Document:

Exhibit 10.18

 

August 1,
2005

 

Robert J. Taragan

25548 Gaylord Court

Calabasas, California 91302

 

Dear
Rusty,

 

This letter sets forth the
terms and conditions of your employment with United Online, Inc. (the “Company”),
effective as of August 1, 2005 (the “Effective Date”).

 

1.             Position.  You will serve in a
full-time capacity as the Company’s Executive Vice President of Operations and
General Manager of CyberTarget.  You will
report to the Chief Executive Officer of the Company.

 

2.             Salary and Benefits.  You will be paid an annual base salary equal
to your current annual base salary, payable in bi-weekly installments in
accordance with the Company’s standard payroll practices, subject to any
increases as determined by the Board of Directors of the Company (the “Board of
Directors”) from time to time.  You will
be eligible to participate in the Company’s employee benefits plans, including
its 401(k) plan.  In addition, you will
be entitled to participate in the Company’s Exec-U-Care Medical Reimbursement
Insurance Plan so long as such plan is made generally available to the Company’s
senior executives.  You will be entitled
to a minimum of 4 weeks of paid vacation each year or such greater amount as
determined in accordance with the Company’s standard vacation policy.

 

3.             Bonus.  For fiscal years 2005 and 2006, you will be
eligible to participate in a bonus program with eligibility for up to 100% of
your annual base salary.  The criteria
for a bonus for fiscal year 2005 is set forth in the United Online, Inc. 2005
Management Bonus Plan and the amount of such bonus will be determined by the
Compensation Committee of the Board of Directors.  The criteria for a bonus for fiscal year 2006
and the amount of such bonus will be determined by the Board of Directors or a
committee thereof.

 

4.             Acceleration of Stock Options and Restricted Stock Units.  Upon
the termination of your employment by the Company “without cause” or by you for
“good reason” (each term as defined below) within the two (2)-year period
following the Effective Date, the vesting of your outstanding stock options and
restricted stock units will be accelerated by the additional number of shares
in which you would have been vested at the time of such termination if you had
completed an additional twelve (12) months of service (calculated, with respect
to restricted stock units, as if such units vest on a monthly basis).  If such termination occurs within twelve (12)
months after a “Change in Control” or “Corporate Transaction” (as defined in
the applicable stock plan, option agreement or restricted stock unit
agreement), the vesting will be accelerated by the greater
of (i) the additional number of shares as calculated pursuant to the preceding
sentence and (ii) the additional number of shares in which you would have
been vested at the time of such termination if you had completed an additional
period of service equal in duration to the actual period of service completed
by you between the grant date for each applicable award and the date of the
termination (calculated, with respect to restricted stock units, as if such
units vest on a monthly basis).  Such
vesting acceleration will be contingent upon your signing the Release referred
to in Section 7(b) below.  Upon the
termination of your employment as a result of death or Disability (as defined
below) within the two (2)-year period following the Effective Date, the vesting
of your outstanding stock options and restricted stock units will be
accelerated by the additional number of shares in which you would have been
vested at the time of such termination if you had completed an 

 

 

additional twelve (12) months of service (calculated, with respect to
restricted stock units, as if such units vest on a monthly basis).  In the event of an inconsistency between the
terms set forth in this paragraph and the terms set forth in the applicable
stock plan, stock option agreement and/or restricted stock unit agreement, the
terms set forth in this letter will control; provided, however, that the
foregoing will not be construed to diminish the rights that you currently have
under the applicable stock plan, stock option agreement and/or restricted stock
unit agreement.  The provisions of this
paragraph will only apply to equity awards outstanding as of the date of this
letter, although future equity awards may also be covered by this paragraph if
so stated in a resolution of the Board of Directors or a committee thereof.

 

5.             Policies; Procedures; Proprietary Information and Inventions Agreement.  As
an employee of the Company, you will be expected to abide by all of the Company’s
policies and procedures, including, without limitation, the terms of the
Proprietary Information and Inventions Agreement between you and the Company,
the Insider Trading Policy, the Code of Ethics and the Employee Handbook.

 

6.             At Will Employment.  Notwithstanding anything to the contrary
contained herein, your employment with the Company will be “at will” and will
not be for any specified term, meaning that either you or the Company will be
entitled to terminate your employment at any time and for any reason, with or
without cause.  Any contrary
representations which may have been made to you are superseded by the terms set
forth in this paragraph.  This is the
full and complete agreement between you and the Company on this subject.  Although your job duties, title, compensation
and benefits, as well as the Company’s personnel policies and procedures, may
change from time to time, the “at will” nature of your employment may only be
changed in an express written agreement signed by you and a duly authorized
officer of the Company.

 

7.             Termination of Employment

 

a.             Termination by You.  If you terminate your employment with the Company for any reason, other
than as a result of death or Disability or for “good reason” as defined below,
all obligations of the Company as set forth in this letter will cease, other
than the obligation to pay you for services rendered through the date of
termination, to pay you for any accrued but unused vacation days as of the date
of termination, and to fulfill its obligations with respect to your exercise of
any vested stock options in accordance with the terms of the applicable stock
plan and option agreement.  If you
terminate your employment with the Company for “good reason,” as defined below,
in addition to the foregoing, the Company will pay you the Separation Payment
subject to the conditions set forth in Section 7(b) below.  However, and notwithstanding the termination
of your employment by you, you will continue to be obligated to comply with the
terms of the Proprietary Information and Inventions Agreement and if
applicable, the noncompetition provision set forth in Section 9 below.

 

b.             Termination by the Company.  If your employment is terminated by the Company “without cause” as
defined below, and subject to the signing of a release, the form of which is
attached hereto as Exhibit A (the “Release”), the Company will pay you a
separation payment (the “Separation Payment”) equal to an amount equal to one
year of your then current annual base salary plus
the Annual Bonus (as defined herein). 
For purposes of the immediately preceding sentence, “Annual Bonus” means
your then current annual base salary multiplied by the bonus percentage used to
calculate the bonus awarded to you for the immediately preceding year.  This Separation Payment will be payable
monthly on a pro rata basis over twelve (12) months after such
termination.  Payment of this Separation
Payment will be contingent on your signing the Release.  Upon termination of your employment “without
cause,” other than the obligations set forth in the first sentence of Section 7(a)
above and the acceleration of 

 

2

 

vesting provided in Section 4 above, the Company will have no
further obligation to you except pursuant to this paragraph.

 

If your employment is
terminated by the Company “with cause” as defined below, the Company will have
no further obligation to you under the terms of this letter, other than the
obligations set forth in the first sentence of Section 7(a) above.  However, and notwithstanding the termination
of your employment by the Company “with cause” or “without cause,” or by you
for “good reason,” you will continue to be obligated to comply with the terms
of the Proprietary Information and Inventions Agreement and if applicable, the
noncompetition provision set forth in Section 9 below.

 

You have the right decline
to receive a portion of the benefits set forth under Sections 4 and 7 in the
event that you determine that the provision of such benefits to you would
result in a “parachute payment” as such term is defined in Section 280(G)(b)(2)
of the Internal Revenue Code of 1986.

 

c.             Termination by Death or
Disability.  If your employment is terminated as a result
of your death, the Company will be obligated to pay your estate or
beneficiaries (as the case may be) for services rendered by you for the Company
through the date of your death.  If your
employment is terminated as a result of your Disability, as defined below, the
Company will be obligated to pay you for services rendered by you for the
Company through the date of your termination. 
In the event of termination of your employment due to death or
Disability, you, your estate or your beneficiaries, as appropriate, will be
entitled to the acceleration benefits set forth in Section 4.  The provisions of this Section 7(c) will
not affect or change the rights or benefits to which you are otherwise entitled
under the Company’s benefits plans or otherwise.

 

d.             Definitions.

 

For purposes of this letter,
“good reason” means:

 

	
  (i)

  	
  a reduction in your base
  salary without your prior written consent;

  
	
  (ii)

  	
  a material reduction in
  your position, duties or responsibilities, without your prior written
  consent, unless such reduction is effected at the request of Mark R.
  Goldston;

  
	
  (iii)

  	
  a change in your place of
  employment which is not within a 50-mile radius of the following address,
  without your prior written consent: 21301 Burbank Boulevard, Woodland Hills,
  CA 91367, or;

  
	
  (iv)

  	
  any material breach by the
  Company of the terms of this letter which is not cured by the Company within
  30 days following receipt of written notice thereof.

