EXHIBIT 10.6
CONFIDENTIAL TREATMENT REQUESTED OF ITEMS MARKED [--OMITTED--]
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT entered into as of the 30th day of
September, 2005 (the "Effective Date") by
and between DEGUSSA WALL SYSTEMS,
INC., a Delaware corporation ("Degussa")
and JUST-RITE SUPPLY, INC., a Florida
corporation ("Just-Rite"). Degussa and
Just-Rite may hereinafter be referred to
individually as a "Party" or collectively
as the "Parties."
R E C I T A L S:
A. Degussa and an affiliate of Just-Rite Supply, Inc. entered into
that
certain Asset Purchase Agreement as of July
25, 2005 ("Purchase Agreement"),
whereby Degussa purchased certain of the
assets associated with the
manufacturing operations of Acrocrete, Inc.
and the Acrocrete products produced
in Acrocrete's Kennesaw, Georgia
manufacturing facility.
B. Following the closing of the Purchase Agreement, Degussa
will
manufacture those certain Acrocrete
products under the trade name "Acrocrete" as
identified on Exhibit "A" hereto which were
previously manufactured by
Acrocrete, Inc. immediately prior to such
closing (the "Products").
C. Degussa desires to appoint Just-Rite as its exclusive
distributor of
the Products in the States of Alabama,
Florida, Georgia, Louisiana and
Mississippi (the "Territory") and Just-Rite
has agreed to serve as the exclusive
distributor of the Products in the
Territory, subject to the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises and
covenants
contained herein and such other good and
valuable consideration, the receipt and
sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. RECITATIONS. The above recitations are true and correct and
are
incorporated herein by this reference.
2. APPOINTMENT. Degussa hereby appoints Just-Rite as its
exclusive
distributor of the Products in the
Territory. Just-Rite shall have the exclusive
right to sell to, solicit and take orders
from customers within the Territory
for the Products. Just-Rite accepts such
appointment and agrees to act as
exclusive distributor within the Territory.
In connection therewith, Just-Rite
agrees not to purchase products and
supplies of other manufacturers for sale in
the Territory that perform the same purpose
as the Products, so long as the
Products are available for purchase from
Degussa. Such exclusivity shall not
impair Just-Rite's ability to sell products
which are manufactured by its
affiliates.
<PAGE>
3. RIGHT OF FIRST REFUSAL. During the term hereof, Degussa
hereby
grants to Just-Rite a Right of First
Refusal to serve as the exclusive
distributor in [----OMITTED----] ("New
Territories"). Just-Rite shall notify
Degussa of the establishment of a new
facility. Upon such notification, and upon
approval by Degussa based on the other
conditions set forth in this Section 3,
Just-Rite shall become the exclusive
distributor for Products for the New
Territories.
4. JUST-RITE DUTIES. Just-Rite agrees to use it best efforts to
actively and diligently promote and sell
the Products in the Territory.
Just-Rite shall purchase one hundred
percent (100%) of its requirements of the
Products from Degussa. Just-Rite shall
solicit and take orders from their
potential customers at prices to be
established from time to time by Just-Rite
and on the terms and conditions specified
by Just-Rite. Decisions regarding
customer credit and all matters relating to
billing shall be made only by
Just-Rite.
5. DEGUSSA DUTIES. Degussa shall use its best efforts to
continuously
and timely manufacture Products during the
Term (as hereinafter defined)
sufficient to meet the demands of
Just-Rite. Degussa shall sell to Just-Rite the
Products upon the terms hereof and shall
ship such Products to Just-Rite in a
timely and commercially reasonable manner;
provided, however, that Just-Rite
shall be current under the payment terms
set forth herein. Degussa agrees that
it will refer any inquiries of purchases of
Products directly to Just-Rite as
its exclusive distributor within the
Territory. Degussa will ship the Products
FOB Degussa's facility. Just-Rite may give
to Degussa direction for direct
shipment from time to time to Just-Rite's
customers. Upon receipt of such
directions, Degussa agrees to directly ship
the Products in accordance therewith
and charge Just-Rite the cost of shipping.
