Distributorship And Sales Agency And Royalty Agreement

DISTRIBUTORSHIP AND SALES AGENCY AND ROYALTY AGREEMENT

THIS DISTRIBUTORSHIP AND SALES AGENCY AGREEMENT (the “Agreement”) is made this 19 day of January, 2009, by and between Megola, Inc., with its principal place of business located at 704 Mara Street, Suite 111, Point Edward, Ontario, Canada N7V1X4 ( “Megola” and sometimes the "Company") and Vulcan Technologies, LLC, a New Jersey limited liability company, having its principal offices located at C/O Law Offices of Joseph J. Tomasek, 77 North Bridge Street, Somerville, New Jersey 08876 ( “Vulcan” and sometimes the "Distributor").

BACKGROUND:

WHEREAS, Megola has obtained the North American rights to a line of fire prevention products known as the “Hartindo” line of products and may, in the future, obtain or develop additional fire resistant products alone or with third parties or obtain additional products by virtue of agreements and contracts with third parties (collectively, the “Products”) and desires to appoint Vulcan, and to take certain actions that shall cause Vulcan to be a distributor/sales representative for the Products in North America;

WHEREAS, Vulcan shall make certain payments to Megola for its appointments under this Agreement and shall introduce parties to Megola and to certain of its contract parties to purchase the Product, in exchange for which Megola and its contract parties shall acknowledge the role of Vulcan as the exclusive distributor/sales representative for each of Vulcan’s customers (the “Customer(s)”) during the term of this Agreement.

NOW, THEREFORE, in consideration of the promises hereinafter made by the parties hereto, it is agreed as follows:

ARTICLEI
APPOINTMENT

1.Co-Exclusive Distribution Rightsto Woodsmart and Janus Contracts. In partial consideration of the Vulcan payment set forth in Section 3 below, the Company hereby appoints Vulcan as the co-exclusive distributor under:

A. a certain Marketing and Distributorship Agreement (the “Janus Contract”), dated November 21, 2007, by and between Megola, Inc., MSE Enviro-Tech Corp. and Janus Products Corp. (“Janus”), rendering Vulcan by such appointment and assignment, the co-exclusive distributor/sales representative with Janus of the “Fire Blanket” under the terms of said contract; Megola hereby agrees that Vulcan shall earn royalty payments for each “Fire Blanket” sold by or through Janus during the term of this Agreement (see Appendix ‘A’).

B. a certain Hartindo AF21 Products, Purchase, Sales, Distribution, Marketing and Service Agreement (the “Woodsmart Contract”), dated October 5, 2008, by and between Megola, Inc., MSE Enviro-Tech Corp. and Woodsmart Solutions, Inc. (“Woodsmart”), rendering Vulcan the co-exclusive distributor of the Products and “Enhanced Product” under the terms of said contract; Megola hereby agrees that Vulcan shall earn royalty payments for each concentrate gallon of Product sold to or through Woodsmart during the term of this Agreement. Vulcan hereby agrees that the first $311,000 of revenue derived from sales received by Megola under the Woodsmart Contract will belong exclusively to Megola to repay its costs to produce and deliver the first 100,000 gallons of Product (see Appendix ‘A’).

2.Exclusive Distribution and Sales Representative Rights.In further consideration of the Vulcan payment set forth in Section 3 below, the Company hereby appoints Vulcan as the exclusive distributor and sales representative for the following industries or parties, as the case may be:

A. Megola hereby grants to Vulcan (i) the exclusive distribution/sales representative rights for the Product in the countries of Canada and Mexico and (ii) co-exclusive distribution/sales representative rights in the United States of America (the “U.S.”), to the railroad industry (the “Railroad Industry”) for a ten (10) term, provided, however, that Vulcan’s co-exclusive distribution/sales representative rights for the U.S. shall be negotiated further by Megola with MSE Enviro-Tech to enable Vulcan the complete U.S. exclusive rights. This negotiation process should be finalized within 90 days following the execution and delivery of this Agreement. Vulcan shall pay to Megola a commission payment equal to twenty-five (25%) percent of Vulcan’s profit, less Megola’s ”Cost”, defined below, on Products purchased (the “Vulcan Commission”) by any party in the Railroad Industry. Megola’s “Cost”shall be defined for all purposes of this Agreement as Megola’s actual costs to acquire the raw materials for the Product, the costs for its preparation, including the toting, mixing and skimming processes, as well as Megola’s freight expenses through shipment (see Appendix ‘A’).Vulcan shall have the right, upon reasonable notice, to audit the costs of Megola with respect to the calculation of its profits for any purchase/sale of the Product in the Railroad Industry. Vulcan hereby commits to generate aggregate gross sales of the Hartindo Products in the Railroad Industry of no less than $3 Million on or before the second anniversary of this Agreement, and, thereafter, agrees to increase such aggregate gross sales by fifteen (15%) percent for each year thereafter, commencing with the third year of the term. In the event Vulcan fails to achieve the aggregate gross sales thresholds at the second anniversary date or for any year of the remaining term of this Agreement, Vulcan shall automatically lose its exclusive rights in the Railroad Industry and shall be a co-exclusive distributor/sales representative for the balance of the term of this Agreement. For example, if Vulcan and/or parties have purchased Hartindo Products and the aggregate cash receipts for the Rail Industry which are equal to or exceed $3,450,000 upon the third anniversary date of this Agreement, the term shall be automatically extended for an additional fourth year since $3,450,000 represents a 15% increase over the $3,000,000 sales requirement for the prior second anniversary date.


B. Except as set provided for under the Janus Contract and the Woodsmart Contract, Megola hereby grants to Vulcan the exclusive distribution/sales representative rights for any Customer introduced byVulcan and any customers Vulcan has under agreements as sales agents. Vulcan shall pay to Megola the Vulcan Commission, or twenty-five (25%) percent of Vulcan’s profit (sales price less Megola’s cost) on Products purchased by any Customer of Vulcan during the term of this Agreement. Vulcan shall have the right, upon reasonable notice, to audit the costs of Megola with respect to the calculation of its profits for any purchase/sale of the Product to a Customer of Vulcan. Megola shall take whatever measures necessary to protect Vulcan’s rights under this Agreement, including but not limited to preventing any other party from selling the Product to a Vulcan Customer. Vulcan also understands that Megola may also require the same provision to potential other distributors M ...