  
	
   

  	
   

  
	
  For purposes of this
  letter, “with cause” means your commission of any one or more of the
  following acts:

  
	
   

  	
   

  
	
  (i)

  	
  willfully damaging of the
  property, business, business relationships, reputation or goodwill of the
  Company or its subsidiaries;

  
	
  (ii)

  	
  commission of a felony or
  a misdemeanor involving moral turpitude;

  
	
  (iii)

  	
  theft, dishonesty, fraud
  or embezzlement;

  
	
  (iv)

  	
  willfully violating any
  rules or regulations of any governmental or regulatory body that is or is
  reasonably expected to be injurious to the Company or its subsidiaries;

  
	
  (v)

  	
  the use of alcohol,
  narcotics or other controlled substances to the extent that it prevents you
  from efficiently performing services for the Company or its subsidiaries;

  
	
  (vi)

  	
  willfully injuring any
  other employee of the Company or its subsidiaries;

  
	
  (vii)

  	
  willfully injuring any
  person in the course of performance of services for the Company or its
  subsidiaries;

  
	
  (viii)

  	
  disclosing to a competitor
  or other unauthorized persons confidential or proprietary information or
  secrets of the Company or its subsidiaries;

  

 

3

 

	
  (ix)

  	
  solicitation of business
  on behalf of a competitor or a potential competitor of the Company or its
  subsidiaries;

  
	
  (x)

  	
  harassment of any other
  employee of the Company or its subsidiaries or the commission of any act
  which otherwise creates an offensive work environment for other employees of
  the Company or its subsidiaries;

  
	
  (xi)

  	
  failure for any reason
  within five (5) days after receipt by you of written notice thereof from the
  Company, to correct, cease or otherwise alter any insubordination, failure to
  comply with instructions, inattention to or neglect of the duties to be
  performed by you or other act or omission to act that in the opinion of the
  Company does or may adversely affect the business or operations of the
  Company or its subsidiaries;

  
	
  (xii)

  	
  breach of any material
  term of this letter; or

  
	
  (xiii)

  	
  any other act or omission
  that is determined to constitute “cause” in the good faith discretion of the
  Board of Directors.

  

 

For purposes of this letter,
“without cause” means any reason not within the scope of the definition of the
term “with cause.”

 

For purposes of this letter,
“Disability” means your inability to engage in any substantial gainful activity
necessary to perform your duties as General Manager of CyberTarget by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted, or can be expected to last, for a
continuous period of not less than twelve (12) months.

 

8.             Withholding Taxes.  All forms of compensation referred to in this
letter are subject to reduction to reflect applicable withholding and payroll
taxes.

 

9.             Noncompetition and Nonsolicitation Covenants.  From
and after the Effective Date until one year after termination of your
employment with the Company for any reason, you will not directly or indirectly
solicit, attempt to solicit, interfere or attempt to interfere with the
relationship of the Company or its subsidiaries with existing customers for the
products or services of the Company or its subsidiaries, on your behalf or any
other person or entity engaged in the design, development, manufacture,
marketing or sale of a product or service which is in competition with the
products or services of the Company or its subsidiaries; or directly or
indirectly solicit any of the employees of the Company or its subsidiaries for
the purpose of hiring them or inducing them to leave their employment with the
Company or its subsidiaries, on your own behalf or on behalf of any other
person or entity.  In addition, from and
after the Effective Date until one year after termination of your employment
with the Company for any reason, so long as you are receiving the Separation
Payment, you will not, at any place in any county, city or other political
subdivision of the United States in which the Company or its subsidiaries is
engaged in business or providing its services:

 

a.             directly or
indirectly design, develop, manufacture, market or sell any product or service
which is in competition with the products or services of the Company or its
subsidiaries; or

 

b.             directly or indirectly own any interest in,
control, be employed by or associated with or render advisory, consulting or
other services (including but not limited to services in research) to any
person or entity, or subsidiary, subdivision, division or joint venture of such
entity in connection with the design, development, manufacture, marketing or
sale of a product or service which is in competition with the products or
services of the Company or its subsidiaries; provided, however, that nothing in
this letter will prohibit you from owning less than one percent (1%) of the
equity interests of any publicly held entity.

 

4

 

10.           Entire Agreement.  This letter, together with the Proprietary
Information and Inventions Agreement, any Company handbooks and policies in
effect from time to time and the Company’s stock option plan, stock option
agreement and restricted stock unit agreement, contains all of the terms of
your employment with the Company and supersedes any prior understandings or
agreements, whether oral or written, between you and the Company.  If any provision of this letter is held by an
arbitrator or a court of competent jurisdiction to conflict with any federal, state
or local law, or to be otherwise invalid or unenforceable, such provision shall
be construed in a manner so as to maximize its enforceability while giving the
greatest effect as possible to the parties’ intent.  To the extent any provision cannot be construed
to be enforceable, such provision will be deemed to be eliminated from this
letter and of no force or effect and the remainder of this letter will
otherwise remain in full force and effect and be construed as if such portion
had not been included in this letter. 
This letter is not assignable by you. 
This letter may be assigned by the Company to its subsidiaries or to
successors in interest to the Company or its lines of business.

 

11.           Amendment and Governing Law.  This letter may not be amended
or modified except by an express written agreement signed by you and the
Company.  The terms of this letter and
the resolution of any disputes will be governed by California law, and venue
for any disputes will be in Los Angeles, California.

 

12.           Term.  This
letter will expire on the two (2) year-anniversary of the Effective Date,
except Sections 6, 9, 10, 11, and 12 will survive such expiration.  Following the expiration of this letter, your
employment with the Company will continue to be “at will.”

 

We look forward to
continuing our successful relationship. 
You may indicate your agreement with these terms by signing and dating
this letter.

 

If you have any questions,
please call the undersigned.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
  UNITED ONLINE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark R. Goldston

  	
   

  
	
   

  	
  Name:

  	
  Mark R. Goldston

  
	
   

  	
  Title:

  	
  Chairman, President & Chief Executive Officer

  
					

 

I have read the foregoing and accept the
terms set forth in this letter:

 

	
  /s/
  Robert J. Taragan

  	
   

  
	
  Robert
  J. Taragan

  	
   

  

 

Dated: 
August 1, 2005

 

5EXHIBIT 10.2

 

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT,

MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED WITH
THE

SECURITIES AND EXCHANGE COMMISSION (“SEC”) PURSUANT TO
SEC RULE 24b-2

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

MANUFACTURING AND LIMITED DISTRIBUTION LICENSE
AGREEMENT

 

THIS MANUFACTURING AND LIMITED
DISTRIBUTION LICENSE AGREEMENT, (this “Agreement”) by and between CINNABON, INC., a Washington corporation, with principal
offices at Six Concourse Parkway, Suite 1700, Atlanta, Georgia, 30328-5352 (“CBI”),
and POORE BROTHERS, INC., a Delaware corporation, with principal
offices located at 3500 S. La Cometa Drive, Goodyear, Arizona 85338 (“PBI”),
is made effective as of the 10th day of September, 2004 (“Effective
Date”).

 

RECITALS

 

CBI is engaged in the marketing of cinnamon rolls
and other fresh baked products in the United States and worldwide, under the
trademarks described in Exhibit A
(“Trademarks”);

 

PBI supplies retailers throughout the United States
with a wide range of snack products;

 

CBI is willing to grant to PBI a limited, exclusive
and non-transferable license to use CBI proprietary information in the
manufacture and sale of certain consumer snack products (“Approved Products”)
for the purposes described in and pursuant to the terms and conditions
contained in this Agreement.

 

CBI is willing to grant a limited, exclusive and
non-transferable license to PBI to use the Trademarks for purposes of
packaging, advertising and selling the Approved Products pursuant to the terms
and conditions contained in this Agreement; and

 

PBI desires to obtain the licenses described above
under the conditions contained in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth herein, and other valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, agree as follows:

 

1.             Definitions.  Exhibit B contains a list of defined terms
that are used in this Agreement and the definitions for those terms.  Any specific dates referenced in this
Agreement that fall on a weekend or holiday shall be construed to mean the
first business day following such weekend or holiday.

