended and supplemented. The Corporation shall
to the fullest extent permitted by said section indemnify each member of the
Board and each officer from and against any and all of the expenses,
liabilities or other matters referred to in or covered in Article VII of
these Bylaws.
Section 7.03 Advance of Expenses. To the maximum extent permissible by the
Delaware General Corporation Law and the Certificate of Incorporation of this
Corporation, expenses incurred in defending any proceeding shall be advanced
by this Corporation prior to the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of the agent to repay the amount of
the advance if it shall be determined ultimately that the agent is not
entitled to be indemnified as authorized in this Article.
Section 7.04 Other Contractual Rights. The indemnification provided by this
Article VII shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. The rights to indemnity hereunder shall continue as to a person who
has ceased to be a director, officer, employee, or agent and shall inure. to
the benefit of the heirs, executors, and administrators of the person.
Nothing contained in this Article shall affect any right to indemnification
to which persons other than directors and officers of this Corporation or any
subsidiary hereof may be entitled by contract or otherwise.
Section 7.05 Limitations. No indemnification or advance shall be made under
this Article in any circumstance where it appears: (I) that it would be
inconsistent with a provision of an agreement to which the indemnitee is a
party and which was in effect at the time of the accrual of the alleged cause
of action asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits indemnification;
or (ii) that it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.
Section 7.06 Insurance. Upon and in the event of a determination by the
Board of this Corporation to purchase such insurance, this Corporation shall
have the power to purchase and maintain insurance on behalf of any agent of
the Corporation against any liability asserted against or incurred by the
agent in such capacity or arising out of the agent's status as such whether
or not this Corporation would have the power to indemnify the agent against
that liability under the provisions of this Article vii.
Section 7.07 Fiduciaries of Corporate Employee Benefit Plan. This Article
does not apply to any proceeding against any trustee, investment manager, or
other fiduciary of an employee benefit plan in that person's capacity as
such, even though that person may also be an agent of the Corporation as
defined in Section 7.01 of this Article. This Corporation shall have power
to indemnify such a trustee, investment manager or other fiduciary to the
maximum extent permitted by Delaware law.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Seal. The Board shall provide a corporate seal, which shall be
in the form of a circle and shall bear the name of the Corporation and words
and figures showing that the Corporation was incorporated in the State of
Delaware and showing the year of incorporation.
Section 8.02 Waiver of Notices. Whenever notice is required to be given by
these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or
after the time stated therein, and such waiver shall be deemed equivalent to
notice.
Section 8.03 Loans and Guaranties. 'The Corporation may lend money to, or
guarantee any obligation of, and otherwise assist any officer or other
employee of the Corporation or of its subsidiaries, including any officer who
is a director, whenever, in the judgment of the Board, such loan, guaranty or
assistance may reasonably be expected to benefit the Corporation. The loan,
guaranty, or other assistance may be with or without interest, and may be
unsecured or secured in such manner as the Board shall approve, including,
without limitation, a pledge of shares of stock of the Corporation.
Section 8.04 Gender. All personal pronouns used in these Bylaws shall
include the other genders, whether used in the masculine, feminine or neuter
gender, and the singular shall include the plural, and vice versa, whenever
and as often as may be appropriate.
Section 8.05 Amendments. Except as provided in this Section 8.05 of these
Bylaws, these Bylaws, or any of them, may be rescinded, altered, amended or
repealed, and new Bylaws may be made (I) by the Board, by vote of a majority
of the number of directors then in office as directors, acting at any meeting
of the Board or (ii) by the stockholders, by the vote of a majority of the
outstanding shares of voting stock of the Corporation, at an annual meeting
of stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting; provided,
however, that Section 3.02 of these Bylaws can only be amended if that
Section as amended would not conflict with the Corporation's Certificate of
Incorporation and that Sections 7.02, 7.03 and 7.04 of these Bylaws can only
be amended if such Sections as amended would pertain only to prospective
acts. Except as provided in this Section 8.05, any Bylaw made or altered by
the stockholders may be altered or repealed by the Board or may be altered or
repealed by the stockholders.
CERTIFICATE OF SECRETARY
The undersigned hereby certifies as follows:
(1) That the undersigned is the duly elected and acting Secretary of
REDNECK FOODS, INC., a Delaware corporation (the "Corporation");
(2) That the foregoing Bylaws constitute the Bylaws of the Corporation
as duly adopted by the Written Consent of the Sole Incorporator, dated as of
January 31, 1997; and
(3) That the foregoing Bylaws constitute the Bylaws of the Corporation
as duly approved and adopted by the Unanimous Written Consent of the Board of
Directors in Lieu of the Organizational Meeting, dated as of February 4,
1997.
IN WITNESS WHEREOF, I have signed my name and affixed the seal of the
Corporation as of February 4, 1997.
David Womick, Secretary
SEE REVERSE SIDE FOR STATEMENT OF RESTRICTIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER 1 SHARES
REDNECK FOODS, INC.
AUTHORIZED: 20,000,000 SHARES OF COMMON STOCK
COMMON STOCK
This Certifies that is the registered holder of
( ) Shares transferable only on the books of the Corporation by
the holder hereof in person or by attorney upon surrender of this Certificate
properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 4th day of February A.D. 1997.
David Womick, SECRETARY SEAL David Womick, PRESIDENT
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 JEFF FOXWORTHY, an individual ("Foxworthy") with reference
to the following:
A. Simultaneously with the execution and delivery of this Agreement, (i)
Company, Foxworthy and David Womick ("Womick") are entering into a Series A
Convertible Preferred Stock Purchase Agreement (the "Stock Purchase
Agreement") providing for, among other things, the acquisition by Foxworthy
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, Foxworthy 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 "Jeff
Foxworthy," servicemarks, copyrights and trademarks owned or controlled by
Foxworthy and any and all names, symbols, emblems, designs, likenesses,
photographs, images and visual representations of or relating to Foxworthy
that are approved by Foxworthy 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 Foxworthy 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 Foxworthy
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 Foxworthy 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 Foxworthy. Without
limiting the foregoing, Other Products shall include all products and
merchandise currently made available by Foxworthy's affiliate, Club Red.
2. LICENSE.
2.1. Grant of License. Subject to the terms of this Agreement and the
Stock Purchase Agreement, Foxworthy 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 Foxworthy, sublicense the rights granted by Foxworthy
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
Foxworthy and which provide that such franchisees are by bound by the terms
hereof.
2.3. Foxworthy's Right to Approve Use of the Licensed Material.
(a) Right of Approval. Notwithstanding the provisions of Section 2.1,
Foxworthy 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
Foxworthy 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
Foxworthy, 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
Foxworthy's 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 Foxworthy 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 Foxworthy with samples of such Licensed Products, any
packaging therefor, and any advertisements devoted thereto. Foxworthy shall
have the right to approve such Licensed Product in all respects, including as
to type, quality, style, color, and cost. Foxworthy shall notify Company of
his approval or disapproval of such materials or Licensed Products within
thirty (30) days of receipt. In the event Foxworthy 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. Foxworthy 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 Foxworthy, through other
channels of distribution or sale. Foxworthy 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, Foxworthy shall have the right to
purchase reasonable quantities of Licensed Products from Company at Company's
cost of production; provided that Foxworthy 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 Foxworthy's
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 Foxworthy, Club Red or such
other third parties, as appropriate, at standard wholesale prices and in
sufficient volumes to fulfill the obligations hereunder. Foxworthy 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 Foxworthy.
4. CONSIDERATION AND ROYALTIES.
4.1. Preferred Stock. As partial consideration for the rights granted by
Foxworthy hereunder, Company has issued the Preferred Stock to Foxworthy
pursuant to the terms of the Stock Purchase Agreement.
4.2. Royalties. As additional consideration for the rights granted by
Foxworthy hereunder, Company hereby agrees to pay Foxworthy 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 Foxworthy 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 Foxworthy of such statements
and payments for any period shall not preclude Foxworthy 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 Foxworthy or Foxworthy's 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 Foxworthy 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 Foxworthy of written notice thereof;
(b) At the option of Foxworthy, upon a material breach by David Womick
of his obligations under the Womick 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 Foxworthy of written
notice thereof;
(c) Upon receipt of written notice from Foxworthy 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 Foxworthy's image or reputation as determined by
Foxworthy 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 Womick 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. Foxworthy shall have the right to purchase any inventory of
Licensed Products in Company's possession as of the date of termination. If
Foxworthy 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 Foxworthy 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 Foxworthy. Foxworthy represents and warrants to
Company as follows:
(a) Foxworthy 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) Foxworthy 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 Foxworthy 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 Foxworthy of
notice of the commencement of any action involving a claim referred to in
Section 7.1, Foxworthy will give written notice to Company of the
commencement of such action. If any such action is brought against
Foxworthy, Company will be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to Foxworthy, and after
notice from Company to Foxworthy 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
Foxworthy if Foxworthy engages separate counsel in connection with the
defense thereof; provided, however, that Foxworthy shall have the right to
retain his own counsel, with the reasonable fees and expenses to be paid by
Company, if Foxworthy shall have reasonably concluded that representation of
Foxworthy by the counsel retained by Company would be inappropriate due to
actual or potential differing interests between Company and Foxworthy 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 Foxworthy and with insurance companies approved by
Foxworthy, and shall name Foxworthy 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 Foxworthy 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 Foxworthy 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
Foxworthy. Company shall affix appropriate copyright, trademark and/or other
protective notices (hereinafter "Notices") as may be designated reasonably by
Foxworthy 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. Foxworthy
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 Foxworthy. 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 Foxworthy to the extent necessary in the procurement of any
protection or to protect any of Foxworthy's rights to the Licensed Material.
Foxworthy 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 Foxworthy 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 Foxworthy and their respective successors, permitted
assigns, heirs and legal representatives (as the case may be) of Company and
Foxworthy.
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
Foxworthy. Foxworthy may freely assign his rights hereunder without
Company's consent to any party. Foxworthy 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 Foxworthy.
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: ______ JEFF FOXWORTHY
Title: ________________________
REDNECK FOODS, INC.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is entered into as of February 4, 1997 by and among REDNECK
FOODS, INC., a Delaware corporation ("Company"), DAVID WOMICK, an individual
("Womick"), and JEFF FOXWORTHY, an individual ("Foxworthy"), with reference
to the following facts:
A. Company is a corporation that has been newly-formed for the purposes
of engaging in the business of developing and managing a national franchise
(the "Franchise") of barbecue and/or grill style restaurants (the
"Restaurants").
B. Currently, the only issued and outstanding capital stock of Company is
Five Million One Hundred Thousand (5,100,000) shares of its common stock
("Common Stock"), which is all held by Company's sole shareholder, Womick.
C. Company desires to issue and sell to Foxworthy and Foxworthy wishes to
purchase from Company Two Million Five Hundred Thousand (2,500,000) shares of
Series A Convertible Preferred Stock ("Preferred Stock").
AGREEMENTS
In consideration of the mutual covenants, agreements, representations and
warranties and conditions contained herein, the parties hereto do hereby
agree as follows:
1. PURCHASE OF PREFERRED STOCK.
1.1 Purchase of Shares. Subject to the terms and conditions of this
Agreement, Foxworthy hereby agrees to purchase from Company and Company
agrees to sell to Foxworthy Two Million Five Hundred Thousand (2,500,000)
shares of Preferred Stock.
1.2 Purchase Consideration. In exchange for the shares of Preferred Stock
purchased hereunder, Foxworthy shall provide the following valuable
consideration to Company:
(a) License Agreement. Foxworthy and Company shall enter into a License
Agreement (the "License Agreement") in the form of Exhibit A attached hereto
pursuant to which Foxworthy shall grant to Company a limited license to use
the name and likeness of Foxworthy in connection with the promotion of the
Restaurants.
(b) Promotion Agreement. Foxworthy and Company shall enter into a
Promotion Agreement (the "Promotion Agreement") in the form of Exhibit B
attached hereto pursuant to which Foxworthy shall provide certain promotional
services to Company in connection with the promotion of the Restaurants.
The parties acknowledge that, as of the date of execution of this Agreement,
the aggregate value of the consideration contributed to Company by Foxworthy
pursuant to Sections 1.2(a) and 1.2(b) is Fifty Thousand Dollars ($50,000).
1.3 Forfeiture of Shares.
(a) Forfeiture Schedule. Foxworthy agrees that his ownership in the shares
of Preferred Stock purchased hereunder (or in any shares of stock received
upon conversion of such shares) shall be subject to the forfeiture provisions
of this Section 1.3. One Million Six Hundred Sixty-Six Thousand Six Hundred
Sixty-Seven (1,666,667) of the shares of Preferred Stock purchased hereunder
shall not be subject to forfeiture. Eight Hundred Thirty-Three Thousand
Three Hundred Thirty-Three (833,333) of the shares of Preferred Stock
purchased hereunder shall initially be subject to forfeiture pursuant to the
terms of this Agreement but the number of shares subject to forfeiture shall
be reduced Thirteen Thousand Eight Hundred Eighty-Nine (13,889) shares
monthly, on the first day of each month, over the five (5) year term of the
Promotion Agreement.
(b) Vesting Upon Change of Control. All shares subject to forfeiture
hereunder shall no longer be forfeitable and Foxworthy's interest therein
shall fully vest upon a Change of Control of Company. As used herein, a
"Change of Control" shall mean the occurrence of any of the following events:
(i) An acquisition (other than directly from Company) of any voting
securities of Company (the "Voting Securities") by a "Person" or "Group" (as
such terms are used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") immediately after which
such Person or Group has "Beneficial OwnershiP" (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of more than fifty percent (50%) of the
combined voting power of Company's then outstanding Voting Securities.
(ii) Approval by the shareholders of Company of:
(1) A merger, consolidation or reorganization involving Company, unless
the shareholders of Company, immediately before such merger, consolidation or
reorganization, own, directly or indirectly, immediately following such
merger, consolidation or reorganization, at least fifty percent (50%) of the
combined voting power of the outstanding voting securities of the corporation
resulting from such merger, consolidation or reorganization in substantially
the same proportion as their ownership of the outstanding Voting Securities
immediately before such merger, consolidation or reorganization.
(2) A complete liquidation or dissolution of Company
(c) Event of Forfeiture. Forfeiture of shares hereunder shall occur
only upon an early termination of the Promotion Agreement that is caused by a
breach of such agreement by Foxworthy. In such event, Foxworthy shall (i)
forfeit any right to any shares of Preferred Stock (or in any shares of stock
received upon conversion of such shares) that remain subject to forfeiture
pursuant to the provisions of Section 1.3(a) and (b), and (ii) promptly
execute and deliver all appropriate share certificates and assignments to
effect the transfer of such forfeited shares to Company.
1.4 Rights of Preferred Stock. The rights, preferences and privileges of
the Preferred Stock and their principal features with respect to voting,
dividends, liquidation, preferences and conversion features (including anti-
dilution adjustments) shall be as set forth in the Certificate of
Incorporation of Company attached hereto as Exhibit C (the "Certificate of
Incorporation").
1.5 Post-Conversion Anti-Dilution Option.
(a) When Available. Under the terms set forth in the Certificate of
Incorporation, the Preferred Stock is subject to automatic conversion. From
and after the date such automatic conversion occurs, Foxworthy shall be
entitled to the option described in this Section 1.5.
(b) Scope of Right. If Company offers equity securities for sale to Womick
or to one or more third party investors (or rights to acquire equity
securities including convertible debt, warrants, options and similar rights),
Foxworthy shall have the option to purchase in such offering all or a portion
of that percentage of the total securities to be sold in such offering as
equals the percentage of the total then-outstanding capital stock of Company
held by Foxworthy (determined by assuming that, as of the time of the
determination, all of the issued and outstanding equity securities of Company
have been converted into Common Stock). The option of Foxworthy to purchase
securities pursuant to this Section 1.5 shall be on all the same terms and
conditions as such securities are offered to third party investor(s),
including without limitation terms with respect to timing of payments and
subscriptions.
(c) Exceptions to Option. Company shall have the right to offer for sale
debt securities that have no right to convert into equity securities without
triggering the option rights set forth in this Section 1.5. Further, the
option rights shall not be triggered by issuance of equity shares (i) upon
conversion of Preferred Stock, (ii) to officers, directors, employees or
consultants of Company for services pursuant to a stock option plan or stock
purchase plan approved by the Board of Directors of Company pursuant to
Section 4.2, (iii) to banks, lenders and equipment lessors in connection with
debt financing or equipment leases approved by the Board of Directors of
Company, (iv) as a dividend or distribution on Preferred Stock or Common
Stock of Company, (v) in connection with a merger or consolidation for
acquisition by Company of any other corporation or business entity or assets,
or (vi) by way of a dividend or other distribution on shares issued as
described in clauses (i) through (v) of this sentence.
(d) Means of Exercise. The option provided in this Section 1.5 shall be
exercised within thirty (30) days after receipt of written notice from
Company of the offer for sale to one or more third parties of Company's
equity securities by a written notice from Foxworthy that states Foxworthy's
desire to purchase securities pursuant to this Section 1.5.
(e) Termination on Public Offering. The option described in this Section
1.5 shall terminate and be of no further force or effect upon the
registration of the Common Stock of Company under the Securities Exchange Act
of 1934, or upon Company being required to file reports with the Securities
Exchange Commission under Section 15(d) of such act.
1.6 Stock Certificates; Legends. Concurrently with the execution of this
Agreement and the other Transaction Documents, Company shall deliver to
Foxworthy stock certificates representing all of the shares of Preferred
Stock purchased hereunder. In order to reflect the restrictions on
disposition of the Preferred Stock, the stock certificates for the Preferred
Stock will be endorsed with restrictive legends, including the following
legends:
(a) Federal Legend. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER SUCH
ACT, (ii) A "NO ACTION" LETTER OF THE SECURITIES AND EXCHANGE COMMISSION WITH
RESPECT TO SUCH SALE OR OFFER, OR (iii) AN OPINION OF COUNSEL OR OTHER
EVIDENCE SATISFACTORY TO THE REDNECK FOODS, INC. THAT REGISTRATION UNDER SUCH
ACT IS NOT REQUIRED WITH RESPECT TO SUCH SALE OR OFFER."
(b) Other Legends. Any other legends required by applicable state blue sky
laws.
Any legend endorsed on a certificate or instrument evidencing any of the
Preferred Stock issued pursuant to this Agreement and any stop transfer
instructions with respect to such Preferred Stock shall be removed and
Company shall issue a certificate or instrument without legend to the holder
of such Preferred Stock if such Preferred Stock is registered under the
Securities Act of 1933 or if such holder provides Company with an opinion of
counsel for such holder, in form and substance reasonably satisfactory to
Company, to the effect that a public sale, transfer or assignment of such
Preferred Stock may be made without registration.
1.7 Transaction Documents. As used herein, the "Transaction Documents"
shall mean collectively, this Agreement and all other documents to be
executed pursuant hereto, including without limitation, the License
Agreement, the Promotion Agreement, the "Registration Rights Agreement," the
"Womick Employment Agreement," the "Bernstein Employment Agreement," the
"Williams Consulting Agreement," the "Proprietary Rights and Confidentiality
Agreements" and the "Arbitration Agreement" as such terms are defined herein.
2. OBLIGATION TO RAISE CAPITAL
2.1 Obligation. As a condition subsequent to the obligations of Foxworthy
hereunder, Company and Womick shall be obligated to obtain for Company equity
investments totaling at least Two Million Five Hundred Thousand Dollars
($2,500,000) in gross capital less applicable, reasonable commissions (the
"Investment Capital") from third party investors by November 1, 1997.
Company may accept either cash or property contributions from third party
investors as the Investment Capital; provided, that, with respect to
contributions of property, Foxworthy shall have the right to approve any such
property prior to its acceptance by Company and provided further that
Foxworthy shall have the right to approve the valuation given to such
property as of the date of contribution. Company and Womick may determine
(i) the type(s) and amount(s) of equity shares to be issued by Company in
exchange for the Investment Capital, and (ii) the percentage of the overall
equity of the Company such issued shares shall represent. Notwithstanding
the foregoing, the parties acknowledge and understand that, pursuant to the
conversion rights of the Preferred Stock set forth in the Certificate of
Incorporation, the Preferred Stock shall, once the Investment Capital has
been successfully obtained by Company, automatically convert into equity
shares constituting twenty-five percent (25%) of the overall equity of
Company. Consequently, the shares to be issued in exchange for the
Investment Capital shall, when added to the Common Stock held by Womick,
constitute seventy-five percent (75%) of the overall equity of Company. To
accomplish this 25/75 percentage split, Foxworthy and Womick acknowledge and
accept that the issuance of shares in exchange for the Investment Capital
will have a disparate impact on their respective percentage interests in the
overall equity of Company, with the most likely result being that the
percentage interest of Womick is diluted to a greater extent than the
percentage interest of Foxworthy.
2.2 Full Information. Company and Womick shall keep Foxworthy fully
informed of all actions taken by Company and Womick in fulfillment of their
obligations under this Section 2, including by means of providing Foxworthy
with copies of all correspondence and solicitation materials provided to
potential investors.
