Exhibit 10.1
EXECUTION COPY
NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION. SUCH
PORTIONS HAVE BEEN REDACTED AND ARE MARKED WITH A "[*]" IN PLACE OF THE
REDACTED LANGUAGE.
EXPORT AGREEMENT
This Export Agreement (this "Agreement") is entered into as of February 14,
2005, between Gosling Partners Inc., a Delaware corporation (the "Company") and
Gosling's Export (Bermuda) Limited ("GXB"), a company organized under the laws
of Bermuda.
WHEREAS, the parties are interested in pursuing global sales of GXB's
Products (as defined below) and to maximize the distribution of the Products in
the Territory (as defined below).
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and in consideration of the mutual
promises set forth below, the parties hereto, intending to be legally bound,
agree as follows:
1. Definitions.
a. "Case" shall mean twelve (12) bottles of 750 ml. each (nine liters) or
equivalent volume of rum in different bottle sizes.
b. "Castle" shall mean Castle Brands Inc.
c. "Contract Year" shall mean any twelve (12) month period beginning on
the first day of April and ending on the last day of March of the
following calendar year.
d. "Industry Buyer" shall mean an entity whose primary business is the
sale of beverage alcohol products.
e. "Initial Term" shall mean the period commencing on April 1, 2005 and
continuing for fifteen (15) years thereafter.
f. "Intellectual Property Rights" shall mean registered or unregistered
trademarks, trade names, including, but not limited to, Gosling's
Black Seal(R) Rum, Gosling's Gold Rum(R) and Gosling's Old Rum(R),
patents, patent applications, patent rights (including any patents
issuing on such applications or rights), service marks, trade dress,
licenses, technology and all other intellectual property, including,
without limitation, all computer programs, formulas, databases,
know-how, trade secrets used or held for use in connection with the
Products.
g. "Renewal Term" shall mean the period commencing the first day
following the end of the "Initial Term" or any subsequent "Renewal
Term" and continuing for fifteen (15) years thereafter.
h. "Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, trust, association,
unincorporated organization, or other entity.
i. "Products" shall mean all of the products set forth on Schedule I
hereto.
j. "Territory" shall include all national or international markets with
the exception of Bermuda.
k. "Trademarks" shall mean all trademarks, brand names and logo design
used on or in connection with Products.
2. Assignment of Rights.
(a) GXB hereby assigns its global distribution rights (excluding Bermuda)
to all Products to the Company for the Term of this Agreement and hereby
appoints the Company as its exclusive authorized global exporter of the Products
in the Territory. In connection therewith, GXB hereby grants the Company an
exclusive license for the use of its global Trademarks for the Products for the
Term of this Agreement.
(b) The compensation to GXB by the Company for the assignment of these
global distribution rights is a total payment of $2,500,000, payable in four
equal installments of $625,000 at April 1, 2005, October 1, 2005, April 1, 2006
and October 1, 2006.
(c) On April 1, 2005, the beginning of the Initial Term, GXB shall assign
all of its rights, title and interest in and to the National Distribution
Agreement, effective January 1, 2005, between GXB and Castle (as amended to
reflect an initial term of fifteen (15) years, commencing from April 1, 2005)
(the "National Distribution Agreement") to the Company.
(d) GXB further agrees to assign all of its rights, title and interests in
and to that certain distribution agreement to be entered into at a subsequent
date between GXB and Castle with respect to the United Kingdom market (the "UK
Distribution Agreement").
All rights and obligations of the parties specified in the National
Distribution Agreement and the UK Distribution Agreement shall remain in full
force and effect to the extent that those two agreements are not inconsistent
with the terms and conditions of this Agreement. If there are inconsistencies
between those agreements and this Agreement, the terms and conditions of this
Agreement shall prevail.
