DISTRIBUTION AND OPERATION SERVICES AGREEMENT
THIS DISTRIBUTION AND OPERATION SERVICES AGREEMENT, ("Agreement") is made
as of June 21, 2005 (the "Effective Date"), by and among VitroTech Corporation,
a Nevadt 6 0 a corporation ("VitroTech"), VitroCo Incorporated, a Nevada
corporation and wholly-owned subsidiary of VitroTech ("VitroCo") and VitroTech
Product Distributor LLC, a Delaware limited liability company ("Distributor").
R E C I T A L S:
WHEREAS, VitroTech and VitroCo are engaged in the mining, processing and
sale of a family of proprietary amorphous aluminosilicate based products (the
"Products") designed to improve performance and quality of a broad array of
manufacturing applications;
WHEREAS, VitroTech and VitroCo lack the financial resources to fully
exploit the business opportunities relating to the Products and VitroTech is
presently seeking additional financing to fund those operations; and
WHEREAS, VitroTech and VitroCo desire to contract certain operations to
Distributor and Distributor is willing to perform such operations on the terms
set forth herein.
NOW, THEREFORE, in consideration of the premises and the covenants and
obligations of the parties herein contained, the parties hereto hereby agree as
follows:
1. Grant of Exclusive Rights. VitroTech and VitroCo hereby grant to the
Distributor, during the Term (as defined below) hereof, the exclusive,
royalty-free right to buy, mine, process, sell and distribute the Products on a
worldwide basis, and assume all of VitroTech's and VitroCo's customer accounts
and distributor agreements, including, but not limited to, the right to contact
and solicit any present, former or future customers of VitroTech or VitroCo, all
subject to the existing rights of third parties to distribute Products, as
follows:
(a) The rights of the Distributor hereunder may not be assigned,
transferred or sublicensed to any other person, other than to an affiliate
of the Distributor, without the prior written consent of the other
parties, which shall not be unreasonably withheld;
(b) The Distributor is an independent contractor and is not a legal
representative or agent of VitroTech or VitroCo for any purposes
whatsoever. The Distributor is not authorized to, and agrees that it will
not, make any warranties or representations, or assume or create any other
obligation on behalf of VitroTech or VitroCo except as expressly
authorized by such party in writing;
(c) Distributor agrees that it will not sell Product in
contravention to any agreement between VitroTech or VitroCo and any other
party effective as of the Effective Date.
(d) VitroTech and VitroCo each hereby grant a royalty-free license
to the Distributor to utilize any and all of its respective trademarks,
service marks or trade names ("Trademarks"), whether or not registered, in
connection with promotion, sale and distribution of the Products; and
(e) Subject to the prior rights and security interests of the
VitroTech Secured Creditors (as defined below), VitroTech and VitroCo each
agree to sell, assign, transfer and convey all of the Inventory (defined
as any mined Product held by or for the benefit of VitroTech or VitroCo
and set forth on Exhibit A) to the Distributor, and Distributor agrees to
pay VitroTech and VitroCo the direct cost of their respective Inventory,
as set forth on Exhibit A, not later than five days following the receipt
of payment by Distributor from the sale to third party of such Inventory.
Notwithstanding the foregoing, if on the fifth anniversary of the
Effective Date any items of Inventory have not been sold and for which
payment to VitroCo has not been made hereunder, the Distributor shall, on
that date pay to VitroCo the direct cost of such Inventory items or, at
the Distributor's sole option, return the same to VitroCo. As of the date
hereof, Distributor agrees to assume all of the costs and expenses of
storage, warehousing, shipping and handling such Inventory, which arises
on or after the date hereof.
2. Mining and Processing of Products. It is the intention of the parties
to structure this transaction so that the ISO9001 Certificate of Registration
(the "ISO Registration") issued to VitroCo shall be maintained through out the
Term. If the ISO Registration can be transferred to another entity, upon the
Distributor's request, VitroCo agrees to transfer the ISO Registration to the
Distributor or any other entity designated by the Distributor, and VitroCo and
VitroTech covenant and to take any and all reasonable actions to facilitate such
transfer. VitroTech and VitroCo each hereby grant to the Distributor, during the
Term of this Agreement, the right to perform all mining, processing services,
quality control and warranting of Products as shall be reasonably necessary to
mine, process and deliver the Products in their final salable form, and to the
extent the ISO Registration does not permit such mining, processing services,
quality control and warranting of Products ("Restricted Activities") to be
performed by Distributor, but such Restricted Activities can be performed by
VitroTech, then VitroTech shall perform such Restricted Activities to the
maximum amount permitted pursuant to the ISO Registration and to the extent that
the ISO Registration does not permit such Restricted Activities to be performed
by VitroTech, such Restricted Activities shall be performed by VitroCo,
provided, however, VitroTech and VitroCo hereby agree that they shall provide
Distributor with any and all quality control services, warranting of Products
and any other services necessary to preserve the ISO Registration and to ensure
that the Distributor obtains the Products in the format required by the
Distributor. Distributor shall pay all of its own costs generated by mining,
processing services, quality control and warranting of Products and to the
extent VitroCo or VitroTech is performing any Restricted Activities, Distributor
shall reimburse VitroCo or VitroTech, as applicable, for all direct costs of
such Restricted Activities and preserving the ISO Registration, in a manner
consistent with the standards of the ISO Registration.
VitroTech and VitroCo each hereby grant a royalty-free license to the
Distributor to utilize any and all of its respective proprietary rights,
including any patented procedures or products, intellectual property, techniques
or other trade secrets (the "Proprietary Rights"), whether or not patented,
relating to the mining, processing and use of the Products.
