2004-094FILE REFERENCE FORM I 2004-094 I
X
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Amendment to Agreement (attached to original ordinance & agreemem) 03/23/04
ORDINANCE NO. 2004-
AN ORDINANCE AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO EXECUTE
AN EQUIPMENT SALE, LEASE, AND LICENSE AGREEMENT BETWEEN THE CITY OF
DENTON AND BIODIESEL INDUSTRIES, INC.; SAID AGREEMENT BEING FOR
PROFESSIONAL SERVICES AND HIGH TECHNOLOGY PROCUREMENT FOR THE
DESIGN, DEVELOPMENT, AND OPERATION OF A BIODIESEL PRODUCTION FACILITY;
AUTHORIZING THE EXPENDITURE OF FUNDS THEREFORE AND PROVIDING AN
EFFECTIVE DATE (RFP 3111).
WHEREAS, after advertising for and receiving competitive sealed proposals in accordance
with the law, City staff reviewed and rated the sealed proposals and recommends that the Equipment,
Sale, Lease, and License Agreement for the design, development, and operation cfa biodiesel facility
be awarded to Biodiesel Industries, Inc. (the "Provider") as the proposal offering the best final offer
based on the evaluation factors contained in the request for proposal, said agreement being attached
hereto and made a part hereof as Exhibit "A" (the "Agreement"); and
WHEREAS, the Agreement calls for a high technology procurement of equipment and
professional services of a highly technical nature; and
WHEREAS, the City Council f'mds that the Provider's proposal as set forth in the Agreement
is the proposal offering the best final offer based on the evaluation factors contained in the request
for proposal
WHEREAS, the Provider is qualified on the basis of its demonstrated competence and
qualifications to perform the proposed professional services; and
WHEREAS, the amount being charged for professional services under the Agreement are
fair and reasonable and are consistent with and not higher than the recommended practices and fees
published by the professional associations applicable to the Provider's profession and such fees do
not exceed the maximum provided by law; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1. The findings and recitations contained in the preamble of this ordinance are
incorporated herein by reference as if fully set forth herein.
SECTION 2. The Agreement is hereby approved and the City Manager, or his designee is
hereby authorized to enter into the Agreement on behalf of the City.
SECTION 3. The City Manager is author/zed to expend funds as required by the Agreement.
SECTION 4. This ordinance shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the ~/).~ dayof ~/~/
EULINE BROCK MAYOR
,2004.
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LEGAL FORM:
HERBERT L. PROUTY, CITY ATTORNEY
EQUIPMENT SALE, LEASE,
AND
LICENSE AGREEMENT
BIODIESEL INDUSTRIES, INC.,
BIODIESEL INDUSTRIES OF DENTION
And
THE CITY OF DENTON, TEXAS
March~, 2004
EQUIPMENT SALE, LEASE, AND LICENSE
AGREEMENT
PARTIES
THIS EQUIPMENT SALE, LEASE, ~.~ND L~(~E~N3S~) AGREEMENT (the
"Agreement") is entered into effective as of theo~day of ~T~e~ga~, 2004, by and between
BIODIESEL INDUSTR]ES, INC., a Delaware corporation ("BioD"); BIODIESEL INDUSTRIES
OF DENTON ("Affiliate"), a subsidiary of BioD, and, the CITY OF DENTON, TEXAS, a home
rule municipal corporation ("City"). BioD, Affiliate, and City are sometimes referred to collectively
herein as the "Parties", and each individually as a "Party".
II
RECITALS
2.1 BioD is engaged in the business of producing, supplying, and marketing biodiesel and
biodiesel production facilities on a global scale.
2.2 BioD is also in the business of manufacturing for sale modular production units
which produce biodiesel.
2.3 City owns and operates a municipal landfill and waste collection system, which
would be suitable for a biodiesel production facility.
2.4 The Parties desire to enter into an Agreement to, among other things, establish,
encourage and support a business enterprise for the development of a biodiesel production facility,
and the production of biodiesel in Denton, Texas which will employ people locally, utilize local
resources, and produce a clean, renewable source of energy.
2.5 Affiliate is currently a wholly owned subsidiary of BioD which will maintain totally
separate books and records for accounting purposes, which ma}~ be under the management and
control of a separate board of directors, which may have additional or different shareholders,
which may establish itself as an independent business structure, and which will undertake the
objectives of this Agreement as set forth herein.
2.6 To accomplish these purposes, BioD will sell and license biodiesel production
equipment to City, and City will lease said equipment to Affiliate for rent based upon a percentage
of net profits.
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2.7 NOW, THEREFORE, in consideration of the promises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
III
CERTAIN DEFINITIONS
The following capitalized terms shall have the respective meanings specified in this Article 11I.
Other terms defined elsewhere herein shall have meanings so given them. The terms defmed in this
Article III include the plural as well as the singular.
3.1 Afl'fflate. "Affiliate" is currently a wholly owned subsidiary of Biodiesel
Industries, Inc. a Delaware corporation which shall be registered to do business in the State of
Texas.
3.2 City. "City" is the City of Denton, Texas, a home rule municipal corporation.
3.3 Customer. "Customer" shall mean persons or companies to whom Affiliate sells,
or will in the future sell, Biodiesel exclusively for use within the Territory, and under no
circumstances for shipment outside of the Territory.
3.4 Disclosing Party. "Disclosing Party" shall mean the Party that discloses its
Proprietary Information to the other Party.
3.5 GAAP. "GAAP" shall mean the generally accepted accounting principles of the
Financial Accounting Standards Board, consistently applied, as amended from time-to-time.
3.6 Improvements. "Improvements" shall mean any updates, upgrades, improvements,
new versions and releases, enhancements or replacements of the Technology, as applicable.
3.7 Licensed Marks. "Licensed Marks" shall mean all trademarks, trade names,
logos, and marks currently belonging to BioD and which may in the future be adopted for use by
BioD or its Aff'diates. It is expressly agreed that the appearance and/or style of the Licensed Marks
may change from time-to-time in BioD's sole discretion.
3.8 Marketing Expenses. "Marketing Expenses" shall mean all costs and expenses
arising from and related to marketing, promotional and advertising activities, including
advertisement placement and advertisement creation for the production and sale of biodiesel, as
well as employee salaries for employees whose employment responsibilities involve marketing
biodiesel.
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3.9 Most Favored Nation Basis. "Most Favored Nation Basis" shall mean that
the Affiliate will offer to and provide to the City the price or terms for the sale and purchase of
biodiesel provided to any other customer in the Territory.
3.10 Proprietary Information. "Proprietary Information" of a Disclosing Party shall
mean the following, to the extent previously, currently or subsequently disclosed to the Receiving
Party, hereunder or otherwise: information relating to products or technology of the Disclosing
Party or the properties, composition, structure, use or processing thereof, or systems therefore, or
to the Disclosing Party's business (including, without limitation, computer programs, code,
schematics, data, know-how, processes, ideas, inventions (whether patentable or not), names and
expertise of employees and consultants, all information relating to customers and customer
transactions and other technical, business, financial, customer and product development plans,
forecasts, strategies and information). In particular, but without limitation, Proprietary Rights,
Technology, and Improvements shall be considered Proprietary Information.