Degussa shall provide to Just-Rite
marketing materials, sales and product
literature and general sales and
marketing support comparable to the
materials, literature and support provided
by Degussa to distributors of its other
product lines such as Finestone, Senergy
and Sonowall Stucco Systems (the "Other
Product Lines").
6. TRADEMARK. Degussa hereby grants to Just-Rite, a royalty
free
license to use the trademark "Acrocrete"
(the "Trademark") on and in connection
with the promotion and sale of Products.
Such use shall at all times meet such
commercially reasonable requirements with
respect to style, appearance and
quality as Degussa may establish from time
to time to ensure that the standards
of all products and promotions using the
Trademark shall be maintained.
Just-Rite expressly agrees that it shall
not have any right, title or interest
in the Trademark, except as otherwise
provided herein. Nothing in this Agreement
shall be construed to grant or assign to
Just-Rite any additional right, title
or interest in said Trademark. Degussa
makes no representation or warranty with
respect to the ownership of any rights
relating to the Trademark.
7. PRICE OF PRODUCTS. All sales of the Products by Degussa to
Just-Rite
shall be made at the pricing as set forth
on Exhibit B. Such pricing shall
remain unchanged for a period of
[----OMITTED----] from the Effective Date.
After [----OMITTED----] of the Effective
Date, Degussa shall have the right to
increase prices for the Products at a level
commensurate with increases to
Degussa's Other Product Lines.;
2
<PAGE>
8. PAYMENT. Payment for Products purchased by Just-Rite shall be
paid
[----OMITTED----]. All payments shall be
paid to Degussa at the address
indicated in the Notices section indicated
below or such other address that
Degussa shall provide to Just-Rite from
time to time during the term of this
Agreement. In the event of termination of
this Agreement all sums then unpaid
shall continue to be payable on the terms
and conditions set forth herein.
9. TITLE AND RISK OF LOSS. Title and risk of loss or damage to
Products
shall pass from Degussa to Just-Rite upon
delivery to the carrier at Degussa's
manufacturing facility.
10. MINIMUM PURCHASE REQUIREMENTS. During the Term of this
Agreement,
and so long as Degussa continues to
manufacture Products in sufficient quantity,
Just-Rite shall purchase a minimum of
[----OMITTED----] ($[----OMITTED----]) of
Products and any other products sold or to
be sold by Degussa during the Term,
including Acrodry ("Degussa Products") from
Degussa (the "Purchase
Requirement"). In the event Just-Rite
purchases less than the Purchase
Requirement during the Term, then the
following conditions shall apply:
a) If Just-Rite purchases $[----OMITTED----] in Products or less
during
the Term, then Just-Rite shall pay Degussa,
not more than thirty (30) days after
the expiration of the Term, a total of
$2,300,000, representing a refund of the
purchase price under the Purchase
Agreement, plus [----OMITTED----] of the
difference between $[----OMITTED----] and
$[----OMITTED---].
b) If Just-Rite purchases less than $[----OMITTED----] but more
than
$[----OMITTED----] in Products during the
Term, then Just-Rite shall pay
Degussa, not more than thirty (30) days
after the expiration of the Term, an
amount equal to [----OMITTED----] of the
difference between $[----OMITTED----]
and the amount of Just-Rite's purchases
during the Term. The amounts payable by
Just-Rite in accordance with Sections 10(a)
or (b) in the event that Just-Rite
does not satisfy the Purchase Requirement
shall be referred to herein as the
"Shortfall Requirement."
c) If Just-Rite's purchases during the Term fall within the
range
contemplated in 10(b), above (i.e., more
than $[----OMITTED----], but less than
$[----OMITTED----]), then Just-Rite may
elect, within five business days of the
expiration of the Term, to extend the Term
for one additional period of two
years (the "Extended Term"). During the
Extended Term, Just-Rite may "earn back"
an amount up to the Shortfall Requirement
owed under the calculation described
in Section 10(b), above. The "earn back"
shall be earned by way of a commission
(the "Commission") of [----OMITTED----] of
the amount by which Just-Rite's
purchases during the Extended Term exceeds
two times the annual average of
purchases during the Term. At the end of
the Extended Term, Just-Rite shall
continue to be obligated to pay the
difference between the Commission and the
Shortfall Requirement set forth in Section
10(b), above.
