EXHIBIT 99.3
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MASTER DISTRIBUTION AND MARKETING AGREEMENT
BETWEEN
SUMITOMO CORPORATION OF AMERICA
AND
DALECO RESOURCES CORPORATION
This Master Distribution and Marketing Agreement is entered into as of this 16th
day of November, 2001 ("Effective Date"), by and between SUMITOMO CORPORATION OF
AMERICA, a New York corporation having a place of business at 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 ("Sumitomo"), and DALECO RESOURCES CORPORATION, a
Delaware corporation having its principal place of business at 000 Xxxxx Xxxxxx
Xxxxxx, Xxxx Xxxxxxx, Xxxxxxxxxxxx 00000 ("Daleco").
W I T N E S S E T H:
WHEREAS, Daleco, through its wholly owned subsidiary corporations, Strategic
Minerals, Inc, CA Properties, Inc and Lone Star Minerals, Inc, (hereinafter
collectively referred to as "CAMI"), owns or has leasehold interests in certain
minerals all as more fully described on Exhibit "A" attached hereto
("Minerals"); and
WHEREAS, Daleco, through its wholly-owned subsidiary corporation, Sustainable
Forest Industries, Inc., has certain harvesting concession rights to certain
hardwood natural resources in Guyana ("Hardwood Products"); and
WHEREAS, Daleco, though its wholly owned subsidiary corporation, Matrix-Lox,
Inc., owns United States Patent No. 5,387,738 ("Patent") for the remediation of
soil, water and air, as such products are listed on Exhibit A ("Patented
Products"); and
WHEREAS, Sumitomo is skilled in the marketing and distribution of natural
resources and is desirous of expanding its horizons into the marketing of the
Minerals, the Hardwood Products and the Patented Products; and
WHEREAS, Sumitomo believes that it can effectively market and distribute the
Minerals, the Hardwood Products and the Patented Products throughout the United
States, Canada, Mexico and Japan (hereinafter the "Territory"); and
WHEREAS, Daleco is desirous of entering in an agreement with an entity skilled
in the distribution of its Minerals, the Hardwood Products and utilization of
its Patented Products; and
WHEREAS, Daleco desires to retain and appoint Sumitomo as its Master Distributor
for the marketing and sale of certain of the Minerals, the Hardwood Products and
the Patented Products; and
WHEREAS, Sumitomo accepts and desires to become Daleco's Master Distributor
in the Territory,
NOW THEREFORE, in consideration of the mutual promises, rights and obligations
described in this Agreement, the parties agree as follows:
1. APPOINTMENT AS MASTER DISTRIBUTOR; DUTIES.
1.1 APPOINTMENT. Daleco hereby appoints Sumitomo and Sumitomo accepts such
appointment to be Daleco's exclusive master distributor for the sale of the
Minerals and the Patented Products (hereinafter the Minerals, the Hardwood
Products and the Patented Products are sometimes collectively the "Products") in
the Territory. Sumitomo shall have the exclusive right to: (a) purchase the
Products from Daleco; and (b) market, distribute and resell the Products in the
Territory during the Term of this Agreement, and any Renewal Terms (as such
terms are defined below in Section 2). In the event Daleco acquires rights to
other minerals or natural resources, or develops other remediation products or
technologies, or enhancements or
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replacements for the Patent, Daleco hereby grants to Sumitomo a right of first
refusal to market, distribute and resell such other minerals or technology
within the Territory, and should Sumitomo exercise such right, such other
minerals or technology shall be considered "Products", and their sale and
marketing by Sumitomo will be subject to the terms and conditions hereof (except
as the parties may otherwise agree). To the extent Daleco acquires right in, or
develops, other non-mineral products or services, Daleco agrees to consult with
Sumitomo to ascertain whether Sumitomo would have an interest in distributing
and marketing such other products ("Additional Products"). Throughout the term
of this Agreement, Daleco and Sumitomo agree to consult on a regular basis
regarding the marketing of the Products or Additional Products both within and
outside the Territory.
1.2 EXCLUSIVITY; SOLICITATION. Daleco agrees that it will not appoint or
utilize any other distributor for the Products or sell the Products directly or
indirectly in the Territory during the Term and any Renewal Term (as those terms
are defined in Section 2 below) of this Agreement. Daleco shall require any
other distributors of the Products in areas outside the Territory to agree to
not sell or market the Products either directly or indirectly in the Territory.