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3. Rights Regarding VitroTech and VitroCo Employees. In conjunction with
the undertakings of the Distributor to assume the responsibility and associated
costs of sales activities relating to the Products of VitroTech and VitroCo, and
to facilitate those undertakings, the parties agree as follows regarding the
employees of VitroTech and VitroCo:
(a) The Distributor shall have the unlimited right to solicit and
hire any and all employees of VitroTech and VitroCo ("Employees", and any
Employees actually hired by the Distributor are referred to herein as
"Transferred Employees"). VitroTech and VitroCo will enter into a mutual
release which shall forever release such Transferred Employees from any
and all covenants, promises, agreements, obligations or liabilities which
relate in any way to the Transferred Employees' employment with
Distributor, which release shall be substantially in the form of Exhibit B
attached hereto. Upon executing the mutual release, the Distributor shall
pay such Transferred Employee all amounts owing for back wages, salary and
benefits by VitroTech and VitroCo, provided, however, that Distributor's
obligation hereunder will be decreased by any compromise reached between
Distributor and any Transferred Employees.
(b) Management of the Distributor and VitroTech will, not later than
ten calendar days following the date hereof (the "Employee Review Date"),
review the existing personnel of VitroTech and VitroCo ("Employees"): (i)
to facilitate Distributor's determination as to which Employees it wishes
to solicit pursuant to paragraph 3(a) above, (ii) to determine which
Employees will be reasonably required to carry on the business of
VitroTech (the "Retained VitroTech Employees"), (iii) to determine which
Employees will be reasonably required to carry on the business VitroCo
(the "Retained VitroCo Employees") and (iv) to determine which Employees,
if any, are not required to support the future operations of the
Distributor, VitroTech or VitroCo (the "Undesignated Employees"). For
purposes of this Agreement former employees set forth on Exhibit C shall
be deemed to be Undesignated Employees. In conjunction therewith,
representatives of both VitroTech and the Distributor will meet with all
Employees and evaluate their status, including amounts owing to those
Employees, on a case-by-case basis and in accordance with applicable
California law. The parties will negotiate in good faith to determine
which Employees shall be Retained VitroTech Employees, Retained VitroCo
Employees and Undesignated Employees.
(c) Within ten calendar days following the Employee Review Date, the
Distributor shall (i) pay on behalf of all Employees all employment
related taxes to the extent due and owing and not previously paid by
VitroTech and VitroCo to the appropriate governmental authorities and (ii)
pay all back salary, wages, unreimbursed expenses and other amounts due
and owing and not previously paid by VitroTech to Retained VitroTech
Employees; provided, however, that Distributor's obligation hereunder will
be decreased by any compromise reached between Distributor and any
Retained VitroTech Employees. In addition, as part of the Basic Overhead
Costs (as defined below), commencing as of the Effective Date until such
time as VitroTech is capable of paying the Basic Overhead Costs without
being Insolvent (as defined below), the Distributor shall reimburse
VitroTech, for the salary, wages, expenses and other amounts incurred by
VitroTech for the Retained VitroTech Employees; provided, however, that
Distributor's obligation hereunder will be decreased by any compromise
reached between Distributor and any Retained VitroTech Employees (the
"Current VitroTech Employee Costs"). The reimbursement of such Current
VitroTech Employee Costs for the Retained VitroTech Employees shall be
paid as the same become due. For purposes of this Agreement "Insolvent"
means with respect to VitroTech or VitroCo, as the case may be, that it is
not capable of paying its bills as they become due in the ordinary course
of business.
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(d) Within ten calendar days of the entering into a definitive and
binding Mine Transfer Agreement (as defined below)(the "Mine Transfer
Date"), the Distributor shall pay all back salary, wages, unreimbursed
expenses and other amounts to the extent due and owing and not previously
paid by VitroCo to Retained VitroCo Employees and Undesignated Employees
through the Mine Transfer Date; provided, however, that Distributor's
obligation hereunder will be decreased by any compromise reached between
Distributor and any Retained VitroCo Employees. In addition, as part of
the Basic Overhead Costs, commencing as of the Mine Transfer Date until
such time as VitroCo is capable of paying the Basic Overhead Costs without
being Insolvent, the Distributor shall reimburse VitroCo, for the salary,
wages, expenses and other amounts incurred by VitroCo for the Retained
VitroCo Employees (the "Post Mine Transfer Date VitroCo Employee Costs").
The reimbursement of such Post Mine Transfer Date VitroCo Employee Costs
for the Retained VitroCo Employees shall be paid as the same become due
after the Mine Transfer Date. To the extent that there is a disagreement
between the Distributor, on the one hand, and VitroTech and VitroCo, on
the other hand, as to whether an Employee shall be a Retained VitroCo
Employee or an Undesignated Employee, such Employee shall be deemed to be
an Undesignated Employee for purposes of this Agreement, and the
Distributor shall only have the obligation to pay or reimburse VitroCo as
if that Employee is a Undesignated Employee and under no circumstances
shall costs associated with the ongoing employment of such Employee be
included within Basic Overhead Costs.