3.11 Proprietary Rights. "Proprietary Rights" shall mean patent rights, copyrights,
trade secret rights, and similar proprietary intellectual property rights.
3.12 Purchase Price. "Purchase Price" shall mean the amount to be paid by City to
BioD hereunder for the purchase of the MPU, as further reflected in Section 4.2, below.
3.13 Receiving Party. "Receiving Party" shall mean the Party hereto that receives
Proprietary Information of the other Party.
3.14 Technology. "Technology" shall mean those processes, techniques and equipment
relied upon for the production and distribution of biodiesel, including the collection, use and
processing of feedstocks for making biodiesel.
3.15 Territory. "Territory" shall mean the Greater Dallas/Fort Worth Metroplex which
consists of Denton, Collin, Dallas, Cooke, Grayson, Ellis, Erath, Hood, Hunt, Johnson, Navarro,
Palo Pinto, Parker, Somerville, Tarrant, Wise, Rockwall and Kaufman counties.
SALE AND LEASE OF EQUIPMENT
4.1 Description of Equipment. Execution of this Agreement shall constitute the
obligation of City to acquire a modular production unit from BioD (the "MPU"), the exact
specifications and details of which are described in greater detail on Exhibit A, attached hereto and
incorporated herein by reference.
4.2 Purchase Price. In consideration for the purchase of the MPU, City shall pay to
BioD the sum of SIX HUNDRED AND FIFTY THOUSAND DOLLARS ($650,000).
4.3 Payment Provisions.
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4.3.1. Payment Schedule. Payment of the Purchase Price shall be made in
installments as follows: (1) $150,000 upon the signing of this Agreement which is payment for the
license fee, (2) $150,000 within 45 days of signing this agreement, (3) $150,000 upon the
completion of the MPU, and (4) $100,000 upon delivery of the MPU to the site at the City's
landfill, and (5) $100,000 upon completion of installation by BioD and Final Acceptance by City.
City shall have the right to inspect the progress of construction of the equipment prior to each
payment, with Final Acceptance conditioned upon BioD demonstrating that the MPU has been
installed and is operational Delays in payment of the first three payments may extend the delivery
date and completion of installation time set forth in section 4.4.2 but only to the extent of such
delay. To secure the delivery and completion of the installation of the MPU, upon the signing of
this Agreement BioD will deliver to the City an irrevocable letter of credit in the amount of
$500,000 and in substantially the same form as the letter of credit attached hereto and made a part
hereof as Exhibit B. The letter of credit shall be from a federally insured bank having offices in
Dallas, Texas to where drafts on the letter of credit may be drawn. The letter of credit shall be for
a period of six months, except that BioD shall substitute a letter of credit no later then 30 days
prior to its expiration for an additional six month period should the schedule set forth in 4.4.2 be
delayed. Upon the completion of the installation of the MPU and the City's Final Acceptance of
the MPU, the letter of credit will be released. As an alternative to the letter of credit, BioD may
elect to have City issue a Purchase Order, with payments 2-4 as set forth above due upon delivery
of the MPU to the landfill site at Denton. In such case payment 5 will be made as set forth above
upon completion of the installation of the MPU by BioD and Final Acceptance by the City. ,*my
additional costs directly associated with the Letter of Credit or sim/far financing arrangements
drawn upon the Purchase Order shall be borne by City as they are incurred.
4.3.2. Sales and Use Taxes. The City as a tax exempt governmental entity is
exempt from sales and use taxes.
4.3.3. Place of Pawaents. City shall tender payment of the Purchase Price to
BioD at such place as BioD shall designate in writing to City. However the place where the sale of
the MPU is deemed to have occurred is Denton County, Texas.
4.4 Delivery.
4.4.1. General Terms. Delivery of the MPU shall be to the location designated by
City at the City's landfill, at the expense of BioD which shall be in addition to the Purchase Price.
4.4.2. Schedule. Delivery of the MPU shall be made within four months of the
receipt of the first payment due hereunder. Completion of the installation of the MPU shall be
within one month thereafter.
4.5 Lease. City agrees to lease to Affiliate for a period of twenty years, with two
options for ten year renewals by Affiliate, the MPU and a site for operations at its landfill for rent
equal to 49% of net operating profits generated from the first and second MPU's, paid on a
quarterly basis. Affiliate agrees to maintain adequate books and records subject to inspection by
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City upon reasonable notice and conforming to GAAP. City shall have the right to appoint one
member of a three person managing board of Affiliate and shall have the right to attend and
participate in all board meetings of Affiliate. Should the number of the board members increase the
City will be entitled to appoint additional board members so that a ratio one to three of City
appointed board members will be maintained. Net operating profits shall be defined as gross
revenues from the sale ofbiodiesel and glycerin, minus any expenses including reasonable salaries,
raw materials, utilities, maintenance, transportation, insurance, professional fees, marketing, taxes
and court ordered payments or fines. Any taxes, fees or charges levied by the City against
Affiliate shall be deducted wholly from City's share of net operating profits. In no event shall
City be liable for any debts or obligations incurred by Affiliate.
4.6 Warranties.
4.6.1. Limited Warranty The Parties hereby expressly agree that there are no
warranties on the MPU which extend beyond the general warrant that the Technology and
Equipment are suitable for the intended purpose of producing biodiesel meeting ASTM 6751
standards. BioD does not warrant that the MPU or the Technology shall be free from defects or
errors that do not compromise the ability of the MPU to meet its intended purpose. Rather, BioD
warrants that the nature and extent of defects and errors shall not exceed industry standards, and that
warranties provided by vendors of individual components of the MPU shall be extended to City and
Affiliate. BioD agrees to use reasonable efforts to promptly correct any errors that disable the MPU
or the Technology. This warranty shall not apply in the event City, Affiliate or any other party, with
or without the consent of Affiliate, makes or permits any alteration of the MPU or the Technology, or
any part thereof, by any party other than BioD.
4.6.2. Disclaimer. Except as provided in Section 4.6.1 above and Article IX
below, BioD hereby expressly disclaims any warranty, express or implied, including the warranty
of merchantability or a warranty that the MPU can be used, or is fit for any particular purpose
other than producing biodiesel. City hereby purchases and accepts the MPU, and Affiliate hereby
leases and accepts the MPU, solely on the basis of the warranties expressed herein and Section
4.6.1. and Article IX.
4.7 Damages.
4.7. I. City's and Affiliate's Remedies. City's and Affiliate's exclusive remedy
for claims arising under this Agreement shall be for actual damages, injunctive relief, specific
performance and/or declaratory judgment relief. In no event will BioD be liable for lost profits or
other consequential or incidental damages. Notwithstanding the foregoing, should BioD be in
default under this Agreement or the City is enjoined from using the MPU or Technology due to a
patent infringement suit, or the like, which results in the City's inability to receive a minimum of
300,000 gallons of biodiesel fuel annually as contemplated by this Agreement, then BioD shall be
required to provide sufficient biodiesel fuel to the City to meet this minimum at the same purchase
price provided for in Subsection 4.9 (f) of this Agreement regardless of the actual cost to BioD to
provide such biodiesel fuel.