Daleco agrees to diligently attempt to identify, locate and solicit interest and
inquiries in the Products within the Territory. Daleco agrees to refer to
Sumitomo any sales leads, referrals, inquiries or purchase orders for the
Products received by Daleco from within the Territory. Sumitomo will undertake
and diligently perform all marketing and sales responsibilities for Daleco's
existing customers, including without limitation those customers listed on
Schedule 1.2 attached hereto.
1.3 POINT OF CONTACT. Sumitomo agrees it will designate a single point of
contact to handle all communications to and from Daleco for purposes of
implementing and administering
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this Agreement. The name and contact data for such contact at Sumitomo shall be
set forth on Exhibit "A" attached hereto. Sumitomo reserves the right to change
the identity of such contact from time to time upon written notice to Daleco.
1.4 APPOINTMENT OF SUB-DISTRIBUTORS. Sumitomo shall have the right to
appoint sub-distributors ("Subdistributors") upon the prior written approval of
Daleco, which shall not be unreasonably withheld or delayed. Any Subdistributors
shall perform their duties and functions consistent with the undertakings and
obligations of Sumitomo hereunder. Sumitomo shall be responsible for the conduct
and performance of any and all Subdistributors engaged by it as though such
conduct and performance was undertaken by Sumitomo.
1.5 PROMOTION OF THE PRODUCTS. Sumitomo shall diligently promote the
Products in the Territory. Daleco shall provide reasonable quantities of the
Products (and any sales or promotional literature that Daleco may develop in the
future) as may be requested by Sumitomo from time to time for the purposes of
promotion and marketing. Sumitomo and Daleco shall cooperate and make available,
one to the other, such officers and/or sales and marketing personnel to jointly
develop sales and marketing materials. Additionally, Sumitomo shall research,
devise and implement those marketing strategies and advertising programs in such
manner and utilizing such media as jointly developed with and approved by
Daleco. Sumitomo shall bear the costs for any such marketing and advertising
programs. Sumitomo agrees that, in the furtherance of the parties' mutual
objectives hereunder, it will:
(a) by means of personal visits to, and by correspondence with,
customers and potential customers, solicit orders and interest in the Products;
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(b) cause its representatives to attend trade shows and technology
fairs in the Territory in order to promote the Products;
(c) maintain contact with customers and to supply technical advice
and assistance to customers as needed;
(d) neither indicate to any third party that it is acting as an
agent of Daleco, nor will it incur liability on behalf of Daleco;
(e) bring to Daleco's attention any evidence of improper or wrongful
use of Daleco's intellectual property rights in the Territory of which Sumitomo
becomes aware or receives notice, and to cooperate and coordinate with Daleco
the taking of any actions to protect the rights of Daleco and Sumitomo with
respect to the Products;
(f) bring to Daleco's attention any market or other information
received by Sumitomo which it considers to be of interest to Daleco in relation
to the marketing and sale of the Products; and
(g) identify Daleco as the supplier of the Minerals and the Patented
Products and owner of the Patent.
2. TERM.
2.1 INITIAL TERM. Subject to Section 11.1 below, the initial term of this
Agreement shall be for the ten (10) year period commencing on the Effective Date
and ending on November 16, 2011 (Term).
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2.2 RENEWAL TERMS. Unless terminated by either party by written notice to
the other not less than 180 days prior to the end of the Term or Renewal Term,
this Agreement shall automatically renew for successive twenty (20) terms (each
a "Renewal Term") at the end of the Term.
3. FEES; WARRANTS.
3.1 FEES. Sumitomo shall pay to Daleco on the Effective Date a Fee for
each of the Products as such Fee is set forth next to such Product on Exhibit A
attached hereto ("Product Fees"). Each such Fee shall be paid once only and the
parties agree that Daleco shall be entitled to no additional fees for the
granting of the rights provided hereunder to Sumitomo. Each such Fee shall be
paid in cash in immediately available funds.
3.2 USE OF PRODUCT FEES. Each Product Fee shall be utilized by Daleco
exclusively for the development, extraction, processing and refining of the
specific Minerals for which such Product Fee is paid, and shall not be
reallocated or utilized by Daleco for any other purpose without the consent of
Sumitomo.