4. Cooperation Regarding VitroTech and VitroCo Debt. VitroTech, VitroCo
and the Distributor agree to cooperate and use commercially reasonable efforts
to settle, restructure or convert into equity the current indebtedness of
VitroTech and VitroCo and, to that end, agree as follows:
(a) Management of VitroTech, VitroCo and the Distributor will
jointly meet and negotiate with existing creditors (including, but not
limited to, all trade debt, all Employees, all notes bearing contingent
interest ("Contingent Interest"), all secured debt and all convertible
debt) of VitroTech and VitroCo ("VitroTech Creditors") in an effort to
renegotiate the existing indebtedness;
(b) Subject to applicable limitations of securities laws, for a
period of six months following the Effective Date (the "Offering Period"),
the Distributor will make available to all VitroTech Creditors, pro rata,
the right to invest in the Distributor on terms substantially identical to
the terms on which the Distributor offers securities to Third Party
Investors. For purposes hereof, "Third Party Investors" means all persons
to whom the Distributor offers any of its securities during the six months
following the Effective Date, other than (i) the members of the
Distributor as of the Effective Date, and (ii) the VitroTech Secured
Creditors. In the event that the Distributor offers an ownership interest
to Third Parties during the Offering Period at varying prices, the terms
on which the VitroTech Creditors will be permitted to invest in the
Distributor will be the lowest price of any such offers. Notwithstanding
the foregoing however, the Distributor may offer the Secured Creditors of
VitroTech or VitroCo the opportunity to invest in the Distributor on terms
that are more favorable than the terms being offered to the unsecured
VitroTech Creditors, and the unsecured VitroTech Creditors shall have no
right to participate in such opportunity to the extent that they are not
Secured Creditors of VitroTech or VitroCo;
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(c) All settlements or other agreements with VitroTech Creditors
pursuant to this paragraph 4 shall be subject to the joint approval of
VitroTech and the Distributor;
5. Cooperation Regarding Mines and Hi-Tech. VitroTech, VitroCo and the
Distributor agree to cooperate and use commercially reasonable efforts to
negotiate with representatives of Enviro Investment Group, LLC ("EIG"), Red Rock
Canyon Mineral, LLC ("Red Rock"), Valley Springs Mineral, LLC ("Valley
Springs")(collectively, EIG, Red Rock and Valley Springs are referred to as the
"Mines") and Hi-Tech Environmental Products, LLC ("Hi-Tech") with a view to
obtaining an equitable transfer of the mining properties held by the Mines to
VitroTech or VitroCo and entering into a definitive and binding agreement (the
"Mine Transfer Agreement"), satisfactory to the Distributor, within the
Distributor's sole and absolute discretion, and the adjustment of payment
obligations of VitroTech and VitroCo to the Mines and Hi-Tech.
6. Other Obligations of Distributor. The Distributor shall:
(a) Devote its commercially reasonable efforts to the promotion and
sale of the Products consistent with good business practices and in a
manner that it reasonably believes will reflect favorably on the Products
and the goodwill and reputation of VitroTech and VitroCo;
(b) Comply, in all material respects, with the provisions of all
applicable laws and the rules and regulations thereunder, and refrain from
engaging in any illegal business practices whatsoever with respect to the
promotion and sale of the Products;
(c) Hold itself out as an independent contractor with respect to
VitroTech and VitroCo and not present itself as an agent, representative
or employee of any other party, and prominently display in any advertising
or signage related to the Products that it is an Authorized Master
Distributor of VitroTech and VitroCo;
(d) Not make any warranties, express or implied, by operation of law
or otherwise, concerning the Products which are in addition to any written
warranties made by VitroTech and VitroCo;
(e) Advise VitroTech and VitroCo of complaints relating to the
Products received in writing;
(f) Pay for all the Distributor's costs associated with the
promotion and advertising of the Products;
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(g) Obtain and pay for such licenses, permits and authorizations as
may be necessary in connection with the Distributor's promotion and sale
of the Products.
7. Payment and Funding Obligations. As consideration for the rights
granted to the Distributor hereunder, the parties agree as follows:
(a) Direct Costs and Basic Overhead Costs.
(i) The Distributor shall pay the known fixed Direct Costs (as
defined below) as the same shall become due and payable.
(ii) Until such time as VitroTech and VitroCo can pay their
own Basic Overhead Costs (as defined below) without being Insolvent,
the Distributor shall pay the Basic Overhead on a monthly basis on
the first day of each month.
(iii) The Distributor, in its sole and absolute discretion,
may pay any Direct Costs or Basic Overhead Costs to third parties
directly on behalf of VitroCo or VitroTech, as applicable, and the
Distributor shall provide evidence of such payment to VitroCo or
VitroTech, as applicable.
(iv) Set forth on Exhibit D, is the current quarterly budget
(the "Current Quarter Budget"). During the Term, thirty days prior
to the beginning of each calendar quarter, VitroCo and VitroTech
shall cause to be prepared and delivered to Distributor a quarterly
budget (each, including the Current Quarter Budget, a "Budget") for
the succeeding quarter. The Distributor shall have fifteen days to
review the Budget. If the Distributor disputes any items set forth
in the Budget, the Distributor shall notify VitroCo and VitroTech,
and the parties shall negotiate in good faith as to whether and what
amount of such disputed items should be incurred. The final
determination with respect to disputed items shall be made by the
Distributor in its sole and absolute discretion. Notwithstanding
anything to the contrary set forth herein, the Distributor shall
have no obligation to pay VitroTech or VitroCo any amount in excess
of the amount set forth in the Budget for such line item unless the
Distributor consents, which consent shall be in the Distributor's
sole and absolute discretion, to make such payment.
(v) The parties acknowledge and agree that it is the intent of
the parties to reduce the Direct Costs and Basic Overhead Costs as
much as reasonably possible without materially adversely affecting
VitroTech and VitroCo. To the extent that the Distributor can
reasonably arrange for any Direct Costs or Basic Overhead Costs to
be obtained at a lower price, VitroCo and/or VitroTech shall utilize
such arrangement (and Budget shall be amended to reflect such lower
cost), so long as the operations of VitroCo and VitroTech are not
materially harmed by such arrangements.
(vi) For purposes hereof, "Direct Costs" means costs incurred
by VitroCo or VitroTech relating to the mining, processing, sale or
transfer of Products to or for the benefit of the Distributor,
including but not limited to the mining costs, processing costs,
freight charges, storage charges, warehouse charges, handling
charges, payments to the Mines measured based on sales (but no
greater than 10%), payments to Hi-Tech measured by sales (but no
greater than 5%), and payments Contingent Interest (measured by
sales of Product) incurred by VitroTech or VitroCo; provided
however, to the extent that any Contingent Interest obligation is
decreased for any reason, then the Distributor is only obligated to
pay such reduced amount of Contingent Interest.