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4.7.2. BioD's Remedies. Failure of City to pay the Purchase Price when due shall
give BioD the unlimited right, without liability, to take possession of the MPU, and to have all of
the remedies of a secured party under the Uniform Commercial Code of the State of Texas. Should
Affiliate fail to make the lease payments to the City when due, or otherwise default under the
lease, the City will give Affiliate and BioD at least 30 days written notice of such default, during
which Affiliate or BioD shall have an opportunity to cure.
4.8 Related Obligations of BioD. In addition to all other obligations hereunder
regarding the sale of the MPU, BioD shall, at its sole cost and expense, also be obligated as
follows:
(a) provide consulting services to assist Affiliate with the design of its plans for
appropriate site preparations;
(b) provide commissioning of the MPU so as to ensure that the MPU is fully
operational;
(c) offer to sell to City a second MPU for operation in conjunction with the first
MPU at a price of $390,000, and subject to the same lease terms to Affiliate contained herein;
arid,
(d) provide initial training to designated Affiliate personnel for the initial
operation of the MPU; and
(e) provide in conjunction with the Affiliate, the installation of the MPU and
make it operational so that it is satisfactorily using the Technology.
4.9 Related Obligations of Afl'fflate. In addition to all other obligations hereunder
regarding the purchase of the MPU, Affiliaie shall, at its sole cost and expense, also be obligated
as follows:
(a) at its sole cost and expense, provide all necessary and appropriate site
preparations for the MPU, any additional improvements needed for a second MPU, and all
expenses associated with a third MPU;
(b) obtain any and all necessary construction and operating permits; and
(c) pay all Marketing Expenses in order to satisfy its obligations under this
Agreement, which shall include providing a "link" on the Affiliate website to the BioD website.
(d) maintain adequate insurance to cover loss, damage or theft of the MPU and
site improvements, liabilities for injuries sustained during as a result of its activities, product liability
insurance, directors and officers insurance, and with all policies indicating BioD and City as
additional insured parties and meeting the City's insurance requirements contained in Exhibit C
attached hereto and incorporated herein by reference.
(e) provide all necessary employees and personnel and other maintenance and
operational costs and expenses necessary to operate and maintain the MPU, Technology and
related equipment and activities to meet the goals and purposes of this Agreement.
(f) sell to City a minimum of 300,000 gallons of biodiesel annually on a Most
Favored Nation Basis during the term of the Lease at a purchase price not to exceed $1.30
per gallon until the completion of five years or the City receives $650,000 worth of lease
payments from the Affiliate as provided in Section 4.5 whichever occurs latter. Thereafter
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the purchase price for the biodiesel will have an annual adjustment based upon the
consumer price index for the Dallas Fort Worth Area.
4.10 Related Obligations of City. In addition to all other obligations hereunder
regarding the purchase of the MPU, City shall, at its sole cost and expense, also be obligated as
follows:
(a) at its sole cost and expense, provide a mutually agreeable site for the MPU
at its landfill site, with suitable access to utilities, and transit for personnel
and vehicles necessary for the operation of one MPU initially, and for up to
two additional MPU's at the same site;
(b) assist with all necessary construction and operating permits;
(c) purchase a minimum of 300,000 gallons of biodiesel annually on a Most
Favored Nation Basis" during the term of the Lease at a purchase price not
to exceed $1.30 per gallon until the completion of five years, or the City
receives $650,000 worth of lease payments from the Affiliate as provided in
Section 4.5 whichever occurs latter. Thereafter the purchase price for the
biodiesel will have an annual adjustment based upon the consumer price
index for the Dallas Fort Worth Area.
V
LICENSE
5.1 Grant. Subject to all the terms and limitations of this Agreement, BioD hereby
grants to City, and by extension to Affiliate, a perpetual, non-transferable, non-sublicensable
license (the "License") to use the Technology and the associated Proprietary Rights solely for the
purpose of producing, marketing, promoting, and otherwise using biodiesel in the Territory, and
only so long as City and Affiliate are in full compliance with this Agreement and the Agreement
has not expired or been terminated. The License is exclusive only in the Territory and no rights to
use the Technology or any associated Proprietary Rights are granted by BioD outside of the
Territory. Biodiesel produced hereunder by City or Affiliate will not be marketed or provided
directly or indirectly by City or Aff'fliate to any party which is not a Customer intending to use the
biodiesel inside of the Territory. Any marketing by City or Affiliate to Customers outside the
Territory shall be done solely in cooperation with BioD (and with BioD's prior written consent in
each instance, which may be withheld in its sole discretion), and shall be in compliance with all
applicable laws. City and Affiliate and its employees, directors,, shareholders and officers, agree
not to compete with BioD by producing, marketing or distributing biodiesel outside of the
Territory without the express written consent of BioD.
5.2 License to Licensed Marks. Subject to all the terms and limitations of this
Agreement, the License shall also expressly include the grant hereunder by BioD to City and
Affiliate of a perpetual, non-transferable, non-sublicensable license to use the Licensed Marks in
the Territory solely in connection with the marketing, promotion, and supply of biodiesel. The
foregoing grant is exclusive only in the Territory. Said use of the Licensed Marks shall be
sufficiently different to distinguish it geographically from BioD's Licensed marks.
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5.3 Retained Rights. BioD shall retain and own all right, title and interest in and to the
Technology, Licenses Marks, and all Proprietary Rights. Any and all Improvements, extensions of
the Technology, and all related additions and items shall be the sole and exclusive property of
BioD, even if developed, perfected, or otherwise derived through the sole effort and expense of
City or Affiliate.
ROYALTIES
There shall be no royalty payments due to BioD by City as part of this Agreement.
VII
ADDITIONAL RIGHTS AND OBLIGATIONS OF AFFILIATE
In addition to all other rights and obligations of Affiliate hereunder, Aff'fliate also hereby
agrees as follows:
7. I Duties. Affiliate shall, among other things:
(a) produce, promote market, sell, advertise, and otherwise exploit biodiesel
within the Territory, subject to and in satisfaction of the Minimum Standards;
(b) comply with all applicable laws, and, at all times, to conduct its activities
under this Agreement in a lawful manner; and
(c) use the Licensed Marks in accordance with this Agreement.
7.2 Minimum Standards. Affiliate shall satisfy the minimum standards for marketing,
customer service, operational reliability, performance, and technological development. Such
minimmn standards also include the standards, functional, and performance requirements for the
MPU.
7.3 Regulatory Approval. Affiliate shall ensure that the MPU and the production of
biodiesel by the MPU satisfies all applicable regulatory standards and requirements in the
Territory, and that it will diligently pursue the necessary regulatory approvals for the operation of
the MPU and the provision of biodiesel in the Territory.
7.4 Reverse Engineering. Affiliate and City agree not to disassemble, decompile, or
otherwise reverse engineer the MPU or otherwise attempt to derive processes underlying the
Technology, or, except as contemplated by this Agreement, copy, reproduce or modify the
Technology, or allow others to do any of the foregoing, without the express written consent of
BioD.
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7.5 Exclusive Right in Territory. So long as City and Affiliate are not in breach of
this Agreement, then (i) the License granted hereunder shall be exclusive to City and Affiliate
within the Territory, and (ii) BioD shall not sell another MPU to be located within the Territory.
