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EXHIBIT 10.20
THE REGISTRANT HAS REQUESTED THAT CERTAIN PORTIONS OF THIS EXHIBIT
BE GIVEN CONFIDENTIAL TREATMENT. AN UNREDACTED VERSION OF THIS
EXHIBIT HAS BEEN FILED WITH THE COMMISSION.
AGREEMENT, DATED SEPTEMBER 24, 1997, BETWEEN
JOHN M. BACHMAN, INC. AND C3, INC.
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REDACTED--OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION AND IS
DENOTED HEREIN BY *****
AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of September 24, 1997
by and among C3, INC., a North Carolina corporation ("C3"), JOHN M. BACHMAN,
INC. ("JMB").
Statement of Purpose
C3 is engaged in the business of designing, manufacturing, marketing and
selling gemstones made of silicon carbide ("Moissanite Gemstones"). JMB, through
an affiliate provides stone cutting services. The parties desire to enter into
this Agreement to formalize the terms upon which JMB will cut Moissanite
Gemstones for C3 in consideration of the payments set forth below.
Therefore, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledge, the
parties hereby agree as follows:
1. Expansion Funds. Within 10 business days after the date of this
Agreement first set forth above, C3 will advance to JMB by certified check
delivered to the address set forth in Section 7 funds in the amount of *****
(the "Expansion Funds"), which funds will be utilized by JMB solely to expand
its affiliate's production facility and procure additional equipment and labor
as needed to enable JMB and its affiliate to satisfy the production volumes
contemplated by this Agreement. The entire amount of the Expansion Funds will be
an advance against production charges payable by C3 pursuant to Section 2,
below, and C3 will be credited against production charges for the entire amount
of the Expansion Funds pursuant to Section 2, below.
2. Cutting Charges. C3 will pay JMB for Moissanite Gemstone cutting
services provided hereunder at the specifications set forth as Exhibit A hereto
and at a rate of ***** per stone for round stones less than or equal to ***** in
diameter and ***** per carat for stone for round stones greater than ***** in
diameter and at the rates as set forth on Exhibit B hereto for other shapes.
Together with each shipment of cut stones delivered to C3, JMB will deliver to
C3 a detailed invoice itemizing the number and sizes of Moissanite Gemstones cut
by its affiliate and included in each such shipment and the amount payable by C3
to JMB for such services. In the event C3 disputes any portion of an invoice, C3
will deliver to JMB a detailed written description of such dispute together with
payment of any undisputed portion of the invoice and 75% of the disputed
portion, and the parties will cooperate in good faith to resolve any such
dispute. If they are unable to do so within 60 days after the date of the
invoice giving rise to the dispute, the matter will be submitted to arbitration
pursuant to Section 14 of this Agreement. C3 will pay in full all undisputed
charges on each invoice within 5 business days after receipt of each invoice by
wire transfer to an account specified by JMB. Beginning with the invoice
reflecting cutting services provided by JMB from and after May 1, 1998, the
amount payable to JMB by C3 reflected on each invoice will be reduced by 25%
until the aggregate amount of such reductions equals ***** and C3 has received
full credit against production charges for the amount of the Expansion Funds.
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REDACTED--OMITTED MATERIAL HAS BEEN FILED WITH COMMISSION AND IS DENOTED
HEREIN BY *****
3. Term; Termination.
(a) The initial term of this Agreement will begin as of the date
first set forth above and will continue until December 31, 1998; provided
that the Agreement will continue automatically thereafter for calendar
year terms until the earlier to occur of (i) the delivery by either party
to the other of written notice delivered not less than 60 calendar days
before the end of the then current term of the notifying party's desire to
terminate this Agreement as of December 31 of such year; or (ii) the
termination of this Agreement pursuant to subsection b., below.
(a) Either C3 or JMB may terminate this Agreement upon (i) the
breach by the other party of any of its agreements or covenants set forth
herein, provided that the terminating party first provides written notice
describing such breach and demanding its cure to the other party and
permits such party a sixty-day period to cure such breach; (ii) changes in
any laws or regulations affecting C3, JMB or its affiliate that render any
material aspect of their performance contemplated by this Agreement
illegal; (iii) any actions by the other party that materially harm the
image or reputation of the terminating party as regarded by its customers,
suppliers or the public; or (iv) in accordance with Section 17.