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(vii) For purposes hereof, "Basic Overhead Costs" means costs
incurred by VitroTech to support its essential operations as a
public reporting company, including, lease payments, utilities,
taxes (other than taxes based on the income of VitroTech and
VitroCo), insurance, directors fees, filing fees accounting fees and
legal fees related to public company reporting, the Current
VitroTech Employee Costs and Post Mine Transfer Date VitroCo
Employee Costs, provided, however, that Basic Overhead Costs shall
not: (i) cumulatively exceed $600,000 in any 12-month period
("Overhead Cap"), or (ii) include any Processing Oversight and ISO
Costs (as defined below) and Trade Debt (as defined below).
Notwithstanding anything to the contrary set forth herein, the
Distributor shall have no obligation to pay VitroTech or VitroCo any
amount in excess of the Overhead Cap, unless the Distributor
consents, which consent shall be in the Distributor's sole and
absolute discretion, to make such payment.
(b) Product Royalty Payment. The Distributor shall pay to VitroCo an
amount (the "Product Royalty") equal to five percent (5%) of the gross
sales price of all Products sold by the Distributor, as follows:
(i) Product Royalty payments will be due and payable on or
before the fifteenth day of each month based on gross amounts
collected by the Distributor from the sale of Products during the
preceding calendar month;
(ii) In the event of any reduction in payments to Hi-Tech,
which amounts are included in Direct Costs (each such reduction
being referred to as a "Reduced Direct Cost"), the Product Royalty
shall be increased by an amount equal to the Reduced Direct Cost.
(iii) Notwithstanding the foregoing, no Product Royalty shall
be payable with respect to the EIG Mine Material XP-VL800-110# Drum,
which is approximately 13,138 pounds and which is set forth on
Exhibit A attached hereto.
(c) Processing Oversight and ISO Payments. The Distributor shall pay
to, or on behalf of, VitroTech an amount sufficient to cover Processing
Oversight and ISO Costs of VitroTech, as follows:
(i) The Distributor shall pay to VitroTech, or will pay
directly on behalf of VitroTech, all Processing Oversight and ISO
Costs as those costs are incurred by VitroTech; and
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(ii) For purposes hereof, "Processing Oversight and ISO Costs"
means all costs incurred by VitroTech or VitroCo relating directly
to maintenance of the ISO Registration, including but not limited to
all costs of (A) maintaining and renewing the ISO Registration and
(B) processing oversight required in connection with the ISO
Registration.
(d) Trade Creditor Payments. The Distributor shall pay on behalf of
VitroTech and VitroCo, certain trade creditor payments (to the extent
VitroTech and VitroCo are legally required to pay), as follows:
(i) The Distributor shall, on the Mine Transfer Date, begin
the process to satisfy all Trade Debt of VitroTech and VitroCo and
continue until completion;
(ii) For purposes hereof, "Trade Debt" means all amounts owing
with respect to the purchase of goods or services by VitroTech or
VitroCo in the reasonable course of business, excluding amounts
owing to the Mines and Hi-Tech.
All payments pursuant to this Agreement shall be made in United States
dollars (USD).
8. Equity Interest. Within five days after the date hereof, the
Distributor shall issue to VitroTech a non-diluting twenty-five percent (25%)
equity ownership interest (the "Equity Interest") in the Distributor as follows:
(a) The Equity Interest shall consist of membership interests of the
Distributor that will, at all times and notwithstanding any future
issuances of securities by the Distributor, be entitled to (i) a
preferential distribution on liquidation equal to twenty-five percent
(25%) of the liquidation proceeds, if any, of the Distributor and (ii)
mandatory distribution of twenty-five percent (25%) of the pre-tax net
income of the Distributor, as measured on a annual basis and payable not
later than ninety (90) days following the end of each calendar year.
(b) The holder of the Equity Interest will have a right to appoint
one member to the board of managers of the Distributor.
(c) Pre-tax net income of the Distributor shall be calculated in
accordance with U.S. generally accepted accounting principles.
9. Right of First Refusal. Before any outstanding equity ownership
interest (an "Offered Interest") in the Distributor may be sold or otherwise
transferred (including transfer by gift or operation of law) by the holder of
such Offered Interest (a "Selling Holder"), VitroTech shall have a right of
first refusal to purchase the Offered Interest on the terms and conditions set
forth in this paragraph (the "Right of First Refusal"), as follows:
(a) Notice of Proposed Transfer. The Selling Holder shall (i)
deliver to VitroTech a written notice (the "Notice") stating: (A) the
Selling Holder's bona fide intention to sell or otherwise transfer such
Offered Interest; (B) the name of each proposed purchaser or other
transferee ("Proposed Transferee"); (C) the amount of the securities to be
transferred to each Proposed Transferee; (D) the bona fide cash price or
other consideration for which the Selling Holder proposes to transfer the
Offered Interest (the "Offered Price"); and (E) the material terms and
conditions of the proposed transfer (the "Offer Terms") and (ii) offer the
Offered Interest at the Offered Price and on the Offer Terms to VitroTech.
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(b) Exercise of Right of First Refusal. At any time within 30 days
after receipt of the Notice, VitroTech may, by giving written notice to
the Selling Holder, elect to purchase all, but not less than all, of the
Offered Interest proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price and on the terms determined in
accordance with subsection (c) below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Offered Interest purchased by VitroTech under this paragraph shall be the
Offered Price, and the terms and conditions of the transfer shall be
identical in all material respects to the Offer Terms (the "Terms"). If
the Offered Price includes consideration other than cash, the cash
equivalent value of the non-cash consideration shall be determined by the
Board of Directors of the Distributor in good faith.