2.3 Compliance with Securities Laws; Indemnification. Company and Womick
shall ensure that all solicitations, offering and sales made in connection
with the Investment Capital are done in full compliance with all applicable
federal and state securities laws. Company and Womick shall inform all
potential investors in writing that (i) Foxworthy is not a promoter of
Company or of the offering of securities, (ii) Foxworthy is receiving the
Preferred Stock issued to him hereunder in exchange for the License Agreement
and the Promotion Agreement, and not in exchange for monies paid, and (iii)
the rights and remedies provided to Foxworthy under this Agreement and under
the Transaction Documents are for the benefit of Foxworthy and the protection
of his investment in Company only. Company and Womick, and each of them,
agree, jointly and severally, to indemnify, defend and hold harmless
Foxworthy for any and all suits, claims and causes of action arising in
connection with the raising of the Investment Capital, including suits,
claims and causes of action arising under applicable federal and state
securities laws.
2.4 Preservation of Funds. Except as provided in this Section 2.4, any and
all cash funds obtained by Company as part of the Investment Capital shall be
deposited into an escrow account and held until the full amount of the
Investment Capital has been obtained. No funds shall be released from such
escrow account without the prior approval of Foxworthy. Upon release from
escrow, the Investment Capital funds shall be deposited into the general
corporate bank accounts of Company and shall, subject to the terms of this
Agreement and the Transaction Documents, be used for the business purposes of
Company. Notwithstanding the foregoing, during the time the Investment
Capital is being raised, Company may use some of the funds so raised to pay
for the reasonable and necessary expenses of Company (not to exceed
($200,000), including the reasonable and necessary travel and related
expenses of Womick, in connection with soliciting and raising the remainder
of the Investment Capital; provided, however, that full disclosure has been
made to all investing parties that (i) all or a portion of their invested
funds may be expended in such manner without any guaranty of recovery or
success , and (ii) Foxworthy has the right to terminate all involvement with
Company in the event all of the Investment Capital is not obtained by Company
pursuant to the terms of this Agreement; and provided further that Company
provides Foxworthy with satisfactory evidence that such full disclosure has
been made.
3. ADDITIONAL AGREEMENTS.
3.1 Registration Rights Agreement. The parties shall enter into a
Registration Rights Agreement in the form of Exhibit D attached hereto (the
"Registration Rights Agreement").
3.2 Womick Employment Agreement. Company shall enter into an employment
agreement with Womick who shall serve as Chief Operating Officer of Company
pursuant to the terms of the Employment Agreement attached hereto as Exhibit
E (the "Womick Employment Agreement").
3.3 Bernstein Employment Agreement. Company shall enter into an employment
agreement with Robert H. Bernstein who will serve as Chief Financial Officer
of Company pursuant to the terms of the Employment Agreement attached hereto
as Exhibit F (the "Bernstein Employment Agreement").
3.4 Williams Consulting Agreement. Company shall enter into a consulting
agreement with J.P. Williams pursuant to the terms of the Consulting
Agreement attached hereto as Exhibit G (the "Williams Consulting Agreement").
3.5 Confidentiality Agreements. Company shall require each person employed
by Company (including independent contractors, if any) with access to
confidential information to execute and deliver to Company a confidentiality
and non-disclosure agreement and assignment of inventions agreement in the
form attached hereto as Exhibit H (the "Proprietary Rights and
Confidentiality Agreement") pursuant to which such person agrees not to use
or disclose confidential and proprietary information of Company and assigns
to Company certain work product of that person.
3.6 Arbitration Agreement. Company, Foxworthy, Womick, Robert H. Bernstein
and J.P. Williams will enter into an Arbitration Agreement in the form
attached hereto as Exhibit I (the "Arbitration Agreement").
3.7 Consents and Approvals. Company shall use its best efforts to obtain
any and all consents from other parties, if any, required in connection with
the consummation of this Agreement and the transactions contemplated herein
and to obtain any and all permits or approval of any governmental body or
agency required by such party for the lawful consummation of this Agreement
and the other Transaction Documents.
3.8 Selection of Professionals. The parties agree that the Company will
retain Blanc Williams Johnston & Kronstadt to serve as outside legal counsel
to Company with respect to all legal matters and will retain Bernstein &
Bernstein to serve as outside accountants to Company with respect to all
financial matters. Any change by Company of its outside legal counsel or
accountants shall require the approval of the Board of Directors under
Section 4.2.
3.9 For so long as he remains a shareholder of Company, Foxworthy shall
have the right in his sole discretion to select the identity of the persons
or firms who will render professional services to Company, including without
limitation legal and accounting services.
3.10 Option to Acquire Franchises. For the first five (5) years after the
Investment Capital has been obtained by Company, Foxworthy shall have the
option to purchase from Company the franchise rights for up to ten (10)
Restaurants on terms that (i) provide for franchise fees and royalties that
are equal to fifty percent (50%) of the lowest franchise fees and royalties
payable by any other franchisee, and (ii) in all other respects are at least
as favorable as the most favorable terms offered by Company to any other
franchisee.
4. BOARD REPRESENTATION
4.1 Board Composition. After Company has acquired the Investment Capital
pursuant to Section 2, the composition of the Board of Directors of Company
shall be determined as provided in this Section 4.1.
(a) Number and Selection of Directors. The Board of Directors shall
consist of seven (7) directors. Foxworthy and Womick each agree to hold and
to vote all of their respective shares of (i) Preferred Stock, (ii) Common
Stock, and (iii) any voting shares of Company stock issued upon conversion of
the Preferred Stock (hereafter collectively referred to as the "Voting
Shares") to elect to the Board of Directors two (2) director nominees
selected by Foxworthy and four (4) director nominees selected by Womick. The
six directors so nominated shall upon their election appoint the seventh (7th)
member of Board of Directors.
(b) Removal of Directors. Foxworthy and Womick agree to vote all of the
Voting Shares held by them to remove (with or without cause) (i) any of the
directors selected by Foxworthy pursuant to this Section 4 upon instructions
in writing to such effect from Foxworthy, and (ii) any of the directors
selected by Womick pursuant to this Section 4 upon instructions in writing to
such effect from Womick.
(c) Initial Selections. The initial directors selected by Foxworthy shall
be Robert H. Bernstein and J.P. Williams. The initial directors to be chosen
by Womick shall be Womick, Eric Schmid, Jim Scheifly and Howard Branson.
(d) Changes in Size of Board. Company may, in its discretion, from time to
time, take the appropriate corporate measures to change the number of
directors comprising the Board of Directors. In the event of such a change,
the number of directors to be nominated by Foxworthy and Womick pursuant to
Section 4.1(a) shall be proportionately increased or decreased; provided,
however, that Foxworthy shall at all times be entitled to nominate and have
elected a number of directors constituting at least twenty-five percent (25%)
of the members of the Board of Directors.
(e) Termination. The provisions of this Section shall terminate and be of
no further force or effect upon the registration of the Common Stock of
Company under the Securities Exchange Act of 1934, or upon Company being
required to file reports with the SEC under Section 15(d) of such act.
4.2 Actions of Company Requiring Special Board Approval. Notwithstanding
anything to the contrary contained herein and notwithstanding the potential
ability of Company to take certain actions without first obtaining the
express authorization of the Board of Directors, Company shall not take any
material business action without first obtaining the approval of a majority
of the Board of Directors which majority must include at least one (1) of the
directors selected pursuant to Section 4.1 by Foxworthy. Without limiting
the generality of the foregoing, the actions of Company requiring such
approval shall include:
(a) The selection and quality of the types of foods and beverages to be
served in the Restaurants and the determination of menu pricing.
(b) The design, development and method of construction of Restaurant
buildings.
(c) The selection and any change in the name or names under which the
Restaurants will be operated and promoted.
(d) The selection, development and implementation of all advertising and
promotions concerning the Restaurants.
(e) The development and implementation of franchise plans and offerings.
(f) The issuance of any form of security of any class, whether equity or
debt, including stock options and warrants.
(g) The assumption of any loan, indebtedness or other borrowing.
(h) The establishment of any stock option or stock purchase plan.
(I) The determination of the exercise price of the options granted pursuant
to the Bernstein Employment Agreement and/or the Williams Consulting
Agreement.
(j) The termination by Company without cause of the Bernstein Employment
Agreement or the Williams Consulting Agreement.
(k) The acceptance of all business plans and budgets and any changes
thereto.
(l) The payment of any dividend or other distribution to the shareholders
of Company.
(m) The compensation of all officers and directors of Company.
(n) Any change in the identity of the outside legal counsel or outside
accountants of Company.
(o) Any merger, reorganization, recapitalization, dissolution or sale,
including a sale of substantially all the assets of Company.
(p) The introduction by Company of material new products, services or other
business outside of the scope of the planned business of Company and/or the
expansion of Company's expected geographical territories of operation.
(q) Any act that would make it impossible to carry on the ordinary business
of Company, including any act of insolvency and any assignment of the assets
of Company in trust for creditors or on the assignee's promise to pay the
debts of Company.
The commencement or settlement of any material litigation, tax audits or
other material adversarial proceedings. A proceeding shall be considered
"material" if the amount in issue exceeds Two Hundred Fifty Thousand Dollars
($250,000).
(s) Any transaction which would permit any person to possess or use Company
property for other than a Company purpose.
(t) The acquisition by Company of any asset or property having a fair
market value in excess of Two Hundred Fifty Thousand Dollars ($250,000).
Notwithstanding the foregoing, the Board of Directors may, in its discretion,
delegate an individual or a special committee to provide the approval
required by this Section 4.2; provided, however, that such individual, or the
members of a majority of such special committee must be approved in advance
by Foxworthy in his sole discretion. Furthermore, prior to the time the
composition of the Board of Directors is determined pursuant to the
provisions of Section 4.1, Company shall not take any action requiring
approval under this Section 4.2 without the prior approval of Foxworthy.
4.3 Interested Director Transactions. Company shall not enter into a
transaction with any member of the Board of Directors of Company (an
"Interested Director") or with any corporation, firm or association in which
an Interested Director has a material financial interest, without the prior
approval of a majority of the members of Company's Board of Directors,
excluding the vote of the Interested Director. Further, if the Interested
Director is Womick or if the transaction requires approval under Section 4.2,
such majority must include at least one (1) of the directors selected
pursuant to Section 4.1(a) by Foxworthy.
4.4 Amendment to Company Bylaws. Within a reasonable period of time
following the execution of this Agreement, the parties agree to take the
necessary corporate actions to amend the bylaws of Company to incorporate
therein the provisions of this Section 4.
5 CONDITIONS SUBSEQUENT TO FOXWORTHY'S OBLIGATIONS
5.1 Conditions. Foxworthy's obligations under this Agreement and the
Transaction Documents, including the License Agreement and the Promotion
Agreement are conditioned upon all of the following, which shall occur no
later than November 1, 1997:
(a) The successful fulfillment by Company and Womick of their obligation to
obtain the full amount of the Investment Capital pursuant to the provisions
of Section 2. The Investment Capital shall not be considered successfully
obtained until (i) all Investment Capital contributed as cash has been
actually deposited into the general corporate bank accounts of Company, and
(ii) full title to all Investment Capital contributed as property has been
transferred to Company and such title has been perfected.
(b) The reasonable satisfaction of Foxworthy that the Investment Capital
was solicited and obtained by Company and Womick in full compliance with all
applicable laws, including federal and state securities laws.
(c) The approval of Foxworthy, which shall not be unreasonably withheld, of
(i) the conceptual plan for the development of the Restaurants, (ii) the
types and quality of foods and beverages to be served in the Restaurants,
(iii) menu pricing, (iv) the design, development and method of construction
of Restaurant buildings, and (v) each then-planned use of his name and
likeness pursuant to the License Agreement.
5.2 Consequence of Failure to Satisfy Conditions. In the event that any
or all of the conditions specified in Section 5.1 have not been satisfied in
full by November 1, 1997, Foxworthy shall have the option, in his sole and
absolute discretion, to completely rescind the transactions contemplated by
this Agreement and the Transaction Documents. Foxworthy shall exercise such
option no later than December 31, 1997 by providing Company with written
notice of such exercise, together with all stock certificates representing
the Preferred Stock (or any stock issued upon conversion thereof) and
appropriate stock assignments. Upon delivery of such notice, certificates
and stock assignments, Foxworthy will have no further obligations of any kind
under this Agreement or under any of the Transaction Documents, all of which
agreements shall thereafter be of no further force or effect.
6. REPRESENTATIONS AND WARRANTIES OF COMPANY AND WOMICK.
6.1 Representations and Warranties of Company. Company represents and
warrants to Foxworthy as set forth in this Section 6.1.
(a) Organization. Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to carry on its business as it is now being
conducted and as it is contemplated to be conducted and to own all of its
assets. Company is duly qualified or licensed to do business in each
jurisdiction in which the nature of its business or properties makes such
qualification or licensing necessary except to the extent that any failures
to qualify or obtain a license are not in the aggregate materially adverse to
Company.
(b) Capitalization. The authorized capital stock of Company consists of:
(i) Twenty Million (20,000,000) shares of Common Stock, of which Five Million
One Hundred Thousand (5,100,000) shares are issued and outstanding, and Two
Million Five Hundred Thousand (2,500,000) shares of Preferred Stock, all of
which are currently designated as Series A Preferred. All outstanding Common
Stock has been validly issued under applicable federal and state securities
laws (with no violations) and no further registration, qualification or other
compliance under such securities laws is required. All of the outstanding
shares of Common Stock are validly issued, fully paid and nonassessable and
are not subject to preemptive rights created by statute, Company's
Certificate of Incorporation or Bylaws, or any agreement to which Company is
a party or is bound. Except as set forth above, Company does not have any
shares of its capital stock issued or outstanding and does not have any
outstanding subscriptions, options, warrants, rights or other agreements or
commitments obligating Company to issue or reserve shares of its capital
stock or other securities or equity.
(c) Authority Relative to this Agreement. 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.
(d) No Conflict. The execution and delivery of this Agreement by Company
and the performance of its obligations hereunder: (i) are not in violation
or breach of, and will not conflict with or constitute a default under, any
of the terms of the Certificate of Incorporation or Bylaws of Company or,
under any contract, license, franchise, permit, or order or decree; (ii) will
not result in the creation or imposition of any material lien, encumbrance,
equity or restriction in favor of any third party upon any of the assets or
properties of Company or on any of the capital stock of Company; and (iii)
will not conflict with or violate any applicable law, rule, regulation,
judgment, order or decree of any government, governmental instrumentality or
court having jurisdiction over Company or any of its assets or properties.
(e) Affiliates; Investments. Company has no subsidiaries or affiliated
companies and Company does not otherwise directly or indirectly control any
other entity and Company has no equity interest in any corporation,
partnership, joint venture, trust or other business entity.
(f) Compliance With Law. Company is and has been in material compliance
with all applicable laws, regulations and laws, the violation of which would
have a material adverse effect on the business, assets or property of
Company. All licenses, franchises, permits and other governmental
authorizations held by Company are valid in all material respects and
sufficient for the business presently carried on by Company, except where the
failure to hold such licenses, franchises, permits and authorizations would
not have a material adverse effect upon the business, assets or property of
Company.
6.2 Representations and Warranties of Company and Womick. Company and
Womick jointly and severally represent and warrant to Foxworthy as set forth
in this Section 6.2.
(a) Execution. This Agreement has been executed and delivered by Company
and Womick and each is the valid and binding obligation of each such party
enforceable in accordance with its respective 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.
(b) No Liabilities. Except for the legal fees of counsel for Company,
Womick and Foxworthy, involved in the formation of Company and the
preparation of this Agreement and the Transaction Documents, Company has no
liabilities, obligations or commitments of any nature (absolute, accrued,
contingent or otherwise, known or unknown, whether matured or unmatured,
including tax liabilities).
(c) Consents. Except as contemplated by this Agreement, no consent of any
person is required to be obtained on the part of Company or Womick to permit
the transactions contemplated herein. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality (a "Governmental Entity"), is required by or with respect to
Company or Womick in connection with the execution and delivery of this
Agreement by Company or the consummation by Company of the transactions
contemplated hereby.
(d) Litigation. There are no suits, actions or proceedings pending or
threatened against or affecting: (i) Company; (ii) Womick in any way related
to Company, its assets or business, or ownership of capital stock of Company;
or (iii) Company or Womick, which questions or challenges the validity or
performance of this Agreement. There is no judgment, decree, injunction,
rule or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Company. Company is not in
default under or in breach or violation of, nor, is there any valid basis for
any claim of default by Company under, or breach or violation by Company of,
any contract, commitment or restriction to which Company is a party or to
which it or any of its properties is bound. No other party is in default
under or in breach or violation of, nor is there any valid basis for any
claim of default by any other party under or any breach or violation by any
other party of, any material contract, commitment, or restriction to which
Company is bound or by which any of its properties is bound, where such
defaults, breaches, or violations would, in the aggregate, be materially
adverse to Company.
(e) Brokers or Finders. Company and Womick have not incurred, directly or
indirectly, any liability for any brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement, the
Transaction Documents, or any transaction contemplated hereby or thereby.
However, the parties acknowledge that it may be commercially prudent to pay a
reasonable brokerage or finders fees or agents' commissions in connection
with obtaining the Investment Capital.
(f) Disclosure. No statement by Company or Womick contained in this
Agreement and the Exhibits attached hereto, any other Transaction Document or
any written statement or certificate furnished or to be furnished pursuant
hereto or in connection with the transactions contemplated hereby and thereby
(when read together) contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances
under which they were made.
7. REPRESENTATIONS AND WARRANTIES OF FOXWORTHY
Foxworthy represents and warrants to Company as set forth in this Section 7.
7.1 Authority Relative to this Agreement. This Agreement and the other
Transaction Documents to which Foxworthy is a party have been duly executed
and delivered by Foxworthy, and each is a valid and binding obligations
enforceable in accordance with its respective 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.
7.2 Consents. Except as contemplated by this Agreement, no consent of any
person is required to be obtained on the part of Foxworthy to permit the
transactions contemplated herein and in the Transaction Documents. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to
Foxworthy in connection with the execution and delivery of this Agreement and
the Transaction Documents by Foxworthy or the consummation by Foxworthy of
the transactions contemplated hereby and thereby.
7.3 Investment Representations.
(a) The shares of Preferred Stock purchased by Foxworthy hereunder and the
shares of stock to be issued upon conversion of the Preferred Stock (the
"Securities") will be acquired for Foxworthy's own account, not as a nominee
or agent, and not with a view to the distribution of any part thereof.
(b) Foxworthy understands that the purchase of the Securities represents a
speculative investment, and is aware of and has investigated Company's
business, management and financial condition, and has had access to such
other information about Company as Foxworthy has deemed necessary or
desirable to reach an informed and knowledgeable decision to acquire the
Securities.
(c) Foxworthy understands that the Securities have not been registered
under the Securities Act of 1933 (the "Securities Act") by reason of reliance
upon certain exemptions therefrom, and that the reliance of Company on such
exemptions is predicated upon, among other things, the bona fide nature of
Foxworthy's investment intent as expressed herein.
(d) Foxworthy is experienced in evaluating and investing in securities of
companies in the development state and has made investments in securities
other than those of Company. Foxworthy is knowledgeable in business and
financial matters and is capable of evaluating the merits and risks of an
investment in Company. Foxworthy acknowledges that he has the ability to
bear the economic risk of his investment pursuant to this Agreement.
Foxworthy represents and warrants that he is an "accredited investor" as
defined in Rule 501(a) of the Securities Act.
(e) Foxworthy understands that the Securities being purchased hereunder are
restricted securities within the meaning of Rule 144 under the Securities
Act; that the Securities are not registered and must be held indefinitely
unless they are subsequently registered or an exemption from such
registration is available.
(f) Foxworthy represents and agrees that the sale of the Preferred Stock
was not accomplished by the publication of any advertisement or by any
general solicitation.
7.4 Disclosure. No statements by Foxworthy contained in this Agreement or
in any other Transaction Document or any written statement or certificate
furnished or to be furnished pursuant hereto or in connection with the
transactions contemplated hereby and thereby (when read together) contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
8. AFFIRMATIVE COVENANTS OF COMPANY.
8.1 Financial Statements and Budgets. Company, through its Chief Financial
Officer, shall deliver to Foxworthy the following:
(a) Within one hundred twenty (120) after the end of each fiscal year of
Company, a consolidated profit or loss statement for such fiscal year, a
consolidated balance sheet of Company as of the end of such year, and a
consolidated statement of changes in financial condition for such year
including sources and application of funds reviewed by independent public
accountants selected by Company;
(b) Within forty-five (45) days after the end of each of the first three
(3) quarters of the fiscal year, an unaudited consolidated profit or loss
statement for such fiscal quarter and an unaudited balance sheet as of the
end of such fiscal quarter which shall be certified to be true and correct by
the President and Treasurer of Company; and
(c) As soon as available, but in any event within sixty (60) days after
commencement of each new fiscal year, a business plan and projected financial
statements and for such fiscal year.