7.6 Required Changes and Maintenance. Affiliate shall make any changes and/or
corrections in or to the MPU as may be reasonably required by BioD to prevent an erosion of the
functionality or productivity of the MPU. Affiliate shall also maintain the quality standards
prescribed by BioD. All such necessary changes and actions shall be at the sole cost and expense
of Affiliate.
7.7 Promotional Materials. Affiliate shall have the right to create and distribute
promotional and marketing literature and materials for biodiesel, using the Licensed Marks and
materials and content provided by BioD. Affiliate shall furnish to BioD, at no expense to BioD,
samples of all literature and materials containing the Licensed Marks that it distributes or intends
to distribute prior to any distribution thereof. BioD shall control the quality of all promotional and
marketing literature and materials bearing the Licensed Marks and Affiliate's use of the Licensed
Marks. Such quality control must be necessary, in BioD's reasonable determination, to the
preservation of BioD's interest in the Licensed Marks, the "look and feel" and value propositions
associated with the Licensed Marks, and other similar quality related standards. If BioD believes
that the Licensed Marks are being used by Affiliate in a manner likely to diminish BioD's rights in
or protection of the Licensed Marks, Affiliate agrees, at its sole cost and expense, to make
whatever changes and/or corrections BioD deems necessary to protect the Licensed Marks.
7.8 Protection of Reputation. Affiliate agrees that it shall not engage, participate or
otherwise become involved in any activity or course of action that diminishes and/or tarnishes the
image and/or reputation of City, BioD or any Licensed Mark.
7.9 Inspection Rights. City and BioD shall have the right to inspect the operations and
facilities of Affiliate during normal business hours upon reasonable prior notice, to the extent
reasonably necessary to ensure that BioD's and City's quality standards have been and are being
met by Affiliate. Affiliate shall provide BioD and City with monthly reports (no later than ten (10)
days after the end of each calendar month) no more detailed than the internal reports of Affiliate,
taking into account BioD's advice when formulating the internal format of Aff'fliate, for BioD to
evaluate the operational efficiency and controls of Affiliate, and to obtain reasonably detailed
financial information.
VIII
ADDITIONAL RIGHTS AND OBLIGATIONS OF BIODIESEL
In addition to all other rights and obligations of BioD hereunder, BioD also hereby agrees
as follows:
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8.1 Marketing and Technical Support. BioD shall provide a reasonable amount of
continuing marketing and technical support of Affiliate, although such matters shall remain the
primary responsibility of Affiliate.
8.2 Additional Support. BioD shall provide a reasonable amount of regulatory and
operational compliance and customer service support, although such maters shall remain the
primary responsibility of Affiliate.
8.3 Additional Quality Standards. In addition to the Minimum Standards, BioD shall
also establish reasonable quality standards for the operation of the MPU, which will need to be
satisfied by Affiliate.
8.4 Protection of Affiliate's Rights. BioD shall not itself, and shall not permit any
other person except Affiliate or City, and shall use reasonable efforts so that no other person
except Affiliate or City can, directly or indirectly (i) use the Licensed Marks or Technology in the
Territory, or (ii) use or license any part of the Technology in the Territory, whether or not in
association with the Licensed Marks, for the benefit of any person other than Affiliate or City.
8.5 Intent as to Intellectual Property. BioD shall provide to Affiliate and City, as
soon as reasonably practicable after the Effective Date of this Agreement, Technology in a form
which would be reasonably necessary for Affiliate to produce biodiesel from the MPU. All
Improvements to the Technology will only be required to be provided by BioD to Affiliate within a
reasonable time after BioD makes the same available for distribution to its others affiliates, and
Affiliate shall have no less priority in this regard than other affiliates with similar licenses. The
Parties shall use their best efforts to work together to implement the Technology so that Affiliate
may launch the MPU as soon as possible.
IX
REPRESENTATIONS AND WARRANTIES OF BIODIESEL AND AFFILIATE
BioD and Affiliate hereby represent and warrant to City that:
9.1 Organization. BioD is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware, and Affiliate is currently a wholly owned subsidiary
of BioD.
9.2 Authorization.
9.2.1 Operation of Business. BioD has the requisite corporate power and authority
and all requisite licenses, permits and franchises necessary to own and operate its properties and to
carry on its business as now being conducted and to provide the equipment and services provided for
in this Agreement.
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9.2.2 Execution of Agreement. BioD has the requisite corporate power and
authority to enter into and carry out the terms and conditions of this Agreement, as well as all
transactions contemplated hereunder. All corporate proceedings have been taken and all corporate
authorizations have been secured which are necessary to authorize the execution, delivery and
performance by BioD of this Agreement. This Agreement has been duly and validly executed and
delivered by BioD and constitutes the valid and binding obligations of BioD, enforceable in
accordance with the respective terms.
9.3 Effect of Agreement. As of the Effective Date, the consummation by BioD of the
transactions herein contemplated, including the execution, delivery and consummation of this
Agreement, will comply with all applicable law and will not:
(a) Violate any judgment, order, writ or decree of any court or administrative
body applicable to BioD or any of its assets; or
(b) Result in the breach of, constitute a default under, constitute an event which
with notice or lapse of time, or both, would become a default under, or result in the creation of any
lieu, security interest, charge or encumbrance upon any of the assets or other properties of BioD
under any agreement, commitment, contract (written or oral) or other instrument to which BioD is a
party, or by which any of the assets or other properties of BioD are bound or affected.
9.4 Consent. There are no (i) non-governmental third parties and (ii) governmental or
regulatory entities in the United States who are entitled to any notice of the transaction, licenses
and services contemplated hereunder or whose consent is required to be obtained by BioD for the
consummation of the transactions contemplated hereunder.
9.5 Title and Ownership. To the best of its knowledge, BioD is the sole and rightful
owner of all right, title and interest in and to the Technology and the Licensed Marks and all
related Proprietary Rights therein and it has the unrestricted right to market, license and exploit the
Technology and the Licensed Marks.
9.6 Absence of Adverse Claims. To the best of its knowledge, no claims have been
made in respect of the Technology or Licensed Marks and no demands of any third party have
been made pertaining to them, and no proceedings have been instituted or are pending or
threatened that challenge the rights of BioD in respect thereof.
9.7 Services. Ail services to be rendered by BioD hereunder will be provided by BioD
in a professional, diligent and timely manner using staff knowledgeable and suitably qualified for
the performance of the respective tasks for which they are responsible and it will use reasonable
efforts to ensure that the quality and reliability of its Services are no less favorable to Affiliate than
the equivalent services provided by it for its own purposes or for its other licensees.
9.8 Competitive Advantage. BioD shall use reasonable efforts to remain competitive
and to continually improve and upgrade its Technology, systems, and facilities.
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X
REPRESENTATIONS AND WARRANTIES OF CITY
City hereby represents and warrants to Biodiesel and Affiliate that:
10.1 Organization. City is a home rule municipal corporation organized under the laws of
the State of Texas.
10.2 Authorization.
10.2.1 Operations. City has the requisite municipal power and authority and all
requisite licenses, perm/ts and franchises necessary to own and operate its properties and to carry on
its activities as now being conducted and as provided for in this Agreement.
