Item 1.01 Entry into a Material Definitive
Agreement.
On June 27, 2016, and
effective June 24, 2016, Fifty-Six Hope Road Music Limited (“
56 Hope Road
”) provided Jammin Java Corp. (the
“
Company
”, “
we
” and “
us
”) notice of the termination of the fifteen (15)
year license agreement entered into with 56 Hope Road on September 13, 2012 (the “
Long-Term License
”).
The Long-Term License
provided us a worldwide, exclusive, non-transferable license to utilize the “
Marley Coffee
” trademarks (the
“
Trademarks
”) in connection with the manufacturing, advertising, promotion, sale, offering for sale and distribution
of coffee beans in all its forms and derivations, regardless of portions, sizes or packaging (the “
Exclusive Licensed
Products
”)(the Long-Term License also granted us a license to use the Trademarks for services including coffee roasting
services, coffee production services, and coffee sales, supply, distribution and support services, excluding coffee houses, which
rights were not re-licensed pursuant to the Short-Term License described below). 56 Hope Road owns and controls the intellectual
property rights in and to the late reggae performer, Robert Nesta Marley, professionally known as Bob Marley, including the Trademarks.
In addition, pursuant to the Long-Term License, 56 Hope Road granted us the right to use the Trademarks on advertising and promotional
materials that pertain solely to the sale of coffee cups, coffee mugs, coffee glasses, saucers, milk steamers, machines for brewing
coffee, espresso and/or cappuccino, grinders, water treatment products, tea products, chocolate products, and ready-to-use (instant)
coffee products (the “
Non-Exclusive Licensed Products
”, and together with the Exclusive Licensed Products, the
“
Licensed Products
”). Licensed Products could be sold by us pursuant to the Long-Term License through all channels
of distribution, provided that, subject to certain exceptions, we could not sell the Licensed Products by direct marketing methods
(other than through our website), including television, infomercials or direct mail without the prior written consent of 56 Hope
Road. Additionally, 56 Hope Road had the right to approve all Licensed Products, all advertisements in connection therewith and
all product designs and packaging. The agreement also provided that 56 Hope Road owned all rights to any domain names (including
marleycoffee.com), incorporating the Trademarks. In consideration for the foregoing licenses, we agreed to pay royalties to 56
Hope Road in an amount equal to 3% of the net sales of all Licensed Products on a quarterly basis.
56 Hope Road terminated
the Long-Term License due to our breach of certain of the terms of the Long-Term License Agreement, including, but not limited
to, our failure to deliver quarterly statements in a timely manner, our failure to timely make licensing payments, our failure
to deliver audited financial statements in a timely manner, and the Securities and Exchange Commission’s complaint against
us. Some of these breaches were due to cash flow issues and corporate governance matters.
Rohan Marley, our former
Chairman (see Item 5.02 below), owns an interest in 56 Hope Road.
The immediate effect
of the termination of the Long-Term License was minimal, as effective immediately thereafter we entered into the Short-Term License
described below.
On July 6, 2016, (1)
we and Hope Road Merchandising, LLC (“
HRM
”), which exclusively controls all licensing of 56 Hope Road’s
intellectual property rights, entered into a Short Term License Agreement (the “
Short-Term License
”); (2) we
entered into a Secured Promissory Note in favor of 56 Hope Road (the “
Secured Note
”); and (3) we and 56 Hope
Road entered into a Security Agreement to secure amounts owed under the Secured Note, each as described in greater detail below.
The Short-Term License
provides us the right to use the Trademarks from June 27, 2016 until December 27, 2016 (a term of six months)(subject to HRM’s
right to terminate the license in the event we breach the terms thereof or any of the terms of the Secured Note or Security Agreement),
provided that the Short-Term License can be extended in the sole discretion of HRM (at our request) for an additional six month
term after expiration thereof. Other than the term of the agreement, the Short-Term License has substantially similar terms as
the Long-Term License (except as discussed above), with the addition of requiring us to provide customer and vendor lists to HRM
and providing HRM an irrevocable license to use such information. Additional requirements associated with our entry into the Short-Term
License with HRM was that (i) we immediately provide all deficient quarterly and annual statements due; and (ii) we allow 56 Hope
Road or its affiliates to have discussions with our current and potential business partners relating to whether there is a basis
for a continued relationship with us, and to have discussions with unrelated third parties that 56 Hope Road may have an interest
in once the Short-Term License expires.
We plan to continue
to work with HRM and 56 Hope Road in good faith to try to extend the terms of the Short-Term License and remain partners, as well
as to preserve shareholder value. Notwithstanding the above, in the event that HRM decides not to extend the Short-Term License
after the expiration of the initial term or the extended term, it would have a material adverse effect on our results of operations
and assets, could force us to scale back, abandon or attempt to change our business operations, which are solely focused on monetizing
the Licenses, and may force us to seek bankruptcy protection, all of which could cause the value of our common stock to decline
in value or become worthless.
The Secured Note evidences
$297,324 due to 56 Hope Road pursuant to the terms of the Long-Term License, which amount accrues interest until paid at 0.71%
per annum (7.5% per annum if not paid in full at maturity) and is due and payable on August 31, 2016. Amounts due under the Secured
Note are secured by the Security Agreement. The Secured Note contains customary representations and events of default.
The Security Agreement
provides 56 Hope Road a security interest in substantially all of our assets to secure our payment of the Secured Note.