 

2.             Engagement.

 

(a)           License; Grant.  
Subject to the terms and conditions of this Agreement, CBI hereby grants
to PBI and its Affiliates the exclusive right, license and privilege to use the
Trademarks

 

1

 

during the Term in
connection with, and only in connection with, the manufacture, distribution or
sale by PBI of the Approved Products.

 

(b)           Term.  During the
Test Market Term, PBI shall engage in commercially reasonable actions to
determine the likelihood of success of the Approved Products.  Upon a “successful” Test Market Term, PBI
may, at its option, choose to continue the Agreement for the Initial Term.  A “successful” Test Market Term shall mean
either: (1) that PBI has billed Customers for a total of at least [*] Dollars
($[*]) in Net Sales, and PBI has paid to CBI at least [*] Dollars ($[*]) in
Royalty Fees, and PBI Customers have experienced an acceptable sell-through
rate for the Approved Products or (2) that PBI Customers have experienced a
sell-through rate for the Approved Products that warrants, in PBI’s sole
discretion, continuing distribution of the Approved Products.  At the conclusion of the Initial Term, PBI
may renew this Agreement for the Renewal Term by notifying CBI in writing of
such intent within thirty (30) days before the expiration of the Initial
Term.    PBI shall, at its sole expense,
use diligent, good faith efforts to sell, market and promote the Approved
Products in the Territory during the Test Market Term, Initial Term and the
Renewal Term.  Unless specifically stated
otherwise in this Agreement, all costs and expenses relating to such marketing
activities and strategy shall be borne by PBI.

 

(c)           Minimum Net Sales. 
Should PBI fail to make the Minimum Net Sales required in any year or to
meet its obligations under Section 2(b),
PBI, at its option may, within thirty (30) days following such year, or its
failure to meet its obligations under Section 2(b), pay to CBI as a Royalty Fee
the difference between Earned Royalties based on the actual Net Sales and the
Earned Royalties that would have been due based on the Minimum Net Sales
required for such year.  Should PBI fail
to pay such amount to CBI, CBI’s sole and exclusive remedy will be to terminate
this Agreement, except that such termination shall not be considered “with
cause” under Section 17(b).

 

(d)           Limitations. 
The Trademarks shall be used by PBI only in connection with the
manufacture, distribution or sale of the Approved Products during the Term and
may not be used for any other merchandise.

 

(e)           Third Party Manufacturers. 
Subject to all terms of this Agreement, PBI has the right to authorize
Third Party manufacturers to use the Trademarks in the manufacture or creation
of the Approved Products and related marketing, distribution, packaging and
shipping materials on behalf of PBI or its Affiliates.  PBI shall be responsible for requiring its
Third Party manufacturers to use the Trademarks and produce the Approved
Products such that they satisfy all the requirements of this Agreement.

 

(f)            No Other Right to Licensed Marks. 
This Agreement conveys to PBI no other rights in the Trademarks or to
other intellectual property owned by CBI; nor does this Agreement grant to any
other Third Party rights to the Trademarks or to other Intellectual Property
owned by CBI.

 

(g)           No Rights Outside Territory. 
PBI agrees that it possesses no right to sell the Approved Products to
exporters or others for resale or reshipment outside the Territory.  In the event that PBI becomes aware that any
party to whom it sells the Approved Products intends to sell or ship, or is
selling or shipping, the Approved Products outside the Territory, PBI shall
take actions which are both commercially reasonable and legally permissible to
prevent such sales or shipment.  In such
case, PBI shall indemnify and hold CBI harmless from any damages, subject to
paragraph 20 and 14(c) herein, that may result from such action.

 

(h)           CBI Modification of Trademarks. 
PBI acknowledges that from time to time and without PBI’s approval, CBI
may modify certain elements of the Trademarks, add new marks, or discontinue
the use of certain Trademarks. 
Accordingly, CBI does not represent or warrant that the

 

2

 

Trademarks or any of its
elements will be maintained or used in any particular fashion.  In the event that CBI modifies the Trademarks
or creates new Trademarks, this Agreement applies to any such modifications or
creations effective upon written notification from CBI; provided, however, that
PBI may continue to sell, manufacture and distribute, and shall not be required
to destroy or cease using, any Approved Products inventories, raw materials or
supplies (including packaging and labeling components thereof that have not yet
been consumed) that exist or are part of work in progress as of PBI’s receipt
of the notification unless directed otherwise by CBI and CBI agrees to pay all
reasonable costs related to destroying or ceasing use of all Approved Products
inventories, raw materials or supplies (including packaging and labeling
components thereof that have not yet been consumed) that exist or are part of
work in progress, and the creation of any and all necessary new artwork.  Upon written notification to PBI, which shall
be timely and not unreasonably withheld, this Agreement shall automatically
include a license to PBI to any such modified or new Trademarks, consistent
with the terms stated herein.  PBI will
have a period of not less than ninety (90) days before CBI shall require PBI to
begin use of any modified or new Trademarks.

 

(i)            Trademarks.  PBI shall not
use any of the Trademarks as part of its corporate or other company names.

 

3.             Transferability. 
Neither Party shall sell, assign, mortgage, transfer or otherwise
encumber this Agreement, to any Third Party, except as expressly approved, in
writing, by the other Party, which approval shall not be unreasonably
withheld.  Notwithstanding the foregoing,
however, upon prior sixty (60) days written notice to the other Party, a Party
may assign or transfer this Agreement to any corporation which is or becomes an
Affiliate of such Party, or which survives a merger in which such Party
participates, or to any corporation or other person or business entity which
acquires all or substantially all of the assets of such Party, provided,
however, that the Third Party to whom such assignment is made agrees to comply
in full with the obligations hereunder.

 

4.             Payment and Reporting
Obligations.

 

(a)           Sales and Forecast Reports . 
Within ten (10) days of the end of each month and thirty (30) days of the
end of each PBI fiscal quarter, PBI shall provide CBI a sales report for the
prior month and fiscal quarter by Approved Product, together with a non-binding
forecast of sales for the upcoming month or fiscal quarter, as applicable.

 

(b)           Royalty Fee. 
Within thirty (30) days following the end of each PBI fiscal quarter
during the Term, PBI shall pay to CBI the Earned Royalties due from sales of
the Approved Products during the preceding quarter.

 

(c)           Accounting.  In addition
to PBI’s payment obligations set forth in
Section 4(b) above, within thirty (30) days following the last day
of each PBI fiscal quarter, PBI shall provide CBI with a written accounting
report that includes: (i) the sales of Approved Products for the reporting
period, (ii) the number and a description of any returned or rejected
shipments, including order size and the date of the shipment that was rejected
or returned, (iii) such other information as CBI may reasonably request.  Such accounting report shall be signed by the
chief financial officer of PBI or such other senior officer of PBI as may be
reasonably acceptable to CBI, shall be certified as being true and accurate,
shall be a complete accounting of the subject accounting period, and shall
correspond to and support the payments required in Section 4(b) for the same period.

 

(d)           Annual Reports. 
PBI shall provide CBI with an annual aggregate statement for the
preceding PBI fiscal year.  Such annual
reports, which shall be certified as accurate by PBI’s chief

 

3

 

financial officer, shall
be delivered as soon as possible after the last day of the immediately
preceding PBI fiscal year of the Agreement, but in no event later than sixty
(60) days after the end of such year.

 

(e)           Audit Rights. 
During the term of this Agreement and for a period of twenty-four (24)
months after the termination or expiration hereof, PBI shall maintain, and CBI
shall have the right, at CBI’s sole cost, to inspect and audit PBI’s books and
records required to verify the amounts due hereunder, any invoices submitted
hereunder, and compliance by PBI with the terms and conditions of this
Agreement.  PBI shall maintain adequate
books and records to document all sales and all items reflected in the
computation of the Royalty Fees.  Such
books and records shall be made available to CBI at any time during regular
business hours, upon ten (10) days advance written request.

 

5.             Trademarks

 

(a)           Ownership and Registration. 
CBI represents that it owns all right, title, and interest to the
Trademarks, and that trademark registrations have been received from the
government of the United States for the Trademarks or that CBI has filed the necessary applications for
registration, as set forth in Exhibit A. 
CBI represents that as of the date of this Agreement, no Third Party has
made any meritorious claim (as determined by a court of competent jurisdiction)
of right, misappropriation or infringement relative to the Trademarks and CBI
warrants that, to the best of CBI’s knowledge, CBI’s licensing of the
Trademarks to PBI does not infringe upon or otherwise violate any legal rights
of any Third Party in the Territory known to CBI.

