AMENDED AND RESTATED
DISTRIBUTION RIGHTS XXXX OF SALE AGREEMENT
THIS DISTRIBUTION RIGHTS XXXX OF SALE AGREEMENT made this 30th day of
November, 1996, between:
U.S. ENVIRONMENTAL, INCORPORATED
0000 Xxxx Xxxxxxx 00
Xxxxx Xxxx, Xxxxxxxxx 00000
a Minnesota corporation ("USE"), and
MERCURY WASTE SOLUTIONS, INC.
000 X. Xxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
a Minnesota corporation ("MWS"):
This Agreement amends and restates that certain Distribution
Rights Xxxx of Sale Agreement (the "Original Distribution Rights
Agreement") dated January 4, 1996 by and between USE and MWS pursuant
to Section 9 of the Original Distribution Rights Agreement.
Pursuant to that certain Asset Purchase Agreement (the "Asset
Purchase Agreement") dated January 4, 1996 by and between USE and MWS,
for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, USE does hereby sell, assign, transfer
and convey unto MWS, its successors and assigns, all and singular, the
exclusive right to distribute and sell and USE's design rights of (the
"Distribution Rights") the Model 2000 lamp processing equipment ("Model
2000") and any and all new types and items of lamp processing or
mercury retorting/distilling equipment including modifications to the
Model 2000 manufactured by or for USE ("New Equipment"), as such
equipment exists now or may be varied or redesigned in the future
(collectively, the "Equipment").
TO HAVE AND TO HOLD all and singular the Distribution Rights unto MWS,
its successors and assigns, forever.
USE hereby covenants and agrees to and with MWS, its
successors and assigns, to do, execute, acknowledge and deliver, or to
cause to be done, executed, acknowledged and delivered, to MWS, its
successors and assigns, all such further acts, assignments, transfers,
and assurances that may be reasonably requested, conveying, delivering,
assuring and confirming, to MWS, its successors or assigns, or for
aiding and assisting in collecting or reducing to possession, any or
all of the Distribution Rights, including without limitation with
respect to any claims regarding the Distribution Rights asserted by
Xxxxxx Xxxxxx, Xxxxxxx Xxxxxx (collectively, the "Seilers") and/or
Resource Technology, Inc. ("RTI").
This Xxxx of Sale shall be binding upon the successors and assigns of
USE and shall inure to the benefit of the successors and assigns of MWS.
1. Sale of Equipment. In addition to, and in connection with the
conveyance of the Distribution Rights, USE agrees that USE shall sell to MWS,
subject to the terms and conditions of this Agreement, MWS's requirements for
Equipment. USE shall sell Equipment to MWS on the terms and conditions set forth
in the RTI Agreement (as defined in Section 4 hereof), or any successor
agreement. Delivery of the Equipment shall be at the cost of MWS.
2. Distribution Payments. In consideration for the transfer of the
Distribution Rights, MWS agrees to pay USE as follows: (i) for each piece of the
Model 2000 Equipment actually sold, the sum of $46,000, and (ii) for each piece
of New Equipment actually sold, the sum of $25,000 (each such payment under (i)
or (ii) shall be referred to herein as a "Distribution Payment"); provided,
however that the aggregate maximum amount of Distribution Payments shall not
exceed the sum of $460,000 (the "Total Distribution Payment"). The Distribution
Payments shall be earned by USE upon final consummation of a sale of Equipment,
and shall be payable to USE pursuant to the terms of a promissory note in the
form attached hereto as Exhibit A (the "Distribution Note(s)"). After USE has
earned the Total Distribution Payment, USE shall have no further rights with
respect to the Equipment or the distribution of the Equipment. The Distribution
Note(s) shall bear interest at 10%, with interest accruing thereon payable to
USE monthly. The aggregate outstanding principal balance of the Distribution
Note(s) shall be due and payable on January 4, 2001. In addition, at such time
as the Board of Directors of MWS has determined, in its sole discretion, that
the principal balance outstanding on the Revolving Loan (defined below) is at
the maximum amount anticipated to be advanced against the Revolving Loan and no
further advances against the Revolving Loan are projected (the "Determination"),
then MWS may prepay the Distribution Note(s) in whole or in part, without
penalty or premium, out of Excess Cash Flow as described below. For purposes of
this Agreement, "Excess Cash Flow" shall mean MWS's gross revenue actually
received less (i) all operating expenses of MWS excluding depreciation, (ii)
reserve for the income taxes of MWS (if MWS becomes a Subchapter C corporation)
or of MWS's shareholders with respect to income of the MWS, (as long as MWS is a
Subchapter S corporation), (iii) interest and scheduled principal payments on