3.3 WARRANTS. As an additional inducement for Sumitomo to enter into this
Agreement and pay the Product Fees, Daleco hereby grants to Sumitomo warrants
("Warrants") to purchase Five Hundred Forty Thousand (540,000) shares of
Daleco's common stock, as follows:
Amount of Warrants Exercise Price Term
------------------ -------------- ----
108,000 $2.00/share 5 years
162,000 $2.50/share 5 years
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270,000 $3.00/share 5 years
The Warrants shall be issued to Sumitomo pursuant to a Warrant Agreement in the
form attached hereto as Exhibit B, which Warrant Agreement shall be executed and
delivered as of the Effective Date. The Warrants shall have certain registration
rights as provided in that certain Registration Rights Agreement dated as of
November 16, 2001 between Daleco and Sumitomo.
4. PURCHASE AND SALE OF PRODUCTS.
4.1 ORDERS. Except as the parties may otherwise agree with respect to a
particular Product or customer, Sumitomo shall place all orders for Products
with Daleco from time to time. Sumitomo shall endeavor to place orders in
sufficient time to allow Daleco to fulfill such orders in accordance with the
anticipated delivery date. Any orders placed within a time frame that does not
permit sufficient time in which to allow the order to be timely and properly
filled Daleco shall not be deemed to be a breach of this Agreement and Daleco
shall use its best efforts to fill such orders in a prompt and efficient manner.
Sumitomo and Daleco agree that, in general, orders shall be placed with Daleco
not less than 60 days in advance of the delivery date to Sumitomo ("Lead Time"),
or such other Lead Time as shall be established from time to time by the
parties. Daleco and Sumitomo further agree and acknowledge that the Lead Time
may vary depending on the Mineral or Patented Product ordered, and that the Lead
Time is a generalization for discussion and planning purposes only. Daleco will
use diligent efforts to complete and fulfill each such order to permit delivery
on the delivery date. Each order placed by Sumitomo for Products shall be
governed by the terms and conditions of this Agreement; conflicting or
additional terms provided in any order, order acknowledgment or other document
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exchanged between the parties shall be of no effect unless specifically accepted
in writing by an authorized representative of each party. Each order shall
specify, at a minimum:
o Desired Quantities of the Product;
o Tax status, including exemption certificate number if tax
exempt;
o Exact "Xxxx to" and "ship to" addresses; and
o Requested delivery schedule and preferred shipping method.
4.2 SHIPPING. All Products will be delivered FOB mine site or
manufacturing facility.
4.3 FORECASTS. Sumitomo shall, from time to time, provide information to
Daleco that becomes available to Sumitomo as Sumitomo shall consider useful or
appropriate in order to assist Daleco with scheduling the production of
Products, which information Sumitomo shall endeavor to ascertain is accurate;
provided that, no such information shall be deemed a commitment by Sumitomo to
purchase any Products in the absence of a purchase order.
4.4 CANCELLATION OR POSTPONEMENT OF ORDERS. Sumitomo may cancel or reduce
the quantity of any order without liability on or before ten (10) days in
advance of the agreed upon delivery date without cancellation charge (except for
transportation cancellation charges incurred by Daleco for such order). Sumitomo
may postpone the delivery of any portion of an order one time for up to ninety
(90) days without any liability by delivering written notice to Daleco on or
before ten (10) days in advance of the agreed upon ship date. Any Product
shipped to Sumitomo or Sumitomo's customer shall be property of Sumitomo and/or
the customer with title having passed at the delivery point.
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4.5 DELIVERY OF PRODUCTS. Daleco will deliver all Products FOB the mine
site or the manufacturing location unless other terms are agreed upon on a case
by case basis. If, after the order has been delivered to Daleco under Section
4.1, Daleco is not able to meet such delivery date, Daleco will immediately
notify Sumitomo and Sumitomo may either cancel the order or the parties will
agree upon another delivery date. Daleco shall put the Products in the
possession of a carrier, obtain and promptly deliver to Sumitomo any documents
necessary to obtain possession of the Products. Shipment of the Products shall
be made in accordance with Paragraph 5.4 below. Title to the Products shall pass
to Sumitomo upon shipment of the Products. Daleco will ship Products with all
associated documentation. Products shall be subject to inspection and acceptance
by the customer within such number of days after delivery as shall be reasonable
and customary in the industry. Sumitomo shall stipulate with the customers that
acceptance shall be based solely on whether the Products comply with the
specifications for such Products.
4.6 INSPECTIONS. Sumitomo may visit and inspect Daleco's Mineral sites
upon reasonable notice to, and appropriate coordination with, Daleco. Daleco
will make available to Sumitomo information regarding the mineral extraction
procedures and methods utilized by Daleco or its contractors.
