AGREEMENT
This is an agreement (the "Agreement") made between Charleston Holdings,
LLC, a Delaware limited liability company, with offices in Charleston, South
Carolina ("Charleston"), and The Knockout Group, Inc., a Delaware corporation
with offices in Chicago, Illinois ("Knockout") on July 22, 2004 ("Effective
Date").
PREAMBLE
Charleston is the owner of certain "trade secrets," as that term is
defined in ss.39-8-20 of the South Carolina Trade Secrets Act, which trade
secrets pertain to certain information, formulae, techniques, methodologies, and
processes (the "Secret Formulae") utilized in the production of various
household and commercial cleaning products (collectively, the "Products").
The parties wish Knockout to market, sell, advertise and distribute the
Products," and to have the protections afforded by (he patent and trademark laws
of the United States with respect to the Products, The parties wish Charleston
to be the exclusive forraulator, and to have the right, at the direction and
approval of Knockout, to contract with an approved manufacturer of the Secret
Formulae for the Products, and otherwise to have all of the protections afforded
to an exclusive licensee of such rights.
Accordingly, the parties wish to enter into this Agreement in order to
provide for the transfer and assignment of the Secret Formulae by Charleston to
Knockout, and for the grant of exclusive manufacturing rights of the Products by
Knockout to Charleston. In consideration of the foregoing, and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties, it is mutually agreed by and between Charleston and Knockout as
follows:
AGREEMENT
1. Sale of Secret Formulae.
Charleston hereby sells, assigns, transfers and conveys ownership to knockout
the Secret Formulae as described with more particularity in Exhibit "A" annexed
hereto and made a part hereof by reference. Such assignment shall include all
right, title and interest in the Secret Formulae, any derivatives and
improvements thereof, including, without limitation, the right to apply for and
obtain such patents, trademarks, trade names, and other identifying marks as
Knockout may choose to pursue. Charleston agrees to execute any documents
necessary or reasonably requested by Knockout to effect evidence of the
assignment. Anything contained hereinabove to the contrary notwithstanding,
Charleston makes no warranties or representations concerning the patentability
of the Secret Formulae, nor ils eligibility for trademark, trade name, or any
other form of registration.
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2. Exclusive Manufacturing Rights.
A. Knockout hereby grants to Charleston the worldwide, exclusive right to
formulate and/or contract with an approved manufacturer to formulate the
Secret Formulae and any derivatives and improvements thereof, i.e. the
ingredients and specific method of combining to form a concentrate (the
"Ingredients"). Such Ingredients shall include all Ingredients which are
to be incorporated into cleaning products as sold and distributed by
Knockout. In addition to formulating and/or manufacturing the Ingredients
for the Products pursuant to the Secret Formulae, Charleston shall be
responsible for tilling containers with the Ingredients (fifty-five gallon
drums, 1,000 liter tanks, etc.), and shipping the Ingredients to
packagers/bottlers designated by Knockout.
B. Should Charleston identify an application for the Ingredients in a
market that o Knockout is not interested in pursuing, then Charleston
shall have the right to market" and sell the Ingredients in the approved
market with the express written approval, not withheld unreasonably, by
Knockout and paying a royalty to Knockout of twenty cents (0.20) for each
gallon of ready to use Product containing the Ingredients. Charleston may
not use the names or any trademarks associated with Knockout's Products in
the sales and marketing of Ingredients in the approved market.
In such an event as set forth in this paragraph 2(B), that Knockout
approves in writing for Charleston to formulate and/or manufacture
Ingredients for use in cleaning products other than those which arc
marketed, sold, advertised or distributed by Knockout ("Offproduct
Ingredients"), then and in such event, Charleston shall pay to Knockout a
royalty of Twenty Cents ($0.20) for each ready to use retail gallon
containing the Offproduct Ingredients so formulated/manufactured by
Charleston. Such payment shall be made by Charleston to Knockout within
ten (10) days following receipt by Charleston of payment to it by the
purchaser of such Offproduct Ingredients. Charleston shall keep accurate
books and records of account with respect to such Offproduct Ingredient's,
and shall furnish to Knockout complete and accurate statements of account
for all Offproduct Ingredients sold by Charleston within fifteen (15) days
following the end of each calendar quarter. If an audit or inspection of
Charleston's books and records indicate that sales reported or royalties
paid for any quarter shall have been under reported or underpaid by more
than ten (10) percent, Charleston shall be in material breach of this
Agreement, and in addition to other remedies available to Knockout,
Charleston shall immediately reimburse Knockout's costs of the audit or
inspection. Any overpayments to Knockout shall be recouped solely from
future royalties payable to Knockout, and no reimbursement shall be
required in connection therewith.