3. Intellectual Property Rights.
a. Acknowledgement. The Company acknowledges GXB's exclusive right, title
and interest in and to any and all Intellectual Property Rights embodied in or
pertaining to the Products and that, except as to the sales proceeds specified
in Section 4 of this Agreement, or any other agreement between the parties, the
Company shall acquire no rights whatsoever in or to any of such Intellectual
Property Rights and that all usage of such Intellectual Property Rights by the
Company shall inure to the benefit of GXB.
b. Notices, Marks, Legends and Name. The Company shall not alter, remove,
cover, or add to, in any manner whatsoever, any patent notice, copyright notice,
trademark, service xxxx, trade name, serial number, model number, brand name or
legend that GXB may attach or affix to the Products. The Company shall not
market the Products under any name, sign or logo other than the trademarks
authorized to be used by GXB from time to time.
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c. Third Party Claims. The Company shall promptly notify GXB (a) of any
claims or objections that its use of the Intellectual Property Rights in
connection with the distribution of the Products has or may infringe the
Intellectual Property Rights of any other Person, and (b) of any and all
infringements, imitations, illegal use, or misuse, by any Person, of GXB
Intellectual Property Rights which come to its attention; provided, however,
that the Company shall not take any legal action relating to the protection of
GXB Intellectual Property Rights without the prior written approval of GXB; and
provided further that the Company shall render to GXB at GXB's expense, all
reasonable assistance in connection with any matter pertaining to the protection
of GXB's Intellectual Property Rights.
d. Indemnity. GXB shall defend at its own expense any action brought
against the Company to the extent that such action is based on a claim that the
use or supply of any Product in the Territory infringes the Intellectual
Property Rights of any other Person and shall pay any costs and damages finally
awarded against the Company in any such action which are attributable to any
such claim. GXB's obligation under the preceding sentence is subject to the
conditions that (a) the Company shall promptly have notified GXB in writing of
any such claim, and (b) GXB shall have had sole control of such defense and all
negotiations for any settlement or compromise. In the event any Product shall
become, or in GXB's opinion is likely to become, the subject of any infringement
claim, GXB shall have the right to instruct the Company to refrain from
supplying the Product or to take such other steps as GXB may consider
appropriate in order to limit its liability exposure.
4. Sale of Trademarks and Right of First Refusal.
a. GXB shall retain title to the Trademarks and its other Intellectual
Property for all of its portfolio brands. In the event GXB decides to sell any
or all of its Trademarks or other Intellectual Property during any term of this
Agreement, the Company shall have a right of first refusal to purchase said
Trademark(s) and Intellectual Property at the same price being offered by a bona
fide third party offeror. Within 30 days of receipt of a third party offer GXB
shall give written notice to the Company stating the price, terms and the
potential purchaser of the Trademarks and Intellectual Property. The option to
purchase the Trademarks and Intellectual Property shall be exercisable by notice
given to GXB by the Company at any time within 20 days of the receipt of the
notice.
In the event the Company waives its right of first refusal then, in said
event, Castle shall acquire an identical right of first refusal and GXB shall
give written notice to Castle stating the price, terms and the potential
purchaser of the Trademarks and Intellectual Property. The option to purchase
the Trademarks and Intellectual Property shall be exercisable by notice given to
GXB at any time within 20 days of the receipt of the notice to the Company. If
either the Company or Castle exercises its right of first refusal, the party
exercising such right shall have 90 days within which to consummate the purchase
of such Trademarks and Intellectual Property on the terms set forth in the
notice.
If neither the Company nor Castle exercises its option within the
applicable time period set forth above, GXB may, at any time within 90 days
following the expiration of the 20 day option period, sell the Trademarks and
Intellectual Property to the third party offeror.
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If an offer is reduced following the Company's or Castle's waiver of its
right of first refusal, the Company shall have a new right of first refusal at
the reduced price.
b. In the event GXB should decide to sell any or all of its portfolio
Products and/or Trademark(s), whether sold directly or indirectly through the
sale of stock of GXB or its parent company, to a third party, the Company or
Castle, then, in recognition of the facts that (1) the Company has enhanced the
value of the Trademarks through its marketing investments and sales performance
under this Agreement, and (2) the Company may henceforth no longer have the
opportunity to earn a full return on its investments in the brand(s) being sold,
GXB agrees to share the proceeds of any such sale with the Company pursuant to
the following formula:
i. If total Case sales by GXB to the Company are less than *
Cases for the last twelve full months prior to the time of a
sale, the Company shall receive * of the sale proceeds.