8.2 GAAP. All financial statements delivered by Company pursuant to
Section 8.1 above shall be prepared in accordance with generally accepted
accounting principles, consistently applied.
8.3 Inspection. Company shall permit Foxworthy to visit and inspect
Company's properties, to examine Company's books of account and records, and
to discuss Company's affairs, finances, and accounts with its officers, all
at such reasonable times as may be reasonably requested by such party.
8.4 Termination of Covenants. The covenants set forth in Sections 8.1, 8.2
and 8.3 shall terminate and be of no further force or effect upon the
registration of the Common Stock of Company under the Securities Exchange Act
of 1934, or upon Company being required to file reports with the SEC under
Section 15(d) of such act.
9. INDEMNIFICATION
9.1 Indemnity. Company agrees to indemnify, defend and hold harmless
Foxworthy to the fullest extent possible under applicable law from any and
all claims, suits and causes of action arising in connection with the
formation of Company. Company and Womick, jointly and severally, agree to
indemnify, defend and hold harmless Foxworthy to the fullest extent possible
under applicable law from any and all claims, suits and causes of action
arising in connection with the operation of Company and the raising of the
Investment Capital, including without limitation claims, suits and causes of
action arising in connection with Foxworthy's activities or obligations under
the License Agreement, the Promotion Agreement or any of the other
Transaction Documents.
9.2 Indemnification Procedure. Promptly after receipt by Foxworthy of
notice of the commencement of any action involving a claim referred to in
Section 9.1, Foxworthy will give written notice to the indemnifying party or
parties under Section 9.1 of the commencement of such action. If any such
action is brought against Foxworthy, the indemnifying party(ies) will be
entitled to participate in and to assume the defense thereof, with counsel
reasonably satisfactory to Foxworthy, and after notice from the indemnifying
party(ies) to Foxworthy of its or their election to assume the defense
thereof and to pay any and all costs relating thereto, the indemnifying
party(ies) shall not be responsible for any legal or other expenses
subsequently incurred by Foxworthy if Foxworthy engages separate counsel in
connection with the defense thereof; provided, however, that Foxworthy shall
have the right to retain his own counsel, with the reasonable fees and
expenses to be paid by the indemnifying party(ies), if Foxworthy shall have
reasonably concluded that representation of Foxworthy by the counsel retained
by the indemnifying party(ies) would be inappropriate due to actual or
potential differing interests between the indemnifying party(ies) and
Foxworthy in such proceeding.
9.3 D & O Insurance. For so long as Foxworthy continues to be the owner of
at least five percent (5%) of the overall equity of Company or continues to
be a shareholder, officer, director, employee or consultant of Company,
Company shall obtain and maintain in full force and effect a directors and
officers liability insurance policy (the "D & O Insurance") from established
and reputable insurers in an amount of at least Two Million Five Hundred
Thousand Dollars ($2,500,000) per occurrence; provided that such D & O
Insurance can be obtained by Company at commercially reasonable rates. Any
deductibles payable under the D & O Insurance shall be reasonable and subject
to the prior approval of Foxworthy, which approval shall not be unreasonably
withheld. Foxworthy shall be named as an insured under the D & O Insurance
in such as manner as to provide Foxworthy the same rights and benefits as are
accorded the most favorably insured of Company's officers and directors. The
existence of the D & O Insurance coverage will not in any way diminish or
limit Company's indemnification obligation to Foxworthy pursuant to Section
9.1; however, amounts paid to Foxworthy by the D & O Insurance carriers for
claims that are subject to indemnity under Section 9.1 shall be credited to
amounts payable by Company to Foxworthy thereunder.
10. MISCELLANEOUS PROVISIONS.
10.1 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.
10.2 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
10.3 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the
internal laws of the State of California applicable to the construction and
enforcement of contracts wholly executed and performed in California.
10.4 Arbitration. Any and all disputes arising hereunder shall be subject
to resolution by arbitration as provided in the Arbitration Agreement.
10.5 Attorney's Fees. If any party to this Agreement brings an action
against another party to enforce its rights under this Agreement, the
prevailing party shall be entitled to recover its reasonable costs and
expenses, including without limitation, reasonable attorney's fees and costs,
incurred in connection with such action, including any appeal of such action.
In the event that a party brings such an action against more than one of the
other parties to this Agreement, any attorneys' fees awarded against such
other parties shall be equitably apportioned among such other parties in
light of all of the facts and circumstances surrounding their involvement in
such action.
10.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.7 Headings. The headings of the Sections of this Agreement are inserted
for convenience only and shall not constitute a part hereof.
10.8 Entire Agreement. This Agreement, together with the other documents
referred to herein, embody the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein and
supersedes all prior written or oral communications or agreements (including
that certain non-binding letter of intent, dated January __, 1997) all of
which are merged herein. There are no restrictions, promises, warranties,
covenants, or undertakings relating to the subject matter hereof, other than
those expressly set forth or referred to herein.
10.9 Cumulative Remedies. No remedy provided herein is intended to be
exclusive of any other remedy, and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity.
10.10 Third Party Beneficiaries. It is not the intention of this Agreement
or of the parties hereto to confer a third party beneficiary status or right
of action upon any person or entity other than the parties hereto in any
manner whatsoever.
10.11 Severability of Provisions. In the event that any provision of this
agreement, or any portion thereof, is found invalid or unenforceable pursuant
to judicial decree or decision, the remainder of such provision and this
Agreement shall remain valid and enforceable according to its terms.
10.12 Section References. Any reference herein to a Section shall
constitute a reference to all subsections thereof.
10.13 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered, telecopied, sent by overnight courier or by certified
mailed postage prepaid to the appropriate addresses set forth in Exhibit J
hereto. The addresses to which notice is to be given hereunder may be
changed from time to time by the parties entitled to notice by notice given
as provided herein.
10.14 Compliance With Securities Laws. No transfer of any securities or
any interest therein shall be made, except in strict compliance with
applicable securities laws.
10.15 Gender. Where the context so requires, masculine gender shall
include feminine or neuter gender, and the neuter gender shall include the
masculine or feminine gender. Similarly, the singular shall include the
plural and the plural shall include the singular.
10.16 Approval Rights. Except for any and all rights of approval which
Foxworthy has under the License Agreement and the Promotion Agreement, the
parties agree that, with respect to any right of approval of any party under
the Transaction Documents, (i) approval shall not be unreasonably withheld,
and (ii) any item or action subject to approval that has not been
affirmatively disapproved within thirty (30) days of receipt of a written
request for approval shall be deemed approved. With respect to all rights of
approval of Foxworthy under the License Agreement and the Promotion
Agreement, (i) Foxworthy may grant or withhold such approval in his sole and
absolute discretion for any reason (whether or not reasonable), and (ii) any
item or action subject to approval that has not been affirmatively approved
within thirty (30) days of receipt of a written request for approval shall be
deemed not approved. It is intended that the provisions of this Section
10.15 shall apply to all rights of approval refusal contained in the
Transaction Documents irrespective of how such rights are described or
drafted in such documents, and, accordingly, to the extent that the
provisions of this Section 10.15 are in any way inconsistent with any
description of a right of approval in any Transaction Document, the
provisions of this Section 10.15 shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day first above written.
REDNECK FOODS, INC., a Delaware corporation
By: _________________________
David Womick, _________________
JEFF FOXWORTHY
Addresses for Notices
Redneck Foods, Inc.
7 Stuyvesant Road
Ashville, North Carolina 28803
Attention: David Womick
Facsimile: (704) 277-4002
Mr. David Womick
7 Stuyvesant Road
Ashville, North Carolina 28803
Facsimile: (704) 277-4002
Jeff Foxworthy
c/o J.P. Williams
Parallel Entertainment
8380 Melrose Avenue, Suite 310
Los Angeles, CA 90068
Facsimile: (213) 653-2676
PROMOTION AGREEMENT
THIS PROMOTION AGREEMENT (this "Agreement"), dated as of February 4, 1997, is
entered into by and between REDNECK FOODS, INC., a Delaware corporation
("Company"), and JEFF FOXWORTHY, an individual ("Foxworthy") with reference
to the following:
Simultaneously with the execution and delivery of this Agreement, (i)
Company, Foxworthy and David Womick ("Womick") are entering into a Series A
Convertible Preferred Stock Purchase Agreement (the "Stock Purchase
Agreement") providing for, among other things, the acquisition by Foxworthy
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.
As partial consideration for the Preferred Stock purchased pursuant to the
Stock Purchase Agreement, Foxworthy desires to provide Company with certain
promotional appearances and services 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 given to them in the Stock Purchase Agreement.
2. PROMOTIONAL SERVICES.
2.1. Promotional Commercials.
(a) Agreement to Perform. During the Term (as defined in Section 3),
Foxworthy agrees to serve, without charge, but subject to applicable union
and guild minimums, as the feature actor in four (4) commercials per year
promoting the Restaurants and the Franchise. Each such commercial shall be
no longer than sixty (60) seconds in length and shall be produced in no more
than two (2) variations. The commercials may be aired on local or national
television or radio, or both.
(b) Consultation and Approval Rights. Company shall consult with Foxworthy
with respect to the nature, content (including all audio and visual elements)
and use of any commercial proposed by Company, and Foxworthy shall have the
right to approve in his sole and absolute discretion such nature, content and
use. If Foxworthy approves a use, such approvals as to use shall, where
practicable, be made with a general description of approved uses. Further,
Foxworthy shall have the right, in his sole and absolute discretion, to
decline to perform in any commercial proposed by Company if he reasonably
believes that the content of such commercial would be detrimental to the
value of the Licensed Material (as defined in the License Agreement) or to
his image or reputation. In addition, Company shall not broadcast a
completed commercial until such commercial has been submitted to Foxworthy
for his review and Foxworthy has in his sole and absolute discretion approved
the completed form of the commercial and the intended broadcast forum. A
commercial shall not count as one of the four (4) commercials per year
required of Foxworthy under Section 2.1(a) unless such commercial is actually
broadcast.
(c) Scheduling and Expenses. Company shall provide Foxworthy with at least
ninety (90) days advance notice of scheduling of proposed commercials, and
such scheduling shall be subject to Foxworthy's professional availability.
All expenses associated with the production of the commercials, including the
first-class travel, hotel and incidental expenses of Foxworthy and one
companion, and the purchasing of commercial air time shall be paid by
Company.
2.2. Appearance at Annual Franchise Meeting. Each year during the Term,
Foxworthy agrees, subject to Foxworthy's professional availability, to appear
and give a short promotional speech at the annual meeting hosted by Company
for all franchisees of the Franchise. All expenses associated with
Foxworthy's appearance at such meeting, including the first-class travel,
hotel and incidental expenses of Foxworthy and one companion, shall be paid
by Company.
2.3. Additional Promotional Activities. From time to time during the Term,
Company may request that Foxworthy provide other promotional services for the
Restaurants in addition to those set forth herein. Foxworthy may decline or
accept these requests in his sole and absolute discretion.
3. TERM AND TERMINATION. The term of this agreement (the "Term") shall be
five (5) years beginning with the opening of the first Restaurant 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, which breach has not been
cured within thirty (30) days of receipt from Foxworthy of written notice
thereof;
(b) At the option of Foxworthy, upon a material breach by David Womick of
his obligations under the Womick 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 Foxworthy of written notice
thereof;
(c) Upon receipt of written notice from Foxworthy if, as the result of (i)
any act or omission of Company, (ii) any claim or charge against Company or
(iii) any other occurrence or circumstances involving Company, the continued
association of Foxworthy with Company would be detrimental to the value of
the Licensed Material or to Foxworthy's image or reputation;
(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 Womick 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.
4. NO COMPETITIVE PROMOTIONS. During the Term, Foxworthy shall not
directly or indirectly (whether for compensation or otherwise), provide
promotional appearances or services to any business which competes with
Employer's business of owning and managing restaurants that feature barbecue
style as their primary cuisine and marketing and selling barbecue-related
food products. The foregoing restriction will not prevent Foxworthy from
providing other promotional activities and services, including providing such
activities and services for restaurants that do not feature barbecue style as
their primary cuisine and food products other than barbecue-related food
products. Furthermore, the foregoing restriction will not apply after
January 1, 1999 unless there are at least five (5) Restaurants open for
business as of such date, and will not apply after January 1, 2000 unless
there are at least ten (10) Restaurants open for business as of such date.
For purposes of the foregoing, any Restaurant that has been opened for
business either by Company or by any of its franchisees and is operating as
of such date will be considered "open for business."
5. REPRESENTATIONS AND WARRANTIES.
5.1. Representations and Warranties of Company. Company represents and
warrants to Foxworthy 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.
5.2. Representations of Foxworthy. Foxworthy represents and warrants to
Company as follows:
(a) Foxworthy 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) Foxworthy 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.
6. INDEMNIFICATION.
6.1. Indemnification Obligation. Company shall indemnify, defend and hold
harmless Foxworthy from and against any and all claims arising out of or in
connection with Foxworthy's appearance in commercials and performance of
other promotional activities in accordance with this Agreement.
6.2. Indemnification Procedure. Promptly after receipt by Foxworthy of
notice of the commencement of any action involving a claim referred to in
Section 6.1, Foxworthy will give written notice to Company of the
commencement of such action. If any such action is brought against
Foxworthy, Company will be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to Foxworthy, and after
notice from Company to Foxworthy 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
Foxworthy if Foxworthy engages separate counsel in connection with the
defense thereof; provided, however, that Foxworthy shall have the right to
retain his own counsel, with the reasonable fees and expenses to be paid by
Company, if Foxworthy shall have reasonably concluded that representation of
Foxworthy by the counsel retained by Company would be inappropriate due to
actual or potential differing interests between Company and Foxworthy in such
proceeding.
7. MISCELLANEOUS.
7.1. Effectiveness of Agreement. This Agreement shall become effective on
and as of the date of execution of the Stock Purchase Agreement.
7.2. Successors and Assigns. This Agreement shall bind and inure to the
benefit of Company and Foxworthy and their respective successors, permitted
assigns, heirs and legal representatives (as the case may be) of Company and
Foxworthy.
7.3. Further Assurances. The parties shall duly acknowledge, execute,
deliver, and/or procure the due execution and delivery of any and all further
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.
7.4. Assignment. Company may not assign its rights under this Agreement to
any purchaser or transferee without the prior written consent of Foxworthy.
7.5. 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.
7.6. 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 Foxworthy.
7.7. 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.
7.8. 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.
7.9. 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.
7.10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
7.11. 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 Promotion Agreement
to be executed and delivered as of the date first above written.
REDNECK FOODS, INC.,
a Delaware corporation
By
JEFF FOXWORTHY
Title: ________________________
Blanc Williams Johnston & Kronstadt, LLP
Attorneys at Law
A registered limited partnership
Including professional corporations
1900 Avenue of the Stars
17th Floor
Los Angeles, California 90067-4403
Telephone (310) 552-2500
Fax (310)552-1191
Direct Line: (310) 788-8253
February 26, 1998
VIA FACSIMILE
E. Joseph Fitzpatrick, Esq.
Redneck Foods, Inc.
1796 Hendersonville Road
Asheville, NC 28803
Re: Extension of Time for Termination Rights
Dear Joe:
As you know, pursuant to the terms of the Series A Convertible Preferred Stock
Purchase Agreement (the "SPA") entered into as of February 4, 1997 by and among
Redneck Foods, Inc. ("Redneck", David Womick ("Womick") and Jeff Foxworthy
("Foxworthy"), Foxworthy was granted the right to terminate his obligations
under the SPA and the other "Transaction Documents" (as defined in the SPA),
including without limitation, the License Agreement and the Promotion Agreement,
if Redneck and Womick were unable by November 1, 1997 to fulfill their
obligations to obtain the full amount of the "Investment Capital" as required by
Section 2 of the SPA (the "Capital Commitment"). By prior agreement of
Foxworthy, the date to fulfill the Capital Commitment was extended to March 1,
1998.
The purpose of this letter is to confirm that Foxworthy will further extend the
date for fulfillment of the Capital Commitment until the end of the day on June
30, 1998, if the following conditions are agreed to and performed:
1.. Redneck promptly issues to Jay Foxworthy an option to acquire 100,000
shares of the Common Stock of Redneck at 85% of the current market value of the
stock determined as of the date of this letter, which option will be fully
exercisable and vested upon issuance, be fully transferable, and be exercisable
at any time in whole or in part, from time to time, until December 31, 2007.
b. Redneck promptly contributes a total of 75,000 shares of Common Stock to the
following charities:
1.. 50,000 shares to the Duke Children's Hospital
2.. 20,000 shares to the Diabetes Research Institute; and
3.. 5,000 shares to Children of the Night.
In addition to the foregoing,. Redneck has previously agreed to issue certain
options and/or stock to J.P. Williams and Samuel Fox. The terms of these
arrangements have not been fully documented. As further conditions to
Foxworthy's agreement to extend the date of the fulfillment the Capital
Commitment as set forth above, Redneck must agree to the following clarification
and finalization of the terms of the options as follow:
1.. J.P. Williams has previously, in July of 1997, been granted an option
for 540,000 shares of Redneck Common Stock at an exercise price of $.50 per
share. The option is fully exercisable and vested as of the date hereof, is
fully transferable and will be exercisable at any time, in whole or in part,
from time to time, until December 31, 2007. Please note that Mr. Williams would
like this option to be transferred to the Williams Family Trust.
2.. Samuel Fox has been granted an option to acquire 200,000 shares of
Redneck Common Stock at an exercise price equal to 85% of the fair market value
of the stock as of the date of this letter. The option is fully exercisable at
any time, in whole or in part, from time to time, until December 31, 2007.
Additionally, at such time, if any, as he exercises the foregoing options, Mr.
Fox will be granted a credit against the exercise price of the option, which
will be earned a the rate of $75,000 per year, pro rated monthly from January 1,
1998, up to a maximum credit of $225,000. The credit will be earned on a monthly
basis, as long as Mr. Fox remains ready, willing and able to serve as a director
of Redneck, and if elected, does so serve.
If Redneck agrees to the foregoing, please arrange for copy of this letter to be
executed by David Womick on behalf of Redneck. Upon such execution, Foxworthy's
agreement to extend the date for fulfillment of the Capital Commitment to June
30, 1998 shall be effective. Please note, however that we would like to have
each of the foregoing matters more formally documented as soon as practical
after the date of this letter.
Very truly yours,
Gary A. David
Cc: Samuel J. Fox
J.P. Williams
Agreed to by Redneck Foods, Inc.
By Dated:
David Womick, President
WILLIAMS CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into as of
February 4, 1997, by and between Redneck Foods, Inc., a Delaware corporation
("Company") and J.P. Williams, an individual ("Consultant") with reference to
the following: Simultaneously with the execution and delivery of this
Agreement, (i) Company is entering into a Series A Convertible Preferred
Stock Purchase Agreement (the "Stock Purchase Agreement") with David Womick
and Jeff Foxworthy providing for, among other things, the acquisition by Jeff
Foxworthy 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.
Subject to and in compliance with the execution of the Stock Purchase
Agreement, Company and Consultant desire to enter into this Agreement as
provided herein.
NOW, THEREFORE, in consideration of the mutual premises and covenants set forth
herein, the parties hereto agree as follows:
1. Definitions. All capitalized terms used but not otherwise defined
herein shall have the meanings given to them in the Stock Purchase Agreement.
2. Engagement and Term. Consultant has agreed to be engaged by Company,
and Company has agreed to engage Consultant for a term commencing as of the
date Company completes its acquisition of the Investment Capital and
continuing until at least the third anniversary of the opening of the first
Restaurant, unless sooner terminated pursuant to Section 5 hereof (the
"Consulting Term").
3. Duties. Consultant's primary duties and responsibilities hereunder
shall be to provide Company with consulting advice and services with respect
to the promotion and merchandising of the Restaurants and the Licensed
Products. Consultant shall work out of his offices in Los Angeles,
California and devote as much time as he deems necessary in good faith to
fulfill his obligation hereunder, not to exceed ten (10) hours per month. If
the obligations of Consultant hereunder require more than ten (10) hours per
month, an appropriate, equitable and mutually acceptable adjustment will be
made to the compensation payable to Consultant pursuant to Section 4(a).
Consultant shall provide the services required hereunder subject to the
control and direction of the Board of Directors of Company (the "Board of
Directors") which may from time to time make reasonable changes in
Consultant's duties. Consultant shall be free to pursue any other employment
or ventures during the Consulting Term so long as such other employment or
ventures do not unreasonably interfere with the provision of services by
Consultant to Company hereunder.
4. Compensation.
(a) Base Fee and Bonus. During the Consulting Term, Company hereby agrees
to pay Consultant an annual consulting fee of Ten Thousand Dollars ($10,000)
(the "Base Fee"). In addition to the Base Fee, Consultant may be entitled to
a potential bonus (the "Bonus") the amount of which, if any, shall be
determined by the Board of Directors in its sole and absolute discretion.