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3. Approved Manufacturer.
A. Charleston and Knockout presently designate Cessco, Inc. as an initial
contract manufacturer of the Ingredients ("Approved Manufacturer").
Charleston shall establish and maintain as well as supply Knockout with
standard operating procedures to be approved in advance by Knockout
relating to the manufacturing of the Ingredients and blending process that
will be used by Cessco and any subsequent Approved Manufacturers of the
Ingredients and bottlers. If Charleston fails to provide the Ingredients
according to Knockout's business needs, Knockout and Charleston will
cooperate fully and promptly in good faith to select other Approved
Manufacturers for the Ingredients.
B. If Charleston elects not to manufacture or fails to deliver the
prcordered concentrate in the required specifications within 60 days of
the receipt of a purchase" order and/or requirements of a purchase order,
Charleston agrees that Knockout shall have the option, to have a third
party Approved Manufacturer to buy bulk Ingredients to mix, bottle and
package the Products. Should Knockout select this option due to its
business needs, the following alternative royalty structure shall be in
effect: Knockout will pay to Charleston SO.20 per gallon of ready to use
Product produced, 60 days from production completion paid by the first of
each month.
C. Quality Assurance. Charleston shall be responsible for maintaining a
quality control program for the formulation and manufacture of the
Ingredients consistent with industry standards and Knockouts manufacturing
specifications and requirements, and Knockout's packager/bottler shall be
responsible for mixing, labeling and packaging the Ingredients; however,
Knockout shall retain the right to reasonably set or modify the quality
standards and to have a third party work with Charleston and/or Approved
Manufacturer(s) to assure overall quality of Ingredients and/or Products.
4. Payment.
A. All purchase orders for Ingredients shall be submitted directly to
Charleston for an Approved Manufacturer being managed by Charleston.
Knockout shall pay to Charleston the sum of Twenty-four Dollars ($24.00)
for each gallon of Ingredients supplied by Charleston (or its Approved
Manufacturer) to Knockout (or to Knockout's packagers/bottlers). The price
of Ingredients shall not increase during the term of this Agreement.
Charleston has agreed to defer the payment of a portion of the purchase
price for one (I) year, and a portion of the purchase price for one
hundred eighty (180) days. Knockout has agreed to pay a portion of the
purchase price at the time it places an order for Ingredients. The
calculation and timing of the amounts payable shall be as follows: The
portion of the purchase price that shall be deferred for one (1) year
shall be the equivalent of twenty percent (20%) of the gross purchase
price of the Ingredients that are being ordered. Based upon a price of
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Twenty-four Dollars ($24.00) per gallon, the sum of Four and 80/100
Dollars ($4.80) shall be deferred for one (1) year from the date of the
receipt of a purchase order by Charleston. That portion of the purchase
price that shall be paid by Knockout to Charleston upon the submission of
an order for Ingredients shall be seventy percent (70%) of the gross
purchase price less the amount deferred for one (1) year. Based upon a
purchase price of Twenty-four Dollars ($24.00) per gallon, that equates to
Thirteen and 44/100 Dollars ($13.44) ($24.00 - $4.80 = $19.20 X 0.70 =
$13.44). The balance of the purchase price, or Five and 76/100 Dollars
($5.76), shall be paid by Knockout within one hundred eighty (ISO) days of
the receipt by Charleston of a purchase order. All payments required
hereunder shall be in good collected funds. Charleston shall refund
amounts paid for any delivered Ingredients that do not meet the quality
standard as required by Knockout.
