DISTRIBUTION AGREEMENT

DISTRIBUTION AGREEMENT

 

THIS AGREEMENT is made August 3, 2009

BETWEEN :

FERTILIZER KING CORPORATION LIMITED

a corporation incorporated under the laws of Hong Kong, PRC

WITH CORPORATE OFFICES AT :

12121 Wilshire Boulevard Suite 1400
Los Angeles, California
90025, USA

Phone: +1-866-575-6854
Fax: +1-877-420-7950
Email: info@fertilizerking.com

 (“ FK ”)

- and -

TARA MINERALS CORP.

a corporation incorporated under the laws of the State of Nevada

(the “ Distributor ”)

WHEREAS :

A.

FK manufactures and sells the Product (hereinafter defined).

B.

FK desires to retain the services of the Distributor as FK’s exclusive distributor of the Product in the Territory (hereinafter defined).

 

NOW THEREFORE , in consideration of the sum of $10 and the recitals and the mutual covenants contained hereinafter and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:

1.

INTERPRETATION

1.1

Definitions

In this Agreement, the following terms have the following meanings:

“ Agreement ” means this distribution, including the schedules thereto;

“ Confidential Information ” means any and all

 

(a)

information that is not available to the public;

(b)

knowledge and information of a confidential or proprietary nature related to a Party, its equipment designs, manufacturing techniques and formulas, product development know-how, sales and distribution confidential data or its operations in general which the other Party may acquire from first Party; and

(c)

communications between FK and the Distributor,

other than information that (i) becomes publicly available as a result of a disclosure in breach of this agreement, (ii)  becomes available on a non-confidential basis from a source other than the other Party or its representatives, so long as that source is not bound by a confidentiality agreement or otherwise prohibited from transmitting the Confidential Information by a contractual, legal or fiduciary obligation, or (iii) was already known to the other Party on a non-confidential basis;

“ Minimum Sales Requirement ” has the meaning ascribed thereto in Section                                                    5.4.1;

“Party” means a party to this agreement;

“ Product ” means the fertilizers and similar products produced by FK or any of FK’s affiliates;  

“ Sales Contract(s) ” has the meaning ascribed thereto in Section 5.1(a);

“ Term ” has the meaning ascribed thereto in Section 4.1; and

“ Territory ” means the Federal Republic of Mexico.

1.2

Gender and Number

In this Agreement, words in the singular include the plural and vice-versa and words in one gender include all genders.

1.3

Currency

“Dollars” or “$” refers to United States Dollars. All payments made pursuant to this Agreement shall be made in United States Dollars unless mutually agreed upon by both parties.

2.

APPOINTMENT

2.1

Appointment of Distributor

FK hereby grants to the Distributor exclusive promotional, sales and distribution rights regarding the promotion, sale and distribution of the Product in the Territory and the Distributor accepts such rights, all upon and subject to the terms and conditions of this agreement.

 

2.2

Exclusivity of Appointment

2.2.1

Provided that the Distributor has met the Minimum Sales Requirement, the Distributor shall be the sole and exclusive distributor of FK’s Product within the Territory.

2.2.2

FK shall not, directly or indirectly:

(a)

appoint or employ any other sales representative, agent or distributor in the Territory;

(b)

distribute or sell the Product in the Territory, except as provided in this Agreement; and

(c)

knowingly, offer or sell Product to any purchaser or agent who intends to use or export the Product, or resell the Product for delivery, in the Territory.

2.2.3

The Distributor shall be entitled to liquidated damages equal to $100.00 per tonne upon any sales made in contravention of Section 2.2.2 above.

 

2.3

Sub-distributors

2.3.1

The Distributor may appoint sub-distributors covering all or part of the Territory, provided that such sub-distributors shall be subsidiaries of the Distributor or entities with which the Distributor shall have a contractual relationship. The Distributor must notify FK of any newly appointed or formed sub-distributor that are controlled by the Distributor. All other sub-distributors must be approved in writing by FK, but approval will not be duly withheld without cause.

2.4

Customer Enquiries

2.4.1

FK agrees that all enquiries with respect to, and all orders for, the Product received by FK from the Territory shall be promptly referred to the Distributor. FK further agrees that is shall not sell or provide the Product to any other party without first obtaining an agreement that such third party shall not re-sell or distribute the Product within the Territory.