ii. To the extent that Case sales are greater than * Cases but
less than * cases, the Company shall be entitled to an
additional * of the proceeds for each additional * Cases sold
during the prior full twelve months (growing to a level of * at
* cases).
iii. To the extent that Case sales exceed * Cases, the Company shall
be entitled to an additional * of the proceeds for each
additional * Cases sold over * cases during the prior full twelve
months, subject to a maximum of 50% of the sales proceeds for
Case sales of * or more.
iv. If the Company no longer holds the export rights to Products at
the time of a sale of Products and/or Trademarks, then the
Company's share of earned proceeds shall decline at the rate of
* per Contract Year from the proceeds that would have been
payable if the Company still held said export rights; beginning
with the first Contract Year following non-renewal of the Company
export rights. (For example, if the Company's shares were * at
the time it no longer holds the export rights, that percentage
would decline at the rate of * per year for * years.)
c. In the event that one or more of the Products are sold, the Case amounts
above will be reduced to an amount mutually acceptable to the parties.
d. It shall be GXB's obligation to register, at its expense, the Trademarks
for all portfolio Products in all export markets identified by mutual agreement
of the parties.
5. Product Portfolio.
The Company shall not sell any branded items other than Products without
the approval of members of the Board of Directors of the Company representing in
the aggregate at least 80% of the outstanding shares. The Company shall have a
right of first refusal to add to Products any new brands introduced by GXB.
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6. Prices and Terms of Sale.
a. Initial prices to be charged by GXB for the sale of its portfolio
Products to the Company are listed in Schedule II attached hereto. Price
increases by GXB are to be restricted to recovery of actual cost of production
increases incurred by GXB. Schedule I may be amended by mutual agreement of the
parties at any time. The Company shall pay the full amount of the purchase price
for Products within 60 days after the date of invoice to the Company.
b. The price charged by GXB for the Products is exclusive of all taxes,
including national and local sales, use or value-added taxes, customs duties,
withholding taxes or similar charges imposed by any governmental entity after
the Products has been delivered to the destination designated by the Company.
The Company shall pay for all such taxes, assessments or charges, without
reduction in the purchase price charged by GXB.
7. Warranty.
GXB warrants for a period of twelve (12) months from the date of delivery
of the Products to the Company that the Products will be of merchantable quality
and fit for human consumption, provided that following delivery the Products are
handled and stored in a manner that is commercially reasonable for the storage
of beverage alcohol products. In the event the Company claims a breach of the
warranty within the warranty period, GXB shall refund the purchase price
therefore, including freight, insurance and other charges to the Company. GXB
shall indemnify and hold the Company harmless against any proven direct damages
and proven direct losses resulting from the non-conformance of the Products with
this warranty, or any punitive, incidental, special or consequential damages,
awarded to a third party which result from the product quality under the
warranty or through no fault or negligence by of the Company (i.e. human
consumption of any Product past the warranty period if sold by the Company prior
to the expiration of such warranty period). Otherwise, to the extent permitted
by applicable law, the Company waives any claims for incidental, special or
consequential damages or other losses including lost profits.
8. Sales and Marketing Budget.
The Company will prepare an annual Contract Year financial plan (the
"Financial Plan"), which will be submitted for review and approval by the
Company Board of Directors. The Financial Plan will be designed to maintain an
aggressive growth in GXB Products, while also producing a reasonable profit for
the Company and it stockholders. The Financial Plan will include the level of
proposed sales as well as proposed marketing expenditures. It is the objective
to keep the losses, if practical, to a maximum of $750,000 in the first Contract
Year and $500,000 and $250,000, respectively, for the second and third Contract
Year.