B. Charleston and Knockout shall endeavor to improve the Secret Formulae
and reduce the costs associated with the manufacturing of such
Ingredients, while maintaining the quality control standard set by
Knockout, while such cost savings shall be mutually shared between the
parties. ' '
5. Term and Termination;
The term of this Agreement shall commence as of the date hereof, and shall
continue until terminated in accordance with the provisions set forth
hereinafter. It is the intention of the parties that the Agreement shall
remain in full force and effect so long as neither of them is in breach
and so long as Knockout continues to include the Ingredients in its
cleaning products.
(a) Termination by Knockout.
Knockout may terminate this Agreement for the following reasons:
(i) If Charleston defaults in its obligations to procure and
maintain insurance as required herein;
(ii) If Charleston shall become insolvent (as determined by
judicial adjudication), shall make an assignment for the
benefit of creditors, or shall have a petition in
bankruptcy filed for or against it, and such termination
shall be "effective immediately upon Knockout giving
written notice io Charleston;
(iii) If Charleston shall be convicted of a felony related to
the manufacture, use, or sale of Ingredients or
Products; or
(iv) If Charleston defaults in the performance of any of its
other obligations under this Agreement and the default
has not been cured within sixty (60) days of receivin;
written notice from Knockout of such default.
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(b) Termination by Charleston.
Charleston may terminate this Agreement for the following reasons:
(i) If Knockout defaults in its obligations to procure and
maintain insurance as required herein;
(ii) If Knockout shall become insolvent (as determined by
judicial adjudication), shall make an assignment for the
benefit of creditors, or shall have a petition in
bankruptcy filed for. or against it, and such
termination shall be effective immediately upon
Charleston giving written notice to Knockout;
(iii) If Knockout shall be convicted of a felony related to
the manufacture, use, or sale of Ingredients or
Products; (iv) If Knockout shall cease manufacturing,
marketing, selling, or distributing Products;
(v) If Knockout defaults in the performance of any of its
other obligations under this Agreement and the default
has not been cured within sixty (60) days of receiving
written notice from Charleston of such default.
Charleston's Covenants, Warranties, and Indemnifications.
(a) Charleston covenants with Knockout as follows:
Charleston shall provide Ingredients and all specifications for and review
all tests for each lot of Ingredients purchased by Knockout and
formulated/manufactured by an Approved Manufacturer, and Charleston shall
guarantee the quality of all products provided to Knockout.
(b) Charleston shall comply with all applicable laws and regulations in
connection with its formulation, manufacturing, or packaging of the
Ingredients, and Charleston shall be solely responsible for any violation
of such laws and regulations by Charleston, or its affiliates or agents.
Charleston shall defend and hold Knockout harmless in the event of any
legal action of any nature occasioned by the violation by Charleston of
such laws or regulations.
(c) Charleston warrants and represents to Knockout the following, which
shall remain true and correct for the duration of this Agreement:
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(i) Charleston is a duly organized corporation, validly
existing and in good standing under the laws of
Delaware, and has taken all corporate action necessary
to enter into and perform this Agreement;
(ii) The Secret Formulae are original, Charleston is the sole
owner thereof, Charleston has sole right and full power
to enter into this Agreement, and Charleston will not
enter into any contract, agreement, or understanding
with respect thereto that conflicts with the rights
granted to Knockout hereunder; and
(iii) The Secret Formulae do not infringe upon any proprietary
right at common law, or any statutory rights such as
copyright or patent rights, or any other right of any
third party in contravention of law;
(jvj Charleston has fully and completely disclosed the Secret
Formulae including all ingredients, methods of combining
and manufacturing the same, and has fully and completely
disclosed the best known formulation of Ingredients (o
Knockout. 'to(1)
(d) Charleston represents, warrants and covenants that should any of
the aforementioned representations or warranties be breached by Charleston, it
agrees to take such actions necessary to cause Knockout to have the continued,
uninterrupted right to sell, market and advertise the Products using the Secret
Formulae in accordance with the terms of this Agreement and for the duration
hereof provided that this Agreement is not othc! wise terminated due to the
breach thereof by Knockout.