 

(b)           Restrictions. 
PBI agrees that all of the Trademarks are the sole property of CBI and
that any use of the Trademarks outside the scope of this Agreement without CBI’s
express written consent is an infringement of CBI’s exclusive right to use and
ownership of the Trademarks.  Nothing
herein shall give PBI any right, title, interest in or right to use the Trademarks
during the course of, or after the termination of, this Agreement, except the
right to use the Trademarks in accordance with the terms of this
Agreement.  PBI agrees that the use of
the Trademarks pursuant to this Agreement does not constitute a grant of any
ownership interest or other interest in or to the Trademarks, and any and all
goodwill arising from the use of the Trademarks shall inure solely and
exclusively to CBI.  Further, any right
and license of the Trademarks granted hereunder is non-exclusive except as
provided for herein and CBI has and retains the rights, among others, to use
the Trademarks itself in connection with selling any products and services and
retains the right to grant others the right to use the Trademarks, except as otherwise
expressly set forth herein.

 

(c)           Use.  PBI shall not
act, directly or indirectly, in a manner which might lead a Third Party to
believe that the Trademarks are owned by PBI

 

(d)           Warranties.  PBI
acknowledges the importance of maintaining the validity of all of the
Trademarks and the valuable goodwill associated with the Trademarks.  Accordingly, PBI agrees that it:

 

(i)            Shall not have any right to use any
portion of the Trademarks without CBI’s prior written consent in each case
first obtained;

 

(ii)           Shall not use the Trademarks as part of
PBI’s corporate or other legal or fictitious name or combine PBI’s name or
trademarks with those of CBI in any manner that is likely to cause confusion or
be mistaken for the Trademarks;

 

(iii)          Shall comply with any requirements
established by CBI concerning the style, design, display and use of the
Trademarks, to correctly use the trademark symbol TM or registration

 

4

 

symbol ®, as the case may
be, with every use of the Trademarks as may be authorized or approved by CBI;

 

(iv)          Shall not sell any item other than the
Approved Products bearing the Trademarks without CBI’s prior written consent in
each case first obtained and shall not use the Trademarks for any purpose other
than provided in this Agreement; however, PBI may use any textual and/or
pictorial matter, previously approved by CBI in writing, for Promotional
Materials or display and advertising material as may, in PBI’s reasonable
judgment, promote the sale of the Approved Products, so long as such CBI
approval was granted within the twelve (12) months prior to the date of PBI’s
anticipated use of such matter and except as where otherwise required by Court
order, judgment or decree.

 

(v)           Shall not attempt any sublicense,
assignment or other transfer of any interest in any portion of any of the
Trademarks or this Agreement, except as described in Section 3; and

 

(vi)          Shall not challenge or contest in any way
the validity of the Trademarks, or the registration, or the ownership thereof
by CBI or assist any Third Party in challenging CBI’s rights in the
Trademarks.  At CBI’s expense, PBI shall
execute any documents reasonably requested by CBI necessary to obtain or retain
any protection for the Trademarks or to maintain their continued validity and
enforceability.

 

(e)           Modification of Trademarks. 
CBI reserves the right to change or substitute a new or revised
trademark for any Trademark. In the event CBI decides to change some or all of
the Trademarks, PBI shall cease using the discontinued Trademarks and shall
begin distribution of the Approved Products under the new Trademark(s) within
ninety (90) days of such written notice from CBI (or such shorter period as may
be required by a court of competent jurisdiction).  CBI shall reimburse PBI for all reasonable
expenses it incurs in making the appropriate Trademark change or changes,
including without limitation, reasonable packaging expenses, marketing
materials expenses and sales materials expenses.

 

(f)            Notification. 
PBI agrees to notify CBI of any infringement of, or challenge to the
validity of CBI’s ownership of the Trademarks, including the existence of any
non-CBI trademark or trade name of which it may become aware that is similar in
sight, sound, appearance or meaning to the Trademarks.  PBI expressly agrees that it shall take no
action with regard to such trademark or trade name other than notification of
CBI.

 

6.             Intellectual Property.

 

(a)           Ownership.  PBI shall own
all Intellectual Property rights relating to the Approved Products, including
without limitation, all rights in and to all Licensee Know How, Licensee Marks,
copyrights, trade names, trade dress, product names, slogans, packaging,
labeling, recipes, Promotional Materials, manuals, as well as derivative works,
duplicates, replicas, reproductions, and summaries of the foregoing (“PBI
Intellectual Property”).  CBI shall
own the Trademarks and all Intellectual Property of CBI and warrants that it
has the right to grant PBI the licenses in this Agreement.

 

(b)           Reproductions.  Except as described in this Section 6, all
reproductions, notes, summaries, specifications, and similar documents relating
to the PBI Intellectual Property shall become and remain the property of PBI
immediately upon creation.

 

(c)           Notification. 
Each Party agrees to notify the other Party of any infringement of such
other Party’s Intellectual Property rights. 
Each Party expressly agrees that it shall take no action with regard to
such violations other than the notification required by this Section.

 

5

 

(d)           Ownership and Use of Artwork and Designs.

 

(i)            Upon first obtaining the consent of CBI,
PBI may use any Licensee Mark in conjunction with the Trademarks; provided,
however, that the Trademarks must be displayed in a more prominent manner than
the Licensee Marks.

 

(ii)           PBI shall own all copyrights and other
proprietary rights in any and all artwork or designs created by or for PBI for
use in connection with the Approved Products, except to the extent such artwork
or designs utilizes the Trademarks.  Any
portions of any and all artwork or designs created by CBI in connection with
the Approved Products shall be owned exclusively by CBI, except to the extent
such artwork or designs utilizes Licensee Know How or the Licensee Marks.

 

(iii)          CBI reserves for itself and its
Affiliates all rights to use any and all artwork or designs that created by or
for CBI hereunder, without limitation, except that, without PBI’s prior written
consent, CBI may not use such artwork or designs except to fulfill its
obligations under this Agreement if such artwork or designs include Licensee
Know How or Licensee Marks.  CBI agrees
that, during the Term, it will not authorize the use of any artwork or designs
created by or for PBI pursuant to this Agreement on any product similar to the
product for which the artwork or design was created by PBI, without the prior
written consent of PBI

 

(iv)          PBI shall have no obligation to license
CBI to use any Licensee Marks, nor to disclose to CBI any Licensee Know
How.  Any Licensee Know How disclosed to
CBI in PBI’s sole discretion shall be considered PBI Confidential Information
subject to the provisions of Section 13.

 

(v)           For any PBI Intellectual Property that
utilizes the Trademarks or any artwork or designs owned by CBI as described in
this Section in whole or in part, PBI and its Affiliates shall destroy such PBI
Intellectual Property upon expiration or termination of this Agreement for any
reason and shall confirm to CBI in writing that PBI has done so.  Similarly, for any artwork or designs owned
by CBI as described in this Section in whole or in part, which utilizes the PBI
Intellectual Property in whole or in part, CBI and its Affiliates shall destroy
such artwork or designs upon expiration or termination of this Agreement for
any reason and shall confirm to PBI in writing that CBI has done so.

 

7.             Quality Control and
Quality Assurance
PBI acknowledges, and desires to help maintain, CBI’s goodwill and the validity
of the Trademarks.

 

(a)           Pre-Production Approval of Product
Samples.  PBI shall furnish to CBI, free of charge, for
its written approval as to quality and style, at least the number of samples
specified below of each of the Approved Products to be manufactured,
distributed, sold or otherwise used under this Agreement, together with their
packaging, hangtags, and wrapping material in each of the following successive
stages: (i) at least one (1) sample of rough sketches/layout concepts or
description of flavor or food (including, without limitation, details of the
materials to be used, application of artwork and rough product dimensions);
(ii) at least one (1) sample of all finished artwork or final proofs; (iii) at
least one (1) sample of all prototypes or strike-offs; and (iv) at least
twenty-four (24) samples of finished products, including all packaging
materials from the initial production run.  No Approved Products or other material
utilizing the Trademarks shall be manufactured (except to the extent required
to produce production samples), sold, distributed, promoted or otherwise used
in any manner whatsoever by PBI without the prior written approval of CBI of
such Approved Products and materials at each successive stage; however, PBI may
use any textual and/or pictorial matter, previously approved by CBI in writing,
for Promotional Materials or display and advertising material as may, in PBI’s reasonable
judgment, promote the sale of the Approved Products, so long as such CBI
approval was granted within the twelve (12) months prior to the date of PBI’s
anticipated use of such matter and except as where otherwise required by Court
order, judgment or decree..  If CBI fails
to approve in writing any product submission

 

6

 

within five (5) business
days after receipt of PBI’s submission, such failure shall be deemed to
constitute approval of the submission.