indebtedness of MWS, and lease payments (other than principal owing on the Asset
Purchase Loan, as defined below, and the Distribution Note(s)), (iv) interest
payable on the Distribution Note(s), (v) the cost of goods sold, (vi) capital
expenditures, and (viii) a cash reserve of $100,000. MWS shall distribute to USE
thirty-two percent (32%) of such Excess Cash Flow, to be applied by USE to the
principal balance outstanding on that certain Promissory Note bearing even date
herewith in the principal amount of $448,256.60 made payable by MWS to USE (the
"Asset Purchase Loan"), and the aggregate principal balance outstanding on the
Distribution Note(s), in USE's discretion. MWS shall distribute sixty-eight
percent (68%) of such Excess Cash Flow to reduce the principal balance
outstanding on that certain Revolving Credit Promissory Note bearing even date
herewith in the principal amount of up to $2,000,000 made payable by MWS to the
order of Xxxx Xxxxxxx ("Xxxxxxx") or his assigns, as amended from time to time
or replaced with other financing from time to time (the "Revolving Loan").
Before the Determination, all Excess Cash Flow shall be applied to the principal
balance outstanding on the Revolving Loan.
The Distribution Note(s) shall be secured by the assets of MWS pursuant
to the terms of a certain Security Agreement dated January 4, 1996 by and
between MWS and USE, as the same may be amended from time to time (the "Security
Agreement").
3. Reconveyance. MWS shall reconvey to USE the Distribution Rights
relating to the Model 2000 Equipment, if: (i) MWS determines in its sole
discretion to cease distributing Equipment before USE has earned the Total
Distribution Payment, or (ii) during any one year period, beginning on September
12th of each year, beginning with the year following September 12, 1996, before
USE has earned the Total Distribution Payment, MWS either fails to purchase a
minimum of three (3) Pieces of Model 2000 Equipment for retail sale or MWS fails
to issue Distribution Note(s) to USE evidencing Distribution Payments in the
aggregate of at least $138,000, (or any combination with this net result).
Notwithstanding the foregoing, MWS shall retain all rights with respect to New
Equipment and shall retain the rights to any and all new types and items of lamp
processing or mercury retorting/distilling equipment including modifications to
the Model 2000 manufactured by or for or developed by MWS. Upon reconveyance of
the Distribution Rights relating to the Model 2000 Equipment, MWS shall have no
further obligation to USE pursuant to this Agreement or otherwise with respect
to the Distribution Rights, except for payment in accordance with Section 2
hereof of any Distribution Note(s) outstanding on the date of the reconveyance.
4. USE's Representations to MWS. USE warrants that USE has good and
marketable title to the Distribution Rights pursuant to the terms of a certain
Agreement dated as of June 27, 1994 between USE and RTI a copy of which is
attached hereto as Exhibit B (the "RTI Agreement"), and that there are no liens
or security interests which encumber or affect the Distribution Rights, and that
USE will warrant and defend title to the Distribution Rights against all claims
and demands whatsoever, including without limitation any claims asserted by RTI
or the Seilers, at no cost and expense to MWS. USE further represents and
warrants to MWS that it (i) has the exclusive right to sell the Equipment and
has the right and authority to grant to MWS the rights granted hereunder, (ii)
is contractually free to enter into and perform this Agreement without thereby
being in breach or causing a breach of the terms of any other contract,
commitment or understanding, and (iii) the Equipment is in good condition and is
fit for the purpose for which it is intended, and the Equipment's design and
construction complies with all applicable federal and state environmental laws
in effect as of the date of this Agreement. If MWS is unable to distribute and
sell the Model 2000 Equipment because of a breach of USE's foregoing
representations or warranties, MWS may reassign its rights to distribute the
Model 2000 Equipment to USE and in such a case USE agrees to retain the services
of MWS to market and sell the Model 2000 Equipment, for which services USE shall
pay MWS compensation in an amount equal to the gross sales price of each piece
of Model 2000 Equipment sold less: (A) the costs of manufacturing plus $46,000,
until such time as ten (10) pieces of Model 2000 Equipment have been sold under
the terms of this Agreement, whether before or after the reassignment of the
Distribution Rights pursuant to this Section 4, or (B) the costs of
manufacturing after the sale of 10 pieces of Model 2000 Equipment pursuant to
the terms of this Agreement.