(e) During such lime as this Agreement shall be in effect,
Charleston shall, at its sole cost and expense, procure and maintain commercial
general liability insurance in an amount of not less than One Million Dollars
($1,000,000) naming Knockout as an additional insured. Such commercial general
liability insurance shall provide (A) product liability coverage and (B) broad
form contractual liability coverage for Knockout's indemnification under this
Agreement. The minimum amounts of insurance coverage required shall not be
construed to create a limit of Charleston's liability with respect to its
indemnification under this Agreement. Charleston shall furnish Knockout with
written evidence of such insurance upon request of Knockout. Charleston shall
provide Knockout with written notice at least fifteen (15) days prior to the
cancellation, non-renewal or material change in such insurance; if Charleston
does not obtain replacement insurance providing comparable coverage within such
fifteen (15) day period, Knockout shall have the right to terminate this
Agreement effective at the end of such fifteen (15) day period without notice or
any additional waiting periods. Charleston shall maintain such commercial
general liability insurance, on an occurrence basis, beyond the expiration or
termination of this Agreement
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during the period that any product, process, or service, relating to, or
developed pursuant to, this Agreement is being commercially distributed or
sold by Knockout, or any of its affiliates or agents.
(f) Charleston shall indemnify, defend, and hold Knockout harmless
against any damage or judgment, including court costs and attorney's fees, which
may be sustained by or recovered against Knockout arising from Charleston's
breach or violation of the terms of this Agreement or the warranties applicable
to Charleston contained herein or any claim inconsistent with any with any
warranty or representation of Charleston contained herein. Charleston shall also
reimburse Knockout for all expenses including court costs, attorney's fees, and
amounts paid in settlement (to which settlement Charleston has consented)
sustained by Knockout in resisting any claim, demand, suit, action, or
proceeding asserted or instituted against Knockout based upon any breach or
violation of the warranties of Charleston contained herein or any claim
inconsistent with any warranty or ' representation of Charleston contained
herein. Knockout shall advise Charleston of any such claim, demand, or action
promptly after Knockout has been advised thereof, and Charleston shall have the
right (to the extent Knockout has such right) to assist and participate, at
Charleston's expense, in any defense thereof through counsel of Charleston's
choosing.
0, Xxxxxxxx'x Xxxxxxxxx, Xxxxxxxxxx, jind Indemnifications, (a)
Knockout covenants with Charleston as follows:
(i) Knockout shall use diligent efforts to effect
introduction of the Products into the marketplace as
soon as practicable, consistent with sound and
reasonable business practice and judgment; thereafter,
until the termination of this Agreement, Knockout shall
endeavor to keep the Products reasonably and publicly
available to the end users thereof.
(ii) During such time as this Agreement shall be in effect,
Knockout shall, at its sole cost and expense, procure
and maintain commercial general liability insurance in
an amount not less than One Million Dollars ($1,000,000)
and naming Charleston as an additional insured. Such
commercial general liability insurance shall provide (A)
product liability coverage and (B) broad form
contractual liability coverage for Charleston's
indemnification under this Agreement. The minimum
amounts of insurance coverage required shall not be
construed to create a limit of Knockout's liability with
respect to its indemnification
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under this Agreement. Knockout shall furnish Charleston
with written evidence of such insurance upon request of
Charleston. Knockout shall provide Charleston with
written notice at least fifteen (15) days prior to the
cancellation, non-renewal or material change in such
insurance; if Knockout does not obtain replacement
insurance providing comparable coverage within such
fifteen (15) day period, Charleston shall have the right
to terminate this Agreement effective at the end of such
t 24 24 fifteen (15) day period without notice or any
additional waiting periods. Knockout shall maintain such
commercial general liability insurance, on an occurrence
basis, beyond the expiration or termination of this
Agreement during the period that any product, process,
or service, relating to. or developed pursuant to, this
Agreement is being commercially distributed or sold by
Knockout, or any of its affiliates or agents. o '
(lii) Knockout shall comply with all applicable laws and
regulations in connection with its packaging,
distribution, marketing, advertising, or sale of the
Products and Knockout shall be solely responsible for
any violation of such laws and regulations by Knockout,
or its affiliates or agents, except to the extent of not
properly labeling Products due to Charleston's failure
to provide the necessary labeling information to
Knockout required under Section 3. Knockout shall defend
and hold Charleston harmless in the event of any legal
action of any nature occasioned by Ihe violation by
Knockout of such laws or regulations.