5. PRICING; PRODUCTION COSTS.
5.1 PURCHASE PRICE. The price Sumitomo shall pay for Products shall be
calculated as follows: (a) Daleco's Delivery Cost (as defined herein) PLUS (b)
Fifty percent (50%) of (i) Sumitomo's Sale Price to the customer (as defined
herein) LESS (ii) Daleco's Delivery Cost (such difference to be referred to
herein as the "Gross Margin").
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For purposes of this Agreement:
"Daleco's Delivery Cost" shall mean Daleco's booked costs and expenses for the
extraction, refining, crushing, such other processing or manufacturing of a
Mineral or Patented Product as necessary to obtain the grade and quality
necessary to fill an order, and the packaging allocable to that specific order.
Daleco shall provide to Sumitomo evidence of such costs in the form of invoices
from Daleco's contractors for each order. Daleco shall not include in such
Delivery Cost any amounts for Daleco's overhead, insurance, etc, or any margin.
Daleco will consult regularly with Sumitomo in connection with entering into
agreements with contractors for extraction, processing and packaging services.
To the extent Daleco arranges and pays for transportation costs with respect to
a particular order, Daleco shall include such cost as part of Daleco's Delivery
Cost for such order. "Sumitomo's Sale Price" shall mean the invoice cost to the
customer for each order (exclusive of any state or local taxes), LESS any
transportation costs arranged and paid for by Sumitomo. Sumitomo's Sale Price
shall be as determined by Sumitomo; provided that Sumitomo shall consult with
Daleco in establishing prices for the Products in the Territory.
5.2 CREDIT POLICIES; SALES TERMS. Sumitomo shall establish and implement
all credit policies and terms of sale to customers, and Sumitomo shall manage
all collection procedures and matters, and Sumitomo alone shall approve or
reject each customer as Sumitomo shall determine in its own discretion. To the
extent Sumitomo cannot collect payment in full from a customer, Sumitomo shall
be obligated to pay to Daleco only (i) Daleco's Delivery Cost with respect to
such order, and (ii) Fifty percent (50%) of any amount collected from such
customer in excess of Daleco's Delivery Cost.
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5.3 PAYMENTS; REPORTS. Sumitomo shall effect payment to Daleco for each
order within 15 days after receipt by Sumitomo of payment by the customer;
PROVIDED, HOWEVER, that Sumitomo shall effect payment of the Daleco's Delivery
Cost portion of the purchase price to Daleco not more than sixty (60) days after
the date of delivery to the customer. Sumitomo shall prepare monthly sales
reports for Daleco which reports will tabulate sales activity for each Product
for each month, open invoices, collected amounts, calculations of Sumitomo's
Sales Price for each order, and uncollected amounts. In the event where Sumitomo
is required to refund or return all or a portion of any payment received from a
customer of the Products, then in such case Daleco shall refund to Sumitomo any
portion of the purchase price for such Product that exceeds Daleco's Delivery
Cost for such order.
5.4 TRANSPORTATION COSTS. Sumitomo and Daleco shall consult with each
other with respect to arranging and paying for all transportation and shipping
costs (including insurance and fees) for each order, such that they will
identify the most efficient and economical method of shipment.
5.5 SPECIAL PROFIT ALLOCATION. For the customers of Daleco listed on
Schedule 5.5 attached hereto, notwithstanding anything to the contrary herein,
Sumitomo shall be entitled to receive a percentage of the Gross Margin that
shall range between 10% and 20%, as Daleco and Sumitomo shall agree at the time
each order shall be initiated for such customers, based upon the value-added
contribution made by Sumitomo with respect to each such order.
6. WARRANTIES AND REMEDIES.
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6.1 WARRANTIES. Daleco warrants that each Product sold to Sumitomo shall
conform to the grade, quality and other specifications (if any) for that Product
and shall pass in the trade as acceptable.
6.2 REMEDY. Daleco will replace any Product not so conforming as provided
in section 6.1 within 30 days of receipt from Sumitomo of a claim of
non-conformity.
6.3 FREE FROM LIENS, POWER TO PERFORM. Daleco warrants that the title to
Products conveyed hereunder shall be good and its transfer rightful, and shall
be free from all liens, encumbrances, and restrictions. Daleco further warrants
that it has all rights and powers necessary to perform its obligations under
this Agreement and that it has the right to grant the rights provided to
Sumitomo by this Agreement.
