Document:

ex103.htm

KB Mold Company– Mold Development and Royalty Agreement for

Child Resistant Tube Containers

This Royalty Agreement for Child Resistant Tube Containers (this “Agreement) is entered into as of September 11, 2014 (the “Effective Date”) and is between KB Mold Company (“Mold Owner”) and KIM International Corporation dba Kush Bottles (or its successors), a California Corporation with its principal place of business at 1800 Newport Circle, Santa Ana, CA 92705; hereinafter “Kush”.  In consideration of the following mutual promises, and intending to be legally bound, the parties hereto agree as follows:

	
1.  

	
Terms and Conditions. Mold Owner hereby agrees to procure for Kush, on the terms and conditions contained in this Agreement, a mold and insert (“Mold”) to manufacture “Child Resistant Joint and Cone Tube Containers” (“Products”).

	
2.  

	
Term and Termination.

 

	
a.  

	
Length of Term.  Subject to the limitations set forth in this Agreement during the ramp up period (as defined below), the Agreement shall be effective as of the Effective Date and continue until December 31, 2019 (“Initial Term”).  This Agreement shall be automatically renewed at the conclusion of the Initial Term for successive twelve (12) month periods (“Successive Periods”).

	
b.  

	
Termination. Prior to the expiration of the Initial Term, this Agreement may only be terminated upon the occurrence of Mold Owner obtaining from Kush the patent on the Mold (“Mold IP”) or Kush obtaining the Mold from Mold Owner. As to any Successive periods Kush may terminate upon 60 day written notice to Mold Owner.

 

	
3.  

	
Minimum Orders; Quantities.

	
a.  

	
During the “Ramp Up Period”, which is defined as the time period between the Effective Date and the date the Mold begins to be used to manufacture Products, Kush is entitled to continue to purchase similar products from other sources.

	
b.  

	
After the Ramp Up Period, Kush agrees to purchase from the manufacturer of the Products, JB Plastics, a contract plastic injection molder, a minimum of 325,000 Products, every three (3) months, for the Initial Term of the Agreement.

 

	
4.  

	
Royalty and Payment.

	
a.  

	
Royalty Payment.  Kush shall pay to Mold Owner a royalty of one-and-a-half cents ($0.015) per Products ordered (“Royalty”).

	
b.  

	
Billing and Payment.  Mold Owner shall submit to Kush an invoice for the Royalty showing the volume of Products ordered by Kush from the manufacturer of the Products.  Kush shall pay each invoice, by cash, check or wire-transfer within thirty (30) days following date of invoice receipt.

 

	
c.  

	
It is understood between the parties, while Mold Owner is responsible for development of the Mold, manufacturing of the Products is expected to be done by JB Plastics. Kush will continue to be responsible for paying JB Plastics for the manufacturing and supply of the Products.  JB Plastic’s costs shall be documented by invoices directly from JB Plastics to Kush on terms negotiated between JB Plastics and Kush.

 

	
d.  

	
Kush agrees to fully indemnify, hold harmless and defend Mold Owner from and against all claims, actions, suits, demands, damages, liabilities, obligations, losses, settlements, judgments, costs and expenses (“Actions”) except any Actions due to or resulting from the intentional misconduct, negligence, or strict liability of Mold Owner.

	
5.  

	
Tooling and Intellectual Property.

	
a.  

	
The Mold.  Mold Owner will be responsible for the purchase and testing of the necessary tooling required to produce the Mold, the costs for which are estimated to be approximately $150,000.  It is expected the development of the Mold will take about fourteen (14) weeks from the Effective Date, hence the Ramp Up Period.

	
i.  

	
After ordering and having paid Royalty payments to Mold Owner on a minimum of 2,250,000 Products, Kush will have the option to purchase the Mold from Mold Owner for the amount of all direct costs invested into the Mold (including delivery charges, taxes, testing expenses, etc.). Upon completion of the development of the Mold, Mold Owner shall provide Kush with the initial cost figures for the Mold.  Mold Owner shall continue to update Kush with additional cost figures, such as periodic maintenance costs, as they are incurred.

	
b.  