5. Offset. USE acknowledges and agrees that MWS shall have the right to
offset against indebtedness of MWS to USE evidenced by Distribution Note(s), any
damages or losses incurred by MWS arising out of the breach by USE of any of the
terms and conditions of this Agreement, or the Asset Purchase Agreement,
including without limitation, a breach of the representations and warranties set
forth in Section 4 hereof. In the event of such an offset, the interest on the
amount offset against such Distribution Note(s) shall be reimbursed to MWS.
6. Acceleration of Distribution Note(s). If prior to payment in full of
the Total Distribution Payment in accordance with Section 2 hereof and the
related Distribution Note(s), any of the following events occurs, then the
amounts outstanding on Distribution Note(s) existing on the date of the
occurrence may become due and payable in full to USE immediately, upon the
written election of USE:
a. MWS terminates the employment of Xxxx Xxxxxx ("Xxxxxx") pursuant to
Section 5.1(a)(i) of that certain Employment Agreement dated as of
January 4, 1996 by and between MWS and Xxxxxx, as the same may be
amended from time to time (the "Employment Agreement"), or any
successor employment agreement; or
b. At any time after January 1, 1999, Xxxxxx becomes unable to perform
under his employment agreement because of disability or incompetency,
as defined in Section 5.1(a)(ii) of the Employment Agreement or any
successor employment agreement; or
c. The death of Xxxxxx, as long as MWS has been able to procure an
insurance policy on the life of Xxxxxx with MWS as beneficiary, which
MWS shall use its reasonable efforts to obtain.
After the occurrence of any of the above events and an acceleration
election by USE, any Distribution Payments earned by USE shall be payable
pursuant to the terms of Section 2 hereof and shall not be subject to such
acceleration.
7. Exclusive Trade Areas. MWS acknowledges that prior to the date of
this Agreement, in connection with the sale of pieces of Model 2000 Equipment,
USE has granted exclusive territory rights and/or rights of first refusal to the
parties listed on Schedule I attached hereto pursuant to the terms of Purchase
Agreements. MWS agrees to comply with the terms of those Purchase Agreements
specifically listed on Schedule I, solely to the extent of any exclusive
territories or rights of first refusal granted. In no event, however, shall this
be construed as an assumption by MWS of USE's obligations under such Purchase
Agreements, including without limitation any representations or warranties
provided therein, nor shall MWS be held liable or responsible for any violations
by USE of any grants of exclusive territories or rights of first refusal under
such Purchase Agreements, and USE agrees to indemnify and hold harmless MWS for
any damages incurred by MWS arising out of USE's failure to comply with the
terms of such Purchase Agreements.
8. Miscellaneous Provisions. This Agreement contains the entire
agreement of the parties relative to its subject, and shall not be waived,
altered or rescinded except by a writing signed by the party to be charged
therewith. This Agreement except where otherwise specifically stated shall be
governed by and interpreted in accordance with the laws of the State of
Minnesota. The parties hereto hereby consent to the jurisdiction of the state
and federal courts located in the state of Minnesota in conjunction with any
controversy related to this Agreement and waive any argument that venue in such
forums is not convenient. Pronoun references shall be deemed to be of any number
or gender relevant in the context. Paragraph captions are for convenience of
reference and do not alter or limit the terms of this Agreement. The various
terms of this Agreement are independent and severable and the invalidity or
unenforceability of any of them shall not affect the remainder. This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MERCURY WASTE SOLUTIONS, INC.
By ___________________________________________
Xxxx X. Xxxxxxx, its Chief Executive Officer
U.S. ENVIRONMENTAL, INCORPORATED
By ___________________________________________
Xxxx Xxxxxx, its President