6.4 INTELLECTUAL PROPERTY RIGHTS. Daleco warrants that the Patent and
Patented Products do not infringe any copyright, patent, trade secret or other
proprietary right and there are no claims or suits threatened, or pending
against Daleco or, to the knowledge of Daleco, contemplated against Daleco for
infringement of any patents, copyrights, trade secrets or other proprietary
right relating to the Patent or Patented Products.
6.5 LIMITATION. THIS WARRANTY DOES NOT INCLUDE DAMAGES DUE TO INADEQUATE
OPERATING ENVIRONMENT, ACCIDENT, DISASTER, NEGLECT, ABUSE, MISUSE, OR
ALTERATIONS MADE OTHER THAN AS CONTEMPLATED BY THIS AGREEMENT OR WITHOUT
APPROVAL BY DALECO. THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED.
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EXCEPT AS EXPRESSLY STATED IN SECTION 6, DALECO MAKES NO OTHER WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WHATSOEVER TO SUMITOMO OR ANY THIRD PARTIES
CONCERNING THE USE OR OPERATION OF THE PRODUCTS. DALECO EXPRESSLY DISCLAIMS ANY
AND ALL IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
7. INDEMNIFICATION.
7.1 INDEMNIFICATION BY DALECO. Daleco will, at its own expense, defend,
indemnify, and hold Sumitomo harmless from and against any and all claims,
costs, expenses, damages, or other liability, including reasonable attorneys'
fees (collectively "Liabilities"), to the extent that any such action is based
on a claim by a third party brought against Sumitomo that any Product infringes
a United States patent, or copyright, or misappropriates any trade secret, or
arises from (i) any claim of injury or property damage caused by a Product, or
(ii) any breach by Daleco of any of its representations and warranties
hereunder. Daleco's obligations under this Section 7.1 are subject to the
conditions that: (a) Sumitomo promptly notifies Daleco in writing of any such
claim, and (b) Daleco will have sole control of such defense and all
negotiations for any settlement or compromise.
7.2 RIGHTS OF DALECO. If Daleco receives notice of an alleged
infringement, or if use or distribution of any Product shall be prevented by an
injunction based on alleged infringement, or if Daleco reasonably believes that
any Product infringes the rights of any third party, Daleco shall have the
right, at its option to (i) obtain the rights for Sumitomo to continue use and
distribution of such Product or technology, (ii) substitute other suitable
products, software and/or
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technology while maintaining the same form and function, or (iii) modify such
Product so that it is no longer infringing while maintaining the same form and
function.
7.3 INDEMNIFICATION BY SUMITOMO. Sumitomo will at its own expense defend,
indemnify and hold Daleco harmless from and against any and all claims, costs,
expenses, damages or other liability including reasonable attorney's fees, to
the extent that it is based on any conduct or representation by Sumitomo in the
performance of its duties hereunder. Sumitomo's obligations under this Section
7.3 are subject to the conditions that: (a) Daleco promptly notifies Sumitomo in
writing of any such claim, and (b) Sumitomo will have sole control of such
defense and all negotiations for any settlement or compromise.
7.4 GENERAL INDEMNITY. Each party agrees to indemnify and hold harmless
the other party (including their directors, officers, employees, agents and
representatives) from and against any claims, damages and liabilities, including
reasonable attorney's fees, asserted by any person or entity due to personal
injury (including death) or tangible property damage to the extent resulting
from the gross negligence or intentional misconduct of such party; PROVIDED,
HOWEVER, that such party shall not be liable for that portion of liabilities
which are caused by the sole gross negligence of the other party.
8. CHANGES TO PRODUCTS.
8.1 REQUIRED CHANGES. Daleco reserves the right to make engineering
changes at any time to the Patent and Patented Products (i) which are necessary
to comply with changed safety or environmental standards and other environmental
regulations, (ii) which are necessary to make the product non-infringing with
respect to any patent, copyright or other proprietary interest, (iii) which are
for the purpose of improving the quality, reliability or manufacturability
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of the Patent and/or Patented Products or (iv) which are for the purpose of
adding to or improving the functionality of the Patent and/or Patented Products.
Daleco shall provide Sumitomo reasonable advance notice of any such changes.
9. CONFIDENTIAL INFORMATION.
9.1 CONFIDENTIAL AND PROPRIETARY INFORMATION. All information disclosed by
one party to the other that the disclosing party labels as confidential at the
time of disclosure or which otherwise is reasonably understood by the receiving
party to be confidential and proprietary will be deemed "Proprietary
Information" under this Agreement. The recipient may not disclose the other
party's Proprietary Information, may use it only for purposes specifically
contemplated in this Agreement, and must treat it with the same degree of care
as it does its own similar information, but with no less than reasonable care.