(b) Stock Option. In addition to the Base Fee and Bonus, Company hereby
agrees to grant to Consultant options to acquire shares of equity stock of
Company that shall constitute five percent (5%) of the overall equity of
Company as of the date Company completes its acquisition of the Investment
Capital. Consultant's interest in such options shall vest in equal monthly
installments on the first day of each month over the three (3) year
Consulting Term. All options remaining unvested shall vest immediately upon
a Change in Control of Company (as defined in the Stock Purchase Agreement)
or upon a termination of this Agreement by Company without Cause (as defined
in Section 6). If this Agreement terminates prior to the expiration of the
Consulting Term for any other reason, any options remaining unvested as of
the termination date shall expire and Consultant shall have no further
interest therein. After vesting, the options may be exercised by Consultant
in whole or in part at any time for a period of ten (10) years from the date
they are granted. Options that are not exercised within such ten (10) year
period shall expire. The option exercise price shall equal the fair market
value of the shares of equity stock to be received upon exercise of the
options as determined by the Board of Directors of Company pursuant to
Section 4.2 of the Stock Purchase Agreement.
(c) Expenses. In addition to all other compensation provided hereunder,
Consultant shall be entitled to reimbursement for all pre-approved travel and
other expenses necessary for the performance of his duties hereunder, all in
accordance with Company's standard policies and procedures as they may exist
from time to time. All claims for expenses shall be reasonable and
documented in accordance with Company's standard policies and procedures with
respect thereto.
(d) Payment. The payment of the Base Fee and Bonus and any expense
reimbursements shall be according to Company's standard policies and
procedures.
5. Termination
(a) Termination With or Without Cause. Upon written notice to Consultant,
Company shall be entitled to terminate the Consulting Term at any time with
or without Cause. "Cause" with respect to Consultant shall mean (i)
conviction of Consultant of any felony involving moral turpitude or otherwise
affecting or relating to the business of Company (including, without
limitation, his entering of any plea of nolo contendere in connection with
any such felony proceeding); (ii) Consultant's grossly negligent, willful or
intentional conduct resulting in material damage to Company or Company's
business reputation or image; (iii) Consultant's material breach of any
material provisions of this Agreement; (iv) Consultant's willful failure or
gross neglect to abide by the good faith decisions of the Board of Directors;
or (v) the good faith determination of the Board of Directors that Consultant
is performing his duties in a manner which is not commensurate with
reasonable standards for consultants in similar circumstances and with
similar duties to those of Consultant hereunder ("Substandard Performance");
provided that Consultant may not be terminated for Substandard Performance
unless and until (A) the Board of Directors has provided Consultant with
notice of Substandard Performance, which notice specifies with particularity
the areas of such Substandard Performance, (B) Consultant is given at least
thirty (30) days (the "Cure Period") to improve his performance in the
specified areas, and (C) the Board of Directors determines in good faith
after the Cure Period that Consultant is still providing Substandard
Performance in the specified areas.
(b) Death or Disability. This Agreement shall automatically terminate,
without notice, upon the death or permanent disability of Consultant. For
purposes of this Section 5(b), Consultant shall be deemed to be permanently
disabled if he shall be unable, due to illness or injury, to perform his
duties hereunder for eighty percent (80%) or more of the full regular
business days during any two (2) consecutive month period. Consultant shall
be deemed to be permanently disabled on the last day of such two (2) month
period. Consultant shall not be entitled to the Base Fee or Bonus during any
period of disability unless otherwise provided by Company's standard
practices.
6. Relationship of Consultant and Company. Nothing contained in this
Agreement shall be construed as creating a joint venture, partnership or
employment relationship between Consultant and Company nor shall either party
have the right, power or authority to create any obligation or duty, express
or implied, on behalf of the other party. Consultant acknowledges and agrees
that as an independent contractor, Consultant shall be solely responsible for
payment of any and all taxes, worker's compensation, unemployment insurance
and similar taxes or fees required to be paid in conjunction with any
services rendered by Consultant or any of Consultant's consultants hereunder.
7. Proprietary Rights and Confidential Information.
(a) Ownership of Inventions. Consultant agrees that any and all inventions
or original works of authorship in whole or in part conceived or made by
Consultant during the performance of Consultant's duties and responsibilities
to Company hereunder which relate to Company's business or Company's actual
or demonstrably anticipated research and development or which are made
through the use of any of Company's confidential information, equipment,
facilities, supplies, trade secrets or time, or which result from any work
performed by Consultant for Company, shall belong exclusively to Company
whether or not fixed in a tangible medium of expression. Without limiting
the foregoing, Consultant agrees that any such original works of authorship
shall be deemed to be "works made for hire" and that Company shall be deemed
the author thereof under the U.S. Copyright Act (Title 17 of the U.S. Code),
provided that in the event and to the extent such works are determined not to
constitute "works made for hire" as a matter of law, Consultant hereby
irrevocably assigns and transfers to Company all right, title and interest in
and to such works of authorship, including but not limited to copyrights.
Consultant agrees to execute any and all documents required to assign to
Company all of the rights described in this Section and to cooperate with
Company in securing for Company any available protection for any such
inventions, ideas and original works of authorship, including without
limitation patents and copyrights. To the extent that Section 2870 of the
California Labor Code is deemed to apply to the relationship between
Consultant and Company notwithstanding that Consultant is not an employee of
Company, this agreement shall be construed in accordance with the provisions
of Section 2870.
(b) Confidential Information. Consultant shall, if requested by Company,
execute and comply with a standard confidentiality and non-disclosure
agreement pursuant to which Consultant agrees to protect and keep in
confidence all proprietary and confidential information of Company.
8. Miscellaneous.
(a) Notices. All notices and other communications pursuant to this
Agreement shall be made in accordance with the Stock Purchase Agreement. The
address to be used for Company shall be as set forth in the Stock Purchase
Agreement. The address to be used for Consultant shall be:
J.P. Williams
8380 Melrose Avenue
Suite 310
Los Angeles, California 90069
(b) Applicable Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the
internal laws of the State of California applicable to the construction and
enforcement of contracts wholly executed in California by residents of
California and wholly performed in California.
(c) Captions. The section headings and captions contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(d) Severability. If any provision of this Agreement shall be unlawful,
void, or for any reason, unenforceable, it shall be deemed stricken from, and
shall in no way affect the validity or enforceability of, the remaining
provisions of this Agreement. If any provision of this Agreement shall be
determined, under applicable law, to be overly broad in duration,
geographical coverage or substantive scope, such provision shall be deemed
narrowed to the broadest term permitted by applicable law.
(e) Waiver. The waiver by either party hereto of a breach of any provision
of this Agreement by the other shall not operate or be construed as a waiver
of any subsequent breach of the same provision or any other provision of this
Agreement.
(f) Entire Agreement. This Agreement represents the entire agreement and
understanding between the parties hereto regarding the provision by
Consultant of consulting services to Company, and supersedes any and all
previous written or oral agreements or discussions between the parties and
any other person or legal entity concerning said employment.
(g) Binding Agreement. The rights and obligations of the parties under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of such parties. Subject to Consultant's reasonable
consent, Company may assign all or part of its rights hereunder to any
subsidiary or parent company of Company, in which case the services of
Consultant hereunder shall be rendered to such assignee. Notwithstanding the
foregoing, Company may assign its rights hereunder to a wholly owned
subsidiary without Consultant's consent.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(I) Amendments. This Agreement shall not be modified, amended, or in any
way altered except by an instrument in writing and signed by both of the
parties hereto.
(j) Arbitration. Any and all disputes arising hereunder shall be subject
to resolution by arbitration as provided in the Arbitration Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Consulting Agreement as
of the date first written above.
COMPANY: CONSULTANT:
REDNECK FOODS, INC.,
a Delaware corporation
J.P. WILLIAMS
By: _________________________
David Womick,
President
CONSULTING AGREEMENT
This Consulting Agreement is entered into between Timothy Miles DBA Little
Pond Enterprises (LPE) and Redneck Foods, Inc. (Client), (the "Agreement")
with reference to the following facts.
Client has expressed a desire to enter into this Agreement with LPE for LPE
to provide consulting services through which Client will become a publicly
traded company (the "Services"). LPE is in the business of providing such
services and desires to enter into an Agreement with Client to provide such
"Services". This Agreement is for the purpose of defining the services
provided and the rights and responsibilities of both parties.
1. SERVICES PROVIDED BY LPE.
1. LPE will recommend a structure for Client's entry into the public market.
This structure will be approved by Client. The structure will include
distribution to shareholders, creditors, and other parties and will include
agreed upon capital formation requirements of Client.
2. LPE will interact with Clients attorney for the preparation of a 504 or
similar offering prospectus. If requested, LPE will use its expertise and
contacts to locate a suitable securities attorney to represent client.
3. LPE will, if requested, arrange to be provided, such accounting services
as necessary to complete audits of Client's books in order to proceed with
the preparation and filing of the registration.
4. LPE will locate, if appropriate, suitable individuals to serve as
directors of Clients company. These directors will have relevant experience
either to Clients industry, accounting or public markets to encourage market
support for Clients stock.
5. LPE will interact with Clients securities attorney for the preparation
and filing of a Registration Statement on Form SB2 with the Securities and
Exchange Commission (SEC). Securities to be registered in said registration
include the stock issued to LPE, and other such stock as agreed upon by both
parties.
6. LPE will use its contacts and expertise to locate a suitable investor
relations firm to represent client and will interact with the firm to cause
to be prepared such packaging and promotional materials as LPE, the investor
relations firm and Client deem necessary.
7. LPE will prepare a form 15c2-11 and coordinate its distribution to the
brokerage community at its own expense for the purpose of establishing a
market for the stock and arrange a listing on the Over the Counter Market.
8. LPE agrees to use its expertise and business contacts to locate a
suitable broker relations firm to represent Client. LPE will interact with
the broker relations firm for the purpose of developing market support and/or
an underwriter for the Client's offering.
9. LPE agrees interact with the Client's investor relations firm to assure
the continued promotion of Client's stock. This promotion will be evidenced
by the implementation of a financial relations program created by the IR firm
in conjunction with LPE and Client.
10. LPE agrees to arrange for the inclusion of the Company in Moody's company
listing services or another comparable service for the purpose of expanding
the marketability of the stock. LPE will obtain the application for the
Client and assist the Client in preparing the applications..
11. LPE agrees to provide consulting services on an as needed basis to Client
for a period of 1 year from this Agreement. LPE and will make itself
available to render advice to Client concerning but not limited to
shareholder relations, market strategy, broker relations and additional
capitalization and any other subjects as may fall under the services provided
within this contract.
2. RESPONSIBILITIES OF CLIENT
1. Client agrees to provide LPE such financial, business and other material
and information about Client, its products, services, contracts, litigation,
patents, trademarks and other such business matters which LPE may request and
which LPE considers to be important and material information for the
completion of this contract.
2. Client agrees to provide LPE and/or Client's attorneys and accountants
all material requested in order to prepare the registration documents. These
materials include but are not limited to: articles of incorporation and all
amendments thereto, by laws of the corporation, its minutes and resolutions
of all shareholders and board of directors meetings, a copy of the share
register showing the names, addresses and social security number of
shareholders and the dates of issuance and the numbers of shares owned by
each shareholder, the names and addresses of all officers and directors of
the corporation, a resume for each officer and director of the corporation
and audited financial statements providing balance sheets for the two
previous years and Statement of Operations for the three previous years.
3. Client agrees to provide LPE with monthly financial statements containing
Balance Sheets and Profit and Loss statements utilizing "GAP" accounting
until the effective date of the registration and the Client also agrees to
notify LPE of any changes in the status or nature of its business, any
litigation, or any other developments that may require further disclosure in
the registration or other documents.
3. CASH COMPENSATION
LPE will receive a total fee of $70,000 for the above services rendered. Fee
does not include any preapproved expenses incurred by LPE. The cash portion
of the fees are only to be paid from the proceeds of the offering.
4. CONVERSION TO EQUITY
LPE may at its option and prior to filing the 504 memorandum, elect to
convert up to $50,000 of its fees into common stock of Client. The conversion
rate shall be at $.10 per share (500,000) shares and the shares will be
issued pursuant to the 504.
5. REPRESENTATIONS BY LPE
LPE represents warrants and covenants the following:
1. LPE will disclose to Client all material facts and circumstances which
may affect its ability to perform its undertaking herein.
2. LPE will cooperate in a prompt and professional manner with Client, its
attorneys, accountants and agents in the performance of this Agreement.
6. REPRESENTATIONS OF CLIENT
Client represents warrants and covenants the following:
1. Corporation will cooperate fully with LPE in executing the
responsibilities required under this contract so that LPE may fulfill its
responsibilities in a timely manner.
2. Client will not circumvent this Agreement either directly or indirectly
nor will it interfere with, impair, delay or cause LPE to perform work not
described in this Agreement.
3. Client and each of its subsidiaries is a corporation duly organized and
existing under the laws of its state of incorporation and is in good standing
with the jurisdiction of its incorporation in each state where it is required
to be qualified to do business.
4. Client's articles of incorporation and bylaws delivered pursuant to this
Agreement are true and complete copies of same and have been duly adopted.
5. Client will cooperate in a prompt and professional manner with LPE, its
attorneys, accountants and agents during the performance of the obligations
due under this Agreement.
6. Client represents that no person has acted as a finder or investment
advisor in connection with the transactions contemplated in this letter other
than those listed on Exhibit A, and Client will indemnify LPE with respect to
any claim for a finders fee in connection with this Agreement. Client
represents that no officer, director or stockholder of the company is a
member of the NASD, an employee or associated member of the NASD, or an
employee or associated person or member of the NASD. Client represents that
is separately has disclosed to LPE all potential conflicts of interest
involving officers, directors, principal stockholders and/or employees.
7. CONFIDENTIALITY
LPE agrees that all information received from Client shall be treated as
confidential information and LPE shall not share such information with any
other person or entity, except the SEC, attorneys and accountants, without
the express written consent of Client, unless such disclosure clearly will
not cause damages to Client.
Client agrees not to divulge each and any named source (lending,
institutions, investors, individuals, Brokers, etc.) which have been
introduced by LPE for a period of one year from the execution of this
Agreement. Furthermore, Client agrees not to circumvent, either directly or
indirectly, the relationship that each LPE has with said sources.
8. NOTICES
Any notices from either party to the other shall be deemed received on the
date such notice is personally delivered. Any notice sent by fax transmission
shall be deemed received by the other party on the day it has been
transmitted. Any notice sent by mail by either party to the other shall be
deemed received on the third business day after is has been deposited at a
United States Post Office. For purposes of delivering or sending notice to
the parties to this Agreement such notices shall be delivered or sent as
follows:
If notice is delivered to LPE. If notice is to be delivered to Client
Little Pond Enterprises Redneck Foods, Inc..
Carolina Bldg. Suite 222 PO Box 5495.
10 Office Park Rd. Asheville
PO Box 7571 North Carolina, 28813
Hilton Head Island, SC 29938 Phone # 704-277-5577
Phone 803-686-5590 Fax # 704-277-5054
Fax # 803-686-5595
9. ENTIRE AGREEMENT
Neither party has made any representations to the other which are not
specifically set forth in this Agreement. There are no oral or other
agreements between the parties which have been entered into prior or
contemporaneously with the formation of this Agreement. All oral promises,
agreements, representations, statements and warranties hereinafter asserted
by one party against the other shall be deemed to have been waived by such
party asserting that they were made and this Agreement shall supersede all
prior negotiations, statements representations, warranties and agreements
made or entered into between the parties to this Agreement.
10. NO ASSIGNMENT
Neither party may assign any benefit due or delegate performance under this
Agreement without the express written consent of the other party.
11. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws
of the State of South Carolina. It shall also be construed as if the parties
participated equally in its negotiation and drafting. The Agreement shall not
be construed against one party over another party.
Should a dispute arise, both parties agree to submit to binding arbitration
under the guidelines of the American Arbitration Association or some other
mutually agreeable Arbitration Association.
12. WAIVER
The waiver of any provision of this Agreement by either party shall not de
deemed to be a continuing waiver or a waiver of any other provision of this
Agreement by either party.
13. SEVERABILITY
If any provision of this Agreement or any subsequent modifications hereof are
found to be unenforceable by a court of competent jurisdiction, the remaining
provisions shall continue to remain in full force and effect.
14. AUTHORITY TO ENTER INTO AGREEMENT
The individuals signing this Agreement below represent to each other that
they have the authority to bind their respective corporations to the terms
and conditions of this Agreement. The individuals shall not, however have
personal liability by executing this Agreement and sign this Agreement only
in their representative capacities as authorized officers of the Client and
LPE respectively.
Dated this ___ of June, 1997 Dated this ____ of June, 1997
Little Pond Enterprises. Redneck Foods, Inc..
by by
Timothy Miles David A. Womick, President
EXHIBIT A
The following individual has acted as a finder in relation to this agreement
and as such is being compensated by LPE as follows:
Erich Schmid 200,000 shares as defined in Section 4 of the
Agreement. If LPE fails to exercise its option to
convert cash fees to equity, Erich shall receive
$20,000 cash and will be granted the same rights
as in Section 4 of this agreement.
EXHIBIT B
Redneck Foods, Inc. and LPE will mutually agree upon the following
reorganization plan. Alternate reorganization structures may also be chosen
with the approval of both parties.
Redneck Foods, Inc. will reorganize its corporate structure as follows:
Redneck Foods, Inc. will authorize the issuance of 100,000,000 of common
stock and adjust the total issued and outstanding to provide all current
shareholders with 5,100,000 common shares plus Foxworthy Preferred shares.
The Board of Directors will then approve the following:
The issuance of 900,000 shares of common stock at a price of $1.00 per share
pursuant to a Reg D 504 offering memorandum
The issuance of additional shares as necessary for directors, employees and
service providers as determined by Redneck Foods.
EXPENSES
The below listed expenses are fees Client can expect to pay to proceed
through the process of going public and establishing a market for their
stock. Fees with asterisks are optional fees which may be necessary.
Attorneys Fees $20,000 (("504"=$5,000 SB2= $15,000)
Filing Fees (SB) $1/29th of 1% of stock to be registered
Commissions (if applicable) n/a
Auditor $5000+
Moody's Listing $3,500+- (S&P is considerably more)
Transfer Agent $1,500+- plus $200 per month
Additional one time Financial Relations* $75,000
Standard Financial and Market Relations 500,000 shares of common stock
agreement
Directors & Officers Insurance** $15,000 annually
*Financial Relations expenses depend upon a number of factors. The
fundamentals provided and the excitement surrounding the company will affect
the amount of capital necessary to invest in financial relations. The
suggested amount implies no underwriter is utilized.
**Directors and Officers Insurance is optional only if officers provided by
client are sufficient and LPE does not provide directors through referral
Directors and Officers may elect to waive the requirement.
AGREEMENT BETWEEN
REDNECK FOODS. INC. & PIGS "R" US
This Agreement, made this 9th day of October 1997, by and between
Redneck Foods. Inc. ("Redneck") and Pigs "R" Us Inc. ("Pigs").
RECITALS
A. Redneck is a newly formed Delaware corporation, principally
located in North Carolina, formed for the purpose of creating
barbecue restaurants and related food products.
B. Redneck has certain license rights to the name and likeness and
other marks and rights of Jeff Foxworthy ("Foxworthy") pursuant to a
License Agreement with Foxworthy dated February 4, 1997 and attached
hereto as Exhibit "A" (the "License Agreement").
C. Pigs is a Florida corporation principally located at 5730 \Vest
Bronson Highway. Kissimmee, Florida 34746 (including the
improvements thereon, the "'Property').
D. Pigs is the current owner of a leasehold interest in the
Property' pursuant to a written lease dated as of October 2. 1977
with Robert L. Kazaros, as lessor, a true and correct copy of which
is attached hereto as Exhibit "'B".
E. Redneck has created concepts and designs for barbecue
restaurants that will use some of the license rights under the
License Agreement, including Foxworthy's name (the t'Bar-B-Q
Concepts").
F. The parties have agreed (i) to form a joint venture (the
""Venture") for the sole purpose of creating a single barbecue
restaurant on the Property' (the "'Pilot Restaurant") that will
serve as a pilot (i.e. "research and development") restaurant for
the Bar-B-Q Concepts, (ii) to convert the venture into a Limited
Liability Company (an "LLC") as soon as practicable and (iii) to
jointly plan, operate and the Pilot Restaurant. In connection
therewith. Redneck sublicense to the Venture certain rights
under the License Agreement solely In connection with the operation
of the Pilot Restaurant.
G. The parties desire to memorialize the terms and conditions of
the Venture pursuant to this written agreement.
Agreements
In consideration of the mutual promises of the parties hereto and
for other good and valuable consideration. The receipt and
sufficiency of which is hereby acknowledged. Redneck and Pigs.
intending to be legally bound, do hereby agree as follows:
1. Formation or Venture: Conversion to LLC.
A. Formation of Venture. Redneck and Pigs hereby form the venture
as a Joint venture under the laws of the State of Florida, pursuant
to this instrument, for the purposes
herein set forth.