(d) Payment of Purchase Price. Payment of the Purchase Price shall
be made in cash (by check or wire transfer) in accordance with the Terms,
within thirty (30) days after delivery of the written notice by VitroTech
as set forth in paragraph 9(b).
(e) Selling Holder's Right to Transfer. If all of the Offered
Interest proposed in the Notice to be transferred to a given Proposed
Transferee are not purchased by VitroTech as provided in this paragraph,
then the Selling Holder may sell or otherwise transfer such Offered
Interest to that Proposed Transferee at the Offered Price or at a higher
price and on the Offer Terms, provided that such sale or other transfer is
consummated within sixty (60) days after the date of the Notice and
provided further that any such sale or other transfer is affected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this paragraph shall continue to
apply to the Offered Interest in the hands of such Proposed Transferee;
provided however, that with respect to the Offered Interests held by
Proposed Transferees, the Right of First Refusal shall be deemed to have
lapsed and to be of no force or effect on or after the earlier of (i) the
second anniversary of the Effective Date or (ii) a Public Market
Transaction. For purposes hereof, a "Public Market Transaction" shall mean
(A) an underwritten public offering of the equity securities of the
Distributor offered pursuant to a registration statement filed and
effective under the Securities Act of 1933, as amended, or (B) a
transaction by which the Distributor, directly or as a majority owned
subsidiary, becomes subject to the reporting requirements of the
Securities Exchange Act of 1934 (a "reverse merger transaction"), provided
that a reverse merger transaction will only be deemed a Public Market
Transaction if VitroTech shall consent, in writing, to the reverse merger
transaction, which consent shall not be unreasonably withheld. If the
Offered Interest described in the Notice is not transferred to the
Proposed Transferee within the 60 day period set forth above, a new Notice
shall be given to VitroTech, and VitroTech shall again be offered the
Right of First Refusal before any Offered Interest held by the Selling
Holder may be sold or otherwise transferred.
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(f) Exception for Affiliate Transfers. Anything to the contrary
contained in this paragraph notwithstanding, the transfer of any or all of
the Offered Interest to an affiliate of the Selling Holder (including
limited partners of the Selling Holder) shall be exempt from the
provisions of this paragraph. In such case, the transferee or other
recipient shall receive and hold the Offered Interest so transferred
subject to the provisions of subparagraphs a-e of this paragraph.
(g) Exception for Initial Transfers. Anything to the contrary
contained in this paragraph notwithstanding, the transfer of any portion
of the Offered Interest to any person or persons, up to a maximum of
twenty-four percent (24%) of the undiluted equity ownership interest of
the Distributor shall be exempt from the provisions of this paragraph.
(h) Legends. The Distributor shall xxxx its records and shall xxxx
any certificate or document evidencing ownership interests in the
Distributor to indicate that such ownership interests are subject to the
Right of First Refusal as set forth herein.
10. Representations, Warranties and Covenants of VitroTech and VitroCo.
VitroTech and VitroCo each hereby represent and warrant to Distributor that:
(a) VitroTech and VitroCo, respectively, is the owner or has the
valid right to use and to license or sublicense all of its rights to the
Proprietary Rights and the Trademarks, and VitroTech and VitroCo
respectively, has the right to grant the licenses it has granted
hereunder;
(b) VitroTech and VitroCo hereby represent and warranty to the
Distributor that the current Gross Margins (as defined below) are set
forth on Exhibit A. "Gross Margins" means the difference between the base
cost of the Products (including processing, packaging, royalties payments
to the Mines and Contingent Interest) and the day to day resale price of
VitroTech.
(c) VitroTech and VitroCo hereby acknowledge and agree that: (i) any
present or former VitroTech or VitroCo executive, officer, employee or
consultant may be hired by Distributor (the "Employees") and VitroTech and
VitroCo each will release and hold harmless Employees and Distributor from
any rights, duties, liabilities or obligations to VitroTech or VitroCo,
including, but not limited to, any claims that relate to or arise from the
transfer of propriety or confidential technical, business or customer
information to Distributor; and (ii) the Distributor may contact and
solicit all former, present or future customers of VitroTech and VitroCo
in connection with Distributor's sale of the Products; and
(d) VitroTech covenants and agrees that it shall cause VitroCo to
perform all of VitroCo's obligations hereunder.
(e) VitroCo covenants and agrees that after it has paid its other
expenses, it shall apply the balance on the Product Royalty, if any, to
pay for Basic Overhead Costs.
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11. Term and Termination. This Agreement shall be for the "Term"
commencing on the Effective Date and ending on the tenth anniversary of the
Effective Date, unless extended or earlier terminated as provided herein.
(a) Notwithstanding the foregoing, this Agreement may be earlier
terminated:
(i) At the election of VitroTech, in writing, if: (A) the
Distributor is dissolved; (B) the Distributor is adjudged bankrupt;
(C) the Distributor enters into an assignment or other arrangement
for the benefit of its creditors (and the Distributor shall give
VitroTech prompt written notice of any of the foregoing) or (D) the
Distributor fails to satisfy Minimum Sale Requirements. "Minimum
Sales Requirements" means sales by the Distributor of not less than
500,000 pounds of Products per calendar year beginning in 2008,
increasing to 1,000,000 pounds of Products per calendar year
beginning in 2010.
(ii) At the election of the Distributor, in writing, if: (A)
VitroTech or VitroCo are dissolved; (B) VitroTech or VitroCo are
adjudged bankrupt; (C) VitroTech or VitroCo enter into an assignment
or other arrangement for the benefit of its creditors; (and
VitroTech or VitroCo shall give Distributor prompt written notice of
any of the foregoing); (D) the ISO Registration is canceled or
terminated for any reason; or (E) the Mines and Hi-Tech fail to
enter into an agreement to continue providing Products to the
Distributor on terms substantially similar to those set forth herein
in the event of the bankruptcy filing by either VitroTech or
VitroCo, or (F) VitroTech or VitroCo lose the right to mine Products
from the Mines under the terms in which they currently possess those
rights.