10.2.2 Execution of Agreement. City has the requisite municipal power and
authority to enter into and carry out the terms and conditions of this Agreement, as well as all
transactions contemplated hereunder. All municipal proceedings have been taken and all municipal
authorizations have been secured which are necessary to authorize the execution, delivery and
performance by City of this Agreement. This Agreement has been duly and validly executed and
delivered by City and constitutes the valid and binding obligations of City, enforceable in accordance
with the respective terms.
10.3 Effect of Agreement. As of the Effective Date, the consummation by City of the
transactions herein contemplated, including the execution, delivery and consummation of this
Agreement, will comply with all applicable law and will not:
(a) Violate any judgment, order, writ or decree of any court or administrative
body applicable to City or any of its assets; or
Co) Result in the breach of, constitute a default under, constitute an event which
with notice or lapse of time, or both, would become a default under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the assets or other properties of City under
any agreement, commitment, contract (written or oral) or other instrument to which City is a party,
or by which any of the assets or other properties of City are bound or affected.
10.4 Fairness of Fees. Any and all fees, costs, and expenses to be paid hereunder by
City are fair and reasonable, and the result of arm's length, good faith negotiations by and between
the Parties.
10.5 Loyalty. City does not currently, and will not during the term of this Agreement,
represent or promote any services or products that intentionally divert business away from the
business of BioD, the MPU, or the biodiesel to be produced by the MPU.
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XI
REPRESENTATIONS AND WARRANTIES OF AFFILIATE
Affiliate hereby represents and warrants to BioD and City that:
11.1 Organization. Affiliate is currently a wholly owned subsidiary of BioD and is a Texas
corporation in good standing.
11.2 Authorization.
11.2.1 Operations. Affiliate has the requisite power and authority and all requisite
licenses, permits and franchises necessary to own and operate its properties and to carry on its
activities as now being conducted and as provided for in this Agreement and the Lease.
I 1.2.2 Execution of Agreement. Affiliate has the requisite power and authority to
enter into and carry out the terms and conditions of this Agreement and the Lease, as well as all
transactions contemplated hereunder. All proceedings have been taken and all authorizations have
been secured which are necessary to authorize the execution, delivery and performance by Affiliate of
this Agreement and the Lease. This Agreement has been duly and validly executed and delivered by
Affiliate and constitutes the valid and binding obligations of Affiliate, enforceable in accordance with
the respective terms.
11.3 Effect of Agreement. As of the Effective Date, the consummation by Affiliate of the
transactions herein contemplated, including the execution, delivery and consummation of this
Agreement, will comply with all applicable law and will not:
(a) Violate any judgment, order, writ or decree of any court or administrative
body applicable to Affiliate or any of its assets; or
(b) Result in the breach of, constitute a default under, constitute an event which
with notice or lapse of time, or both, would become a default under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the assets or other properties of Affiliate
under any agreement, commitment, contract (written or oral) or other instrument to which Affiliate is
a party, or by which any of the assets or other properties of Affiliate are bound or affected.
11.4 Fairness of Fees. Any and all fees, costs, rent payments and expenses to be paid
hereunder by Affiliate are fair and reasonable, and the result of arm's length, good faith
negotiations by and between the Parties.
11.5 Loyalty. Affiliate does not currently, and will not during the term of this
Agreement, represent or promote any services or products that intentionally divert business away
from the business of BioD, the MPU, or the biodiesel to be produced by the MPU.
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31II
CONFIDENTIALITY
12.1 Proprietary Information of BioD. During the period this Agreement and Lease
are in effect and at all times after their termination, City, Affiliate and its employees, and agents
shall, to the extent permitted by law, maintain the confidentiality of the Proprietary Information of
BinD and not sell, license, publish, display, distribute, disclose or otherwise make available this
information to any third party or use such information except as authorized by this Agreement.
City and Affiliate shall not disclose any such Proprietary Information of BioD to persons not an
employee of City or Affiliate without the prior written consent of BioD. Notwithstanding the
foregoing, the Parties understand and agree that the City as a governmental entity must comply
with the Texas Public Information Act, being Chapter 552 of the Texas Government Code (the
"Open Records Act") and the confidentiality requirements contained herein are subject to the Open
Records Act.
12.2 Proprietary Information of Affiliate. During the period this Agreement is in
effect and at all times after its termination, BioD and its employees, and agents shall maintain the
confidentiality of the Proprietary Information of Affiliate and City and not sell, license, publish,
display, distribute, disclose or otherwise make available this information to any third party or use
such information except as authorized by this Agreement. BioD shall not disclose any such
Proprietary Information of Affiliate or City to persons not an employee of BioD without the prior
written consent of Affiliate or City.
12.3 Lack of Adequate Remedy. The Receiving Party acknowledges and agrees that
due to the unique nature of the Disclosing Party's Proprietary Information, there can be no
adequate remedy at law for any breach of its obligations hereunder, that any such breach may
allow the Receiving Party or third parties to unfairly compete with the Disclosing Party resulting
in irreparable harm to the Disclosing Party, and therefore, that upon any such breach or any threat
thereof, the Disclosing Party shall be entitled to appropriate equitable relief in addition to whatever
remedies it might have at law and to be indemnified by the Receiving Party from any loss or harm,
including, without limitation, lost profits and attorney's fees, in connection with any breach or
enforcement of the Receiving Party's obligations hereunder or the unauthorized use or release of
any such Proprietary Information. The Receiving Party will notify the Disclosing Party in writing
immediately upon the occurrence of any such unauthorized release or other breach. Any breach of
this Section 12.3 will constitute a material breach of this Agreement.
\III
INDEMNIFICATION AND LIABILITY
13.1 Indemnification by Aff'fliate. Affiliate shall indenmify, defend and hold City and
BioD, and their affiliates, directors, officers, employees, shareholders, and each of their
successors and assigns, harmless from and against any and all claims, liabilities, demands, causes
of action, damages, loss and expenses, including, without limitation, personal injury, including
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death, and property damage and reasonable attorneys' fees and costs of suit arising out of or in
connection with:
(a) Any breach of this Agreement by Affiliate;
(b) The conduct of the business of Affiliate; and
(c) The negligent act or omission of Affiliate.
13.2 Indemnification by BioD. BioD shall indemnify, defend and hold City, Affiliate,
and their affiliates, directors, officers, employees, shareholders, and each of their successors and
assigns, harmless from and against any and all claims, liabilities, demands, causes of action,
damages, loss and expenses, including, without limitation, personal injury, including death, and
property damage and reasonable attorneys' fees and costs of suit arising out of or in connection
with:
(a) Any breach of this Agreement by BioD;
(b) Infringement of United States, copyright, trademark, or patent laws by the
Technology, MPU or Licensed Marks;
(c)
Agreement; and
The conduct of the business of BioD, not otherwise in violation of this
(d) The negligent act or omission of BioD.
13.3 No Consequential Damages. Except as provided in Section 4.7.1 of this
Agreement, BinD shall not be liable to City or Affiliate for indirect, special, incidental, exemplary
or consequential damages (including, without limitation, lost profits) related to this Agreement or
resulting from Affiliate's use or inability to use the MPU or the Technology, arising from any
cause of action whatsoever, including contract, warranty, strict liability, or negligence, even if
BinD has been notified of the possibility of such damages.