B. Conversion to LLC. B no later than October 15,1997, the parties
shall convert the Venture into a limited liability company under the
laws of the State of Florida or such other state as the Members
mutually agree. The Venture shall be managed by the Members as
provided in this Agreement. The Members shall cause such formation
and shall file appropriate Articles of Organization or similar
documents to cause such formation. Upon such formation, all
references to the Venture shall mean the Venture as converted to an
LLC and this Agreement shall be the Operating Agreement of the
Venture. Upon conversion to an LLC, the Venture shall continuously
maintain an office and registered agent in the State of Florida as
required by applicable law and shall appoint a registered agent as
required by applicable law.
2. Name of Venture. The name of the Venture shall be "Redneck Pigs
Joint Venture 1". The sole members of the Venture are Redneck and
Pigs. Upon conversion to an LLC, the Venture shall add the words
"LLC" or similar words required by applicable law, to the name of
the Venture.
3. Sublease of Property: Lease of Equipment. Pigs hereby subleases
the Property to the Venture for the Term of the Venture. The
sublease of the Property shall be on all of the terms and conditions
of the Lease including rent without any modification whatsoever.
Pigs hereby represents that the consent of the landlord to this
sublease is not required or has been obtained. Pigs hereby leases
all equipment and other materials located on or used on the Property
for restaurant purposes (collectively, the "Equipment") to the
Venture during the Term for no consideration other than the overall
consideration given to Pigs as a Member of the Venture pursuant to
this Agreement.
4. Licenses.
A. Sublicense of Licensed Materials.
(1) Redneck hereby sublicenses to the Venture on a non-exclusive
basis during the Term the right to use the Licensed Materials under
the License Agreement solely for the operation of the Pilot
Restaurant. Such sublicense is on and subject to all of the terms
and conditions of the License Agreement, including the payment by
the Venture of all amounts payable under the License Agreement for
the activities and sales of the Venture. However, despite the
foregoing, it is understood and an express provision of such License
that Redneck be, and it hereby is, granted the sole and exclusive
right and authority to manage, direct and exercise the sublicensed
rights on behalf of the Venture and Pigs shall not exercise any such
rights individually or on behalf of the Venture. Each use of the
Licensed Materials shall only be with the approval of both Redneck
and Foxworthy.
(2) Redneck shall use reasonable effort to provide to the Venture
such rights in and to the Licensed Materials as Redneck deems
necessary to operate the Pilot Restaurant under the Bar-B-Q Concept;
provided tat Redneck shall have no responsibility for anything not
provided under the License Agreement.
(3) The Venture and Pigs hereby agree to be bound by all of the
terms of the License agreement and acknowledge that are breach b\
them of the provisions of this Section or of the License Agreement
will be a material reach of this Agreement (and of the License
Agreement). Neither the Venture nor Pigs v.11 obtain any rights In
or to the Licensed Materials and it is acknowledged that Foxworthy
is the owner of all such rights.
(4) Upon termination of the venture for any reason neither the
Venture nor Pigs shall have any rights in or to the licensed
Materials and shall terminate their use immediately. Without
limiting the foregoing. Upon such termination, any and all Licensed
Material, including any property containing the Foxworthy name,
logo, likeness or any other unique mark or right of Foxworthy, shall
be taken, held and retained BV Redneck or Foxworthy, including all
signs, menus, displays, products etc. Pigs hereby agrees that with
respect to said Licensed Materials (including any item bearing the
likeness, logo, mark or other right of Foxworthy), neither Pig nor
the Venture will have any right to transfer, encumber or In any way
deal with such Licensed Materials except as expressly permitted by
Redneck in conformance with the License Agreement (and in all cases
subject to approvals that Foxworthy Is entitled to provide or
withhold).
B. License Of Restaurant Rights
(1) Pigs and the Venture both acknowledge and agree that all
aspects of the Bar-B-Q Concepts now existing or hereafter developed,
including all changes developed by either party as part of the Pilot
Restaurant (including all copyrights, trade secrets, patents, design
rights, trademarks. service marks, know how, products, product
concepts, menus, recipes, food preparation, operational procedures,
cost analysis, marketing plans, etc.) (collectively the "Restaurant
Rights") are and will be owned solely by Redneck (or its licensees,
including Foxworthy).
(2) To the extent that Pigs or the Venture are deemed to acquire
any rights in any Restaurant Rights. Pigs and the Venture each
hereby irrevocably assign such rights in whole to Redneck. Pigs and
the Venture agree to execute such agreements and instruments
evidencing such assignment from time to time upon request by Redneck
and irrevocably appoint Redneck (coupled with an interest) as
attorney-in-fact to execute such documents in their name.
(3) The Restaurant Rights are hereby licensed to the Venture on a
non-exclusive basis during the Term solely for the operation of the
Pilot Restaurant. It is an specific condition to such grant that
Redneck will (and it is hereby granted the right) at all times to
have the absolute right in its discretion to control and implement
all uses of the Restaurant Rights by the Venture under this license.
(4) Upon termination of tie Venture for any reason, neither the
Venture nor Pigs shall have any rights in or to the Restaurant
Rights and shall terminate their use immediately. All such rights
shall be the sole property of Redneck (or its licensors).
(5) Redneck agrees that it will use its reasonable efforts to
develop the designs for all signs, logos, interior and exterior
decor arid design, preliminary roof elevation drawings, menu and
related licensed products for use by the Pilot Restaurant.
C Material Nature of Rights The parties hereby acknowledge that
the provisions of Sections 4.A. and 4.B. and the compliance by the
parties with their terms is critical to Redneck and, Redneck would
not have entered into this Agreement but for the agreement of the
Venture and Pigs to comply strictly with their terms.
D. Possible Termination of License Agreement. Pigs recognizes that,
pursuant to a certain Stock Purchase Agreement entered into between
Foxworthy and Redneck on or about February 4, 1 997, Redneck is
required to reach a capitalization level of at least Two Million
Five Hundred Thousand Dollars ($2,500,000.00) no later than March 1,
1998. In the event this capitalization level is not reached by that
date. Foxworthy retains the right to rescind and cancel the License
Agreement (including any licensing rights sublicensed hereunder).
Foxworthy also retains the right to terminate the License Agreement
upon any breach thereof by Redneck or any of its sublicensees. Upon
any such termination any and all uses of the Licensed Materials
would need to be terminated by the Venture without limiting the
foregoing, all signs, logos and merchandise bearing Foxworthy's name
or likeness or using his marks, etc. would then need to be
immediately removed from the premises of the premises or destroyed.
Pigs acknowledges that it has reviewed and understands these
agreements. In the event the License Agreement should terminate for
any reason, then this Venture shall terminate and dissolve (without
liability on the part of Redneck for such termination) and the
parties shall have the rights specified herein upon such termination
and dissolution.
5. Pilot Nature. Pigs recognizes that the Pilot Restaurant is
intended as a pilot and is to be used for research and development
purposes. Pigs recognizes and agrees that food items, layouts, signs
and other aspects of the Bar-H-Q Concept and the Restaurant Rights
may be changed on a regular basis by Redneck as part of Redneck's
ongoing research and development for this new restaurant concept.
The cost of any such changes made by the Venture, subsequent to the
initial costs having been borne by Pigs, will thereafter be treated
as a deduction from Redneck's capital account (but solely up to the
extent of the capital account contributions theretofore made by
Redneck and without creating any negative capital account).
6. Business of Venture. The sole business of the Venture shall
consist of the day to day operation of the Pilot Restaurant at the
Property.
7. Place of Business. The principal offer and place of business of
the Venture shall be 5730 West Bronson Highway. Kissimmee, Florida,
34746. The Venture may have such additional offices as the Members
shall deem advisable and jointly agree upon
8. Term of Venture.
A. The term of the Venture (the "Term") shall commence as of the
date hereof and continue thereafter until the expiration of the
Lease. subject to earlier termination as provided herein. Without
limiting the foregoing the Term shall terminate (I) upon the terms
described in Section 4.D., (ii) upon consummation of the purchase
option described in Section 16.A; and(iii) upon any of the events
described in Section 8.B.
B. Despite the provisions of Section 8.A., the Term of the Venture
will cease upon the occurrence of any of the following additional
events or conditions: (a) the adjudication of a Member as a
bankrupt; (b) the making of an assignment by a Member for the
benefit of its creditors; c the institution of any voluntary or
involuntary proceedings resulting in the appointment of a receiver
for a Member or for any substantial portion of the assets of a
Member; or (d) the institution of any voluntary or involuntary
proceedings by or against a Member, under any state or federal
law(s) providing for the relief of debtors., or re-adjustment of
debts resulting in an adjudication of bankruptcy or insolvency.
C. Automatically upon the happening of any event described in
Section 8.B., the Member to whom the event occurs shall be deemed to
have sold its interest in the Venture to the Venture as of the time
of the filing of any aforesaid petition or institution of any of
said proceedings or procedures. The purchase price of the Interest
of such Member shall be the book value of its capital ac count (but
not less than zero) at the end of the month prior to the month in
which such event condition or proceeding occurs, as such book value
is determined for income tax purposes by an independent Certified
Public Accountant. Upon any such purchase of Redneck's interest, it
is understood that the sublicenses and licenses set forth in Section
4.A. and 4.B. shall terminate and be of no further force of effect.
Payment of said price for the interest of such Member shall be made
only out of the percentage of profit of the Venture which would have
been distributed to such Member had not its interest in the Venture
been purchased. In the event any Member whose interest is thus
acquired has a negative capital account at such time, the purchase
price of his interest shall be $l.00. The terms of this paragraph
shall not be construed to create an executory option in future but
shall automatically effect a sale, as aforesaid, immediately upon
the occurrence of any event or condition set forth above.
9. Capital Contributions: Ownership Interests.
A. Contributions. Redneck shall be obligated to contribute $50,000
in cash to the Venture. Such amount shall be contributed as follows:
(I) within fifteen (15) days after the date hereof, Redneck shall
pay into the capital account S35,000 in cash. The balance of the
$50,000 capital contribution will be made on an as needed basis.
Pigs shall be required to contribute the amounts and services to the
Venture as are set forth on Exhibit "C" attached hereto. No other
capital contributions shall be required of either Member.
B. Ownership Interests. The respective percentages of ownership
interest of the Members in the Venture (the "Ownership Interests")
are as set forth opposite their names on Exhibit 'C~.' attached
hereto. The venture shall maintain a separate capital account for
each Member strictly in accordance with the requirements of Code
Section 704(b) and applicable regulations thereunder.
The Members intend that the capital accounts of the Members be
maintained strictly in accordance with the rules of Regulations
Section l.704-1(b)(2)(iv), as amended from time to time.
10. Decisions - Management. Except provided in Section 4 regarding
Licensed Materials and Restaurant Rights (which shall be managed
solely by the decision of Redneck), all actions, matters and
agreements including but not limited to the sale, lease,
encumbrances, financing, management operation or other matters
involving the business of the Venture, shall be determined by the
mutual agreement of Redneck and Pigs, with each having an equal
voice in and control over all such matters (and with neither being
able to act 'without the approval of the other). All operations
undertaken by the Venture must at all times comply with minimum
quality control standards as well as the License Agreement. Nothing
herein contained shall be deemed or construed to make or constitute
any member hereof an agent for any other member of this Venture.
Anything herein to the contrary notwithstanding, it is agreed that
no member of this Venture shall, without the prior written consent
of the other Member: (I) on behalf of this Venture borrow or lend
any money, (ii) assign, transfer or pledge any claims or debts due
this Venture, or release any such claims or debts, except upon
payment in full; (iii) make an assignment of the assets and/or
properties of the Venture for the benefit of creditors; (Iv) in the
name of or on behalf of the Venture make, execute, deliver or accept
any commercial paper, or execute and deliver any mortgage, deed of
trust, bond, lease, guaranty, deed of other instrument, or purchase
or contract to purchase, sell or contract to sell, any properties of
the Venture; or (v) assign, pledge, sell, mortgage, hypothecate,
encumber or in any other manner transfer or dispose of its interest
in the Venture or in its capital assets or property, or perform any
act detrimental to the best interests of the Venture or which would
make it impossible to carry on the business of the Venture.
11. Distributions. The operating cash flow of the Venture available
for distribution to its Members shall belong to, inure to the
benefit of, and be paid to all of the Members of the Venture in
proportion to their respective ownership interest in the Venture.
Distributions of profits will be made on a quarterly basis. For
purposes of this Agreement, the term "operating cash flows" shall
mean taxable income of the Venture for federal income tax purposes
(including all items of income and expense which. by virtue of
Federal Income Tax Laws, are passed through directly to the Members)
as shown on the book of the Venture, increased by (i) the amount of
depreciation and other non-cash deductions taken in computing such
taxable income and (ii) an;' non-taxable income of the Venture, and
reduced by (a) payments upon the principal of any mortgages or deeds
of trust upon Venture properties and assets or upon any other loans
to the Venture, (b) expenditures for maintenance, repairs,
replacements, and improvements, and (c) such reserve's for capital
improvements and/or replacements, and such reserves to meet
anticipated expenses, as the Venture shall deem to be reasonably
necessary for the efficient conduct of its business. However, the
share of cash flow payable to any Member who is in default under
this Agreement shall be withheld until such default is fully
corrected and may be applied on account of curing such default at
the discretion of the non-defaulting Member.
12. Allocation of Profits and Losses. All net income realized by
the Venture shall belong to, or inure to the benefit of, and be
allocated to the Members in the proportions of their respective
Ownership Interests in the Venture, and losses, in any, sustained by
the Venture, including loss of capital shall be borne by, and
allocated to, the Members in the like proportion. Each of the
Members shall receive, as soon as practicable after the expiration
of each taxable year of the Venture, a statement of receipts and
expenses, together with a statement prepared by an independent
certified public accountant showing the profit and loss of the
Venture for federal, state and municipal purposes, and a
distribution analyzed by reference to taxable income and return of
capital. For purposes of Sections 702 and 7034 of the U.S. Internal
Revenue Code of 1954, as amended, and any corresponding sections of
any future Federal Internal Revenue law or any similar state, county
or municipal income tax law, the allocations set forth in this
Paragraph 12 shall apply. The allocations in this section shall be
subject to all rules and requirements of the Code, including all
provisions of Section 704(b) and (c) thereof.
13. Funds of the Venture. All monies that are or shall become due
to the Venture shall be deposited in one or more accounts to the
credit of the Venture in such banks or other depository as may be
mutually agreed upon by the Members. Checks drawn on funds in any
such account will be signed by Pigs, subject to Redneck's right to
require its approval as to future signings upon thirty (30) day
notice to Pigs.
14. Books of Account. The accounts of the Venture shall be kept
properly posted by Pigs, at its sole expense. The parties agree that
the books of account will remain the property of the Venture. Said
books of account shall be all times during regular business hours be
available for inspection by any Member or his duly authorized
representative. Each Member shall have the right, at its sole cost
and expense, to audit the books of the Venture (provided that, if
the audit shows that the books are materially inaccurate, the
Venture shall pay for such audit). Pigs further agrees that it will
furnish on not less than a weekly basis copies of all normal and
customary weekly recap sheets as well as internal accounting
reports, monthly or quarterly profit and loss statements and such
other and further financial records as may be reasonably requested
by Redneck.
15. Consulting Fee. As a further condition of this Agreement, the
Venture shall pay to Redneck a consulting fee of Three Percent (3%)
of gross sales from the Pilot Restaurant during the Term. This fee
is in addition to the Ownership Interest of Redneck and shall be
considered a guaranteed payment to Redneck.
16. Option and Rights of Refusal
A. Pig's Option. Redneck agrees that Pigs will have the right of
first refusal for a period of five (5) years after the date hereof
to buy any franchise stores in the Orlando, Florida television area
of dominant influence as specified on the map attached as Exhibit
"D", at such time, if any, as franchises may be offered for sale by
Redneck. There is no promise or agreement that Redneck will offer
any franchises. THIS AGREEMENT IS NOT INTENDED TO ACT AS AND SHOULD
NOT BE CONSTRUED AS THE SALE OF ANY FRANCHISE RIGHTS OR A FRANCHISE
AND PIGS UNDERSTANDS THAT IT AND REDNECK ARE TRUE CO-OWNERS OF THE
RESTAURANT. The precise number of stores and geographic reach of
each store will be negotiated as part of any franchise agreement
negotiated and executed by the parties and will be offered at the
then customary and prevailing franchise rates and term's, provided
that as to any restaurant opened by Pigs under any franchise or
marketing development agreement during the first two (2) years
following the date of this Agreement, the royalties payable to
Redneck will be set at three percent (3%) of gross sales for the
first term of franchise contract not to exceed 10 years). Upon
execution of such agreements, if franchises are to be offered in the
area in which the Pilot Restaurant is located, Pigs shall have the
right and option to purchase the interest of Redneck in the Venture
and enter into a franchise agreement for the Pilot Restaurant to
become a franchise. To exercise such option, Pigs will pay (1) a
franchise fee to Redneck of Thirty Thousand Dollars ($30,000.00) for
the franchise for the Pilot Restaurant (which shall be in addition
to any ongoing royalty or other franchise fees); and (ii) as full
and complete payment for Redneck's Ownership Interest in the
restaurant, the amount of Redneck's then current capital account.
Once the payments from Pigs to Redneck for Redneck's interest in
the Venture are fully paid, then, notwithstanding anything to the
contrary contained herein, the Venture will terminate and Redneck
shall have no further rights in or to the Venture or the Pilot
Restaurant. Additionally, once the above described payment is made
by Pigs, they will then be the sole owners of any and all equipment
contained on site. The operation of the Pilot Restaurant shall
thereafter be subject to all franchise agreements.
B Redneck Right of Refusal. Pigs hereby grants to Redneck during
the Term a right of first refusal to match any bona fide offer to
acquire any interest that Pigs has in the Venture, the Property, the
Lease or the Equipment, under those terms and conditions as are
offered by Pigs to any other party. Redneck will have not less than
ten (10) business days to respond to any bona fide right of first
refusal once rendered by Pigs. To be a "bona fide offer," for
purposes of this Section, the offer must be in writing, and be made
by a party having sufficient financial ability to consummate the
purchase of the interest so offered to be purchased; and said offer
must be accompanied by a good faith deposit (by cashier's or
certified check) of at least Five Percent (5%) of the purchase price
offered; and the name and home and business address of the officer
must be shown therein. Pigs shall have no right to sell any of the
foregoing other than pursuant to a bona fide offer. If Redneck does
not exercise its right. Pigs shall have 90 days after such right
expires to make a sale pursuant to the terms of the bona fide offer.
Any sale after such 90 days or on other terms will again be subject
to Redneck's right of first refusal. In addition, any sale by Pigs
shall still be subject to all of the terms of Section 20 of this
Agreement, including consent by Redneck.
17. Ownership of Property. Title to the Venture's property,
leasehold interests and other assets shall be held in the name of
the Venture. It is again recognized that the Venture has no ~ title
or interest in any of the Licensed Material under the License
Agreement nor in any of the Restaurant Rights.
18. Salary. Neither one of the Venturers shall receive a salary
for services rendered to the Venture by it or any of its agents,
employees or representatives. However, this shall not prevent the
Venture from entering into any separate contract with a Member for
the rendering of any services to the Venture, including payment by
the Venture for such services, provided that such contracts are
approved in writing by all Members in each instance.
19. Confidentiality.
A. Definition. "Confidential information" means: (i) all Licensed
Materials and all Restaurant Rights; and (ii) any other nonpublic
information that is confidential or trade secret information of the
Venture (including any information that circumstances indicate
should be treated as confidential (including without limitation,
information relating to the Venture's business, customers,
marketing, recipes, plans, designs, costs, prices and names,
customer lists, finances. business opportunities personnel,
research, development or know-how or information received from
others that the Venture is obligated to treat as confidential; and
(iii) the specific terms and conditions of this Agreement.
Confidential Information shall not include any information that: (i)
is or subsequently becomes publicly available without the receiving
party's breach of any obligation owed to the disclosing party; (ii)
became known to the receiving party prior to the disclosing party's
disclosure of such information to the receiving party: (iii) became
known to the receiving party from a source other than the disclosing
part;' other than by the breach of an obligation of confidentiality
owed to the disclosing party; or (iv) is independently developed by
the receiving party.
B. Obligations. Pigs agrees to maintain the confidential status of
Confidential Information and not disclose it to any other party,
Using reasonable security precautions, at least as great as the
precautions it takes to protect its own confidential Information,
and not to use any such Confidential Information for any purpose
other than the operation of the Pilot Restaurant. It is recognized
that Redneck shall have no such obligation and that it owns or shall
have the right to use all of such information as it determines in
its discretion.
20. Restrictions on Transfer or Encumbrance of Interests. Each of
the Members agrees that it will not pledge, mortgage, hypothecate or
otherwise encumber, nor sell, assign, transfer or otherwise dispose
of its interest in the Venture (or any portion of or right in such
interest), without in each instance receiving the prior written
consent of the other Member of this Venture. No act done in
contravention of this Paragraph 20 shall be legally effective or
binding upon the Venture.