9. Term.
The Initial Term of this Agreement shall be fifteen (15) years. Upon
expiration of the Initial Term, the Agreement will automatically renew for
additional fifteen (15) year periods ("Renewal Terms" and together with the
Initial Term, the "Term") as long as the Company shall have sold * cumulative
Cases during the Initial Term (the "Threshold Amount"), provided that the
parties have not terminated the Agreement with Section 10(b). In the event that
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one or more of the Products are sold the Threshold Amount will be reduced to an
amount mutually acceptable to the parties. If the parties cannot agree upon
mutually acceptable sales objectives for any Renewal Term, the category growth
or decline rate for Products, as reported by Shanken Publications, or other
mutually acceptable industry data supplier, shall apply instead. The Threshold
Amount may be amended at any time by mutual agreement of the parties to reflect
a new Threshold Amount for the Initial Term.
10. Termination.
(a) This Agreement may be terminated by written notice, effective on the
date such written notice is received, after the occurrence of any of the
following events:
i. Failure to achieve performance requirements as specified in
Section 9;
ii. Any material breach of this Agreement, other than by Force
Majeure, provided that the non-breaching party shall give to the
breaching party written notice of such breach or default and
shall request that such breach or default be cured. If the
breaching party shall fail to cure such breach or default within
thirty (30) days of the date of the notice of breach or default,
the non-breaching party may terminate this Agreement immediately
by giving written notice of termination to the breaching party;
or
iii. The sale of substantially all of the Trademarks for the Products
listed on Schedule I pursuant to Section 4(b) to an Industry
Buyer.
(b) Additionally, this Agreement may be terminated by the mutual written
consent of GXB and the Company pursuant to the approval of the directors
representing 80% of the issued and outstanding shares of the Company.
(c) All parties warrant and covenant that, upon expiration or termination,
no party will take any action to impair or diminish the goodwill or business of
another party and no party will disclose any confidential information about
another party.
(d) Any termination of the Agreement will not eliminate the potential
participation by the Company in a sale of the brands or Trademarks, as set forth
in Section 4.
11. Compliance with Applicable Laws.
The Company shall at all times strictly comply with all applicable laws,
rules, regulations and governmental orders, now or hereafter in effect, relating
to its performance of this Agreement or the activities of the Company. The
Company further agrees to make, obtain, and maintain in force at all times
during the term of this Agreement, all material filings, registrations, reports,
licenses, permits and authorizations (collectively "Authorizations") required
under applicable law, regulation or order in order for the Company to perform
its obligations under this Agreement, although it is recognized that the Company
is primarily organized as a marketing company. GXB shall provide the Company
with such assistance as the Company may reasonably request in making or
obtaining any such Authorizations.
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12. General Provisions.
a. Waivers. The waiver by either party of a breach or default in any of the
provisions of this Agreement by the other party shall not be construed as a
waiver of any succeeding breach of the same or other provisions; nor shall any
delay or omission on the part of either party to exercise or avail itself of any
right, power or privilege that it has or may have hereunder operate as a waiver
of any breach or default by the other party.
b. Entire Agreement and Amendments. This Agreement and the purchase orders
accepted by GXB hereunder, constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements
between the parties, whether written or oral, relating to the same subject
matter. No modification, amendments or supplements to this Agreement shall be
effective for any purpose unless in writing and signed by each party. Approvals
or consents hereunder of a party shall also be in writing.
c. Severability. If any term of this Agreement is in violation of, or
prohibited by, any applicable law or regulation, such term shall be deemed as
amended or deleted to conform to such law or regulation without invalidating or
amending or deleting any other term of this Agreement.
d. Assignment. Because of the importance of the personal relationships of
the parties and the mutual levels of trust established between them, it is
agreed that none of the rights or obligations created by this Agreement shall be
assignable by either party without the written consent of the other party, which
consent cannot be unreasonably withheld. In the event of an assignment of this
Agreement, the Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties. Notwithstanding the foregoing, GXB is
free to sell its Products and/or Trademarks, subject to Section 4 hereof and the
stockholders of the Company are free to sell their shares subject to any current
or future restrictions governing such shares.
e. Future Investors. Nothing contained in this Agreement shall preclude the
Company from selling any of its capital stock to any future investor nor shall
anything contained herein grant GXB a right to advise, require or compel the
Company to accept or reject any future purchaser of its capital stock.