13.4 Force Majeure. None of the Parties shall be in default or otherwise liable for any
delay in or failure of performance under this Agreement if such delay or failure arises by any
reason beyond their reasonable control, including any act of God, any acts of the common enemy
or terrorism, the elements, earthquakes, floods, fires, epidemics, riots, failures or delay in
transportation or communications, or any act or failure to act by another Party or such other
Party's employees, or agents. However, lack of funds shall not be deemed to be a reason beyond a
Party's reasonable control. The Parties will promptly inform and consult with each other as to any
of the above causes, which in their judgment may oi could be the cause of a delay in the
performance of this Agreement.
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XIV
STATUS OF THE PARTIES
The relationship of the Parties is purely that of a contractual nature, which is formulated under
this Agreement. Under no circumstances are the Parties to be deemed partners, joint venturers,
co-owners, or the like. Aff'iliate is not and shall not be deemed to be a franchisee of BioD, and
similarly, under no circumstances shall BioD be deemed a franchisor in relation to Affiliate. Each
Party shall be responsible for the operation of its respective sole and separate business, including the
payment of its own costs and expenses incurred in connection therewith.
XV
TERM AND TERMINATION
15. I Effective Date. This Agreement, the Lease and the License granted hereunder shall
take effect upon the date first referenced in Article I, above.
15.2 Term. This Agreement shall continue in full force and effect from the Effective
Date for a term of twenty years, with two options for ten year renewals by City, unless terminated
as provided for hereunder.
15.3 Termination. This Agreement shall terminate upon thirty (30) days prior written
notice from one Party (the "Acting Party") to the other (the "Breaching Party") alleging an "Event of
Default" (as defined below), provided that the Breaching Party does not cease and cure the conduct
constituting "for cause" prior to the expiration of such thirty (30) day period. For purposes of this
Agreement, the term "Event of Default" shall include the following:
(a)
(b)
of this Agreement;
(c)
(d)
Breach of a material provision of this Agreement;
The repeated failure to render full and proper services as required by the terms
Termination or suspension of business;
Initiation, either voluntary or involuntary, of a bankruptcy or insolvency or
assignment for the benefit of creditors proceeding under Federal or state statute;
(e) Determination of insolvency or becoming subject to direct control by a
trustee, receiver or similar authority; or
(f) Liquidation, voluntarily or otherwise.
A termination of the Agreement shall also act as a termination of the Lease.
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15.4 Notice. The notice required under Section 15.3, above (the "Termination Notice"),
must identify in detail the Event of Default. If the Event of Default remains uncured for thirty (30)
days, the Acting Party may terminate this Agreement, the Lease and the License granted herein by
delivering to the defaulting party a subsequent written notice which merely identifies the effective
date of the termination (the "Subsequent Notice").
15.5 Disputes ns to Event of Default. If the Disputing Party disputes the Event of
Default, except in the case of an emergency, the Parties agree to enter into mediation to attempt to
resolve the dispute.
15.6 Option to Acquire and Sell MPU. Upon termination of this Agreement, for any
reason, BioD and City each shall have the right, to be exercised within sixty (60) days after the
date of termination of this Agreement, to have BioD acquire the MPUs for a purchase price equal
to eighty percent (80%) of the Purchase Price actually paid by City. Additionally, whether or not
this option is exercised, each Party shall promptly return to the other any and all Proprietary
Information of the other currently in its possession, or alternatively, deliver to the other a
certification, in writing signed by an officer of that Party under penalty of perjury, that all
Proprietary Information of the other has been deleted or destroyed, and its use discontinued.
X¥I
NOTICES
All notices, requests, demands and other commun/cations required or permitted to be given
hereunder shall be effected pursuant to Section 17.13, below, as follows:
If to BioD or Affiliate:
Mr. Russell T. Teall, IH
BIODIESEL INDUSTRIES, INC.
435 I/2 E1 Sueno Road
Santa Barbara, California 93110
Fax No.
With a cop? to:
Keith A. Rosenbaum, Esq.
SPECTRUM LAW GROUP, LLP
1900 Main Street
Suite 125
Irvine, California 92614
Fax No.
If to City:
City Manager
City of Denton
city Hall
215 E. McKirmey
Denton, Texas 79201
Fax No. 940.349.8596
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ADDITIONAL PROVISIONS
17.1 Executed Counterparts. This Agreement may be executed in any number of
original, fax or copied counterparts, and all counterparts shall be considered together as one
agreement. A faxed or copied counterpart shall have the same force and effect as an original signed
counterpart. Each of the Parties hereby expressly forever waives any and all rights to raise the use of
a fax machine to deliver a signature, or the fact that any signature or agreement or instrument was
transmitted or communicated through the use of a fax machine, as a defense to the formation of a
contract.
17.2 Successors and Assigns. Except as expressly provided in this Agreement, each and
all of the covenants, terms, provisions, conditions and agreements herein contained shall be binding
upon and shall inure to the benefit of the successors and assigns of the Parties hereto.
17.3 Article and Section Headings. The article and section headings used in this
Agreement are inserted for convenience and identification only and are not to be used in any manner
to interpret this Agreement.
17.4 Severabili.ty. Each and every provision of this Agreement is severable and
independent of any other term or provision of this Agreement. If any term or provision hereof is held
void or invalid for any reason by a court of competent jurisdiction, such invalidity shall not affect the
remainder of this Agreement.
17.5 Governing Law. This Agreement shall be governed by the laws of the State of
Texas, without giving effect to any choice or conflict of law provision or rule (whether of the State
of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas. If any court action is necessary to enforce the terms and conditions
of this Agreement, the Parties hereby agree that a court of competent jurisdiction in Denton
County, Texas or the Federal District Court for the Eastern District of Texas shall be the sole
jurisdiction and venue for the bringing of such action. This Agreement is fully performable in
Denton County, Texas.
17.6 Entire Agreement. This Agreement, and all references herein, contains the entire
understanding among the Parties hereto and supersedes any and all prior written or oral agreements,
understandings, and negotiations between them respecting the subject matter contained herein.
Notwithstanding the foregoing, the City and Affdiate reserve the right to enter into such other
agreements as may be necessary, if any, for the Lease.
17.7 Additional Documentation. The Parties hereto agree to execute, acknowledge and
cause to be filed and recorded, if necessary, any and all documents, amendments, notices and
certificates which may be necessary or convenient under the laws of the State of Texas.
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17.8 Attorney's Fees. If any legal action (including arbitration) is necessary to enforce the
terms and conditions of this Agreement, the prevailing Party shall be entitled to costs and reasonable
attorney' s fees.
17.9 Amendment. This Agreement may be amended or modified only by a writing signed
by all Parties.
17.10 Remedies.
17.10.1 Specific Performance. The Parties hereby declare that it is impossible to
measure in money the damages which will result from a failure to perform any of the obligations
under this Agreement. Therefore, each Party waives the claim or defense that an adequate remedy at
law exists in any action or proceeding brought to enforce the provisions hereofi
17.10.2 Cumulative. The remedies of the Parties under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be lawfully entitled.
