EXHIBIT 10.22
ACQUISITION AGREEMENT
THIS AGREEMENT made and entered into as of this 6th day of March 1997,
by and between EMCON, a California corporation ("EMCON"), and its wholly-owned
subsidiary, MONTEREY LANDFILL GAS CORPORATION, a California corporation (the
"Seller"), both having an address at 400 S. El Camino Real, Suite 1200, San
Mateo, California 94402, and BIOMASS ENERGY PARTNERS V, L.P., a Delaware limited
partnership having an office at 40 Tower Lane, Avon, Connecticut 06001 (the
"Buyer").
W I T N E S S E T H :
WHEREAS, the Seller is party to those certain agreements described on
Exhibit A annexed hereto (the "Project Agreements"), pursuant to which the
Seller was granted the exclusive lease of all rights to the Landfill Gas which
is produced within the Monterey Peninsula Landfill located north of the Town of
Marina, County of Monterey, State of California, as shown on the attached
Exhibit B (hereinafter referred to as the "Landfill"); and
WHEREAS, the District has constructed and installed certain Landfill
Gas recovery wells and other equipment in the Landfill and further intends to
construct additional wells and equipment in the Landfill and all of such wells
and equipment are used or are to be used in the Landfill Gas Recovery Project
conducted at the Landfill under the terms of the Project Documents and are owned
by the Seller; and
WHEREAS, the Seller desires to sell to the Buyer and the Buyer desires
to acquire from the Seller for the consideration hereinafter set forth, the sole
and exclusive right and privilege to drill and recover all Landfill Gas at the
Landfill and all other related rights covered by the Project Documents, subject
to the terms and conditions of the Project Documents and to the provisions
hereof, and the parties further desire that the Seller shall sell to the Buyer
all of the Seller's interest in the wells and equipment used in the Landfill Gas
Recovery Project.
NOW, THEREFORE, in consideration, of the performance and observance of
the mutual covenants, terms and conditions herein contained, the parties agree
as follows:
112
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Agreements" - this Agreement, the Assignment, the Bill of Sale
and any other agreements between Buyer and Seller relating hereto.
(b) "Amendment to and Restatement of Gas Sales Contract" Amendment
and Restatement dated December 22, 1986, as amended, originally between Marina
Landfill Gas Corporation and Monterey Landfill Gas Corporation.
(c) "Amendments" - The Third Lease Amendment and Amendment No. 2 to
Amended and Restated Gas Sales Contract, each as more particularly described on
Exhibit A annexed hereto.
(d) "Assignment" - the assignment of Seller's rights in the Project
Documents, in the form annexed hereto as Exhibit E, and in form suitable for
recording.
(e) "Bill of Sale" - the bill of sale in the form annexed hereto as
Exhibit G.
(f) "Code" - the Internal Revenue Code of 1986, as amended.
(g) "Construction Contract" - defined as in Section 5(c).
(h) "District" - Monterey Regional Waste Management District, the
owner and operator of the Landfill.
(i) "Equipment" - the Landfill Gas recovery wells and other
equipment now used and to be used in connection with the Landfill Gas Recovery
Project at the Landfill and more particularly described in the Project
Documents.
(j) "Expansion Area" - Module 3 and the "Wet Weather" area as
described on Exhibit B annexed hereto.
(k) "Landfill" - Monterey Peninsula Landfill located in Monterey,
California, as shown on Exhibit B annexed hereto.
(l) "Landfill Gas" - methane gas and other gases produced by the
anaerobic decomposition of matter within the Landfill.
(m) "Landfill Gas Lease" - the Lease, dated June, 1983, as amended,
originally entered into between Monterey Peninsula Garbage and Refuse Disposal
District and Marina Landfill Gas Corporation.
(n) "Landfill Gas Recovery Project" - the project to recover
Landfill Gas now and to be undertaken at the Landfill, utilizing the Project
Properties.
(o) "Permits" - the permits and licenses relating to the Landfill
Gas Recovery Project as more fully described in Section 2(a)(iv).