 

(b)           PBI shall also provide CBI with three (3)
days advance notice of the anticipated date of the first production run for any
new or significantly modified Approved Product, which notice shall include (i)
the Approved Products that will be manufactured during the production run; and
(ii) the quantity of Approved Products that will be manufactured during the
production run.  No more than once per
PBI fiscal quarter, PBI will provide from any production run such number of
samples as CBI may reasonably request. 
In the event that a sample does not meet the Quality Specifications for
the Approved Products, then CBI shall notify PBI thereof within forty-eight
(48) hours of CBI’s receipt of the sample of any reasonable objection or
inconsistency in the Approved Products in which event PBI shall at its sole
cost and expense, unless such objection or inconsistency results from the
Approved Ingredients, (a) discontinue the Approved Products and (b) recall and
destroy any of the Approved Products produced during the subject production
run.  PBI shall thereafter provide a
substitute lot to CBI.

 

(c)           Right of Entry. 
PBI agrees to provide and allow CBI or its representatives throughout
the Term of this Agreement the right of entry at PBI’s manufacturing facility
at a mutually agreed upon time during normal operating hours to inspect PBI’s
manufacturing standards, including without limitation the cleanliness and
standards employed prior to or during any production run of the Approved
Products.  Additionally, PBI shall allow
CBI to inspect, within PBI’s facility and on a confidential basis, a copy of
all PBI’s quality control manuals that relate to the safety and quality of the
processing, packaging, distribution and storage of all Approved Products (“Quality
Specifications”).

 

(d)           Quality Standards. 
PBI shall comply with any and all applicable state and federal
regulations (including but not limited to FDA regulations) and shall employ the
Quality Specifications relative to the production, storage and transportation
of the Approved Products.  Failure to
maintain these standards shall constitute a material breach as defined in Section 17 of this Agreement.

 

(e)           Adulteration. 
PBI shall not use any substitute for or dilute the Approved Ingredients
in the manufacture of the Approved Products, nor shall PBI take any other
action to intentionally alter or adulterate the product so that it fails to
conform to the standards described in Section 7(c)
above.

 

(f)            Records.  PBI shall
maintain appropriate quality control records and shall allow CBI to inspect
such records on a confidential basis during normal business hours.

 

8.             Packaging, Labeling, and
Promotional Materials

 

(a)           CBI’s Use of Promotional Materials. 
Nothing in this Agreement shall be construed to restrict the rights of
CBI to advertise any product other than the Approved Products, to display the
Trademarks as it deems appropriate, or to advertise the CINNABON® concept, in
the manner and market of its choosing. 
PBI must obtain CBI’s prior and on-going approval of Promotional
Materials relating to the sale of Approved Products.

 

(b)           Packaging and Labeling. 
PBI shall be responsible for packaging and labeling Approved Products
for distribution to Customers.  All
Approved Products sold by PBI shall bear whatever Trademarks, trade names,
logos or other identifying markings as approved in writing by CBI.  PBI shall not label Approved Products in such
a way as to give the false or misleading impression that they are other than
CBI Approved Products.

 

7

 

9.             Distribution and
Collection.

 

(a)           Distribution. 
It shall be PBI’s sole responsibility to distribute the Approved
Products manufactured under this Agreement to Customers for ultimate
distribution to Consumers.

 

(b)           Collection.  It shall be
PBI’s sole responsibility to collect or otherwise account for monies from
Customers for purchases of Approved Products manufactured by PBI under this
Agreement.  All monies collected from
Customers must be reported in accordance with the reporting requirements
delineated in Section 4.

 

10.          Representatives.

 

(a)           Coordination. 
Each Party shall appoint or indicate appropriate representatives to be
responsible for oversight and communication regarding this Agreement.

 

(b)           Technical Support. 
CBI shall make available reasonable technical personnel for coordination
and consultation upon reasonable notice during regular business hours.

 

11.          Customer and Consumer
Complaints.  PBI shall be responsible for processing and
handling all Customer and Consumer complaints received by PBI regarding the
Approved Products.  PBI shall diligently
pursue any reasonably appropriate remedial action required under the
circumstances to address such complaints.

 

12.          Product Recovery or
Recall.

 

(a)           Notification. 
In the event of an actual or potential product problem which may require
a recall or withdrawal of an Approved Product from the market, CBI and PBI each
shall keep the other promptly and fully informed of the facts which may give
rise to a recall or withdrawal and shall cooperate in making the decision and
in implementing the recall or withdrawal. 
To the extent practical under the circumstances, and with due
recognition for promptness in a recall situation, PBI shall immediately prepare
any press release or other communications to the public, which shall be
coordinated with, and approved by, CBI.

 

(b)           PBI’s Duties. 
PBI shall be responsible for carrying out any product recoveries or
recalls for Approved Products manufactured and/or distributed by PBI All costs
and expenses associated with the recovery or recall shall be born be PBI,
unless the recovery or recall is necessitated by a problem with the Approved
Ingredients supplied by CBI or otherwise caused by CBI.

 

13.          Confidentiality.

 

(a)           Other Agreements. 
This Section 13 shall not
reduce or eliminate any obligations under the confidentiality agreement dated
February 2, 2004 between the Parties, nor shall such agreement be construed to
diminish any obligations of confidentiality contained in this Agreement;
provided, however, that the term of such agreement shall be deemed to run
concurrent with the duration of this Section
13.

 

(b)           Confidentiality Requirement. 
It is anticipated that during the course of this Agreement, each Party
shall have access to certain Confidential Information of the other.  Each Party acknowledges and understands that
such Confidential Information is a valuable business asset of the other and
that any unauthorized disclosure of any such Confidential Information may cause
irreparable harm from such disclosure. 
Accordingly, each Party agrees, on behalf of its Representatives, that
except as required by law (including without limitation any Securities and
Exchange Commission public disclosure laws), to (i) hold the other’s
Confidential Information with at least the same degree of confidence afforded
its own confidential information; (ii) not to disclose any such Confidential
Information without the prior written consent of the other; (iii) not to use
any such Confidential

 

8

 

Information except for the purposes that necessitated
the disclosure thereof; (iv) not to engage in any insider trading or certain
tender offers, which may be based on such confidential information.  Each Party shall be responsible for, and
shall indemnify and hold the other harmless from any loss, cost, expense or
damages incurred or suffered by such other Party arising or resulting from the
breach of these covenants by such Party or its Representatives.  The obligation of confidentiality in this Section 13 shall not apply to any
Confidential Information that (a) at the time of disclosure, or thereafter, has
become generally available to the public by the act of one who has the right to
disclose such information without violating any rights of any Party; (b) was or
is available to the other Party on a non-confidential basis from a source other
than the disclosing Party; or (c) has been independently developed without
violating any obligations hereunder.

 

(c)           Press Releases. 
Neither Party may issue a press release regarding this Agreement or the
subject matter thereof without the prior consent of the other Party.

 

(d)           Disclosure of Agreement. 
Neither Party may provide a copy of this Agreement to any Third Party or
disclose the terms or conditions thereof except (i) if legally required
pursuant to subpoena or legal process; (ii) to either Party’s accountant,
attorney,  auditors, lenders,
underwriters, or potential acquirers or to any other party and then only if
each such Party executes a confidentiality agreement with respect to such
information; or (iii) as otherwise provided herein.

 

(e)           Restricted Access to Confidential
Information.  Each Party shall restrict access to
Confidential Information to those employees or agents for whom the relevant
piece of Confidential Information is necessary.