21. Default. If a Member is in default as to any obligations
under this Agreement and does not cure such default within thirty'
(30) days after written notice from the other Member, then, in
addition to any other rights and remedies as may be available at law
or in equity, no further distributions shall be made to the
defaulting Member until the liability of the Member for its default
has been determined by a court of law (and such distributions may be
used to offset any such liability'). The Venture and the other
Member are each hereby granted a security interest in the Ownership
Interest of the Venture to secure all obligations of a Member
hereunder. In addition, if a court of law should determine a breach
to be a material breach that would give a Member the right to
terminate this Agreement for such breach, then the non-defaulting
Member shall have the option to purchase the Ownership Interest for
the price and on the terms specified in Section 8.C, including
payment terms.
22. Effect of Transfers. No assignment or transfer of a Venture
interest, whether permitted by the other Member or in violation of
this Agreement, shall relieve the assignor of its liability under
any provisions of this Agreement unless all Members shall otherwise
agree in writing. Furthermore, in the event or any approval of any
such sale or transfer of a Member's interest, the transferee shall
not be deemed a Member of the Venture, nor be entitled o an rights
or benefits as Member, unless the full name and address of such
Member and the amount of Venture interest acquired by him is
disclosed writing to the other Member and such transferee executes
and delivers such instruments as counsel for the other Member shall
require, evidencing the admission of such new party as a Member and
his or its agreement to comply with all provisions of this
Agreement.
23. Sale or Refinancing of Joint Venture Property. If any bona
fide written offer is received for the purchase of the entire
property of the Venture or any part thereof or if application is
made to refinance the joint venture property, the Venture shall
promptly furnish to each Member a copy of said offer, and within
five (5) days of their receipt thereof, each Venturer shall notify
the Venture as to whether such offer is acceptable to said Venturer.
If the offer is acceptable to both Members, then the parties agree
that the Venture ma accept said offer.
24. Dissolution.
A. Conditions. The Venture shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the
following: (i) a determination by the vote of both Members; (ii) the
sale of all or substantially all of the assets of the Venture; (iii)
the occurrence of any event specified elsewhere in this Agreement;
(iv) as provided by law, (v) the expiration of the period for the
duration of the term of the Venture as stated herein or (v) at such
earlier time as may be provided by the Act.
B. Statement of Intent to Dissolve. As soon as possible following
the occurrence of any of the events specified in this Article
effecting the dissolution of the Venture, the Members shall execute
a statement of intent to dissolve in such form as shall be
prescribed by the Secretary of State of Florida and file any
statement or document required by applicable law.
C. Winding Up. Upon the occurrence of a liquidating event for
purposes of Regulations Section 1.704-1(b), the Venture shall
continue solely for the purpose of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of
its creditors. To the extent not inconsistent with the foregoing,
all covenants and obligations in this Agreement shall continue in
full force and effect until such time as the assets have been
distributed and the Venture has terminated.
D. Responsibilities of Managers for Winding Up. The Members shall
be responsible for overseeing the winding up and liquidation of the
Venture, shall take full account of the liabilities and assets of
the Venture, shall cause its assets to be liquidated as promptly as
is consistent with obtaining the fair market value thereof and shall
cause the proceeds therefrom, to the extent sufficient therefor, to
be applied and distributed as next provided. During the winding-up
process, profits, income and losses will be allocated and
distributions will continue to he shared by Members in accordance
with this Agreement. Redneck shall have the authority to take all
actions to cause the Venture to cease using the Licensed Materials
and the Restaurant Rights as soon as practicable.
E. Distribution. Upon any winding up and liquidation of the
Venture, the proceeds from liquidation, to the extent available,
will be applied and distributed by the Venture as soon as reasonably
possible in the following order:
(i) first, to pay the expenses of liquidation and the debts and
liabilities of the Venture (including loans or advances from
Member), except the claims of creditors or Members whose obligations
will be assumed or otherwise transferred upon liquidation of the
Venture;
(ii) second, to establish any reserves which the Members may deem
necessary, appropriate or desirable for any future, contingent or
unforeseen liabilities, obligations or debts of the Venture which
are not then payable or have not then been paid;
(iii) third, to each Member in accordance with and to the extent of
the positive balance in its capital account after taking into
account all capital account items and adjustments for the taxable
year of such distribution and all allocations that affect the
Member's capital account, Including all items and adjustments
related to the winding up and dissolution itself: and
(iv) fourth, to the Members In accordance with their respective
Ownership Interests.
F Distribution in Kind. Upon any dissolution the Members may elect
by the mutual agreement of both Members to distribute any assets in
kind. Upon any such election, all rights to intangibles shall be
distributed to the Members ratably in proportion to the total
distributions to be made to each Member. Any Property distributed in
kind will be valued at its fair market value and distribution will
then proceed as if the property were sold for cash at such value
with the resulting gain, income profits and/or loss expense and
deduction allocated as provided in this Agreement.
G. Limits. Each Member will look solely to the assets of the
Venture for the payment of any income allocated to such Member and,
if the assets of the Venture remaining after payment or discharge of
the debts and liabilities of the Venture are insufficient to pay all
or any part of such amounts, they will have no recourse against
another Member, or any partner, director, officer, other
stockholder, employee or agent of another Member.
H. Authority After Dissolution. After dissolution, if the Venture
is to be liquidated, the Members can bind the Venture only: (i) by
any act appropriate for winding up the Venture affairs or completing
transactions unfinished at dissolution; and (ii) by any transaction
which would bind the Venture if dissolution had not taken place, if
the other party to the transaction: (a) had extended credit to the
Venture prior to dissolution and had no actual knowledge or notice
of the dissolution; or (b) though not so extending credit, had
nevertheless known of the Venture prior to dissolution and had no
actual knowledge or notice of dissolution. and a certificate of
dissolution had not been filed.
I. Accounting. Upon dissolution (if the business of the Venture is
not continued),and again upon the completion of the winding up of
the affairs of the Venture, an accounting of the Venture will be
made and furnished to all Members.
25. General Provisions.
A. In the construction of this Agreement, words used in the
singular shall include the plural, and the plural the singular, and
words used in the masculine gender shall include the feminine and
neuter. and vice versa. in all cases where such meanings would be
appropriate.
B. This Agreement shall be governed in all respects by the Laws of
the State of Florida.
C. The terms, covenants and provisions of this Agreement shall bind
and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, personal representatives and
assigns.
D. This Agreement is executed in several counterparts, each of
which shall be deemed to be an original.
E. Any member of this Venture may have other business interests,
and may possess, engage in or participate in any business, trade,
profession. employment or business operation or Investment
(including any restaurant including barbecue style restaurants) for
its own account, or in partnership with or as a stockholder of any
other person, firm, partnership, joint venture, corporation or other
entity and neither this Venture nor the other Member shall have any
rights in or to such independent ventures or the income or profits
derived therefrom. Despite the foregoing, neither Member (nor its
affiliates) will, during the Term, own, operate or actively
participate in the operation of a barbecue style located within a
mile radius of the Property.
26. Board of Directors Approval. Notwithstanding anything
contained herein to the contrary this agreement shall not be binding
on Redneck until presented to its Board of Directors and approved by
the Board in accordance with its bylaws.
IN WITNESS WHEREOF, the undersigned parties have hereunto set their
hands and seals as of the date first hereinbefore Written.
WITNESS: REDNECK FOODS Inc
Tammy F. Garavaglia David Womick, President
PIGS 'R' US, Inc.
Cindi L. Black By: Randall K. Kopelaman
Title: President
Exhibit 'A'
Foxworthy License Agreement
Exhibit "B" Lease
Exhibit C
Capital Contributions and Services to be Provided
Cash contributions -
Redneck - $50,000
Noncash contributions by Redneck:
Marketing strategies
Research and development of food and menu items
Noncash contributions by Pigs:
Lease
Leasehold Improvements
Furniture
Equipment
Market Development
Build out of leasehold
Contributions of Pigs in paid personnel:
Operating Personnel for day to day operations
Revised Exhibit C1
Capital Contributions and Services to be Provided
Cash Contributions
Redneck - $50,000
Noncash contributions by Redneck:
Marketing Strategies
Research and development of food items and menu items
Noncash contributions by Pigs:
Lease
Leasehold Improvements
Furniture
Equipment
Market Development
Build out of Leasehold
Contributions of Pigs in Paid Personnel:
Operating personnel for day to day operations
Percentage interest in Joint Venture:
Pigs "R" Us, Inc. 90%
Redneck Foods, Inc. 10%
1 Revised 10/31/97 only to clearly state the respective percentage
interests in the joint venture by each of the venturers, as originally
agreed upon.
Seen and Approved: Redneck Foods, Inc. by E.J. Fitzpatrick, Secretary
10/30/97
'Exhibit "D"
Map of Area of Right to Buy Franchises
The following counties constitute the area in which Franchise
rights may be acquired:
Brevard
Flagler
Lake
Marion
Orange
Oscala
Polk
Seminole
Volusia
MARKETING AGREEMENT
THIS MARKETING AGREEMENT is made by and between SHANNON /
ROSENBLOOM MARKETING, INC., a Florida corporation (hereinafter
"SRM") and REDNECK FOODS, INC. (hereinafter "CLIENT").
RECITALS
WHEREAS, CLIENT wishes to retain SRM for a period of 24 months to
provide investment relations services to CLIENT; those services to include
the dissemination and publication of CLIENT information materials to SRM's
broker network, market makers and to others who can affect and enhance the
shareholder base, liquidity and sales volume of Client's publicly traded
shares.
NOW THEREFORE, in consideration of the mutual promises contained herein,
it is agreed as follows:
A. COMPENSATION
Cash Compensation- SRM will receive a total fee of $125,000 for the following
services provided. Fee does not include any pre-approved expenses incurred
by SRM, which as of this date totals $ 0.00. The cash portion of the fees
are to be paid in two equal payments, the first on the day following the
Client's filing of their 15C- 211, and the second payment due when trading
of the company's stock begins.
Conversion to Equity- SRM may at its' option and prior to CLIENT filing their
504 Memorandum, elect to convert up to $50,000 of its' fees into common
stock of CLIENT. The conversion rate shall be at $0.10 per share (500,000
shares) and the shares will be issued pursuant to the 504.
B. SERVICES PROVIDED
In return for payment by CLIENT of the above-described cash, freely tradable
stock and restricted stock, the Parties understand and agree that SRM will
provide the following services:
client's profile will be distributed throughout SRM's broker network. Upon
selection of the core retail stockbrokers, market makers and/or money
managers, SRM will arrange a Top Performer Due Diligence trip.
This meeting will include a visit of client's headquarters and a
presentation from client's top management paid by CLIENT.
Said trip will be fully outlined to CLIENT at least thirty days prior to
promoting said trip, which outline will include a written estimate of all
expenses likely to be incurred.
3. SRM will continue public awareness by informational mailings to
shareholders, brokers and individual investors. SRM will guarantee no less
than 6 mailings in each twelve month period. Each mailing will consist of no
less than 25,000 prescreened and otherwise qualified potential investors to
be included on the mailing.
4. SRM will prepare a broker bullet sheet which will be sent to brokers to
develop interest in client's company and in working the investor inquiries in
client's stock. SRM will guarantee no less than 6 mailings in each twelve
month period to said brokers.
5. CLIENT is responsible for providing SRM at least 500 Due Diligence
packages within 30 days of signing this contract. SRM will assist, if
necessary, in providing resources and editing of such material. The Due
diligence Package as described herein will include the following materials:
financials; press releases; offering documents; etc.
SRM will work directly with CLIENT to provide lead generating media events
including, but not limited to, the following:
A mass mailing of client's information piece to a minimum of 20,000 small-cap
investors per month.
Circulation of CLIENT information to our list of over 10,000 stock brokers.
Deliver client's information package and handle individual investors' calls.
SRM will provide to CLIENT public relations exposure to newsletter writers,
trade publications and other financial professionals. If the CLIENT is
unable to complete the minimum of $500,000 raised in the 504 offering, then
said CLIENT will have the option of canceling this contract, since SRM's
services will then not be needed.
C. CLIENT EXPENSES
CLIENT shall be responsible for all reasonable expenses for the retail market
makers and/or money managers who attend the Top Performer Broker Group
meeting, so long as a written estimate of said expense has been provided by
SRM and approved by client not less than thirty days prior to said expense
being incurred. CLIENT shall be responsible for all reasonable travel
expenses incurred for the purpose of due diligence of the CLIENT by
financial newsletter writers and/or brokers so long as a written estimate of
said expense has been provided by SRM and approved by client not less than
thirty days prior to said expense being incurred. CLIENT will have total
pre-approval right of these trips and all third party expenses.
D. FURNISHING OF INFORMATION BY CLIENT
CLIENT shall furnish to SRM information about the CLIENT such as copies of
disclosure and filing materials, financial statements, business plans,
promotional information and background of the client's officers and directors
("information package"). CLIENT shall update the information package on a
periodic basis. CLIENT understands that the sole purpose for providing SRM
with the information package is for the utilization in a lead
generation/corporate
relations program. SRM is not obligated to assess the financial viability of
the CLIENT . SRM may rely on and assume the accuracy of the information
package.
E. REPRESENTATIONS AND WARRANTIES OF CLIENT
CLIENT represents that all information included in the information package
furnished to SRM shall disclose all material facts and shall not omit any
facts.
F. COVENANTS OF CLIENT
CLIENT covenants and warrants that any information submitted for
dissemination will be truthful, accurate, in compliance with all applicable
laws and regulations and will not be submitted in connection with any
improper or illegal act or deed.
G. CLIENT RESPONSIBLE FOR INFORMATION PROVIDED SRM
CLIENT assumes and claims all responsibility and liability for the content of
all information disseminated on behalf of CLIENT which has been approved by
CLIENT. CLIENT shall indemnify and hold SRM, harmless from and against all
demands, claims or liability arising for any reason due to the content of
information disseminated on behalf of CLIENT.
H. ASSIGNMENT AND DELEGATION
Neither Party may assign any rights or delegate any duties hereunder without
the other Party's prior written consent.
I. ENTIRE AGREEMENT
This writing contains the entire agreement of the Parties. No
representations were made or relied upon by either Party, other than those
expressly set forth.
Furthermore, CLIENT understands that SRM makes no guarantees, assurances or
representations in regard to the results of its' corporate relations program.
No agent, employee or other representative of either Party is empowered to
alter any of the above terms, unless done in writing and signed by the
President and/or Vice President of the respective Parties.
J. CONTROLLING LAW AND VENUE
This Agreement's validity, interpretation and performance shall be controlled
under the laws of the State of Florida. The proper venue and jurisdiction
shall be as agreed upon by the parties hereto or as ordered by the arbitrator
under Section K below:
K. PREVAILING PARTY
Should a dispute arise, both parties agree to submit to binding arbitration
under guidelines of the American Arbitration Association, or some other
mutually agreeable arbitration association . In the event of the
institution of any arbitration the prevailing party shall be entitled to
receive from the nonprevailing party all reasonable costs, attorney's fees
and expenses.
L. FAILURE TO OBJECT NOT A WAIVER
The failure of either party to this Agreement to object to, or to take
affirmative action with respect to any conduct of the other which is in
violation of the terms of this Agreement shall not be construed as a waiver
of the violation or breach, or of any future violation breach or wrongful
conduct.
M. NOTICES
All notices or other documents under this Agreement shall be in writing and
delivered or mailed by certified mail, postage prepaid, addressed to the
representative or Company as follows:
COMPANY: SHANNON, ROSENBLOOM MARKETING, INC.
3660 Maguire Blvd., Suite 101
Orlando, Florida 32803
CLIENT: REDNECK FOODS, INC.
P.O. Box 5495
Asheville, NC 28813
N. HEADINGS
Headings in this Agreement are for the convenience only and shall not be used
to interpret or construe its' provisions.
O. TIME
For all intents and purposes, time is of the essence with this Agreement.
EXECUTED this ________________ day of 1997.
SHANNON, ROSENBLOOM REDNECK FOODS, INC.
MARKETING, INC.,
By: ________________________________ By: ________________________
Brian Rosenbloom, President David A. Womick,
President
By:
Tim Shannon, Vice-President
SCHEDULE A
CLIENT hereby designates the following person or persons as authorized
representatives of CLIENT for purposes of providing written approvals as
required by this Marketing Agreement.
__________________________
________________________
NAME TITLE
_________________________
________________________
NAME TITLE
__________________________
________________________
NAME TITLE
_________________________
________________________
NAME TITLE
Business Intermediary Services
1402 BB&T Building, Asheville, NC 28801
Office (704)285-0018 Fax (704) 285-0071
BUYER-BROKER AGREEMENT
April 16, 1997
PERSONAL AND CONFIDENTIAL
Mr. David A. Womick, President
Redneck Foods, Inc.
7 Stuyvesant
Asheville, NC 28803
Dear David:
This Agreement is made by and between BUSINESS INTERMEDIARY SERVICES, LTD.,
hereinafter referred to as "BIS" or "the Broker", and REDNECK FOODS, INC.,
hereinafter referred to as "REDNECK" or "the Purchaser". Purchaser hereby
retains Broker for the purpose of locating businesses or properties to be
purchased by Purchaser under terms and conditions acceptable to Purchaser.
This Agreement will be in effect for a twenty-four (24) month period,
commencing on the date of your acceptance. This Agreement will automatically
continue unless terminated by either party by written notice at least thirty
(30) days prior to the expiration of the initial period or any extension(s)
thereafter.
If REDNECK, or any other person acting for Purchaser or in Purchaser's
behalf, purchases any businesses or properties during the life of this
Agreement or within three (3) years thereafter, which was first presented or
submitted to Purchaser by Broker during the life of this Agreement, and the
description of which was submitted to Purchaser in writing, either personally
or by mail posted prior to the termination date of this Agreement, REDNECK
agrees to pay an Accomplishment Fee to BIS in certified check at closing.
If REDNECK, or any other person acting for Purchaser or in the Purchaser's
behalf, obtains an option to purchase any such businesses or properties
during the life of this contract or within three (3) years thereafter, which
was first presented or submitted to Purchaser by Broker during the life of
this contract, and the description of which has been submitted to Purchaser
in writing, either in person or by mail posted prior to the termination date
of the Agreement, Purchaser agrees to pay Broker 40% of the Accomplishment
Fee that would have been earned by Broker if the Purchaser had purchased the
business or property. The payment of the Accomplishment Fee shall be by
certified check at the time the option is obtained. Purchaser further agrees
to pay Broker the balance of the Accomplishment Fee in certified check when
the Purchaser either exercises said option or purchases said business or
property, or assigns said option.
BIS's Accomplishment Fee is based on a percentage of the Total Purchase Price
paid by the Purchaser. The Accomplishment Fee structure is as follows:
5% of Total Purchase Price up to $1 million; plus
4% of Total Purchase Price between $1 million and $2 million; plus
3% of Total Purchase Price between $2 million and $3 million; plus
2% of Total Purchase Price between $3 million and $4 million; plus
1% of Total Purchase Price in excess of $4 million.
The Total Purchase Price for purposes of this Agreement shall be defined as,
but not limited to, any cash, debt guarantees or assumptions, credit
arrangements, assets, promissory notes, royalty agreements, employment
agreements, covenants not to compete, or infusion of capital funds to the
Company, or any other such agreements that are intended to convey value or
benefits to the seller and/or the shareholder.
Purchaser recognizes and confirms in representing Purchaser, BIS will be
using and relying upon information and data furnished to BIS by Seller, and
BIS does not assume responsibility for the accuracy and completeness of the
information. BIS will not undertake to independently verify the information,
and will not make an appraisal of any individual assets owned by the Seller.
The parties hereto acknowledge that BIS is not licensed as a securities
broker or dealer by any state or federal government agency. Notwithstanding
such fact, however, it is agreed that if the transaction must be structured
as a purchase of stock and/or other securities, then REDNECK shall pay BIS
the Accomplishment Fee due hereunder for Financial Advisory Services and for
procuring a seller, but not for the brokering of stock and/or any other
securities.
If the foregoing is in accordance with your understanding, please so indicate
by signing and returning to us the duplicate copy of this letter.
We look forward to being of service to you. Sincerely,
BUSINESS INTERMEDIARY SERVICES, LTD.
Erich K. Schmid, CBI President
EKS/tim
CONFIRMED AND ACCEPTED on this 16 day of April, 1997 REDNECK FOODS, INC.
