DISTRIBUTORSHIP AND SALES AGENCY
AND ROYALTY AGREEMENT
THIS DISTRIBUTORSHIP AND SALES AGENCY AGREEMENT
(the “Agreement”) is made this 19 day of January, 2009,
by and between Megola, Inc., with its principal place of business
located at 704 Mara Street, Suite 111, Point Edward, Ontario,
Canada N7V1X4 ( “Megola” and sometimes the "Company")
and Vulcan Technologies, LLC, a New Jersey limited liability
company, having its principal offices located at C/O Law Offices of
Joseph J. Tomasek, 77 North Bridge Street, Somerville, New Jersey
08876 ( “Vulcan” and sometimes the
"Distributor").
BACKGROUND:
WHEREAS, Megola
has obtained the North American rights to a line of fire prevention
products known as the “Hartindo” line of products and
may, in the future, obtain or develop additional fire resistant
products alone or with third parties or obtain additional products
by virtue of agreements and contracts with third parties
(collectively, the “Products”) and desires to appoint
Vulcan, and to take certain actions that shall cause Vulcan to be a
distributor/sales representative for the Products in North
America;
WHEREAS, Vulcan
shall make certain payments to Megola for its appointments under
this Agreement and shall introduce parties to Megola and to certain
of its contract parties to purchase the Product, in exchange for
which Megola and its contract parties shall acknowledge the role of
Vulcan as the exclusive distributor/sales representative for each
of Vulcan’s customers (the “Customer(s)”) during
the term of this Agreement.
NOW, THEREFORE, in consideration of the promises
hereinafter made by the parties hereto, it is agreed as
follows:
ARTICLE I
APPOINTMENT
1. Co-Exclusive Distribution
Rights to Woodsmart and Janus Contracts .
In partial consideration of the Vulcan payment set forth in Section
3 below, the Company hereby appoints Vulcan as the co-exclusive
distributor under:
A. a certain Marketing and Distributorship
Agreement (the “Janus Contract”), dated November 21,
2007, by and between Megola, Inc., MSE Enviro-Tech Corp. and Janus
Products Corp. (“Janus”), rendering Vulcan by such
appointment and assignment, the co-exclusive distributor/sales
representative with Janus of the “Fire Blanket” under
the terms of said contract; Megola hereby agrees that Vulcan shall
earn royalty payments for each “Fire Blanket” sold by
or through Janus during the term of this Agreement (see Appendix
‘A’).
B. a certain Hartindo AF21 Products, Purchase,
Sales, Distribution, Marketing and Service Agreement (the
“Woodsmart Contract”), dated October 5, 2008, by and
between Megola, Inc., MSE Enviro-Tech Corp. and Woodsmart
Solutions, Inc. (“Woodsmart”), rendering Vulcan the
co-exclusive distributor of the Products and “Enhanced
Product” under the terms of said contract; Megola hereby
agrees that Vulcan shall earn royalty payments for each concentrate
gallon of Product sold to or through Woodsmart during the term of
this Agreement. Vulcan hereby agrees that the first $311,000 of
revenue derived from sales received by Megola under the Woodsmart
Contract will belong exclusively to Megola to repay its costs to
produce and deliver the first 100,000 gallons of Product (see
Appendix ‘A’).
2. Exclusive Distribution
and Sales Representative Rights. In further
consideration of the Vulcan payment set forth in Section 3 below,
the Company hereby appoints Vulcan as the exclusive distributor and
sales representative for the following industries or parties, as
the case may be:
A. Megola hereby grants to Vulcan (i) the
exclusive distribution/sales representative rights for the Product
in the countries of Canada and Mexico and (ii) co-exclusive
distribution/sales representative rights in the United States of
America (the “U.S.”), to the railroad industry (the
“Railroad Industry”) for a ten (10) term, provided,
however, that Vulcan’s co-exclusive distribution/sales
representative rights for the U.S. shall be negotiated further by
Megola with MSE Enviro-Tech to enable Vulcan the complete U.S.
exclusive rights. This negotiation process should be finalized
within 90 days following the execution and delivery of this
Agreement. Vulcan shall pay to Megola a commission payment equal to
twenty-five (25%) percent of Vulcan’s profit, less
Megola’s ”Cost”, defined below, on Products
purchased (the “Vulcan Commission”) by any party in the
Railroad Industry. Megola’s
“Cost” shall be defined for all purposes of
this Agreement as Megola’s actual costs to acquire the raw
materials for the Product, the costs for its preparation, including
the toting, mixing and skimming processes, as well as
Megola’s freight expenses through shipment (see Appendix
‘A’). Vulcan shall have the right, upon
reasonable notice, to audit the costs of Megola with respect to the
calculation of its profits for any purchase/sale of the Product in
the Railroad Industry. Vulcan hereby commits to generate aggregate
gross sales of the Hartindo Products in the Railroad Industry of no
less than $3 Million on or before the second anniversary of this
Agreement, and, thereafter, agrees to increase such aggregate gross
sales by fifteen (15%) percent for each year thereafter, commencing
with the third year of the term. In the event Vulcan fails to
achieve the aggregate gross sales thresholds at the second
anniversary date or for any year of the remaining term of this
Agreement, Vulcan shall automatically lose its exclusive rights in
the Railroad Industry and shall be a co-exclusive distributor/sales
representative for the balance of the term of this Agreement. For
example, if Vulcan and/or parties have purchased Hartindo Products
and the aggregate cash receipts for the Rail Industry which are
equal to or exceed $3,450,000 upon the third anniversary date of
this Agreement, the term shall be automatically extended for an
additional fourth year since $3,450,000 represents a 15% increase
over the $3,000,000 sales requirement for the prior second
anniversary date.
B. Except as set provided for under the Janus
Contract and the Woodsmart Contract, Megola hereby grants to Vulcan
the exclusive distribution/sales representative rights for any
Customer introduced by Vulcan and any customers
Vulcan has under agreements as sales agents. Vulcan shall pay to
Megola the Vulcan Commission, or twenty-five (25%) percent of
Vulcan’s profit (sales price less Megola’s cost) on
Products purchased by any Customer of Vulcan during the term of
this Agreement. Vulcan shall have the right, upon reasonable
notice, to audit the costs of Megola with respect to the
calculation of its profits for any purchase/sale of the Product to
a Customer of Vulcan. Megola shall take whatever measures necessary
to protect Vulcan’s rights under this Agreement, including
but not limited to preventing any other party from selling the
Product to a Vulcan Customer. Vulcan also understands that Megola
may also require the same provision to potential other distributors
Megola may acquire throughout other industries.
C. Megola hereby acknowledges, and shall
take all necessary measures to obtain the acknowledgement of all
interested parties, that “ICI” and its successors are
the exclusive customers of Vulcan and any purchases of the Product
by or through “ICI” shall be subject to the terms of
this Agreement.
3. Vulcan Payments for
Appointments . In consideration of its appointments set forth
in this Agreement, Vulcan agrees to pay Megola the sum of Seven
Hundred Fifty Thousand ($750,000.00) USD dollars, as follows: (i) a
partial payment of $400,000 to Megola due five (5) business days
after the execution and delivery of this Agreement by
all parties, and; (ii) a payment of $350,000 ninety (90) days
following the date of this Agreement, provided, however, that such
payment shall only be due and owing at that time if Woodsmart,
under the Woodsmart Contract, and Janus, under the Janus Contract
and any other distribution means by Megola has purchased no less
than 100,000 finished gallons of AF21. . It is agreed and
acknowledged by Vulcan that the $350,000 pay
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