	
The Patent.  Kush will be responsible for the patent development costs, estimated to be approximately $20,000, and upon completion of development, Kush will own the Mold IP. Mold Owner will have exclusive rights to use the Mold IP with no royalty, fees or restrictions.  Upon successful development of the Mold IP, Kush shall provide Mold Owner with the total direct cost figures for the Mold.

	
i.  

	
In the event Kush breaches this Agreement or threatens insolvency, the patent will then be transferred to Mold Owner free and clear.

	
ii.  

	
In no event shall Kush allow a lien to be placed upon the Product IP without Mold Owner’s prior written consent.

	
iii.  

	
If Kush does not purchase the Mold from Mold Owner by November 30, 2019, Mold Owner shall have the option to buy the Mold IP for the amount of all direct costs invested into the development of the Mold IP.

 

	
6.  

	
Information Access. Mold Owner shall have access to all sales documents, invoices and payment information between Kush and JB Plastics.  Kush shall carbon copy Mold Owner on every purchase order submitted to JB Plastics for the manufacturing of Products.

	
7.  

	
Assignment. No party hereto may assign this Agreement without the prior written consent of the other party, and any attempted assignment in violation of this Agreement shall be null and void.

 

IN WITNESS WHEREOF, the undersigned authorized agents of the parties designated below have executed this Agreement as of the date first set forth above.

KUSH BOTTLES                                                                                           KB Mold Company

By: /s/ Nick Kovacevick                                                                           By:  /s/ Kevin Tom

Nick Kovacevich                                                                                                 Kevin Tom

Chief Executive Officer                                                                                       Chief Executive Officerex104.htm

COMMERCIAL SUBLEASE AGREEMENT

This Commercial Sublease (this “Sublease”) is made effective as of August 1st, 2012, by and between 3 Kings Ventures (“Tenant”), and Kush Bottles (“Subtenant”). Tenant has previously entered into a lease agreement with Tri-Star Interiors (“Landlord”) dated August 1st, 2012 (the “Prime Lease”), a copy of which is attached as an exhibit to this Sublease. Tenant now desires to sublet the leased property to Subtenant and Subtenant desires to sublet the leased property from Tenant. Therefore, the parties agree as follows:

PREMISES. Tenant, in consideration of the sublease payments provided in this Agreement, sublets to subtenant 3500 sq ft. located at 1800 Newport Circle, Santa Ana, CA, 92705 (the “Premises”).

TERM AND POSSESSION. The term of this Sublease will begin on August 1st, 2012 and unless terminated sooner pursuant to the terms of this Sublease, it will continue for the remainder of the term provided in the Prime Lease, which terminates August 1st, 2015.

SUBLEASE PAYMENTS. Subtenant shall pay to Tenant sublease payments of $3000.00 per month, payable in advance on the first day of each month. Sublease payments shall be made to Tenant at 1800 Newport Circle, Santa Ana, CA 92705, which may be changed from time to time by Tenant.

Tenant shall pay for all utilities used or consumed at the Demised Premises during the term of this Agreement as currently obligated by the Tenant under the Prime Lease. The cost of utilities used by Subtenant under the Prime Lease. The cost of utilities used by Subtenant will be built into the monthly rent.

DEFAULTS. Subtenant shall be in default of this Sublease if Subtenant fails to fulfill any lease obligation or term by which Subtenant is bound. Subject to any governing provisions of law to the contrary, if Subtenant fails to cure any financial obligation within 5 days (or any other obligation within 10 days) after written notice of such a default is provided by Landlord to Subtenant, Landlord may take possession of the Premises without any further notice (to the extent permitted by law), and without prejudicing Landlord’s rights to damages. In the alternative, Landlord may elect to cure any default and the cost of such action shall be added to the Subtenant’s financial obligations under this Sublease. Subtenant shall pay all costs, damages, and expenses (including reasonable attorney fees and expenses) suffered by Landlord by reason of Subtenant’s defaults. All sums of money or charges required to be paid by Subtenant under this Sublease shall be additional rent, whether or not such sums or charges are designated as “additional rent” . The rights provided by this paragraph are cumulative in nature and are in addition to any other rights afforded by law.