2.5

Relationship Between the Parties

2.5.1

The Parties agree that the Distributor is an independent contractor in accordance with the terms and conditions of this Agreement, and not an employee, legal representative, agent or partner of FK for any purpose whatsoever.

2.5.2

Nothing contained in this Agreement shall be deemed to constitute FK or the Distributor, representatives, or employees of each other for any purpose. FK and the Distributor are not granted, and shall not represent in any way that they possess, any right or authority to assume any obligation to make any agreement or commitment express or implied, on behalf of or in the name of each other, or to bind each other in any manner. The Distributor is solely

 

responsible for complying with all legal and regulatory requirements and for all efforts of the Distributor in promoting, selling and distributing the Product in the Territory.

2.5.3

The Distributor agrees not to pledge or bind the credit of FK in any way and not to act as to compromise FK's credit and to undertake no guarantee or warranty in respect of the Product of FK except as provided in writing by FK, and in all matters of trade or technical description, shall follow such description as established or ratified by FK in relation to suitability for use of the Product in the Territory.

2.5.4

Upon the attainment of annual sales of Product in the Territory exceeding 150,000 tonnes, FK and the Distributor shall in good faith negotiate a joint venture relationship regarding production of the Product in the Territory.  

3.

REMUNERATION OF THE DISTRIBUTOR

3.1

Distributor’s Fee

The Distributor shall sell the Product in the Territory at prices set by the Distributor, such prices to be determined solely by the Distributor at its discretion. The difference between what the Distributor sells the Product and the price for such Product payable to FK, as further detailed in Subsection 5.3.2, shall comprise the Distributor’s gross margin (the “Distributor’s Fee”).

The Distributor shall pay FK for Product supplied by FK in the manner specified in Section 5.3.6.

All of the Distributor’s expenses for traveling, maintenance, entertainment, office, clerical, employee wages, income and other tax, insurance, telephone, and all other selling and operating expenses incurred by the Distributor shall be borne solely by the Distributor and FK shall not in any way be responsible or liable for such expenses. The Distributor shall provide, manage and control at its own expense, adequate personnel, and equipment, office and communication facilities, to perform its obligations under this Agreement.  Subject to the prior written approval by FK, certain expenses made in support of the Distributor’s activities in the Territory, may qualify for reimbursement by FK.

4.

TERM AND TERMINATION

4.1

Term

This agreement shall commence on the later of: (i) the date of this agreement; (ii) the date when an import licence has been granted to the Distributor by Mexico for the Product; or (iii) the date when FK gives notice to the Distributor that it is in a position to deliver, on 60 days notice, Product at levels of no less than 20,000 t onnes per month, and shall continue for an initial period of 10 years (the “ Initial Term ”) and shall automatically be extended for an additional 10-year period unless terminated in accordance with Section 4.2 (cumulatively, the “ Term ”).

 

4.2

Termination

The Agreement may be terminated:

(a)

by the Distributor following the end of the Initial Term (upon delivery of written notice no less that 120 days prior to the termination date);

(b)

by either party, without prejudice to the rights of either party to money due or to become due under this Agreement, effective immediately and without any requirement of notice, in the event that the other party becomes insolvent, files a petition in bankruptcy, files a petition seeking any reorganization, arrangement, composition, or similar relief under any federal, state or provincial law regarding insolvency or relief for debtors, or makes an assignment for the benefit of creditors or similar undertaking, or if a receiver, trustee or similar officer is appointed for the business or property of the other party or if a petition in bankruptcy is filed against the other party and not dismissed within 60 days of being filed;

(c)

by written agreement signed by FK and the Distributor;

(d)

by either party, at any time without liability of one Party as against the other, if the situation among nations renders the performance of this Agreement illegal;

(e)

by the Distributor, upon 90 days written notice if FK is unable to fulfill the requirements of this contract to supply the Product to the Distributor for reasons of production capacity on the part of FK;

(f)

FK will be entitled to liquidate damages equal to $100 per tonne and have the option to terminate the Agreement upon any sale of product outside of the Territory or any sale of altered FK product not approved in advance by FK..

(g)

provided that the basis for terminating this Agreement has been confirmed by arbitration in accordance with Section 8.1:

(i)

by either party, if the other Party is guilty of any grave misconduct, dishonesty or wilful neglect in the discharge of his duties hereunder;

(ii)

by either party, in the event that the other party has not performed any material covenant, other than a default in payment which shall be dealt with pursuant to Section 4.2(g)(iii), or has otherwise breached any material term of this Agreement upon the expiration of 30 days notice to cure; or

(iii)

by FK in the event that the Distributor is in default in any payment to FK for a period of 30 days after demand from FK.