4. Production Procedures; Standards.
(a) C3 will deliver all Moissanite Gemstones C3 desires to have
cut together with specifications for the cut of each stone to such
location as directed by JMB. It shall be C3's responsibility to ensure
that all Moissanite Gemstones it delivers for production are suitable for
the specifications provided by C3 and JMB shall not be liable to C3 for
the inability to cut to specifications any Moissanite Gemstones not
suitable for such specifications.
(b) JMB covenants that the services to be provided hereunder will
be performed in accordance with specifications provided by C3. C3 will
have the right to return without payment any Moissanite Gemstones received
by C3 from JMB that do not satisfy such specifications and JMB will at its
own expense re-cut at its expense any such Moissanite Gemstones to the
original specifications provided by C3.
(c) For orders placed by C3 under this Agreement JMB will pay all
import, export and freight costs C3 for which C3 will pay JMB ***** or
more. For orders placed by C3 under this Agreement for which C3 will pay
JMB less than *****, C3 will reimburse JMB ***** for any import, export
and freight costs. C3 will provide all shipping insurance and JMB or its
affiliates shall provide insurance for the Moissanite Gemstones while in
their possession. JMB shall cause C3 to be named as an additional insured
party on such insurance.
(d) The parties estimate that the volume of Moissanite Gemstones
to be cut by JMB from the date of this Agreement through December 1998
will be as set forth on Exhibit C hereto. JMB covenants that it will be
able to meet such production volumes
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without delay or additional cost to C3 and in accordance with the
standards set forth in subsection b., above. JMB will have the right to
reject any order by C3 to the extent the volume of any such order exceeds
the volume estimates set forth on Exhibit C hereto by providing written
notice of such rejection to C3 within 10 business days after receipt by
JMB of such an order from C3. Failure to timely reject any excess portion
of an order will constitute acceptance of the entire order by JMB. The
parties will agree in writing on quarterly volume estimates for any
Moissanite Gemstones to be cut pursuant to this Agreement after December
31, 1998.
5. Compliance with Laws. Subject to Section 4.c., above, each party
will perform its duties and obligations hereunder in compliance in all material
respects with all laws and regulations applicable to such party, including
without limitation, those related to the import and export of raw and processed
materials, taxes, tariffs and employment.
6. Noncompetition. JMB nor its affiliates shall cut any Moissanite
Gemstones for any third parties without the prior written consent of C3.
7. Nonexclusive License. JMB grants, and shall cause its affiliates to
grant C3, a perpetual, nonexclusive and royalty-free license to use and
otherwise practice (including the right to sublicense) any inventions developed
by or for JMB, its affiliates or by their employees, all trade secrets or other
proprietary or confidential information, which is applicable or useful in the
cutting of Moissanite Gemstones.
8. Indemnification.
(a) By JMB. JMB shall indemnify, defend and hold harmless C3 and
its officers, directors, agents, shareholders and representatives from,
against, and with respect to any and all loss, damage, claim, obligation,
liability, cost and expense (including without limitation reasonable
attorneys' fees and costs and expenses incurred in investigating,
preparing, defending against or prosecuting any litigation, claim,
proceeding or demand), of any kind or character (a "Loss") arising out of
or in connection with any failure by JMB to perform or observe, or to have
performed or observed, in full, any covenant, agreement or condition to be
performed or observed by each pursuant to this Agreement and the
operations of the businesses of JMB.
(b) By C3. C3 will indemnify, defend and hold harmless JMB and its
officers, directors, agents, shareholders and representatives from,
against, and with respect to any Loss arising out of or in connection with
any failure by C3 to perform or observe, or to have performed or observed,
in full, any covenant, agreement or condition to be performed or observed
by it pursuant to this Agreement and the operations of the business of C3.