 

14.          Indemnification.

 

(a)           By PBI PBI recognizes that CBI has entered into this
Agreement relying on the fact that PBI has full responsibility for the sale of
the Approved Products for distribution to Customers, including, but not limited
to, paying all operating expenses, and that other than the payment of Royalty
Fees, any profit or loss from sales of the Approved Products will belong to PBI
and not CBI. PBI therefore agrees to hold harmless, indemnify and defend (with
legal counsel reasonably satisfactory to CBI and any person or entity claiming
through CBI) CBI, its Affiliates and their respective shareholders, directors,
officers, employees, agents, franchisees, successors and assigns (the “CBI
Indemnified Parties”) against, and to reimburse the CBI Indemnified Parties
for, any and all Claims, either directly or indirectly incurred by or against
the CBI Indemnified Parties arising from or out of (i) any breach by PBI of the
agreements, covenants, representations, or warranties contained in this
Agreement, (ii) any damages or injury to any person or property arising out of
PBI’s negligent or wrongful acts or omissions, (iii) the manufacturing,
packaging, distribution, storage, sale, advertising or promotion of the
Approved Products, or (iv) the unauthorized use or misuse of the
Trademarks.  PBI shall defend and
indemnify CBI from and against all of the above Claims, unless and to the
extent such Claims were caused by the acts, omissions or contributory
negligence of CBI.

 

(b)           By CBI.  CBI
recognizes that PBI has entered into this Agreement relying on the fact CBI
will grant the licenses described herein and otherwise perform its obligations
under this Agreement.  CBI therefore
agrees to hold harmless, indemnify and defend (with legal counsel reasonably
satisfactory to PBI and any person or entity claiming through PBI) PBI, its
Affiliates and their respective shareholders, directors, officers, employees,
agents, successors and assigns (the “PBI Indemnified Parties”) against,
and to reimburse the PBI Indemnified Parties for, any and all Claims, either
directly or indirectly incurred by or against the PBI Indemnified Parties
arising from or out of (i) any breach by CBI of the agreements, covenants, representations,
or warranties contained in this Agreement, (ii) any damages or injury to any
person or property arising out of CBI’s negligent or wrongful acts or
omissions, (iii) any dispute with Third Parties regarding PBI’s authorized use
of Trademarks, or (iv) the Approved

 

9

 

Ingredients. 
CBI shall defend PBI and indemnify PBI from and against all of the above
Claims, unless and to the extent such Claims were caused by the acts, omissions
or contributory negligence of PBI

 

(c)           Notice of Claim. 
With respect to any indemnification obligation under this Agreement, if
an indemnified Party receives notice of the assertion of a Claim, which is
subject to indemnification hereunder, and the indemnified Party intends to seek
indemnification, then the indemnified Party shall promptly give written notice
to the indemnifying Party of the Claim. The failure by an indemnified Party to
notify the indemnifying Party of a Claim will not relieve the indemnifying
Party of any indemnification responsibility under this Agreement, except to the
extent the failure, if any, to provide the notice materially prejudices the
indemnifying Party to defend the Claim. Upon receipt of such notice, the
indemnifying Party shall have the right to exclusively control the defense,
compromise or settlement with its own counsel and at its own expense, provided
that the prior consent of the indemnified Party shall be required if any
settlement may materially impair the indemnified Party’s rights or require
payment of monetary compensation.  The
indemnified Party will be entitled to participate in the defense of any Claim
with its own counsel. Any damage, loss, injury, cost or expense indemnified
against in this Agreement shall be for actual, out-of-pocket costs of the
indemnified Party and shall not include any amount representing loss of profit
or loss of business or special, indirect, consequential or punitive damages to
the indemnified Party of any nature whatsoever. 
The indemnities given hereinabove shall survive the expiration or
termination of this Agreement.

 

15.          Insurance.

 

(a)           Requirement. 
PBI shall at all times during the term of this Agreement maintain
Commercial General Liability Insurance with limits of not less than
$5,000,000.00, Product Liability Insurance, including but not limited to
coverage for food and food service and contractual liability, Worker’s
Compensation Insurance, Employer’s Liability Insurance, and, where applicable,
Automobile Insurance.  All liability
policies shall name CBI as an additional insured.

 

(b)           Proof of Insurance. 
PBI shall provide CBI with a certificate of insurance showing all of the
aforementioned insurance is in effect. 
The policy shall contain a clause stating that the insurance will not be
canceled or reduced without at least thirty (30) day’s prior notice to
CBI.  No policy may be canceled without
CBI’s prior written consent unless replaced within said thirty (30) days, or
else PBI shall be in material breach as defined in Section 17 herein of this Agreement.

 

(c)           Breach.  Failure to
procure insurance, or the lapse of any required insurance policy set forth
herein shall be a material breach as defined in Section 17 herein of this Agreement.

 

16.          Relationship of Parties. 
This Agreement is not intended to create, and shall not be construed to
create, a relationship of partnership or joint venture or franchise, nor to
constitute either Party as the agent or legal representative of the other, and
neither Party shall have any authority, express or implied or apparent, to
assume or create any obligations on behalf of or in the name of the other
Party. Each Party shall be solely responsible for its own employees, including
without limitation payment of all compensation, benefits, and payroll taxes,
and including without limitation all applicable employment and workers’
compensation laws and regulations.

 

17.          Termination.

 

(a)           With Cause.  Except as
provided in Section 17(c) below, in the event
of any breach by either Party of any obligation under this Agreement (“Material
Breach”), the non-breaching Party shall give the breaching Party a
reasonable period of time to cure its breach, which period shall in no event
exceed thirty (30) days’ from the date of first notice to the breaching Party,
unless the breaching Party is diligently working on the issue. If the breaching
Party does not cure the breach within the period

 

10

 

of time provided, the non-breaching Party may declare
the breach a default of this Agreement and thereafter terminate this Agreement
by providing the breaching Party with thirty (30) days prior written notice of
the effective date of termination. The non-breaching Party shall have the
option to waive any such breach of this Agreement without adversely affecting
its rights with regard to any subsequent breaches.

 

(b)           Immediate Termination. 
Either Party may terminate this Agreement immediately by providing
written notice to the other Party upon the occurrence of any of the following
events during the Agreement Term:

 

(i)            The other Party petitions for relief
under the Bankruptcy Code of the United States, or any country or territory, or
if voluntary bankruptcy proceedings are instituted under any federal, state or
foreign insolvency laws, or if such a proceeding is imminent, or if it is
adjudged bankrupt, or if it makes any assignment for the benefit of its
creditors of all or substantially all of its assets;

 

(ii)           An involuntary petition is filed or
execution issued against the other Party and not dismissed or satisfied within
thirty (30) days;

 

(iii)          The other Party engages in fraud or
illegal conduct;

 

18.          Effect of Expiration or
Earlier Termination.  Immediately upon the expiration or earlier
termination of this Agreement or any portion thereof, PBI’s licenses under Section 2 shall terminate and each Party
shall take the following actions, in compliance with any and all
confidentiality obligations as set forth Section
13 and elsewhere in this Agreement and any other applicable
confidentiality agreement(s):

 

(a)           Intellectual Property. 
Each Party shall return all Intellectual Property belong to the other
Party where reasonably feasible, and otherwise shall destroy such Intellectual
Property and certify such destruction to the other Party.

 

(b)           Trademarks. 
Notwithstanding the foregoing, PBI shall be entitled, for an additional
period of three (3) months following any termination or expiration of this
Agreement, pursuant to the terms and conditions of this Agreement, to attempt
to deplete inventory and work in process of the Approved Products, and deplete
raw materials and Approved Ingredients, existing at the time of the termination
or expiration of the Agreement through manufacture and sale of the Approved
Product, but on a non-exclusive basis and subject to payment of Royalty Fees on
sales during such additional period. 
Except as provided in the first sentence of this Section, upon any
termination or the expiration of this Agreement, PBI shall immediately discontinue
all use of the Trademarks and shall no longer have the right to use the
Trademarks or any variation or simulation thereof.

 

(c)           Approved Ingredients and Raw Materials. 
In the case of Approved Ingredients and/or any other raw materials, CBI
may at its sole discretion (i) allow PBI to continue to use any such supplies,
or (ii) require PBI to sell any such supplies back to CBI at cost.

 

(d)           Confidential Information. 
Each Party shall immediately deliver to the other Party all written and
other tangible originals and copies of any and all Confidential Information
belonging to the other Party, not to retain any copies thereof, or certify to
the other Party the destruction of all such Confidential Information.  However, such Party may retain such
Confidential Information to the extent it exists in that Party’s internal
records for the purpose of resolving any disputes, enforcing the terms of this
Agreement and complying with other legal requirements as may be required by
law.