Open orders, not filled by Degussa on account of non-payment or
other
failures by Just-Rite to fulfill its
obligations hereunder shall not be counted
toward the Purchase Requirement. Orders
made by Just-Rite which are not
fulfilled by Degussa when Just-Rite is not
in default hereunder shall count
toward the Purchase Requirement, provided
that such unfilled orders shall have a
thirty-day lead time and cannot represent
more than four percent (4%) of the
Purchase Requirement.
3
<PAGE>
11. COMPLIANCE WITH THE LAWS. Each Party agrees to comply with
all
applicable laws and regulations relating to
the manufacture, sale and
distribution of Products.
12. INDEPENDENT
CONTRACTOR. In performing any services hereunder,
Just-Rite shall operate as an independent
contractor. This Agreement shall not
be deemed to create or constitute a
fiduciary relationship, partnership or joint
venture between Degussa and Just-Rite.
Neither party hereto shall have any
authority to make contracts in the name of,
or be binding on, the other party or
to otherwise pledge the other party's
credit.
13. GOVERNMENTAL APPROVALS. Each party shall be responsible for
their
respective governmental approvals related
to the manufacture, distribution and
sale of Products within the Territory.
14. TERM.
(a) Term. This Agreement shall commence on the Effective Date,
and
shall terminate at the end of three (3)
years (the "Term"), unless extended in
accordance with Section 10 herein (the
"Extended Term") or otherwise terminated
pursuant to the provisions hereof.
(b) Automatic Extensions. This Agreement shall be automatically
extended for successive one (1) year
periods at the end of the initial and each
extended Term, unless either party provides
written notice of termination to the
other party at least one hundred twenty
(120) days prior to the expiration of
the initial or such extended term,
respectively.
(c) Termination by Degussa. Degussa may terminate this
Agreement
prior to the end of the Term hereof, upon
one hundred twenty (120) days written
notice for any default upon Just-Rite's
failure to cure any default of any term,
provision or obligation of this Agreement
within such notice periods.
(d) Termination by Just-Rite. Just-Rite may terminate this
Agreement prior to the end of the Term
hereof upon one hundred twenty (120) days
written notice for any default upon
Degussa's failure to cure any default of any
term, provision or obligation of this
Agreement within such notice periods.
(e) Liability upon Default. Except as otherwise set forth in
the
Purchase Agreement, upon termination, the
non-defaulting party shall not have
any further liability to the defaulting
party, except any obligations or
liabilities, if any, which accrued before
the termination date.
(f) Post Termination. Upon termination of this Agreement, all
rights of Just-Rite to use the Tradename
shall terminate, except for the
completion of orders and contracts already
made and to sell the remaining
balance of Product Just-Rite has in
inventory as of the date of the termination.
All Degussa property in the possession of
Just-Rite shall be returned to Degussa
upon the effective date of such
termination. All other obligations of the
parties that are intended to survive the
termination of this Agreement shall
remain in full force and effect.
4
<PAGE>
15. PRODUCT STANDARDS. Degussa agrees and acknowledges the
importance
of maintaining the Product standards and
quality of production as exist on the
date hereof. In accordance therewith
Degussa agrees to maintain the Products
standards and to support the Tradename in a
commercially reasonable manner. Such
Product standards shall include maintenance
of all existing approvals of all
applicable building code within the
Territory and enhancing Product Standards to
meet all other building codes that may
arise hereafter similar to the
enhancements on Other Product Lines.
16. CLAIMS AND WARRANTIES.
(a) Degussa warrants to Just-Rite that the Products to be sold
pursuant to the terms of th