Daleco and Sumitomo shall at all times, both during the term of this Agreement
and for a period of at least two (2) years after its termination, maintain in
the strictest confidence and trust all such Proprietary Information. These
obligations do not apply to information that: (i) is or becomes known by
recipient without an obligation to maintain its confidentiality, (ii) is or
becomes generally known to the public through no act or omission of recipient,
or (iii) is independently developed by recipient without use of the disclosing
party's Proprietary Information.
10. TERMINATION.
10.1 TERMINATION. At any time during the term of the Agreement, either
party may terminate this Agreement in the event:
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(a) the other party ceases to conduct business in the normal course,
becomes insolvent or makes a general assignment for the benefit of creditors,
becomes generally unable to pay its debts as they become due, suffers or permits
the appointment of a receiver for its business or assets, becomes subject to any
levy, seizure, attachment or execution against it, or becomes subject to any
proceeding under any statute of any governing authority relating to insolvency
or the protection of rights of creditors which is not dismissed within sixty
(60) days; or
(b) the other party fails to perform any material obligation
required to be performed under this Agreement for a period of thirty (30) days
after receipt of notice from the other party of such failure and such failure
has not been cured within such thirty (30) day period; then such other party
shall have the right to terminate this Agreement immediately by giving written
notice to the other of its election to do so.
10.2 RESIDUAL RIGHTS. Any termination of this Agreement shall not relieve
Sumitomo of its obligation to pay for any Products in the manner provided herein
or relieve Daleco of its warranty obligations to Sumitomo and the customers.
10.3 SURVIVAL. The parties agree that the provisions of Sections 3.3, 6,
7, 9, 11 and 12 shall survive termination of this Agreement.
11. CHANGE IN CONTROL OF DALECO; SPECIAL TERMINATION FEE.
11.1 CHANGE IN CONTROL. In the event that a Change in Control (as defined
herein) shall have occurred with respect to Daleco during the Term or during any
Renewal Term (for purposes of this Section 11, the "Current Term"), then in any
such case, (a) the Current Term shall be automatically extended to thirty (30)
years without further action by either party hereto, and (b)
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Daleco shall give Sumitomo written notice of such Change in Control within 10
days of its occurrence, and (c) Sumitomo shall be entitled to receive a Special
Termination Fee (as defined herein) from Daleco.
A "Change in Control" shall mean any event where (i) a third party or parties
acquires direct control of a majority of Daleco's voting stock, and such
acquiring third party shall terminate, or attempt to terminate, this Agreement;
or (ii) Daleco shall enter into a contract to sell or otherwise transfer all or
substantially all of its mineral assets, mineral leases, the Hardwood Products,
or any rights to the Patent (collectively the "Relevant Assets"), or shall sell
or transfer the Relevant Assets to a third party, and in the case of any such
sale or transfer this Agreement is not assigned or transferred to, and assumed
in all of its respects by, such third party (excepting the case where Sumitomo
refuses to grant its consent to such assignment or transfer); PROVIDED, HOWEVER,
that a Change in Control shall not have occurred as a result of the conversion
by the current holders of any shares of Daleco's Class B Preferred stock issued
and outstanding as of November 16, 2001 into shares of Daleco's common stock, or
as a result of the exercise of any stock options or warrants issued and
outstanding as of November 30, 2001.
11.2 PAYMENT OF SPECIAL TERMINATION FEE. In the event of a Change in
Control, the parties agree that Sumitomo shall be entitled to be compensated for
the loss of its expected profits from the distribution and sale of the Products
for the remaining period of the term of this Agreement (as such term shall have
been extended as provided in Section 11.1) (a "Special Termination Fee"), as
shall be determined by the provisions of this Section 11.2. Within 10 days after
receipt by Sumitomo of notice of a Change in Control, each of Sumitomo and
Daleco shall select and retain a reputable independent financial advisor to
render its opinion as to the present value of fair market value of the profits
that Sumitomo would have likely earned during the
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remainder of the term of this Agreement had such Change in Control not occurred.
The two financial advisors shall appoint a third advisor (the expenses of which
shall be borne equally by Daleco and Sumitomo). The three advisors so appointed
shall each render their opinion as required hereby within 30 days of their
appointment, including therein a summary of the methodology used. The amount of
Special Termination Fee payable to Sumitomo by Daleco shall be the arithmetic
average of such three opinions.