(b) The party electing termination shall give written notice to the
non-terminating party. The termination shall be effective upon thirty (30)
days written notice unless the reason for termination is cured within said
thirty (30) day period.
(c) The Distributor shall have a right to extend the Term of
this Agreement, at its sole election on two separate occasions, each
such extension being for five years provided that the aggregate
sales of Products by the Distributor over the five year period
immediately prior to the extension equal or exceed 8,000,000 pounds
and provided, further, that the Distributor provides written notice
to VitroTech, given at least thirty (30) days prior to the end of
the then current Term, of its intent to extend the Term.
12. Effect of Termination. Upon termination of this Agreement:
(a) (i) If termination is by VitroCo, then VitroCo shall have the
right to purchase any or all Products then in the Distributor's possession
at the Distributor's actual purchase price, including shipping costs,
taxes and other fees and costs paid by the Distributor, provided the same
are in their original unopened containers, and subject to any liens on the
Products. In the event that VitroCo exercises its right to purchase said
Products, the Distributor, at its cost, shall return to VitroCo in their
original, unopened and secure containers, to reach VitroCo without damage,
all such Products purchased and VitroCo shall pay the Distributor for the
same, less any then outstanding receivables from the Distributor to
VitroCo, within thirty (30) days following their receipt. Notwithstanding
anything to the contrary contained herein, the Distributor shall have the
right to satisfy all outstanding contracts with its customers that are of
a term of less than one (1) year.
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(ii) If termination is by Distributor, then all obligations of
Distributor under this Agreement shall immediately cease.
(b) VITROTECH AND VITROCO SHALL NOT BE LIABLE TO THE DISTRIBUTOR FOR
ANY DAMAGES, LOSSES OR EXPENSES RESULTING FROM ANY TERMINATION OR
EXPIRATION OF THIS AGREEMENT ARISING FROM ANY CLAIMS ASSERTED BY THE
DISTRIBUTOR WHICH ARE BASED UPON LOSS OF GOODWILL, PROSPECTIVE PROFITS OR
ANTICIPATED ORDERS, OR ON ACCOUNT OF ANY EXPENDITURES, INVESTMENTS, LEASES
OR COMMITMENTS MADE BY THE DISTRIBUTOR.
(c) THE DISTRIBUTOR SHALL NOT BE LIABLE TO VITROTECH OR VITROCO FOR
ANY DAMAGES, LOSSES OR EXPENSES RESULTING FROM ANY TERMINATION OR
EXPIRATION OF THIS AGREEMENT ARISING FROM ANY CLAIMS ASSERTED BY VITROTECH
OR VITROCO WHICH ARE BASED UPON LOSS OF GOODWILL, PROSPECTIVE PROFITS OR
ANTICIPATED ORDERS, OR ON ACCOUNT OF ANY EXPENDITURES, INVESTMENTS, LEASES
OR COMMITMENTS MADE BY VITROTECH OR VITROCO.
(d) The Distributor acknowledges that:
(i) VitroTech and VitroCo have not made any representations to
the Distributor and the Distributor has received no assurances,
that: (A) its business relationship will continue with VitroTech and
VitroCo beyond the stated term of this Agreement or its earlier
termination in accordance with this Agreement; (B) any investment by
the Distributor in the promotion of the Products will be recovered
or recouped; or (C) the Distributor shall obtain any anticipated
amount of profits by virtue of this Agreement; and
(ii) Except as expressly provided herein, the Distributor
shall not have or acquire, by virtue of this Agreement or the
transactions contemplated hereunder, any proprietary or other rights
in the Products, VitroTech's and VitroCo's intellectual and
industrial property or in any goodwill related thereto, whether or
not created by its efforts.
(e) No termination of this Agreement shall constitute a waiver by
any party of any other rights or remedies which it may have against the
other party, nor shall it constitute a termination of any other
contractual agreement between the parties hereto, including but not
limited to the right to receive payment for Products sold to the
Distributor hereunder. Any action for a breach of any of party's
obligations under this Agreement or otherwise must be commenced within one
(1) year after the cause of action has accrued.
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(f) If any party has given any other party notice of its intention
to terminate this Agreement as provided herein, then during such period
between the notice of termination and termination of this Agreement, the
Distributor shall have the right to purchase a reasonable quantity of the
Products to service expected customer needs. VitroCo shall have no
obligation to accept any orders, which have not been accepted by VitroCo
prior to any notice of termination of this Agreement.
13. Confidentiality. The Distributor acknowledges that all information
supplied to it by VitroTech and VitroCo, other than that in published form for
public distribution or expressly designated by VitroTech or VitroCo as
non-confidential or otherwise known to the Distributor, is confidential and
proprietary to VitroTech or VitroCo (collectively, the "Company Confidential
Information") including, without limitation, identification of its customers,
the price at which they purchase material from VitroCo, the sources and prices
of materials obtained by VitroCo or the technical methods used in the mining,
milling and utilization by the end-user of the Products, except that Distributor
may share such information with potential investors provided that such investors
sign a confidentiality agreement. Subject to applicable law, (including legal
process), the Distributor shall not disclose or provide any Company Confidential
Information to any third party and shall take commercially reasonable measures
to prevent disclosure by its present and future employees, officers, agents,
subsidiaries, dealers or consultants during the term of this Agreement and
thereafter. If the Distributor elects to test the performance of the Products in
any process and or products, the Distributor shall (i) supply to VitroCo all
test results including all data pertaining thereto and representative samples of
test items with and without Products (except to the extent the data contains
confidential or proprietary information unrelated to the Products), and (ii)
refrain from analyzing or testing the Products to determine its structure or
composition, including but not limited to the following testing means: x-ray
diffraction for mineralogy or chemical analysis by any means, in either case for
the purpose of "reverse-engineering" the Products. The results of any such test
shall be deemed Company Confidential Information.