(b) Knockout represents and warrants to Charleston the following, which shall
remain true and correct for the duration of this Agreement:
(i) Knockout is a duly organized corporation, validly
existing and in good standing under the laws of
Delaware, and has taken ail corporate action necessary
to enter into and perform this Agreement;
(ii) Knockout shall be the sole owner of the Secret Formulae,
has full power to enter into this Agreement, and has not
entered, and will not enter, into or become subject to
any contract, agreement or understanding with respect
thereto which would conflict with the rights granted to
Charleston hereunder and
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(c) Knockout shall indemnify and hold Charleston harmless against
any damage or judgment, including court costs and attorney's
fees, which may be sustained by or recovered against
Charleston arising from Knockout's breach or violation of the
terms of this Agreement or the covenants or warranties
applicable to Knockout contained herein or any claim
inconsistent with any warranty or representation of Knockout
contained herein. Knockout shall also reimburse Charleston for
all expenses including court costs, attorney's fees, and
amounts paid in settlement (to which settlement Knockout has
consented) sustained by Charleston in resisting any claim,
demand, suit, action, or proceeding asserted or instituted
against Charleston based upon any breach or violation of the
warranties of Knockout contained herein or any claim
inconsistent with any warranty or representation of Knockout
contained herein. Charleston shall advise Knockout of any such
claim, demand, or action promptly after Charleston has been
advised thereof, and Knockout shall have the right (to the
extent Charleston has such right) to assist and participate,
at Knockout's expense, in any defense thereof through counsel
of Knockout's choosing.
8. MISCELLANEOUS.
8.1. Successors; Assignment. This Agreement shall be binding upon and inure io
the benefit of the parties and iheir respective heirs, executors,
administrators, legal representatives, successors, and assigns. Charleston may
not assign this Agreement without prior written consent of Knockout.
8.2 Notices. Notices given by either party must be in writing and shall be
mailed by certified or registered first class mail, return receipt requested,
overnight delivery service, or personally delivered to the addresses set forth
below, as amended in writing from time to time. All notices shall be effective
the earlier of three days from the date of mailing or upon receipt.
8.3. Integration. This Agreement superccdes any other agreements and represents
the entire agreement and understanding between-Knockout and Charleston. No
waiver, alteration, or modification of any of the provisions of this Agreement
shall be binding unless in writing and signed by a duly authorized
representative of the party against which enforcement of such waiver,
alteration, or modification is sought.
8.4. Governing Law. For purposes of any and all disputes with respect to this
Agreement, the parties consent to jurisdiction and venue in the state and
federal courts located in the Stale of Delaware.
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8.5. Binding Authority. The individuals executing this Agreement further warrant
that they have the full power and authority to bind their respective entities to
the terms hereof and have been duly authorized to do so in accordance with such
entities' corporate or other organizational documents and procedures.
8.6. Captions, Sections. Captions contained herein are inserted only as a matter
of convenience and in no way define, limit, or extend the scope or intent of any
provision hereof. Use of the term "Section" shall include the entire subject
Section and all its subsections where the context requires. 8.7. Waiver. Failure
or delay on the part of either party to exercise any right, power or privilege
hereunder shall not operate as a waiver thereof. A waiver of one obligation
hereunder shall not operate as a waiver of any other obligation.
8.8 Scverabilily. If any provision of this Agreement is held to be ineffective,
unenforceable or illegal for any reason, such decision shall not affect the
validity or enforceability of any or ail of the remaining portions thereof.
Understood and agreed to by the duly authorized representatives of the parties
as evidenced by their respective signatures below. The parties have executed
this Agreement as of the xxxx first written above.
Charleston Holdings, LLC
By: /s/ Xxxx X. Xxxxx Xx.
Title: Its President
The Knockout Group, Inc.
By: /s/ Xxxx Xxxxxxx
Title: CEO
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