Furthermore, in the event the Company does sell any shares of its capital stock,
this Agreement shall remain in full force and effect.
f. Force Majeure. Neither party shall be liable to the other party for any
delay or omission in the performance of any obligation under this Agreement,
other than the obligation to pay monies, where the delay or omission is due to
any cause or condition beyond the reasonable control of the party obliged to
perform, including but not limited to, strikes or other labor difficulties, acts
of God, acts of government (in particular with respect to the refusal to issue
necessary import or export licenses), war, riots, embargoes, terrorists attacks,
or inability to obtain supplies ("Force Majeure"). If Force Majeure prevents or
delays the performance by a party of any obligation under this Agreement, then
the party claiming Force Majeure shall promptly notify the other party thereof
in writing and the parties shall use their best efforts to continue performance
under the Agreement.
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g. Governing Law; Arbitration. The rights and obligations of the parties
under this agreement shall not be governed by the provisions of the United
Nations Convention on Contracts for the International Sale of Goods but instead
shall be construed and enforced in accordance with the laws of the State of New
York, in the United States of America without giving effect to principles of
conflict of laws. In the event any disagreement or dispute among the parties
arises under or out of this Agreement, including termination issues, such
disagreement or dispute shall be submitted to Judicial Mediation Services, Inc.,
a professional arbitration service consisting of retired Federal and State
judges ("JAMS") for binding arbitration unless the parties mutually agree upon
an alternative dispute resolution service. The arbitration shall be conducted in
accordance with the rules of JAMS or such other dispute resolution service as
might be agreed upon and shall be held in New York, New York. Any award made by
JAMS or such other dispute resolution service as might be agreed upon shall be
binding upon the parties. Binding arbitration shall be the exclusive remedy for
breach of this Agreement by any party. The parties shall share equally all costs
of arbitration other than representation by counsel which shall be at each
party's own expense.
h. Notices. All notices and other communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been duly given (w)
when delivered if delivered personally, (x) when sent if sent by telecopy, with
a confirmation promptly sent by way of one of the methods permitted in this
Section or by U.S. mail, postage prepaid, (y) the day after deposit with an
overnight courier service marked for overnight delivery, or if deposited with an
overnight courier service marked for non-overnight delivery, the number of days
after delivery as specified to such courier service or (z) five days after
mailing if sent by registered or certified mail (return receipt requested)
postage prepaid, in each case to the parties at the following addresses and/or
telecopier numbers (or such other address or telecopier number for any party as
shall be specified by like notice, provided that notices of a change of address
shall be effective only upon receipt thereof).
If to the Company:
Gosling Partners Inc.
c/o E. Xxxxxxx X. Xxxxxxx
00 Xxx Xxxxxx
Xxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: President and Chief Executive Officer
If to GXB:
Gosling's Export (Bermuda) Limited
XX Xxx XX000,
Xxxxxxxx, XX CX
Bermuda
Telecopy No.: (000) 000-0000
Attention: E. Xxxxxxx X. Xxxxxxx, President
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13. Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original,
and all of which together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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EXECUTION COPY
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives effective as of the Effective Date.
GOSLING PARTNERS INC.
By: /s/ E. Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: E. Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive
Officer
GOSLING'S EXPORT (BERMUDA) LIMITED
By: /s/ E. Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: E. Xxxxxxx X. Xxxxxxx
Title: President
[Signature Page to Export Agreement]
EXECUTION COPY
SCHEDULE I
Products
- Gosling's Black Seal(R) Rum
- Gosling's Gold Rum(R)
- Gosling's Old Rum(R)
- Certain culinary products including cakes, sauces and preserves under the
name of Gosling Gourmet
EXECUTION COPY
SCHEDULE II
Prices
The initial prices to be charged by GXB for the sale of the Products to the
Company shall be calculated pursuant to the formula set forth below:
- Manufacturer's Cost(1) + Producer's Profit(2)
(1) Manufacturer's Cost shall mean the actual cost of manufacturing, as
documented, excluding allocations of corporate overhead.
(2) Producer's Profit for the first two (2) Contract Years shall be equal to
US$7.50 per Case Producer's Profit for the remaining Contract Years shall
be US$10 per Case