 

11

 

19.          Governing Law.  This Agreement and any claim or controversy
arising out of, or relating to, rights and obligations of the parties under
this Agreement and any other claim or controversy between the Parties shall be
governed by and construed in accordance with the laws of the State of Georgia
without regard to conflicts of laws principles. No provision of this Agreement
shall be interpreted in favor of or against any Party because of the Party that
drafted this Agreement.

 

20.          Limitations.  REGARDLESS OF THE BASIS OF RECOVERY CLAIMED, WHETHER
UNDER ANY LEGAL THEORY, INCLUDING CONTRACT, TORT (INCLUDING NEGLIGENCE OR
STRICT LIABILITY), AND WHETHER AT LAW OR IN EQUITY, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER PARTY UNDER THIS AGREEMENT FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS, LOSS OF BUSINESS, FAILURE TO REALIZE
EXPECTED SAVINGS OR LOSS OF GOODWILL, EVEN IF THE OTHER PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

21.          Attorney’s Fees and Costs. 
If any legal action or other proceeding, including any bankruptcy
proceeding, regardless of whether such action is asserted on the basis of
contract, tort (including negligence or strict liability), or otherwise, is
brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, or the conduct of the Parties hereunder, the
Prevailing Party shall be entitled to recover reasonable attorney’s fees and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled, except as limited in Section 20. 
“Prevailing Party” within the meaning of this Section 21 includes, without limitation, a Party who obtains
substantially the relief sought by it.

 

(a)           Good Faith Negotiations. 
In the event of any dispute or difference arising out of or relating to
this Agreement or the breach thereof, the Parties shall use their best efforts
to settle such disputes or differences in good faith negotiations, keeping in
mind their mutual interests, in order to reach a just and equitable resolution
of the dispute or difference satisfactory to both Parties.  Either Party may make a written request to
the other Party by sending notice thereof for a meeting of senior
representatives (i.e. officers whose positions are at the level of
vice-president of above) to resolve the Parties’ differences.  Such meeting shall take place within fifteen
(15) days of receipt of such notice at a time and location acceptable to both
Parties.

 

(b)           Conciliation/Mediation. 
If within thirty (30) days after a meeting of the senior
representatives, the Parties have not succeeded in negotiating a resolution of
the dispute or difference, the Parties shall jointly appoint a mutually
acceptable neutral person not affiliated with either of the Parties, seeking
assistance in such regard from the International Chamber of Commerce if the
Parties are unable to agree upon such appointment within forty (40) days after
the meeting of the senior representatives. 
Any fees associated with such neutral person’s services shall be shared
equally by the Parties.

 

(c)           Arbitration. 
All disputes arising from this Agreement left unresolved after
consultation and mediation shall be finally settled by binding arbitration
under the Rules of Arbitration of the American Arbitration Association by one
arbitrator with industry experience appointed in accordance with said
rules.  Each Party shall bear its own
costs and attorneys’ fees, and the Parties shall share equally in the fees and
expenses of the arbitrator.  The
arbitrator’s decision shall be final and binding, and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction of
the matter.

 

(d)           Injunctive Relief. 
It is expressly agreed that each Party would suffer irreparable harm
from a material breach by the other of any of its covenants contained in this
Agreement, and that remedies other than injunctive relief cannot fully
compensate or adequately protect a Party for such a violation.  Therefore, without limiting the rights of a
Party to pursue all other legal and equitable

 

12

 

remedies available for violation of this Agreement, in
the event of actual or threatened breach by a Party of any of the provisions of
this Agreement, the breaching Party consents that the non-breaching Party shall
be entitled to injunctive or other relief in order to enforce or prevent any
such violation or continuing violation thereof. 
Each Party acknowledges and agrees that the provisions of this Section
are reasonable and necessary and commensurate with the need to protect the
other Party against irreparable harm and to protect its legitimate and
proprietary business interests and property.

 

22.          Severability. 
If any part of this Agreement is held invalid by arbitration, court
decree, or otherwise, the rest of this Agreement shall remain valid, and this
Agreement shall be interpreted as if it had been signed without the invalid
portion.  To the extent that a court or
arbitrator can substantially maintain the intent of the Parties in modifying
any part of this Agreement, it shall be so modified.

 

23.          Other Instruments. 
The Parties agree to acknowledge, sign and deliver all further
documents, instruments or assurances and to perform all further acts needed to
carry out the terms of this Agreement in accordance with its intent.

 

24.          Performance After
Expiration or Termination.  The terms and conditions of
this Agreement that require either CBI or PBI to perform any duty delineated
herein after an assignment of interest hereunder, or the expiration or
termination of this Agreement, that by their nature cannot be performed prior
to any such assignment, expiration or termination, shall, nonetheless, remain
enforceable against the Party from whom any such performance is due after the
assignment, expiration or termination.

 

25.          No Waiver of Rights or
Remedies.  Waiver by either Party of any particular
default shall not impair its rights with respect to any subsequent default, nor
shall any delay or omission of such Party to exercise any rights arising from
any default affect or impair its rights as to the default.  The Parties’ rights and remedies are cumulative,
and no enforcement of a right or remedy shall preclude the enforcement of any
other right or remedy.

 

26.          Approval Standards. 
Whenever the approval of CBI is required under this Agreement (unless
otherwise expressly provided), such approval may not be unreasonably withheld
or delayed.

 

27.          Notices. 
Any action set forth in this Agreement where either Party’s consent is
required as well as all required notices to CBI or PBI, as the case may be,
shall be requested or provided in writing and sent by personal delivery,
registered or certified mail or by verifiable facsimile, addressed to CBI or
PBI at their respective offices designated below and shall be deemed received
when actually delivered.

 

If to CBI:                                                                                              CINNABON, Inc.

Six Concourse Parkway

Suite 1700

Atlanta, GA 30328

Attention: Bill Jachthuber

770-350-3695(Facsimile)

 

With copies to:                                                              AFC Enterprises, Inc.

Six Concourse Parkway

Suite 1700

Atlanta, GA 30328

Attention: Office of General Counsel

770-353-3060 (Facsimile)

 

13

 

If to PBI:                                                                                                 Poore Brothers, Inc.

3500 S. La Cometa Drive

Goodyear, AZ 
85338

Attention: 
President & Chief Executive Officer

623-925-2363 (Facsimile)

 

Each Party hereto
shall provide the other with any notice of change of address thirty (30) days
before the effective date of any such change of address.

 

28.          Entire Agreement;
Modifications.  This Agreement is the entire agreement of the
Parties regarding its subject matter and supersedes all other negotiations,
commitments, and representations unless provided otherwise herein.  This Agreement may not be changed,
discharged, modified, terminated or renewed, unless in writing and signed by
both Parties.

 

29.          Compliance with Law. 
Each Party shall comply with all applicable laws, rules and regulations
in performing its obligations under this Agreement.

 

30.          Force Majeure. 
Neither Party hereto shall be responsible for any failure of performance
of this Agreement if prevented from doing so by acts of God, flood, fire,
explosion, storm, crop failure, transportation difficulties, strikes, lockouts,
or other industrial disturbances, wars, or any law, rule, or action of any
court or instrumentality of the federal or any state government or any other
similar cause beyond the control of any Party. 
In the event of either Party being so rendered unable to perform in
whole or in part, such Party shall give notice in writing of the full
particulars of the force majeure as soon as possible after the occurrence.

 

31.          Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall constitute
one and the same instrument.

 

32.          Successors and Assigns. 
This Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties and the respective heirs, personal
representatives, successors or permitted assignees of the parties hereto.

 

33.          Survival. 
The obligations and agreements under Sections 1, 3, 5(a), 5(b), 5(c),
5(d), 6(a), 6(d), 13, 14, 16, 18, and 19-33 shall survive the termination or
expiration of this Agreement.

 

IN WITNESS WHEREOF, the following individuals hereby represent
that are authorized to execute this Agreement on behalf of their respective
companies and do so effective the day and year first above written.

 

 

	
   

  	
  CINNABON, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Christopher
  P. Elliot

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
  Date:

  	
  9/11/04

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  POORE BROTHERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Thomas W.
  Freeze

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  
	
  Date:

  	
  9/10/04

  	
   

  

 

14

 

EXHIBIT A

 

Trademarks

 

Registrations or
applications for the Trademarks are held in the name of CBI or its
Affiliates.  The Trademarks shall
expressly include, without limitation, the following federally registered, or
applied for, marks:

 

	
  MARK

  	
   

  	
  SERIAL NO.