 

4.3

Effect of Termination

4.3.1

Where either party receives notice of termination of the Agreement pursuant to Section 4.2 above, such party shall have the right to refer the matter to arbitration pursuant to Section 8.1. For greater certainty, where termination is pursuant to Section 4.2(f), this Agreement shall continue in full force and effect unless termination is a remedy prescribed by the arbitral panel

4.3.2

Upon termination of this agreement for any reason:

(a)

each Party will reconvey and release to the other party all rights and privileges granted by this agreement, except as provided in section 4.4;

(b)

the Distributor will return to FK all advertising, informational or technical material given to Distributor by FK;

(c)

the Distributor will cease using FK's trade names and trade marks and thereafter refrain from holding itself out as an authorized distributor of FK;  

(d)

the Distributor shall return any advertising, sales promotional material, technical literature, product sales manuals, and customer promotional catalogues; and

(e)

each Party will immediately pay all amounts owing by it to the other Party.

4.3.3

Notwithstanding the termination or expiry of this agreement, the Parties will cooperate with each other after such termination or expiry to carry out any current outstanding accepted purchase orders.

4.4

Survival

The provisions of this section and of sections 6, 7 and 8 shall survive the termination of this agreement and continue in full force and effect.

5.

OBLIGATIONS OF THE PARTIES

5.1

Obligations of the Distributor

The Distributor shall:

(a)

use its best efforts to market the Product in the Territory, negotiate, settle the terms and conditions of, conclude and sign sales contracts or other arrangements relating to the sale of Product in the Territory (each a “ Sales Contract ”);

(b)

administer all Sales Contracts, including documentation, settlement of disputes, collection of accounts and all other matters that may be necessary to develop, implement and maintain the Sales Contracts;

(c)

Arrange letters of credit as applicable in connection with the purchase of the Product upon order placement under a Sales Contract, unless other credit

 

arrangements have been made with respect to the purchaser under such Sales Contract. [NTD: Trade financing mechanics to be clarified with FK’s and Distributor’s financial institutions]

(d)

perform or incur the expense of any translation of material and staff training to the extent the Distributor so requires;

(e)

utilize the services of technically qualified personnel in the sale of the Product in the Territory when employing or contracting to selling agents, sales teams and area distributors within the Territory and ensure that and such agents, sellers and distributors in the Territory conform to the intent and the terms and conditions as stated herein;

(f)

limit sales activities to the Territory;

(g)

use best efforts to meet the Minimum Sales Requirement;

(h)

furnish to FK  on a quarterly basis the terms of sales relating to the Product;

(i)

furnish to FK on a quarterly basis, reports listing all current and potential clients and customers, names, address, email and contact person and amount of product they purchase on a monthly basis;

(j)

the Distributor will have on staff their own sales agents to document orders and pass onto the FK office, this whole process will be done and recorded through Internet;

(k)

all the Distributor sales must be conducted through the Internet by using FK’s Internet based sales software platform;

(l)

not issue any press release regarding FK products, in or outside the Territory, or in respect of the Territory, without the prior written consent of  FK, with such consent to be given in a timely manner and such consent not to be withheld where the release is required to comply with the reporting jurisdiction;

(m)

The Ditributor must purchase yearly insurance coverage for third party liability and product insurance,respect and fulfill, at FK’s expense, the terms and conditions of any Product warranty;

(n)

protect the goodwill associated with the Product and promptly advise FK of any known or threatened infringement of or challenge to the proprietary rights and upon request, support FK in securing and protecting such proprietary rights and in opposing unfair competition of other firms, all at the expense of FK;

(o)

comply with all local laws, certifications, licensing regulations and rulings of governmental bodies having jurisdiction over the Distributor’s business in respect to the sale and delivery of the Product;

 

(p)

use its most reasonable business practices to provide quality customer service to the end user, including assisting FK in verifying any warranty claims;

(q)

immediately advise FK if the Distributor has any knowledge of the commencement or threat of any legal proceeding or claim based on any alleged defect of any Product;

(r)

provide FK with information of a common interest concerning the Product’s penetration, sales forecasts, competition, trend analysis and the like; including providing, if practicable, advance rolling quarterly sales volume forecast to allow FK ample time to ramp up manufact