The Special Termination Fee shall be payable to Sumitomo within 10 days of its
determination as provided herein.
11.3 SPECIAL TERMINATION FEE NOT A PENALTY. The parties agree that any
payment of the Special Termination Fee is a reasonable method of compensating
Sumitomo in the event of a Change of Control, and that such payment is not a
penalty.
12. TRADEMARKS AND TRADE NAMES.
12.1 USE OF TRADEMARKS. During the term of the Agreement, in the
advertising and promotion of the Products, Sumitomo may from time to time use
Daleco's trade names, logos and trademarks (the "Trademarks"). For this purpose,
Sumitomo is granted a non-exclusive, royalty-free, limited license to use the
Trademarks in accordance with the distribution and marketing of the Products
and/or Patented Products. Sumitomo will not make or permit the removal or
modification of any Trademarks or tags, proprietary notices, labels, or other
identifying marks placed by Daleco on the Products and/or Patented Products or
associated literature.
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12.2 RIGHTS TO TRADEMARKS. Sumitomo acknowledges that Daleco is the
exclusive owner of the Trademarks, and the use of the Trademarks by Sumitomo
does not convey to Sumitomo any right, title or interest in or to the
Trademarks. Sumitomo has no claim or right in the Trademarks, service marks, or
trade names owned, used or claimed now or in the future by Daleco. Sumitomo
agrees that it will not register, nor attempt to register any Trademark in any
jurisdiction unless expressly approved in writing by Daleco in advance.
13. GENERAL PROVISIONS.
13.1 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and enforced in accordance with, the internal laws of the Commonwealth
of
Pennsylvania without giving effect to conflicts of law provisions.
13.2 HEADINGS. Section and subsection headings in this Agreement are
included herein or convenience of reference only and shall not constitute a part
of this Agreement for any other purpose or be given any substantive effect.
13.3 NOTICE. All notices or other communications hereunder shall be in
writing, shall be effective upon receipt and shall be made by hand delivery,
certified mail return receipt requested, or by overnight courier, postage
prepaid addressed as follows:
To DALECO: Daleco Resources Corporation
000 Xxxxx Xxxxxx Xxxxxx
Xxxx Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, President
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with a copy to:
Xxxxxx, Van Denbergh & Xxxxxxx, P.C.
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: C. Xxxxxx Xxxxxxx
To SUMITOMO:
Sumitomo Corporation of America
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx, 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx,
Senior Vice President
Either party may change its address for Notice by giving the other party not
less than ten (10) days notice of its new address in accordance with this
Paragraph 13.4.
13.4 INVALIDITY OF CERTAIN PROVISIONS. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any terms or provisions hereof.
13.5 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts and be different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
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13.6 NEITHER PARTY DRAFTER. The parties hereto agree that this Agreement
is the product of negotiation, that each has been represented by counsel during
its negotiation and that neither party shall be deemed the drafter hereof.
13.7 COSTS. Each party agrees its legal accounting and other fees incurred
in the negotiation of the transaction contemplated hereby, the conduct of its
due diligence and the preparation of the documents, exhibits and schedules
addressed and referenced herein.
13.8 EXPENSES. Except as otherwise agreed in writing, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such expenses.
13.9 FACSIMILE SIGNATURES. This Agreement may be executed by the parties
by facsimile signature, which signatures shall be binding for all purposes.
Original signatures shall be distributed between the parties for receipt by the
other by close of business the next business day following the date of the
facsimile signature transmission.
13.10 ASSIGNMENT. This Agreement may not be assigned (whether voluntarily
or by operation of law) by either party without prior written consent from the
other which will not be unreasonably withheld or delayed. Any attempt by a party
to assign any right, or delegate any duty or obligation, which arises under this
Agreement, without such permission, shall be invalid and have no effect. This
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns, if any, of the parties hereto.
13.11 FORCE MAJEURE. Except as expressly provided in this Agreement,
neither party shall be liable for its failure or delay in performance of its
obligations under this Agreement due
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to strikes, wars, revolutions, fires, floods, explosions, earthquakes,
government regulations, or other causes beyond its control.
13.12 FOREIGN SALES. This Agreement is made subject to all laws,
regulations, orders, or other restrictions on the export from the U.S.A. of
products, documentation, or of other information about products, which may be
imposed from time to time. Neither party shall export any such products or
information to any country for which an export license or other governmental
approval is required at the time of export without first obtaining such license
or approval.