9. Notices. Any notices required or permitted to be given by the
parties hereunder shall be in writing and delivered personally or sent by
registered or certified mail, return-receipt requested, or by express courier
service, addressed as follows:
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If to C3:
C3, Inc.
Post Office Box 13533
Research Triangle Park, NC 27709-3533
Attention: Mr. Jeff N. Hunter, President
Tel: (919) 468-0399
Fax: (919) 468-0486
With a copy (which shall not constitute notice) to:
Womble Carlyle Sandridge & Rice, PLLC
3300 One First Union Center
301 South College Street
Charlotte, North Carolina 28202
Attention: Cyrus M. Johnson, Jr., Esq.
Tel: (704) 331-4900
Fax: (704) 331-4955
If to JMB:
John M. Bachman, Inc.
______________________________
______________________________
Tel:__________________________
Fax:__________________________
With a copy (which shall not constitute notice) to:
______________________________
______________________________
______________________________
Tel:__________________________
Fax:__________________________
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties to this Agreement and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interest or
obligations hereunder shall be assigned by any of the parties to this Agreement
without the prior written consent of all other parties to this Agreement, and
any purported assignment without such consent shall be void.
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12. Third Party Beneficiaries. JMB shall contract with its affiliate to
provide the services required under this Agreement and shall specify in such
Agreement that C3 is a third-party beneficiary of such Agreement. Other than as
set out herein, none of the provisions of this Agreement or any document
contemplated by this Agreement is intended to grant any right or benefit to any
other person or entity.
13. Amendment. Any waiver, amendment, modification or supplement of or
to any term or condition of this Agreement shall be effective only if in writing
and signed by all parties hereto, and the parties to this Agreement waive the
right to amend the provisions of this Section orally.
14. Governing Law. This Agreement shall be governed by the laws of the
State of North Carolina without regard to conflicts of laws principles.
15. Jurisdiction: Service of Process. Each of the parties to this
Agreement submits to the jurisdiction of any state or federal court sitting in
North Carolina any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of such action or proceeding may
be heard and determined in any such court. Each of the parties to this Agreement
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety or other security that may be
required of any party with respect thereto. Any party may make service on any
other party by sending or delivering a copy of the process to the party to be
served at the address and in a manner provided in Section 7 above; provided,
however, that nothing in this Section 13 will affect the right of any party to
serve legal process in any other manner permitted by law or at equity. Each
party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
16. Resolution of Disputes.
(a) No party to this Agreement shall institute a proceeding in any
court or administrative agency to resolve a dispute between the parties
arising out of or related to this Agreement before that party has sought
to resolve the dispute through direct negotiation with the other party. If
the dispute is not resolved within three weeks after a demand for direct
negotiation, the parties shall seek relief through arbitration in North
Carolina administered by the American Arbitration Association under its
commercial arbitration rules and procedures then in effect. The
arbitrator(s) shall base its/their award on applicable laws and judicial
precedent and include in such award a statement of the reasons upon which
the award is based. Judgment on the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. The arbitrator(s)
shall in no event make any damage award that contravenes subsection d. of
this Section 14, but shall order the losing party to pay all of the
charges of the American Arbitration Association for such arbitration and
all of the prevailing party's costs of the arbitration, including
reasonable attorneys' fees.
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(b) All applicable statutes of limitation and defenses based upon
the passage of time shall be tolled while the procedures specified in this
Section 14 are pending. The parties will take such action, if any,
required to effectuate such tolling.
(c) Each party is required to continue to perform its obligations
under this Agreement pending final resolution of any dispute arising out
of or relating to this Agreement.
(d) In no event shall any party hereunder be liable to any other
party for incidental, consequential or special loss or damages of any
kind, however caused, or any punitive damages.
17. Severability. In the event that any provision in this Agreement is
determined to be invalid, illegal or unenforceable in any respect, the remaining
provisions of this Agreement will not be in any way impaired, and the illegal,
invalid or unenforceable provision will be fully severed from this Agreement and
there will be automatically added a replacement provision as similar in terms
and intent to such severed provision as may be legal, valid and enforceable.