David A. Womick President
ARBITRATION AGREEMENT
THIS ARBITRATION AGREEMENT (the "Agreement") dated as of February 4, 1997, is
entered into by and among REDNECK FOODS, INC., a Delaware corporation
("Company"), JEFF FOXWORTHY, an individual ("Foxworthy"), DAVID WOMICK, an
individual ("Womick"), ROBERT H. BERNSTEIN, an individual ("Bernstein") and
J.P. WILLIAMS, an individual, with reference to the following:
A. Simultaneously with the execution and delivery of this Agreement, (i)
Company, Foxworthy and David Womick ("Womick") are entering into a Series A
Convertible Preferred Stock Purchase Agreement (the "Stock Purchase
Agreement") providing for, among other things, the acquisition by Foxworthy
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. Subject to and in compliance with the execution of the Stock Purchase
Agreement each of the parties hereto shall be a party to one or more of the
Transaction Documents (as such term is defined in the Stock Purchase
Agreement).
C. The parties hereto desire that any and all disputes that may arise
under the Transaction Documents be arbitrated through binding arbitration
instead of a lawsuit,
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.
2. Claims Subject to Arbitration. Each of the parties agrees to submit all
disputes and controversies which may arise between or among them with respect
to any or all of the Transaction Documents (including but not limited to
those brought by any party serving as an employee of Company against
Company's shareholders, officers, directors, agents and employees) which are
related to or arising out of (i) the employment or termination of employment
of a party by Company, or (ii) the interpretation, construction or
application of this Agreement any or all of the Transaction Documents,
(collectively, the "Arbitrable Claims") shall be resolved by binding
arbitration. Arbitrable Claims include, but shall not limited to, all
contract and tort claims of any nature, as well as all claims based upon the
application or enforcement of any federal, state, or local law, statute,
regulation or ordinance; however, only claims under applicable workers'
compensation law and unemployment insurance claims shall not be subject to
this Agreement. Arbitration shall be final and binding upon the parties and
shall be the exclusive remedy for all Arbitrable Claims.
3. Waiver of Jury Trial. Each of the parties hereby understands and
acknowledges that by executing this agreement they will be waiving any
constitutional rights that they may have to a trial by jury in regard to all
arbitrable claims.
4. Arbitration Procedure. All arbitrations of Arbitrable Claims shall be
conducted in accordance with the Rules adopted by the American Arbitration
Association ("AAA Rules"). All Arbitrable Claims must be initiated within
the time period specified in Section 7 below, or they shall be deemed to be
time barred. Arbitration shall be initiated by providing written notice to
the other party with a statement of the claim(s) asserted, the facts upon
which the claim(s) are based, and the remedy sought. In any arbitration, the
burden of proof shall be allocated as provided by applicable law. All
arbitration hearings under this Agreement shall be conducted in Los Angeles,
California. The Federal Arbitration Act shall govern the interpretation and
enforcement of this Agreement.
5. Arbitrator Selection and Authority. All disputes involving Arbitrable
Claims shall be decided by a single arbitrator. The arbitrator shall be
selected by mutual agreement of the parties within thirty (30) days of the
effective date of the notice initiating the arbitration. If the parties
cannot agree on an arbitrator, then the complaining party shall notify the
AAA and request selection of an arbitrator in accordance with the AAA Rules.
The arbitrator shall have the authority to award all equitable relief,
damages, costs, and fees provided by law for the particular claim(s)
asserted. The fees of the arbitrator shall be split between both parties
equally. The arbitrator shall have exclusive authority to resolve all
Arbitrable Claims, including, but not limited to, any claim that all or any
part of this Agreement is void or unenforceable.
6. Arbitration Confidentiality. All proceedings and all documents prepared
in connection with any Arbitrable Claim shall be confidential and, unless
otherwise required by law, the subject matter thereof shall not be disclosed
to any person. All documents filed with the arbitrator or with a court shall
be filed under seal. The parties shall stipulate to all arbitration and
court orders necessary to effectuate fully the provisions of this Section
concerning confidentiality.
7. Limitations on Bringing Claims. All Arbitrable Claims must be initiated
within 180 days ("Limitations Period") days after the occurrence of the acts
or omissions specified in the claim. Each of the parties hereby understands
and acknowledges that by executing this Agreement they will be waiving all
rights under statutes of limitations which provide different limitation
provisions for the commencement of actions.
8. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by each of the parties.
No failure to exercise and no delay in exercising any right, remedy, or power
under this Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, or power under this Agreement
preclude any other or further exercise thereof, or the exercise of any other
right, remedy, or power provided herein or by law or in equity.
9. Acknowledgment. Each of the parties hereto acknowledges that he or it
has had the opportunity to consult legal counsel in regard to this Agreement,
that he or it has read and fully understands the provisions of this
Agreement, is aware of and understands its legal effect, and has entered into
it freely and voluntarily.
IN WITNESS WHEREOF, the undersigned have executed this Arbitration Agreement
as of the date first written above.
REDNECK FOODS, INC.,
a Delaware corporation
JEFF FOXWORTHY
By: _________________________
David Womick,
President
DAVID WOMICK
ROBERT BERNSTEIN J.P. WILLIAMS
BERNSTEIN EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
February 4, 1997, by and between Redneck Foods, Inc., a Delaware corporation
("Employer") and Robert H. Bernstein, an individual ("Employee") with reference
to the following:
A. Simultaneously with the execution and delivery of this Agreement, (i)
Employer is entering into a Series A Convertible Preferred Stock Purchase
Agreement (the "Stock Purchase Agreement") with David Womick and Jeff
Foxworthy providing for, among other things, the acquisition by Jeff
Foxworthy of certain shares of Series A Convertible Preferred Stock (the
"Preferred Stock") of Employer upon the terms and subject to the conditions
set forth therein.
B.
C. Subject to and in compliance with the execution of the Stock Purchase
Agreement, Employee and Employer desire to enter into this Agreement as
provided herein.
D.
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, and in the Stock Purchase Agreement and in the Transaction
Documents, the parties hereto agree as follows:
1. Definitions. All capitalized terms used but not otherwise defined
herein shall have the meanings given to them in the Stock Purchase Agreement.
2. Employment; Term of Employment. Employee has agreed to be employed
by Employer, and Employer has agreed to employ Employee, for a term
commencing as of the date Company completes its acquisition of the Investment
Capital and continuing until at least the third anniversary of the opening of
the first Restaurant, unless sooner terminated pursuant to Section 6 hereof
(the "Employment Term"). If Employee continues as an Employee after the
Employment Term, such employment shall be deemed an employment at will unless
Employer and Employee enter into a written extension of this Agreement or a
new written employment agreement.
3. Title and Duties.
(a) Title. Employee shall have the title and serve in the capacity of
Chief Financial Officer and, in such capacity, shall be subject to the
control and direction of the Board of Directors of Employer (the "Board of
Directors") and Employer's Chief Executive Officer as designated by the Board
of Directors. Employer may make reasonable changes in Employee's title from
time to time.
(b) Duties. Employee's primary duties and responsibilities hereunder
shall be to perform all reasonable duties that are customary for his position
within the restaurant and food service industry and as may be prescribed by
the Board or Employer's Bylaws. Employee hereby agrees to perform such
duties and satisfy such responsibilities throughout the Employment Term and
thereafter so long as employed by Employer. Employee shall work out of his
offices in Calabasas, California and devote approximately twenty percent
(20%) of his time and efforts to the performance of his duties hereunder;
provided, however, that if the obligations of Employee hereunder require more
or less than twenty percent (20%) of his time and efforts, an appropriate,
equitable and mutually acceptable adjustment will be made to the compensation
payable to Employee pursuant to Section 4(a). As part of his duties,
Employee shall arrange for Employer to hire a controller and other accounting
staff, and Employee shall be responsible for overseeing the performance of
such personnel.
4. Compensation.
(a) Base Salary and Bonus. During the Employment Term, Employer hereby
agrees to pay Employee an annualized base salary of Fifty Thousand Dollars
($50,000) (the "Base Salary"). In addition to the Base Salary, Employee may
be entitled to a potential bonus (the "Bonus") the amount of which, if any,
shall be determined by the Board of Directors in its sole and absolute
discretion.
(b) Stock Option. In addition to the Base Salary and Bonus, Employer
hereby agrees to grant to Employee options to acquire shares of equity stock
of Employer that shall constitute three percent (3%) of the overall equity of
Employer as of the date Employer completes its acquisition of the Investment
Capital. Employee's interest in such options shall vest in equal monthly
installments on the first day of each month over the three (3) year
Employment Term. All options remaining unvested shall vest immediately upon
a Change in Control of Employer (as defined in the Stock Purchase Agreement)
or upon a termination of this Agreement by Employer without Cause (as defined
in Section 6). If this Agreement terminates prior to the expiration of the
Employment Term for any other reason, any options remaining unvested as of
the termination date shall expire and Employee shall have no further interest
therein. After vesting, the options may be exercised by Employee in whole or
in part at any time for a period of ten (10) years from the date they are
granted. Options that are not exercised within such ten (10) year period
shall expire. The option exercise price shall equal the fair market value of
the shares of equity stock to be received upon exercise of the options as
determined by the Board of Directors of Employer pursuant to Section 4.2 of
the Stock Purchase Agreement.
(c) Expenses. In addition to all other compensation provided hereunder,
Employee shall be entitled to reimbursement for all pre-approved travel and
other expenses necessary for the performance of his duties hereunder, all in
accordance with Employer's standard policies and procedures as they may exist
from time to time. All claims for expenses shall be reasonable and
documented in accordance with Employer's standard policies and procedures
with respect thereto.
(d) Payment. The payment of the Base Salary and Bonus and any expense
reimbursements shall be according to Employer's standard policies and
procedures. Employer shall deduct and withhold from all compensation payable
to Employee hereunder any and all applicable Federal, state and local income
and employment withholding taxes and any other amounts required to be
deducted or withheld by Employer under applicable statutes, regulations,
ordinances or orders governing or requiring the withholding or deduction of
amounts otherwise payable as compensation or wages to employees.
5. Limitations.
(a) No Competitive Activities. During the Employment Term, Employee
shall not directly or indirectly (whether for compensation or otherwise),
within North America, own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or furnish any capital to
or be connected in any manner (whether alone or as a partner, officer,
director, employee, agent or shareholder) with, or provide any advice or
services as a consultant for, any business which competes with Employer's
business or the business of any affiliate of Employer as such businesses may
be conducted from time to time; provided, however, that nothing contained in
this Agreement shall be deemed to preclude Employee from purchasing or
owning, directly or beneficially, as a passive investment, less than two
percent (2%) of any class of the publicly traded securities of any
corporation. For purposes of the foregoing, the "Employer's business" shall
be the ownership and management of restaurants that feature barbecue style as
their primary cuisine and barbecue food products. The parties acknowledge
that Employee is involved in the ownership and management of a chain of
restaurants known as Figtree Cafes, and the parties agrees that such
involvement, now or as it may exist in the future, will not in any way
constitute a violation of Employee's obligations under this Section 5(a).
(b) Proprietary Information and Confidentiality. Employee shall, if
requested by Employer, execute and comply with a standard confidentiality,
non-disclosure and inventions agreement pursuant to which Employee agrees to
protect and keep in confidence all proprietary and confidential information
of Employer and to assign to Employer all interest in any proprietary
information or materials developed by Employee during the course of his
employment.
6. Termination
(a) Termination With or Without Cause. Upon written notice to Employee,
Employer shall be entitled to terminate the Employment Term at any time with
or without Cause. "Cause" with respect to Employee shall mean (i) conviction
of Employee of any felony involving moral turpitude or otherwise affecting or
relating to the business of Employer (including, without limitation, his
entering of any plea of nolo contendere in connection with any such felony
proceeding); (ii) Employee's grossly negligent, willful or intentional
conduct resulting in material damage to Employer or Employer's business
reputation or image; (iii) Employee's material breach of any material
provisions of this Agreement or his employment with Employer (including,
without limitation, his breach of any of the provisions of Section 5; (iv)
Employee's willful failure or gross neglect to obey the good faith directions
of the Board of Directors; or (v) the good faith determination of the Board
of Directors that Employee is performing his duties in a manner which is not
commensurate with reasonable standards for employees in similar circumstances
and with similar duties to those of Employee hereunder ("Substandard
Performance"); provided that Employee may not be terminated for Substandard
Performance unless and until (A) the Board of Directors has provided Employee
with notice of Substandard Performance, which notice specifies with
particularity the areas of such Substandard Performance, (B) Employee is
given at least thirty (30) days (the "Cure Period") to improve his
performance in the specified areas, and (C) the Board of Directors determines
in good faith after the Cure Period that Employee is still providing
Substandard Performance in the specified areas.
(b) Death or Disability. This Agreement shall automatically terminate,
without notice, upon the death or permanent disability of Employee. For
purposes of this Section 5(b), Employee shall be deemed to be permanently
disabled if he shall be unable, due to illness or injury, to perform his
duties hereunder for eighty percent (80%) or more of the full regular
business days during any two (2) consecutive month period. Employee shall be
deemed to be permanently disabled on the last day of such two (2) month
period. Employee shall not be entitled to Base Salary or Bonus during any
period of disability unless otherwise provided by Employer's standard
practices.
7. Miscellaneous.
(a) Notices. All notices and other communications pursuant to this
Agreement shall be made in accordance with the Stock Purchase Agreement. The
address to be used for Employer shall be as set forth in the Stock Purchase
Agreement. The address to be used for Employee shall be:
Robert H. Bernstein
Bernstein & Bernstein, Inc.
23901 Calabasas Road
Suite 1065
Calabasas, California 91302
(b) Applicable Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by and construed in accordance with
the internal laws of the State of California applicable to the construction
and enforcement of contracts wholly executed in California by residents of
California and wholly performed in California.
(c) Captions. The section headings and captions contained herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(d) Severability. If any provision of this Agreement shall be unlawful,
void, or for any reason, unenforceable, it shall be deemed stricken from, and
shall in no way affect the validity or enforceability of, the remaining
provisions of this Agreement. If any provision of this Agreement shall be
determined, under applicable law, to be overly broad in duration,
geographical coverage or substantive scope, such provision shall be deemed
narrowed to the broadest term permitted by applicable law.
(e) Waiver. The waiver by either party hereto of a breach of any
provision of this Agreement by the other shall not operate or be construed as
a waiver of any subsequent breach of the same provision or any other
provision of this Agreement.
(f) "Key Man" Insurance. To the extent that Employer desires to obtain
insurance on Employee's life and/or health, Employee shall cooperate and do
all acts necessary (including submitting to medical examinations) to enable
Employer to obtain said insurance.
(g) Representation Regarding Prior Contracts. Employee represents and
warrants that no prior contract or agreement of any kind entered into by
Employee or any prior or other performance by Employee will interfere in any
manner with Employee's complete performance of Employee's duties hereunder or
with Employee's compliance with the other terms and conditions hereof.
(h) Entire Agreement. This Agreement represents the entire agreement
and understanding between the parties hereto regarding Employee's employment
with Employer, and supersedes any and all previous written or oral agreements
or discussions between the parties and any other person or legal entity
concerning said employment.
(i) Binding Agreement. The rights and obligations of the parties under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of such parties. Subject to Employee's reasonable
consent, Employer may assign all or part of its rights hereunder to any
subsidiary or parent company of Employer, in which case services of Employee
hereunder shall be rendered to such assignee. Notwithstanding the foregoing,
Employer may assign its rights hereunder to a wholly owned subsidiary without
Employee's consent. Employee may not assign his rights or obligations under
this Agreement.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(k) Amendments. This Agreement shall not be modified, amended, or in
any way altered except by an instrument in writing and signed by both of the
parties hereto.
(l) Costs and Expenses. If either party to this Agreement brings an
action against the other party to enforce his or its rights under this
Agreement, the substantially prevailing party shall be entitled to recover
his or its costs and expenses, including without limitation, attorneys' fees
and costs, incurred in connection with such action, including any appeal of
such action.
(m) Arbitration. Any and all disputes arising hereunder shall be subject
to resolution by arbitration as provided in the Arbitration Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Employment Agreement as
of the date first written above.
EMPLOYER: EMPLOYEE:
REDNECK FOODS, INC.,
a Delaware corporation
___________________________
ROBERT H. BERNSTEIN
By: _________________________
David Womick,
President
PROPRIETARY RIGHTS AND CONFIDENTIALITY AGREEMENT
The undersigned is being hired to perform services as an employee or
independent contractor working for Redneck Foods, Inc., a Delaware
corporation ("Company"). In consideration of the undersigned's original and
continuing employment with or work for Company in a capacity in which he or
she may receive access or contribute to the production of Confidential
Information (as defined below), the undersigned agrees as follows:
For purposes of this Agreement, "Confidential Information" shall mean
information or material proprietary to Company or designated as Confidential
Information by Company and not generally known by non-Company personnel,
which the undersigned develops or of which the undersigned may obtain
knowledge or access through or as a result of the undersigned's relationship
with Company (including information conceived, originated, discovered or
developed in whole or in part by the undersigned). The Confidential
Information includes, but is not limited to, the following types of
information and other information of a similar nature (whether or not reduced
to writing): discoveries, ideas, inventions, concepts, software in various
stages of development, designs, drawings, specifications, techniques, models,
data, source code, object code, documentation, diagrams, flow charts,
research, development, processes, procedures, "know-how", marketing
techniques and materials, marketing and development plans, customer names and
other information related to customers, price lists, pricing policies,
financial information and employee files. Confidential Information also
includes any information described above which Company obtains from another
party and which Company treats as proprietary or designates as Confidential
Information, whether or not owned or developed by Company. INFORMATION
PUBLICLY KNOWN THAT IS GENERALLY EMPLOYED BY THE TRADE AT OR AFTER THE TIME
THE UNDERSIGNED FIRST LEARNS OF SUCH INFORMATION, OR GENERIC INFORMATION OR
KNOWLEDGE WHICH THE UNDERSIGNED WOULD HAVE LEARNED IN THE COURSE OF SIMILAR
EMPLOYMENT OR WORK ELSEWHERE IN THE TRADE, SHALL NOT BE DEEMED PART OF THE
CONFIDENTIAL INFORMATION.
All notes, data, reference materials, sketches, drawings, memoranda,
documentation and records in any way incorporating or reflecting any of the
Confidential Information and all proprietary rights therein, including
copyrights, shall belong exclusively to Company and the undersigned agrees to
turn over all copies of such materials in the undersigned's control to
Company upon request or upon termination of the undersigned's employment with
Company.
The undersigned agrees during his or her employment by Company and thereafter
to hold in confidence and not to directly or indirectly reveal, report,
publish, disclose or transfer any of the Confidential Information to any
person or entity, or utilize any of the Confidential Information for any
purpose, except in the course of the undersigned's work for Company.
The undersigned agrees that any inventions, ideas or original works of
authorship in whole or in part conceived or made by the undersigned during or
after the term of his or her employment or relationship with Company which
are made through the use of any of the Confidential Information or any of
Company's equipment, facilities, supplies, trade secrets or time, or which
relate to the Company's business or the Company's actual or demonstrably
anticipated research and development, or which result from any work performed
by the undersigned for Company, shall belong exclusively to Company and shall
be deemed part of the Confidential Information for purposes of this Agreement
whether or not fixed in a tangible medium of expression. Without limiting
the foregoing, the undersigned agrees that any such original works of
authorship shall be deemed to be "works made for hire" and that Company shall
be deemed the author thereof under the U.S. Copyright Act (Title 17 of the
U.S. Code), provided that in the event and to the extent such works are
determined not to constitute "works made for hire" as a matter of law, the
undersigned hereby irrevocably assigns and transfers to Company all right,
title and interest in such works, including but not limited to copyrights.
This agreement shall be construed in accordance with the provisions of
Section 2870 of the California Labor Code (a copy of which is attached
hereto) relating to inventions made by an employee, and accordingly this
Agreement is not intended and shall not be interpreted to assign to or vest
in Company any of the undersigned's rights in any inventions other than those
described in the first sentence of this Section 4.
Attached is a complete description of all inventions or original works of
authorship made by the undersigned prior to his or her employment with
Company, and it is agreed that these inventions and original works of
authorship shall be excluded from the provisions of Section 4 above.
Because of the unique nature of the Confidential Information, the undersigned
understands and agrees that Company will suffer irreparable harm in the event
that the undersigned fails to comply with any of his or her obligations under
Sections 2, 3 or 4 above and that monetary damages will be inadequate to
compensate Company for such breach. Accordingly, the undersigned agrees that
Company will, in addition to any other remedies available to it at law or in
equity, be entitled to injunctive relief to enforce the terms of Sections 2,
3 and 4 above.
This Agreement shall be governed by California law applicable to contracts
between residents of California which are wholly executed and performed in
California. This Agreement contains the full and complete understanding of
the parties with respect to the subject matter hereof and supersedes all
prior representations and understandings, whether oral or written. In the
event that any provision hereof or any obligation or grant of rights by the
undersigned hereunder is found invalid or unenforceable pursuant to judicial
decree or decision, any such provision, obligation or grant of rights shall
be deemed and construed to extend only to the maximum permitted by law, and
the remainder of this Agreement shall remain valid and enforceable according
to its terms.
I agree to the above terms and acknowledge receipt of a copy of this
Agreement.