14. Trademarks.
(a) VitroTech's and VitroCo's Trademarks may only be used in
connection with promotion and sale of the Products and may not be used by
the Distributor for any other purpose or in connection with the sale or
promotion of any goods, services or Products, which are not provided by
VitroTech or VitroCo to the Distributor. The Distributor's use of such
Trademarks shall conform to any requirements reasonably imposed by
VitroTech.
(b) Except as expressly provided herein, the Distributor
acknowledges that it will not acquire any rights, titles, or interests in
any of VitroTech's or VitroCo's Trademarks.
(c) The Distributor may adopt, use or register any words, phrases or
symbols which are identical or similar to any of VitroTech's or VitroCo's
Trademarks, provided, however, that upon the termination of this
Agreement, at the written request of VitroTech, the Distributor shall
assign to VitroTech or VitroCo any trademarks, service marks, trade names
or similar rights obtained by the Distributor during the term of this
Agreement which relate to the Products or the Distributor's sale thereof,
all at no cost to VitroTech or VitroCo.
13
15. Products Warranties and Limitation of Remedies. During the Warranty
Period, VitroCo hereby warrants that the Products sold shall conform to
VitroCo's then current published specifications for such Products.
(a) Provided the Distributor notifies VitroCo, in writing, of any
nonconformity in any of the Products and returns such Products to VitroCo
during the Warranty Period, as applicable, VitroCo shall replace such
non-conforming Products, provided that all of the following conditions are
met:
(i) The Products (and to the extent reasonably available, in
its original container) is returned to VitroCo, at which time title
transfers to VitroCo; and
(ii) The Products has not been altered, reprocessed, misused,
abused, damaged by accident, subjected to undue stress, or attempted
to prepare the Products for use more than one time.
The cost of returning any defective or non-conforming Products to VitroCo
and the cost of returning any replaced Products to the Distributor shall
be borne by VitroCo.
(b) THE REPLACEMENT OF ANY NON-CONFORMING OR DEFECTIVE PRODUCTS
ABOVE SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY OF THE DISTRIBUTOR
(AND SHALL CONSTITUTE FULFILLMENT OF ALL OBLIGATIONS OF VITROCO HEREUNDER)
FOR THE BREACH OF ANY WARRANTY BY VITROCO.
(c) THE FOREGOING PRODUCTS WARRANTIES ARE EXCLUSIVE AND IN LIEU OF
ALL OTHER WARRANTIES WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
(d) The Distributor acknowledges that there are no warranties
implied by custom or usage in the trade between the Distributor and
VitroTech or VitroCo that have become a part of this transaction.
(e) VITROCO SHALL NOT BE LIABLE TO THE DISTRIBUTOR FOR ANY LOSS OR
DAMAGE CAUSED BY DELAY IN FURNISHING THE DISTRIBUTOR WITH ANY PRODUCTS OR
ANY OTHER PERFORMANCE BY VITROCO UNDER THIS AGREEMENT.
(f) IN NO EVENT SHALL ANY PARTY HERETO BE LIABLE TO THE OTHER FOR
ANY SPECIAL, CONSEQUENTIAL OR INDIRECT DAMAGES, HOWEVER CAUSED.
14
16. Products Specifications. VitroCo reserves the right to change the
Products' specifications, but not in an adverse manner for the intended use.
17. All Sales Final. All sales are final and all Products shall be paid
for by Distributor as set forth above in Paragraph 7. Any return of any Products
shall be subject to the prior written approval of VitroCo. Claims that a Product
is not as warranted based upon any defects which are discoverable upon
inspection of the Products and claims for shortages in delivery shall be deemed
waived and released by the Distributor unless made in writing and delivered to
VitroCo within five (5) business days of the Distributor's receipt of the
shipment giving rise to such claim(s), in the case of a purported shortage, and
within one hundred and eighty (180) days, in the case of Products purported
being not as warranted. Failure to so notify VitroCo shall constitute an
irrevocable acceptance of the Products. Any conforming Products returned with
VitroCo's Returned Material Authorization (RMA) to VitroCo must be shipped
prepaid in secure containers to reach VitroCo without damage.
18. Relationship Among the Parties. Nothing herein contained shall
constitute a partnership between, or a joint venture by, the parties hereto, or
constitute any party the agent of the other. No party shall hold itself out
contrary to the terms of this paragraph, and no party shall become liable by any
representation, act or omission of the other contrary to the provisions hereof.
This Agreement is not for the benefit of any third party and shall not be deemed
to give any right or remedy to any such party whether referred to herein or not.
19. Broker's Commission. Each party hereto warrants to the other parties
hereto that it has not incurred any obligation by reason of this Agreement or
the transactions contemplated by this Agreement, for a brokerage commission or
finder's fee for which any other party would be liable. Each party hereto
indemnifies and will hold the other parties hereto free and harmless from and
against any damage or expense that such other party may incur by reason of the
untruth as to the warranting party of the foregoing warranty, including expenses
for attorney's fees and court costs. The Distributor may pay sales commissions
or fees in connection with sale of Products, and the other parties shall have no
liability with respect thereto.
20. Assignment. This Agreement shall be binding upon the parties and their
respective successors and assigns. Notwithstanding the foregoing sentence, no
party shall assign any of its rights or obligations under this Agreement unless
such assignment has received the prior written consent of the other parties,
which consent shall not be unreasonably withheld.
21. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of Delaware.
(b) Language. The governing language to be used for purposes of the
interpretation and meaning of this Agreement shall be English.