13.13 RELATIONSHIP OF THE PARTIES. The parties are each independent
contractors. No agency relationship between Sumitomo and Daleco is made by this
Agreement. Neither party shall have any right or authority to act on behalf of
the other nor shall either party represent that it has such right or authority.
13.14 PUBLICITY; MUTUAL APPROVAL. All publicly distributed materials
prepared by either party that mention the other party, the products of the other
party, or this Agreement, shall be approved by both parties in writing before
publication. Within thirty (30) days of signing this Agreement by both parties,
on a date mutually agreed to by Sumitomo and Daleco, Sumitomo and Daleco agree
to issue a press release announcing the execution of this Agreement with Daleco.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
DALECO RESOURCES CORPORATION
By: /s/ Xxxx X. Xxxxxxxxx
--------------------------------------
Xxxx X. Xxxxxxxxx,
President
SUMITOMO CORPORATION OF AMERICA
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxxx,
Senior Vice President
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SCHEDULE 1.2
LIST OF CURRENT DALECO CUSTOMERS
(i) Penoles - Torreon, Mexico
(ii) Leviathan Mine - California
(iii) Iron Mountain Mine - California
(iv) Modern Mushroom Company & Xxxxxxxx Mushroom Company -
Pennsylvania
(v) Chief Consolidated Mines - Eureka, Utah
(vi) Municipal Water Dept. - Park City, Utah
(vii) [Dairy Farm] - Columbus, Ohio (Valentine Contact)
(viii) [Chicken Farm] - Columbus, Ohio (Valentine Contact)
(ix) Chiquaqua Cement for Kaolin
(x) Public Service of New Mexico - Acid Flux Process -
CaCO3 (2 Plants)
(xi) Arizona Public Service - (Same as above) (1 Plant)
(xii) Salt River Power Co. - (Same as Above #'s 10 & 11) (1
Plant)
(xiii) Kentucky Coal - (Coal Slurry Remediation)
(xiv) Municipal Waste Treatment - Columbus, Ohio
(xv) Omachron Technologies - (Home water treatment
filters)
(xvi) Illinois Hog Association - (Hog waste remediation)
(xvii) West Virginia Paper Co. - (As per Xxx Xxxxxx'x
contact)
(xviii) Guiness, Cina & Eccier Dimensional Stone & Tile -
(For the Domestic and International commercialization
of the Marble at Oro Grande)
(xix) Walmart Stores (Fertilizer Sales)
(xx) Waste Management, Inc. - General Corporate
Development
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(xxi) City of Albuquerque, Municipal Water Dept. -
Albuquerque, NM (Removal of arsenic from drinking
water)
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SCHEDULE 5.5
SPECIAL PROFIT ALLOCATION CUSTOMERS
(i) Summitville Mine Remediation - Summitville, CO
(ii) Synthetic Mine operation - Xxxxxx, Nevada
(iii) Hilltop Landscaping (Decorator stone)
(iv) WW Construction (supply of road base material for
road to Indian Reservation operated by the Bureau of
Indian Affairs)
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EXHIBIT A
DESCRIPTION OF THE PRODUCTS AND FEES
The
Master Distribution and Marketing Agreement specifically covers the
following products:
Product Fee
------- ---
1. Hardwood Products $15,000
2. Perlite $25,000
3. Zeolite $50,000
4. Kaolin Clay (excluding Japan) $100,000
5. Calcium Carbonate $100,000
6. Clean Age Series (CA2, CA3,
CA4, CA5 and CA6, and all
future CA or other remediation
products and services) $250,000
--------
$540,000
Sumitomo shall have a right of first refusal with respect to the marketing and
distribution of other minerals or natural resources, or any new remediation
products, Daleco and its subsidiaries acquire or develop in the future. Fees for
such additional minerals or natural resources or remediation products shall be
negotiated by Sumitomo and Daleco in good faith.
SOLE POINT OF CONTACT AT SUMITOMO:
The initial sole point of contact at Sumitomo for purposes of this Agreement
shall be:
Xxxxxx X. Xxxxxxxxx
Senior Vice President
& General Manager, Corporate Business Development
Sumitomo Corporation of America
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
000-000-0000
000-000-0000
xxxxxx.xxxxxxxxx@xxxxxxxxxxxx.xx.xx
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EXHIBIT B
[FORM OF WARRANT AGREEMENT]
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