17.11 Waiver. No failure by any Party to insist on the strict performance of any covenant,
duty, agreement, or condition of this Agreement or to exercise any right or remedy on a breach shall
constitute a waiver of any such breach or of any other covenant, duty, agreement, or condition.
17.12 Assignability. This Agreement is not assignable by either Party without the expressed
written consent of all Parties, except as expressly set forth herein.
17.13 Notices. All notices, requests and demands hereunder shall be in writing and
delivered by hand, by facsimile transmission, by mail, by telegram or by recognized commercial
over-night delivery service (such as Federal Express, UPS or DHL), and shall be deemed given (a) if
by hand delivery, upon such delivery; (b) if by facsimile transmission, upon telephone confirmation
of receipt of same; (c) if by mail, forty-eight (48) hours after deposit in the United States mai, first
class, registered or certified mail, postage prepaid; (d) if by telegram, upon telephone confirmation of
receipt of same; or (e) if by recognized commercial over-night delivery service, upon such delivery.
17.14 Time. All Parties agree that time is of the essence as to this Agreement.
17.15 Disputes. With regard to all disputes other than those that require immediate action
due to an emergency, the Parties agree to cooperate and meet ia order to resolve any disputes or
controversies arising under this Agreement. Should they be unable to do so, except in the case of an
emergency, the Parties agree to mediate such disputes with a third party mediator mutually agreed
upon by the Parties.
17.16 Provision Not Construed Against Party Drafting Agreement. This Agreement is
the result of negotiations by and between the Parties, and each Party has had the opportunity to be
represented by independent legal counsel of its choice. This Agreement is the product of the work
and efforts of all Parties, and shall be deemed to have been drafted by all Parties. In the event of a
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dispute, no Party hereto shall be entitled to claim that any provision should be construed against any
other Party by reason of the fact that it was drafted by one particular Party.
17.17 Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in
this Agreement are incorporated herein by reference and made a part hereof as if set out in full
herein.
17.18 Consents, Approvals and Discretion. Except as herein expressly provided to the
contrary, whenever this Agreement requires consent or approval to be given by a Party, or a Party
must or may exercise discretion, the Parties agree that such consent or approval shall not be
unreasonably withheld, conditioned, or delayed, and such discretion shall be reasonably exercised.
17.19 No Third Party Beneficiaries. This Agreement has been entered into solely by and
between BioD, City, and Affiliate, solely for their benefit. There is no intent by any of the Parties to
create or establish a third party beneficiary to this Agreement, and no such third party shall have any
right to enforce any right, claim, or cause of action created or established under this Agreement.
17.20 Best Efforts. The Parties shall use and exercise their best efforts, taking all
reasonable, ordinary and necessary measures to ensure an orderly and smooth relationship under this
Agreement, and further agree to work together and negotiate in good faith to resolve any differences
or problems which may arise in the future.
17.21 Del'tuitional Provisions. For purposes of this Agreement, (i) those words, names,
or terms which are specifically defined herein shall have the meaning specifically ascribed to them;
(ii) wherever from the context it appears appropriate, each term stated either in the singular or
plural shall include the singular and plural; (iii) wherever from the context it appears appropriate,
the masculine, feminine, or neuter gender, shall each include the others; (iv) the words "hereof",
"herein", "hereunder", and words of similar import, when used in this Agreement, shall refer to
this Agreement as a whole, and not to any particular provision of this Agreement; (v) all
references to designated "Articles", "Sections", and to other subdivisions are to the designated
Articles, Sections, and other subdivisions of this Agreement as originally executed; (vi) all
references to "Dollars" or "$" shall be construed as being United States dollars; (vii) the term
"including" is not limiting and means "including without limitation"; and, (viii) all references to all
statutes, statutory provisions, regulations, or similar administrative provisions shall be construed
as a reference to such statute, statutory provision, regulation, or similar administrative provision as
in force at the date of this Agreement and as may be subsequently amended.
XVIII
EXECUTION
1N WITNESS WHEREOF, this Agreement has been duly executed by the Parties, and shall
be effective as of and on the date set forth in Article I of this Agreement.
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BIODIESEL INDUSTRIES, INC.,
a Delaware corporation
TITLE: ~°C/~,,6 ~
City Manager
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO FOR)M
HERB ERT L~5~RO UTTC ITY ATTORNEY
BY: '/~'/'~,f ~
IRICD~o_,SEL i'~ oo ..... · ,,,~,~," '-'~ DENTON, INC.,
a subsidiary of Biodiesel Industries
TITLE:
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ACKNOWLEDGMENTS
STATE OF CALIFORNIA
COUNTY OF S~N~:ar-~
SHAJLENDRA KUMAR BHAwNANI[
Commission # 1414506
Notary Public- California
Venlura County
MY Comm. Expires Al:n 29, 2007 ~
This instrument is acknowledged before me, on this ~3'r~ day of ~,x~tl:~ , 2004 by
~u c. Se_l\ -l'~aX\ , ~ e.x~-t~.~x.~r-- of the Biodiesel Industries, Inc. a Delaware
corporation, on behalf of said corporation.
I
Notary Public in and for the State of California
STATE OF TEXAS
COUNTY OF DENTON
This instrument is acknowledged before me, on tkis~day of ~ff'g~cf~d/~, 2004 by Michael A.
Conduff, City Manager of the City of Denton, Texas, on behalf of ~aid city.
[~%~.¥~. Notaw Pubiic, State of Texas
~,~ .".~ My Commission Expires
June 27, 2005
Nota~ Public in and for the State of Texas
STATE OF C~'-f~'a 6
COUNTY OF S)ak~1~,~lk~tk~/3cott'~
This instmme_~.nt is acknowledeed before me, on this ~9 ff~day of ~r~n~ , 2004 by
the ...............
subsi~ of Biodiese] hdus~ies, ~c., on behalf of s~d co¢oration.
Not~ Public in ~ ~ the S~ate of Te~s
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EXHIBIT A
MPU
The specifications and description of the Modular Production Equipment as referred to in
Section 4.1 of this Agreement is as follows.
(1) Two, 1,500 gallon reactors with hot water heating coils and plumbing composed of
304 stainless, with circulation pumps and level sensors meeting applicable electrical standards
for handling flammable liquids.
(2) One, 300 gallon tank for mixing alcohol and catalyst and plumbing, composed of 304
stainless, With circulation pump meeting applicable electrical standards for handling flammable
liquids.
(3) Two, CINC V-10 centrifuges and plumbing configured with the reactors to separate
biodiesel, glycerin and water, and installed to meet applicable electrical standards for handling
flammable liquids.
(4) Two, drying columns and plumbing designed to remove water from biodiesel.
(5) One filter system designed to remove particulates and water from biodiesel.
(6) One distillation system designed to remove alcohol from glycerin, composed of
stainless steel and and installed to meet applicable electrical standards for handling flammable
liquids.
(7) One control panels designed to control all electrical functions of the above equipment,
with an emergency cut off switch on the panel and on the processing equipment. Panel to be
mounted in a remote control room separated from the above described equipment.
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EXHIBIT B
LETTER OF CREDIT
NAME OF BANK:
DATE:
IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER:
BENEFICIARY
THE CITY OF DENTON, TEXAS
C/O CITY MANAGER
CITY OF DENTON
CITY HALL
215 E. MCKINNEY
DENTON, TEXAS 76201
APPLICANT
BIODIESEL INDUSTRIES, INC.