Date: ____________________________
Signature: ________________________
Name (printed): ___________________
Social Security No: _________________
Mailing Address: ___________________
CALIFORNIA LABOR CODE
2870. Employment Agreements; Assignment of Rights
(a) Any provision in an employment agreement which provides that an
employee shall assign or offer to assign any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret information,
except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of February
4, 1997, is entered into by and among REDNECK FOODS, INC., a Delaware
corporation ("Company"), JEFF FOXWORTHY, an individual ("Foxworthy") and
DAVID WOMICK, an individual ("Womick"), with reference to the following:
Simultaneously with the execution and delivery of this Agreement, (i) Company
and Foxworthy entering into a Series A Convertible Preferred Stock Purchase
Agreement (the "Stock Purchase Agreement") providing for, among other things,
the acquisition by Foxworthy 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.
Womick is currently the owner of 5,100,000 shares of the Common Stock of
Company.
Pursuant to Section 3.1 of the Stock Purchase Agreement, the parties hereto
have agreed to enter into this Agreement to provide, under certain
circumstances, for the registration of Foxworthy's Preferred Stock and
Womick's Common Stock as provided herein.
NOW, THEREFORE, in consideration of the obligations and agreements contained
herein and in the Stock Purchase Agreement, the parties hereto agree as
follows:
1. Definitions. All capitalized terms used but not otherwise defined
herein shall have the meanings ascribed thereto in the Stock Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
1.1. "Commission" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
1.2. "Exchange Act" shall mean the Securities Exchange Act of 1934 or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
1.3. "Registrable Shares" shall mean (i) any shares of Preferred Stock
acquired by Foxworthy pursuant to the Stock Purchase Agreement (whether by
purchase or promissory note conversion), (ii) any shares of the equity stock
of Company issued or to be issued upon the conversion of the Preferred Stock
referred to in clause (i), (iii) any shares of Common Stock held by Womick,
and/or (iv) any other shares of stock of Company issued as a dividend or
other distribution with respect to, or in exchange for or in replacement of,
the shares referred to in clauses (i), (ii) and/or (iii).
1.4. "Rule 144" shall mean Rule 144 promulgated under the Securities Act or
any successor or complementary rule thereto.
1.5. "Securities Act" shall mean the Securities Act of 1933 or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
2. Piggyback Registration.
2.1. Registrations. Subject to the terms and conditions set forth in this
Agreement, if Company at any time determines to prepare and file a
registration statement under the Securities Act in connection with the
proposed offer and sale for money or property of any of its securities
(except any registration statement in connection with any acquisition of any
entity or business or any employee benefit plan, including any stock option
plan, or on Form S-4 or Form S-8 promulgated under the Securities Act or any
successor forms thereto), Company shall promptly, but in no event less than
thirty (30) days prior to the proposed date of filing of such registration
statement, give written notice to Foxworthy and Womick of its intention to so
register such securities (such notice to specify the underwriter, if any, for
such proposed offering, the proposed number of shares to be offered and any
other material terms of such proposed offering if known at such time) and,
upon the written request, given within fifteen (15) days after delivery of
such notice by Company, of Foxworthy and/or Womick to include in such
registration Registrable Shares held by Foxworthy or Womick, as the case may
be (which request shall specify the number of Registrable Shares proposed to
be included in such registration by Foxworthy and/or Womick), Company shall
cause all such Registrable Shares requested to be included by Foxworthy
and/or Womick to be included in such registration on the same terms and
conditions as the securities otherwise being sold in such registration;
provided, however, that if the offering which is the subject of such
registration is underwritten, in whole or in part, and the managing
underwriter advises Company in writing that the inclusion of all Registrable
Shares proposed to be included in such registration would interfere with the
successful marketing (including pricing) of the securities proposed to be
registered by Company, then the number of Foxworthy's and/or Womick's
Registrable Shares to be included in the underwritten offering may be reduced
or excluded altogether; provided that all of Womick's Registrable Securities
shall be subject to reduction or exclusion before any of Foxworthy's
Registrable Securities are reduced or excluded. If Foxworthy and/or Womick
elects to include Registrable Shares in any registration statement filed by
Company in accordance with the provisions of this Section 2, but some or all
of such Registrable Shares are excluded from such registration pursuant to
this Section 2, Foxworthy and/or Womick shall have the right pursuant to this
Section 2 to include such excluded Registrable Shares in any subsequent
registration statement or registration statements as may be filed by Company
with respect to offerings of its securities, subject to the terms and
conditions set forth in this Section 2. Company may require that the
Registrable Shares requested for inclusion be included in the underwriting on
the same terms and conditions as the securities being sold through the
underwriters. In the event Company grants registration rights to one or more
third parties that are more favorable than the registration rights granted to
Foxworthy pursuant to this Section 2, then in lieu of the registration rights
granted pursuant to this Section 2, Foxworthy shall be entitled to the more
favorable third-party registration rights.
2.2. Terms and Conditions. In connection with any registration pursuant to
this Section 2, and subject to the other applicable terms and conditions of
this Agreement, Company shall in its sole discretion determine the terms and
conditions of such registration, including, without limitation, the timing
thereof; the scope of the offering contemplated thereby (i.e., whether the
offering shall be a combined primary offering and a secondary offering or
limited only to a secondary offering); the manner of distribution of
Registrable Shares and all other material aspects of the registration and the
registration process. In connection therewith, Company may require that any
such registration be underwritten.
2.3. Expenses. All expenses of Company incurred in effecting a
registration under this Section 2, including, without limitation, all
registration and filing fees (including all expenses incident to filing with
the NASD), fees and expenses of complying with securities and "blue-sky"
laws, printing expenses and fees and expenses of counsel and accountants,
shall be borne 100% by Company. All expenses of Foxworthy and Womick
incurred in effecting a registration under this Section 2, including all
underwriting discounts and selling commissions shall be borne by Foxworthy
and Womick, respectively, except that the Company shall bear the legal fees
and expenses of one counsel to Foxworthy and Womick, up to a maximum of
Twenty Thousand Dollars ($20,000) per registration. All expenses of
Foxworthy and Womick, including the legal fees and expenses of such counsel,
which exceed Twenty Thousand Dollars ($20,000) shall be borne solely by
Foxworthy and Womick, respectively.
3. Demand Registrations.
3.1. S-3 Registrations. After Company becomes eligible for the use of Form
S-3, Foxworthy shall have the right to require Company to file a Form S-3
registration statement or its equivalent under the Securities Act covering
the registration of not less than Five Hundred Thousand Dollars ($500,000) in
market value of the Registrable Shares. Company shall be obligated to effect
only four (4) registrations pursuant to this Section 3.1.
3.2. Notice. If Foxworthy wishes to exercise his rights under Section 3.1,
he shall do so by providing Company with written notice (specifying that such
notice is being made pursuant to this Section 3.3) which notice shall specify
the number of Registrable Shares to be included in such registration.
3.3. Underwriting. If Foxworthy intends a registration pursuant to this
Section 3 to be underwritten, Foxworthy's notice to Company shall specify the
underwriter or underwriters to be employed in connection therewith. Company
shall have the right to reasonably approve any underwriter selected by
Foxworthy. Foxworthy's right to participate in a registration pursuant to
this Section 3 shall be conditioned upon Foxworthy's participation in and
agreement to the terms of such underwriting.
3.4. Standoff. Notwithstanding the provisions of Section 3.1 and 3.2,
Company shall not be obligated to effect a registration pursuant to this
Section 3 during the period starting with the date sixty (60) days prior to
Company's estimated date of filing of and ending on a date six (6) months
following the effective date of a registration statement pertaining to an
underwritten public offering of securities for the account of Company;
provided that Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective and that
Company's estimate of the date of filing such registration statement is made
in good faith. Further, if Company shall furnish to Foxworthy a certificate
signed by the President of the Company stating that in the good faith
judgment of the Board of Directors it would be seriously detrimental to
Company or its shareholders for a registration statement to be filed in the
near future, then Company's obligation to file a registration statement
pursuant to this Section 3 shall be deferred for a period not to exceed
ninety (90) days; provided, however, that such a deferral shall not occur
more than once in any twenty-four (24) month period.
3.5. Expenses.
(a) Expenses of Company. All expenses of Company incurred in effecting a
registration under this Section 3, including, without limitation, all
registration and filing fees (including all expenses incident to filing with
the NASD), fees and expenses of complying with securities and "blue-sky"
laws, printing expenses and fees and expenses of counsel and accountants,
shall be borne 100% by Company. If, however, Foxworthy makes and then
subsequently withdraws a request for a registration pursuant to Section 3.1
or 3.2, Foxworthy shall bear all such expenses of such registration.
Notwithstanding the foregoing, if, at the time of a withdrawal of a request
for registration, Foxworthy shall have learned of a material adverse change
in the condition, business or prospects of Company that was not known to
Foxworthy (or which Foxworthy was not reasonably capable of knowing without
investigation) at the time of the request, and such material adverse change
is, in good faith, the reason why Foxworthy decided to withdraw his request,
then Foxworthy shall not be required to pay any of such registration
expenses.
(b) Expenses of Foxworthy. All expenses of Foxworthy incurred in effecting
a registration under this Section 3, including all underwriting discounts and
selling commissions shall be borne by Foxworthy, except that Company shall
bear the legal fees and expenses of counsel to Foxworthy, up to a maximum of
Twenty-Five Thousand Dollars ($25,000) per registration. All expenses of
Foxworthy, including the legal fees and expenses of such counsel, which
exceed the foregoing maximum shall be borne solely by Foxworthy.
4. Filing Obligations of Company. In connection with any registration of
the Registrable Shares effected pursuant to Sections 2 or 3 Company shall:
(a) prepare and file the registration statement and such amendments and
supplements to the registration statement and the prospectus or offering
circular used in connection therewith as may be necessary to keep the
registration statement current and effective for a period of six (6) months
(or, if sooner, such time as all securities covered by such registration
statement have been sold) and to comply with the provisions of the Securities
Act and the rules and regulations thereunder with respect to the disposition
of all the Registrable Shares covered by the registration statement for the
period required to effect the distribution thereof;
(b) furnish to Foxworthy and/or Womick, as the case may be, such number of
copies of any prospectus or offering circular, including a preliminary
prospectus, and of a full registration statement and exhibits in conformity
with the requirements of the Securities Act and rules and regulations
thereunder, as Foxworthy and/or Womick may reasonably request in order to
facilitate the disposition of such securities;
(c) use its best efforts to register or qualify the Registrable Shares
covered by the registration statement under the securities or blue sky laws
of such state jurisdictions of the United States as Foxworthy and/or Womick
may reasonably request, and accomplish any and all other acts and things
which may be necessary or advisable to permit sales in such jurisdictions of
such Registrable Shares; provided, however, that Company shall not be
required to consent to general service of process for all purposes, or to
qualify as a foreign corporation, in any jurisdiction where it is not then
qualified or to register or qualify the Registrable Shares covered by such
registration statement in any jurisdiction which would require Company to
amend its certificate of incorporation or By-Laws or covenant or undertake to
do any other act or make any other change regarding its capitalization or
share ownership prior to the effectiveness of such registration or
qualification;
(d) if such registration is an underwritten public offering, enter into an
underwriting agreement in form and substance usual and customary under the
circumstances; and
(e) if a prospectus relating to such registration is required to be
delivered under the Securities Act, notify Foxworthy and Womick of
Registrable Shares covered by such registration statement of the happening of
any event which would cause the prospectus for such registration statement,
as then in effect, to include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances in which
they are being made.
5. Conditions to Registration Obligations. Company shall not be obligated
to effect the registration of the Registrable Shares pursuant to Sections 2
or 3 unless Foxworthy and/or Womick consents to customary conditions of a
reasonable nature that are imposed by Company, including, but not limited to,
the following:
(a) conditions prohibiting the sale of Registrable Shares by Foxworthy
and/or Womick until the registration is effective;
(b) conditions requiring Foxworthy and/or Womick to comply with all
applicable provisions of the Securities Act and the Exchange Act including,
but not limited to, the prospectus delivery requirements of the Securities
Act, and to furnish to Company information about sales made in such public
offering;
(c) conditions prohibiting Foxworthy and/or Womick upon receipt of
telegraphic or written notice from Company that it is required by law to
correct or update the registration statement or prospectus from effecting
sales of the Registrable Shares until Company has completed the necessary
correction or updating; and
(d) if such registration is an underwritten public offering, conditions
requiring Foxworthy to enter into an underwriting agreement in form and
substance usual and customary under the circumstances.
6. Underwriting Agreement; Lock-up Agreement. In consideration for Company
agreeing to its obligations under this Agreement, on each occasion that
Foxworthy and/or Womick shall include Registrable Shares in an underwritten
registration pursuant to Section 2 or 3 for the sale thereof to the public,
and if requested by the managing underwriter in an underwritten registration,
Foxworthy and Womick hereby agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of, any
Registrable Shares (other than those Registrable Shares actually included in
such registration and sold to the public thereunder) for such period of time
(not to exceed one hundred twenty (120) days) from the effective date of such
registration as the underwriter may specify; provided that all the officers
and directors of Company agree to restrictions at least as restrictive in
connection with such registration. Notwithstanding the foregoing, to the
extent that Foxworthy and Womick shall enter into an underwriting agreement
that contains provisions covering matters addressed in this Section 6, the
provisions contained in such underwriting agreement shall control as to the
party or parties so entering into such underwriting agreement.
7. Information Provided by the Foxworthy. Whenever under this Agreement
Registrable Shares are being registered, each of Foxworthy and Womick shall,
as a condition to the inclusion of his Registrable Shares in such
registration, provide Company on a timely basis with such information and
materials as Company may reasonably request in order to effect the
registration of the Registrable Shares.
8. Rule 144. With a view to making available to Foxworthy and Womick the
benefits of Rule 144 under the Securities Act, Company agrees to use its best
efforts to make and keep available adequate current public information with
respect to it within the meaning of, and as required pursuant to, Rule
144(c).
9. Future Grants of Registration Rights. From and after the date of this
Agreement, Company shall not, without the written consent of Foxworthy, enter
into any agreement with any holder or prospective holder of any securities of
Company that (i) provides for the granting to such holder of registration
rights greater than the rights of Foxworthy hereunder, or (ii) includes
provisions that, in the case of a public offering involving an underwritten
registered offering, makes the rights granted to Foxworthy hereunder subject
to or subordinate to the rights granted to such holder or requires an
exclusion or reduction in the number of Registrable Shares of Foxworthy to be
included in the underwriting prior to a pro rata exclusion or reduction in
the number of securities of such holder to be included in the underwriting.
10. Indemnification.
10.1. Indemnification by Company. In connection with any registration of
any Registrable Shares under the Securities Act pursuant to this Agreement,
Company shall indemnify, defend and hold harmless Foxworthy and Womick and each
underwriter of an offering of such securities, each of Foxworthy's, Womick's and
each of such underwriter's officers, directors, and partners, and each person
controlling that underwriter, with respect to which registration, qualification
or compliance has been effected pursuant to this Agreement, against all claims,
losses, damages, costs, expenses and liabilities whatsoever, (or actions in
respect thereof) arising out of or based on (1) any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement,
prospectus, offering circular or other documents (including any related
registration statement, notification or the like) incident to any such
registration or qualification or compliance, (2) any omission (or alleged
omission) to state in any such registration statement, prospectus, offering
circular, or other document a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (3) any violation by
Company of the Securities Act, the Exchange Act or any federal or state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any federal or state securities law applicable to Company or
the offering and relating to action or inaction required of Company in
connection with any such registration, qualification or compliance. Company
shall reimburse Foxworthy, Womick and each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any claim, loss, damage,
cost, expense, liability or action of the type and nature described in this
Section 10.1; provided, however, that the indemnity obligation contained in this
Section 10.1 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of Company (which consent shall not be unreasonably withheld).
Notwithstanding the foregoing, Company shall not be liable to Foxworthy in any
such case pursuant to the provisions of this Section 10.1 to the extent that any
such claim, loss, damage, cost, expense, or liability arises out of or is based
on any untrue statement or omission based on written information furnished to
Company by Foxworthy for use in any such prospectus, offering circular or other
document, and Company shall not be liable to Womick in any such case pursuant to
the provisions of this Section 10.1 to the extent that any such claim, loss,
damage, cost, expense, or liability arises out of or is based on any untrue
statement or omission based on written information furnished to Company by
Womick for use in any such prospectus, offering circular or other document.
10.2 Indemnification by Foxworthy. In connection with any registration of
Registrable Shares under the Securities Act pursuant to this Agreement,
Foxworthy will indemnify Company, each of its directors and officers, each
underwriter, if any, and each underwriter's officers, directors and partners, of
the securities covered by such an underwriter, within the meaning of the
Securities Act, each person who controls Company within the meaning of the
Securities Act, against all claims, losses, damages, costs, expenses and
liabilities whatsoever or (actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other documents (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state in any such registration
statement, prospectus, offering circular or other document a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse Company, such directors, officers, partners,
persons or underwriters for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
cost, expense, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to Company by Foxworthy for use therein; provided,
however, that the indemnity obligation contained in this Section 10.2 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of Foxworthy (which
consent shall not be unreasonably withheld).
10.3. Indemnification by Womick. In connection with any registration of
Registrable Shares under the Securities Act pursuant to this Agreement,
Womick will indemnify Company, each of its directors and officers, each
underwriter, if any, and each underwriter's officers, directors and partners, of
the securities covered by such an underwriter, within the meaning of the
Securities Act, each person who controls Company within the meaning of the
Securities Act, against all claims, losses, damages, costs, expenses and
liabilities whatsoever or (actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other documents (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state in any such registration
statement, prospectus, offering circular or other document a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse Company, such directors, officers, partners,
persons or underwriters for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
cost, expense, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to Company by Womick for use therein; provided, however,
that the indemnity obligation contained in this Section 10.2 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of Womick (which consent
shall not be unreasonably withheld).
10.4. Indemnification Procedure. Promptly after receipt by an indemnified
party of notice of the commencement of any action involving a claim referred
to in the preceding paragraphs of this Section 10, such indemnified party
will, if a claim in respect thereof is made against an indemnifying party,
give written notice to the latter of the commencement of such action. In
case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that an indemnified party shall have the right to
retain its own counsel, with the reasonable fees and expenses to be paid by
the indemnifying party, if such indemnified party shall have reasonably
concluded that representation of such indemnified party or parties by the
counsel retained by the indemnifying party or parties would be inappropriate
due to actual or potential differing interests between such indemnified party
or parties and any other party represented by such counsel in such
proceeding.
10.5. Contribution. If the indemnification provided for in this Section 10
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage, liability or
action referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amounts paid or payable by such indemnified party as a result of such loss,
claim, damage, liability or action in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions which resulted in such loss, claim, damage, liability or action as
well as any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
11. Miscellaneous.
11.1. Effectiveness of Agreement. This Agreement shall become effective on
and as of the date of execution of the Stock Purchase Agreement.
11.2. Successors and Assigns. This Agreement shall bind and inure to the
benefit of Company, Foxworthy and Womick and, subject to Section 11.3, the
respective successors, permitted assigns, heirs and legal representatives (as
the case may be) of Company, Foxworthy and Womick.
11.3. Assignment. Neither Foxworthy nor Womick may assign his rights under
this Agreement to any purchaser or transferee without the prior written
consent of Company. Notwithstanding the foregoing, Foxworthy and Womick may
each assign his respective rights hereunder without Company's consent to (i)
one or more of his parents, spouse, children, grandchildren or siblings, or
any trust for the benefit of one or more of such persons, or (ii) his
legatees, executors or other fiduciaries pursuant to a last will and
testament or pursuant to the terms of any trust which take effect upon death.
Furthermore, Foxworthy and Womick may each assign his respective rights
hereunder without Company's consent on up to five (5) separate occasions;
provided that on any such occasion the assignment is to a single party in
connection with the transfer of at least ten percent (10%) of his Registrable
Shares and provided further that Company is provided with prior written
notice identifying the name and address of such assignee and any other
material information as to the identify of such assignee as may be reasonably
requested by Company. Notwithstanding anything to the contrary contained
herein, Foxworthy may elect to transfer all or a portion of his Registrable
Shares to any third party (to the extent such transfer is otherwise
permissible) without assigning his rights hereunder with respect thereto
provided that in any such event all rights under this Agreement with respect
to the Registrable Shares so transferred shall cease and terminate.
11.4. 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.
11.5. 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, Foxworthy and Womick.
11.6. 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.
11.7. 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.
11.8. 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.
11.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
11.10. Arbitration. Any and all disputes arising hereunder shall be
subject to resolution by arbitration as provided in the Arbitration
Agreement.
12. Exercise Contingent Upon No Material Breach. The exercise by Foxworthy
of any of his rights under this Agreement shall be contingent upon the
absence of any material uncured breach by Foxworthy under any of the
Transaction Documents. The exercise by Womick of any of his rights under
this Agreement shall be contingent upon the absence of any material uncured
breach by Womick under any of the Transaction Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be executed and delivered as of the date first above written.
REDNECK FOODS, INC.,
a Delaware corporation
By
Name: JEFF FOXWORTHY
Title: ________________________
DAVID WOMICK
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