  	
   

  	
  REGISTRATION

  NO.

  	
   

  
	
  Cinnabon

  	
   

  	
  73-591336

  	
   

  	
  1424169

  	
   

  
	
  Cinnabon & Design

  	
   

  	
  73-591337

  	
   

  	
  1426734

  	
   

  
	
  Cinnabon & Design

  	
   

  	
  78-401475

  	
   

  	
   

  	
   

  
	
  Cinnabon & Design

  	
   

  	
  78-401487

  	
   

  	
   

  	
   

  
	
  Cinnabon World Famous

  	
   

  	
  75-647375

  	
   

  	
  2304346

  	
   

  
	
  Cinnamon Rolls & Design

  	
   

  	
  78-264471

  	
   

  	
   

  	
   

  
	
  Makara

  	
   

  	
  74-418259

  	
   

  	
  1921083

  	
   

  
	
  World Famous Cinnamon Rolls

  	
   

  	
  74-734362

  	
   

  	
  2029844

  	
   

  

 

15

 

EXHIBIT B

 

Definitions

 

1.1                                 Affiliates. 
Any entity that controls is controlled by or shares common control
with a Party to this Agreement.

 

1.2                                 Approved Ingredients.  The
term “Approved Ingredients” shall refer to the ingredients set forth in Exhibit C.

 

1.3                                 Approved Products.  Cinnabon®
branded salted snacks (including, without limitation, snack mix, chips, nuts
and extruded snacks) and shelf-stable packaged cookies and breakfast/snack bars
that bear one or more Trademark(s), and that have been approved by CBI.

 

1.4                                 CBI Indemnified Parties.  The “CBI
Indemnified Parties” shall mean CBI, its Affiliates and their respective
shareholders, directors, officers, employees, agents, franchisees, successors
and assigns.

 

1.5                                 Confidential Information.  The term “Confidential Information” shall mean the terms of this
Agreement and any amendments hereto, and all other information, know-how, and
techniques, including, but not limited to, product specifications, materials,
designs, styles, product sources, computer systems, marketing decisions and
directions, trade secrets, proposed trademarks and other proprietary matters
and data imparted to or made available by either Party to the other which is
(i) designated as confidential, (ii) known by either Party to be considered
confidential by the other, or (iii) by its nature inherently or reasonably
considered confidential.  PBI’s
Confidential Information expressly includes, without limitation, the Quality
Specifications.

 

1.6                                 Customer.  The term “Customer” shall refer to customers in all distributions
channels, including without limitation the following distribution
channels:  airlines, supermarkets,
mass merchandisers, warehouse clubs convenience stores, drug stores, dollar
stores, military distribution channels, video stores, the internet, vending
machines and wholesale distributors servicing these operations and other
traditional retailers that sell food items.

 

1.7                                 Earned Royalties.  The term “Earned Royalties” shall mean a royalty equal to [*]
based upon Net Sales of all Approved Products during a PBI fiscal quarter
payable quarterly based on the previous PBI fiscal quarter’s Net Sales.

 

1.8                                 Consumer.  The
term “Consumer” shall refer to customers of Customers.

 

1.9                                 Renewal Term.  The “Renewal
Term” shall be the period commencing at the conclusion of the Initial
Term and continuing, unless terminated earlier pursuant to the terms of this
Agreement, for five (5) years.

 

1.10                           Renewal Term Minimum Net
Sales.  The “Renewal Term Minimum Net Sales”
means: [*].

 

16

 

1.11                           Initial Term.  The “Initial Term” is a period commencing at
the conclusion of the Test Market Term and continuing, unless terminated
earlier pursuant to the terms of this Agreement, for five (5) years.

 

1.12                           Initial Term Minimum Net Sales.  The “Initial Term Minimum Net Sales” means:
[*].

 

1.13                           Intellectual Property.  The
term “Intellectual Property” shall mean all trademarks, copyrights, trade
names, trade dress, product names, slogans, packaging, labeling, artwork,
recipes, Promotional Materials, manuals, as well as derivative works,
duplicates, replicas, reproductions and summaries of the foregoing.

 

1.14                           Licensee Know How.  Licensee Know How includes, without
limitation, all pictorial, graphic, visual, audio, audio-visual, digital, or
any other type of creations, trade secrets, inventions, ideas, methodologies
and applications, whether finished or not, including, but not limited to,
drawings, designs, sketches, images, specifications, bills of materials, cutter
designs, mathematical or chemical formulae, product recipes, customer or
supplier lists or information, tooling and tooling aids, illustrations, film,
video, electronic, digitized or computerized information, software, object
code, source code, text, printed materials, notes, and translations, which
feature or include Licensee Marks (as defined below) or PBI’s or a Third Party’s
proprietary information regarding manufacture, production or sale of the
Approved Products.

 

1.15                           Licensee Mark.  The term “Licensee Mark” means any
proprietary mark owned by PBI.

 

1.16                           Material Breach.  The
term “Material Breach” shall mean any breach of this Agreement as set forth in Section 17.

 

1.17                           Minimum Net Sales.  The term “Minimum Net Sales” means the
Initial Term Minimum Net Sales and the Renewal Term Minimum Net Sales,
collectively.

 

1.18                           Net Sales.  The
term “Net Sales” means the total of actual sales price billed by PBI to
Customers (whether for cash, credit or other consideration) from the sale of
Approved Products by PBI, less

 

(a)                                  the
amount of any cash or credit refunds made upon any sale where the Approved
Products sold are returned by the Customer and accepted by PBI, or

 

(b)                                 freight,
sales tax or other taxes collected by PBI directly from customers and accounted
for and paid by PBI to a taxing authority; and

 

(c)                                  the
amount of any quantity or cash discounts; and

 

(d).                              the
amount of a receivable deemed non-collectible by PBI.

 

1.19                           Party.     The term “Party” shall refer to either CBI or
PBI

 

17

 

1.20                           PBI Indemnified Parties.  The
term “PBI Indemnified Parties” shall mean PBI, its Affiliates and their
respective shareholders, directors, officers, employees, agents, franchisees,
successors and assigns.

 

1.21                           PBI Intellectual Property.  The
term “PBI Intellectual Property” shall have the meaning given that term in Section 6(a).

 

1.22                           Prevailing Party. The term “Prevailing Party” shall have the
meaning given that term in Section 21.

 

1.23                           Promotional Materials.  The
term “Promotional Materials” shall refer to any marketing, advertising, or
other methods of promoting the Approved Products or the CINNABON® name or
Trademarks, in any medium.

 

1.24                           Quality Specifications.  The
term “Quality Specifications” shall mean PBI’s quality control manuals that
relate to the safety and quality of the processing, packaging, distribution and
storage of all Approved Products.

 

1.25                           Representatives.  The
term “Representatives” means a Party’s directors, officers, employees, agents
and advisors.

 

1.26                           Royalty Fees.  The
term “Royalty Fees” means the Earned Royalties due from Net Sales during
a fiscal quarter.

 

1.27                           Term.  The “Term”
means the Test Market Term, the Initial Term, and the Renewal Term,
collectively.

 

1.28                           Test Market Term.  The “Test Market Term” means that nine (9)
month period following the Commencement Date.

 

1.29                           Third Party.  The
term “Third Party” shall refer to any individual, corporation, partnership, or
entity other than CBI or PBI

 

1.30                           Trademarks. The term “Trademarks” shall refer to the
marks set forth in Exhibit A
attached hereto, any other trademark used by CBI to market or advertise its
products, and such other related distinctive logos, designs, art work, colors,
or usage associated with the Trademark as may be expressly approved in writing
by CBI from time to time, for use in connection with the Approved Products.

 

1.31                           Territory.  The “Territory”
means the United States, its territories and possessions, US Military
bases and Puerto Rico, Canada and Mexico, and such other geographic regions
that are added with the mutual written consent of the parties; provided that
the Territory during the Test Market Term shall be only the United States, its
territories and possessions, US Military bases and Puerto Rico.

 

18

 

EXHIBIT C

 

Approved Ingredients

 

“MAKARA” Brand Cinnamon - which shall be supplied by CBI or by a Third
Party designated by CBI, and which shall be the only cinnamon product used in
the production of any and all Approved Products containing cinnamon as an
ingredient and/or packaged as “cinnamon flavored” products

 

19

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