(c) Further Assurances. Each of the parties agree that it will,
without further consideration, execute, acknowledge and deliver such other
documents and take such other actions as may be reasonably requested by
the other party in order to consummate the purposes and subject matter
hereof; provided that such party incurs no additional material financial
obligation thereby.
15
(d) Modification. Only a writing dated on or subsequent to the date
hereof signed by each of the parties hereto may amend this Agreement.
(e) Notices. Any notice, request, approval or other communication
given in connection herewith shall be in writing and shall be deemed
delivered when actual and personal delivery is effected on the party being
given notice and when a true copy is given by facsimile to each of the
parties listed below. If mailed, notice shall be effective three (3)
business days after the same have been deposited in a United States post
office with postage prepaid and addressed to the parties as follows,
together with a facsimile sent to the noticed party on the same day as
deposited at the post office. If notice is deposited in a post office
outside the United States, it shall be effective ten (10) days after being
deposited provided notice is also sent by facsimile. Any party, by notice
so given, may change its address for any subsequent notice.
If to VitroTech or VitroCo:
VitroTech Corporation
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000
Telefacsimile: (000) 000-0000
If to the Distributor: Xxx Xxxxx
c/o Wachtel & Masyr, LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telefacsimile: (000) 000-0000
With a copy to: Xxxxxxx & Masyr, LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxxxxxxx
Telefacsimile: (000) 000-0000
(g) JURY TRIAL WAIVERS. TO THE FULLEST EXTENT PERMITTED BY LAW, AND
AS SEPARATELY BARGAINED-FOR CONSIDERATION, EACH PARTY HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY KIND ARISING OUT OF OR RELATING TO ANY OF THE OBLIGATIONS UNDER THIS
AGREEMENT. EACH PARTY HEREBY EXPRESSLY ACKNOWLEDGES INCLUSION OF THIS JURY
TRIAL WAIVER.
(h) Section Headings. The subject headings of the sections of this
Agreement are for convenience of reference only, and words contained
therein shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of this Agreement.
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(i) Gender; Number. The masculine, feminine or neuter gender and the
singular or plural number shall be deemed to include the other whenever
the context of this Agreement so indicates or requires.
(j) Severability. Any provision of this Agreement, which may be
prohibited by law or otherwise held invalid, shall be ineffective only to
the extent of such prohibition or invalidity and shall not invalidate or
otherwise render ineffective the remaining provisions of this Agreement.
No provision of this Agreement shall be interpreted for or against a party
because such party or its representation drafted the same.
(k) Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and same agreement, and it
shall be necessary to produce only one such counterpart in making proof of
this Agreement. Facsimile copies of signatures shall be deemed originals.
(l) Waiver. Waiver by either party of any breach of any term or
condition of this Agreement shall not constitute a waiver of subsequent
breaches.
(m) Counting of Days. Business days shall not include legal holidays
or a Saturday, a Sunday or days on which banking institutions are not
required to be open.
(n) Force Majeure. No party hereto shall be liable for failure to
perform, in whole or in material part, its obligations under this
Agreement if such failure is caused by any event or condition not existing
as of the date of this Agreement (unless reasonably foreseeable by such
party) and not reasonably within the control of the affected party,
including without limitation, by fire, flood, typhoon, earthquake,
explosion, strikes, labor troubles or other industrial disturbances,
unavoidable accidents, war (declared or undeclared), acts of terrorism,
sabotage, embargoes, blockage, acts of any governmental entities, riots,
insurrections, or any other cause beyond the control of the parties;
provided, only, that the affected party promptly notifies the other party
of the occurrence of the event of force majeure and takes all reasonable
steps necessary to resume performance of its obligations so interfered
with.
(o) Audit Rights. During the term of this Agreement and for 6 months
thereafter, upon reasonable prior written request and during normal
business hours, VitroTech shall have the right to audit, at VitroTech's
sole cost and expense, the Distributor's books and records and
calculations, and schedules thereto, with respect to all amounts payable
hereunder. During the term of this Agreement and for 6 months thereafter,
upon reasonable prior written request and during normal business hours,
Distributor shall have the right to audit, at Distributor's sole cost and
expense, Vitrotech's and VitroCo's books and records and calculations, and
schedules thereto, with respect to all amounts payable by Distributor
hereunder.
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(p) Financial Statements. Each of VitroTech and the Distributor
agrees to provide to the other (i) audited financial statements of the
respective party for each year ending December 31, which financial
statements shall be provided within seventy days after year-end and (ii)
unaudited financial statements of the respective party for each of the
first three calendar quarters of each calendar year, which financial
statements shall be provided within thirty days after end of each calendar
quarter. All such financial statements shall include a balance sheet and
statements of operations, cash flows and changes in equity, all prepared
in accordance with SEC Regulation S-X.
22. Acknowledgment. This Agreement, including any exhibits, schedules and
amendments, has been negotiated at arm's length between persons sophisticated
and knowledgeable in the matters dealt with in this Agreement. Experienced and
knowledgeable legal counsel has represented each party. Accordingly, any rule of
law or legal decision that would require interpretation of any ambiguities in
this Agreement against the party that has drafted it is not applicable and is
waived. The provisions of this Agreement shall be interpreted in a reasonable
manner to affect the purposes of the parties and this Agreement.
23. Definitions. For purposes hereof, the following terms shall have the
means set forth as follows:
(a) "Warranty Period" means a one hundred eighty (180) day period
commencing from the date of delivery of the Products to the Distributor.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth in the introduction to this Agreement.
VITROTECH CORPORATION VITROTECH PRODUCT
DISTRIBUTOR LLC
By: ________________________________ By:__________________________
Xxxxx Xxxxxxxxxxx Xxx Xxxxx
Chief Executive Officer Manager
VITROCO INCORPORATED
By:________________________________
Chief Executive Officer
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