  

  

  

LATE PAYMENTS. For any payment that is not paid within (6) days after its due date, Subtenant shall pay a late fee of $100.00.

SECURITY DEPOSIT. At the time of the signing of this Sublease, Subtenant shall pay to Landlord, in trust, a security deposit of $0.00 to be held and disbursed for Subtenant damages to the Premises or other defaults under this Sublease (if any) as provided by law.

CUMULATIVE RIGHTS. The rights of the parties under this Sublease are cumulative, and shall not be construed as exclusive unless otherwise required by law.

NON-SUFFICIENT FUNDS. Subtenant shall be charged a fee of $1,000,000.00 for each check that is returned to Landlord for lack of sufficient funds.

PROPERTY INSURANCE. Lessor, Tenant, and Subtenant shall each maintain appropriate insurance for their respective interests in the Premises and property located on the Premises. Lessor and Tenant shall be named as an additional insured in such policies. Subtenant shall deliver appropriate evidence to Tenant as proof that adequate insurance is in force issued by companies reasonably satisfactory to Tenant. Tenant shall receive advance written notice from insurer prior to any termination of such insurance policies. Subtenant shall also maintain any other insurance which Tenant or Lessor may reasonably require for the protection of Tenant or Lessors interest in the Premises. Subtenant is responsible for maintaining casualty insurance on its own property.

LIABILITY INSURANCE. Subtenant shall maintain liability insurance on the Premises in a total aggregate sum of at least $0.00. Subtenant shall deliver appropriate evidence to Tenant as proof that adequate insurance is in force issiued by companies reasonably satisfactory to Tenant and Lessor. Tenant and Lessor shall receive advance written notice from the insurer prior to any termination of such policies.

WAIVER OF RIGHTS. Each of the Tenant and Subtenant agrees to, and does hereby, waive all rights of recovery and causes of action against the other, their respective agents and employees, and all persons claiming through or under the other, relating loss of business, business interruption or loss of rentals resulting from any damage or destruction to the Demised Premises or and of Subtenant’s property contained therein, notwithstanding that any such damage or destruction may be due to the negligence of Tenant or Subtenant, their respective agents or employees. Tenant and Subtenant also waive rights of recovery and causes of action against Lessor for loss of business, business interruption or loss of rentals, resulting from any such damage or destruction, notwithstanding that such damage or destruction may be due to the negligence of Tenant or Subtenant, their respective agents and employees.

  

  

  

GOVERNING LAW. This Sublease shall be construed in accordance with the laws of the State of California.

INCORPORATION OF PRIME LEASE. This Sublease is subject to all of the terms of the Prime Lease with the same force and effect as if each provision of the Prime Lease were included in this Sublease, except as otherwise provided in this Sublease. All of the obligations and rights of Tenant under the Prime Lease shall be binding upon Subtenant. All of the obligations of Landlord under the Prime Lease shall inure to the benefit of Subtenant. It is the intent of the parties that, except as otherwise provided in this Sublease, the relationship between Tenant and Subtenant shall be governed by the various provisions of the Prime Lease as if those provisions were included in this Sublease in full, except that the terms “Landlord,” “Tenant” and “Lease” as used in the Prime Lease, shall instead refer to, respectively, “Tenant,” “Subtenant” and “Sublease.” The Subtenant herein executes this Sublease with the express acknowledgement that Subtenant has read, reviewed, understands and agrees to comply with all obligations, rights, limitations and responsibilities contained in the Prime Lease.

AMENDMENTS TO SUBLEASE AGREEMENT

	
·  

	
4,500 square feet for $3,500 per month effective April 1, 2013 through January 31, 2014

 

 

	
·  

	
10,000 square feet for $8,000 per month effective February 1, 2014 through August 1, 2015

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