435 1/2 EL SUENO ROAD
SANTA BARBARA, CALIFORNIA 931 I0
ATTN: RUSSELL T. TEALL, 11I
AMOUNT
USD 500,000.00
FiVE HUNDRED THOUSAND AND NO/100'S US
DOLLARS
EXPIRATION
., 2004 AT BANK OF
DALLAS, TEXAS
WE HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER
., IN FAVOR OF THE CITY OF DENTON, TEXAS, AS BENEFICIARY BY
ORDER AND FOR THE ACCOUNT OF BIODIESEL INDUSTRIES, INC. AVAILABLE FOR
PAYMENT AT SIGHT AT THE COUNTERS OF BANK OF N.A. FOR U.S.
$500,000.00 (FIVE HUNDRED THOUSAND U.S. DOLLARS) AGAINST ANY ONE OF THE
FOLLOWING DOCUMENTATION REQUIREMENTS:
1) A STATEMENT SIGNED BY A PURPORTED OFFICER OF BENEFICIARY STATING
"BIODIESEL INDUSTRIES, INC. HAS NOT PERFORMED IN ACCORDANCE WITH THE
TERMS AND CONDITIONS OF THE EQUIPMENT SALE, LEASE, AND LICENSE
AGREEMENT DATED , 2004 BETWEEN THE CITY OF DENTON
AND BIODIESEL iNDUSTRIES, INC.", OR
2) A STATEMENT SIGNED BY A PURPORTED OFFICER OF BENEFICIARY STATING
"BIODIESEL INDUSTIES, INC. HAS FAILED TO DELIVER A REPLACEMENT LETTER OF
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CREDIT SATISFACTORY TO BENEFICIARY PRIOR TO THE THIRTIETH DAY PRIOR TO
THE STATED EXPIRATION DATE OF LETTER OF CREDIT NUMBER _,"
OR
SPECIAL INSTRUCTIONS:
1) PARTIAL AND MULTIPLE DRAWINGS ARE PERMITTED.
2) DOCUMENTS
MUST BE PRESENTED AT OUR COUNTERS LOCATED AT
, DALLAS, TEXAS 75202 NO LATER THAN
., 2004.
3)
ALL COSTS RELATED TO DRAWINGS UNDER THIS LETTER OF CREDIT NUMBER
SHALL BE CHARGED TO THE ACCOUNT OF THE APPLICANT.
WE HEREBY ENGAGE WITH YOU THAT ALL DOCUMENTS PRESENTED IN
COMPLIANCE WITH THE TERMS OF THIS CREDIT WILL BE DULY HONORED W
DRAWN AND PRESENTED FOR PAYMENT ON OR BEFORE THE EXPIRATION DATE OF
THIS LETTER OF CREDIT.
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS
TRANSACTION, PLEASE CALL 800-
AUTHORIZED SIGNATURI~
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EXHIBIT C
INSURANCE REQUIREMENTS
Affiliate shall, during the term of this agreement and any extension thereof, maintain
adequate insurance coverage as follows:
In General. All policies of insurance provided shall be issued by insurance companies
qualified to do business in the State of Texas and either (1) listed on the U.S. Department of
the Treasury's Listing of Approved Sureties (Department Circular 570) (as amended), or (2)
having a current rating of"A-" or better in the most current available A.M. Best Co., Inc.'s,
Best's Insurance Reports, Property and Casualty Edition. Except in the case of workers'
compensation insurance, City and BinD, and their respective officers and employees shall be
included as an additional named insureds on all insurance policies. Affiliate shall cause
copies of certificates of insurance to be furnished to City and BioD concurrently with or
prior to conducting construction-related site inspections, surveys, etc. associated with this
agreement. The certificates shall name City and BioD as the certificate holders and as an
additional named insured (except in the case of workers' compensation insurance). If
requested, Affiliate shall also cause copies of the insurance policies required by this
agreement to be provided to City and BioD.
Workers' Compensation Insurance. Affiliate shall obtain and maintain during the term of
this agreement and any extension thereof workers' compensation insurance with statutory
limits as required by laws and regulations for all of Affiliates's employees employed at the
Project.
Comprehensive Public Liability and Property Damage Liability Insurance. Affiliate
shall secure and maintain during the term of th_is agreement and any extension thereof a
commercial general public liability and property damage liability insurance policy. The
policy shall protect City and BioD, and their respective officers and employees from claims
for damages for personal injury, including accidental death, and from claims for property
danmge which may arise from Affiliates's operations under this agreement, whether any such
operation be by the Affiliate or by anyone directly or indirectly employed by Affiliate. The
minimum amounts of such insurance shall be not less than $1,000,000 for each occurrence,
and $3,000,000 general aggregate, and $2,000,000 products/completed operations aggregate.
Such policy(les) shall provide coverage for liability resulting from premises/operations,
products/completed operations, independent contractors and contractual liability.
Automobile Public Liability Insurance. Affiliate shall secure and maintain during the term
of this agreement and any extension thereof comprehensive automobile public liability
insurance with limits not less than $1,000,000 per occurrence, covering owned, hired, and
non-owned automobiles and mobile equipment.
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5. Environmental Impairment Liability Insurance. Affiliate shall secure and maintain
during the term of this agreement and any extension thereof Environmental Impairment
Liability insurance with limits not less than $1,000,000 per occurrence, covering Liability and
cleanup costs associated with discharges or releases of chemicals or other forms of pollution.
6. Property Insurance. Affiliate shall secure and maintain during the term of this agreement
and any extension thereof Property Insurance on an Ali-Risk basis, providing for 100% of
the replacement cost of all associated buildings and equipment.
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27
AMENDMENT TO EQUIPMENT, SALE, LEASE,
AND
LICENSE AGREEMENT
This Amendment to Equipment, Sale, Lease, m~d License Agreement (the
"Amendment") is entered into effective as of the 23ra day of March,-2004, by and
between Biodiesel Industries, Inc ("BioD") and the City of Denton, Texas ("City").
WHEREAS, BioD and the City have entered into that certain Equipment, Sale,
Lease, and License Agreement dated March 23, 2004 (the "Agreement"); and
WHEREAS, the Agreement contemplates that BioD will establish a wholly
owned subsidiary Texas corporation to enter into the Agreement as the Affiliate, as more
particularly defined in the Agreement; and
WHEREAS, the parties to the Agreement are entering into this Amendment to
allow BioD to assume the rights and obligations of the Affiliate under the Agreement
until such time as the Affiliate has been incorporated and signs the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and in the Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, BioD and City hereby
agree as follows:
1. BioD herby assumes and is responsible for all of the rights and obligations
of the Affiliate under the Agreement until such time as the Affiliate is duly incorporated
as a Texas corporation and signs the Agreement. BioD shall immediately become
licensed to do business in Texas if it has not already done so, and shall immediately
provide City with written evidence of same.
and effect.
All other terms and conditions of the Agreement shall remain in full fome
BIODIESEL INDUSTRIES, INC.
A Delaware corporation
Rdssell Teall
President
City Manager
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO FORM
HERBERT L P~Y, ClTVTTORNEY