18. Entire Agreement. This Agreement and the Exhibits hereto constitute
the entire contract between the parties to this Agreement pertaining to the
subject matter of this Agreement, and supersede all prior and contemporaneous
agreements and understandings between the parties with respect to such subject
matter. Notwithstanding the foregoing, the parties agree and acknowledge that
they continue to be bound by all terms and provisions of that certain
Confidential Disclosure Agreement, dated as of October 10, 1996, and by its
execution and delivery of this Agreement JMB hereby becomes a party to and
agrees to be bound by the terms of such agreement as a "Promisor" thereunder.
19. Force Majeure.
(a) Neither party shall be liable for delay or failure of
performance of this Agreement if the delay or failure is caused by acts of
God, war, fire, embargo, strikes or other labor trouble, governmental
regulations or actions or any cause beyond the control of the parties.
(b) If a delay or failure of performance caused by force majeure
shall continue for a period of more than three (3) months, each of C3 and
JMB shall have the right to terminate this Agreement immediately upon
written notice to the other.
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IN WITNESS WHEREOF, each of the parties has executed and delivered this
Agreement, or has caused this Agreement to be executed and delivered by its duly
authorized officer, as of the date first above written.
C3, INC.
By: /s/ Jeff N. Hunter
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Name: Jeff N. Hunter
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Title: President
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JOHN M. BACHMAN, INC.
By: /s/ John M. Bachman
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Name: John M. Bachman
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Title: President
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REDACTED--OMITTED MATERIAL HAS BEEN FILED WITH COMMISSION AND IS DENOTED
HEREIN BY *****
EXHIBIT A
SPECIFICATIONS
Stones must be cut according to the engineered cutting diagram supplied by C3.
The diagram specifies all angles and indexes. These angles and indexes will
produce a stone that has the following:
ROUND BRILLIANT DESIGN CUTTING SPECIFICATION:
- Table width ***** of stone width
- Pavilion depth measured from girdle to cutlet is ***** of stone
width
- Crown depth measured from girdle to table is *****
- Girdle thickness is thin to medium per diamond standards
- Girdle should be round and polished
- The P2 facets should be cut to cause the P1 facets to meet point
***** from girdle to culet.
Other shapes are required to be cut from time to time. For each shape, the
cutting requirement will be communicated to JMB by C3 either by engineered
diagram or specified angles and indexes.
FINISH SPECIFICATION:
All stones must meet the standards of *****. The finish will show no
evidence of polish lines when viewed in a microscope using ***** power. This
specification will apply to all shapes cut.
GENERAL:
- - Meet points must not show any undercutting or over cutting *****.
- - Crown depth, Pavilion depth should be within plus or minus *****.
- - This specification will apply to all shapes cut.
- - All shape engineered diagrams may change from time to time.
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DENOTED HEREIN BY *****
EXHIBIT B
1st. Sept. 1997
Cutting Charges *****
(Using *****)
Small Sizes Size in mm. US $ per piece
- ----------- ----------- --------------
Round ***** *****
***** *****
Oval ***** *****
***** *****
***** *****
Pear ***** *****
***** *****
***** *****
Marquise ***** *****
***** *****
***** *****
***** *****
Trilliant ***** *****
Heart ***** *****
Princess ***** *****
Square ***** *****
***** *****
Large Sizes Size in mm. US $ per Carat
- ----------- ----------- --------------
Round ***** *****
Oval ***** *****
Marquise ***** *****
Heart ***** *****
Trillion ***** *****
For small orders we charge ***** for our import and re-export expenses. For
cutting-orders of over ***** we absorb these expenses. Note: small stones we
charge per piece, larger stones per carat.
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REDACTED--OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
AND IS DENOTED HEREIN BY *****
EXHIBIT C
PRODUCTION VOLUMES
For the Month of: Volume of:*
---------------- -----------
November 1997 *****
December 1997 *****
January 1998 *****
February 1998 *****
March 1998 *****
April 1998 *****
May 1998 *****
June 1998 *****
July 1998 *****
August 1998 *****
September 1998 *****
October 1998 *****
November 1998 *****
December 1998 *****
*Volumes are finished pieces per month.