113
(p) "Project Documents" - The Landfill Gas Lease, the Amendment to
and Restatement of Gas Sales Contract and the Amendments, each as more
particularly described as Exhibit A annexed hereto.
(q) "Project Properties" - the assets described in Section 2(a).
(r) "Section 29 Credits" - the credits against income tax liability
provided for the production and sale of fuel from a nonconventional source under
Section 29 of the Code.
(s) "User" - Pacific Gas and Electric Company.
2. SALE AND ASSIGNMENT.
(a) Subject to the payment by Buyer of the purchase price of
$1,150,000, Seller hereby sells, transfers and assigns unto the Buyer, its
successors and assigns, all of Seller's right, title and interest in
(i) the Project Documents and the Landfill Gas Recovery
Project, including, without limitation, all easements, rights of way, and
appurtenances and all rights to drill for Landfill Gas in all sections of the
Landfill, whether developed now or hereafter;
(ii) the Landfill Gas and the Landfill Gas reserves at, in and
under the Landfill;
(iii) the Equipment; and
(iv) all other tangible and intangible personal property,
interests and rights relating to the Landfill Gas Recovery Project, including,
without limitation, any use, occupancy, water, environmental, discharge,
construction and operating permits or licenses (the "Permits"), to the extent
assignable.
All the foregoing are referred to herein as the "Project
Properties."
All of Buyer's rights shall be subject to the rights of
the District under the Project Documents.
(b) As a material condition hereof and covenant of the Buyer, the
Buyer agrees to be bound by all the terms, covenants, obligations and conditions
of the Project Documents.
(c) The Seller has received from the Buyer simultaneously herewith
all of the following duly executed:
(i) the Assignment; and
(ii) the Bill of Sale.
(d) The Buyer has received from the Seller simultaneously herewith:
(i) the Assignment, duly executed by the Seller and duly
consented to by the District;
114
(ii) the Bill of Sale;
(iii) such other instruments of transfer and consent as shall
be necessary to transfer to Buyer the rights to the Project Properties.
3. ALLOCATION OF PURCHASE PRICE. The purchase price set forth in
section 2(a) shall be allocated as set forth in Exhibit D annexed hereto. The
Buyer and the Seller shall report the transfer of project properties in
accordance with the provisions of Section 1060 of the Internal Revenue Code of
1986, as amended and the regulations thereunder.
4. PAYMENT.
(a) In consideration for the Seller's agreements hereunder, the
Buyer shall pay an aggregate of $1,150,000, payable as follows:
(i) The Buyer has heretofore paid to the Seller the sum of
$7,500.
(ii) The Buyer has paid to the Seller the sum of $942,500 in
immediately available funds on the date hereof; and
(iii) The Buyer shall pay to Seller the sum of $200,000, in
immediately available funds, upon the first to occur of the following events,
with interest at the rate of 9% per annum from the date of this Agreement
through the date of payment, payable at the date of payment:
(x) December 31, 1997, if no changes to Section 29 of the
Code materially adverse to Buyer with respect to the Landfill Gas
Recovery Project shall have been enacted into law prior to that date;
or, if enacted, shall have been repealed prior to that date; or
(y) the date upon which an amendment to Section 29(g)(1)(A) of
the Code shall have been enacted into law; provided that the July 1, 1998 date
in such Section shall be changed to a date no earlier than December 31, 1997 and
no other amendments to Section 29 of the Code materially adverse to the Buyer
with respect to the Landfill Gas Recovery Project shall have been enacted into
law; or
(z) the date upon which the next Federal budget shall be
enacted into law; provided that no changes to Section 29 of the Code materially
adverse to the Buyer with respect to the Landfill Gas Recovery Project shall
have been enacted into law in connection with the enactment of such budget.
If none of the above events shall occur on or before December 31, 1997, then,
upon such date, the obligation to make the $200,000 payment along with any
accrued interest shall terminate and be of no further force and effect and the
aggregate consideration shall be thereupon reduced automatically to $950,000.
5. EMCON'S AND SELLER'S WARRANTIES. EMCON and the Seller jointly
represent and warrant to the Buyer on and as of the date hereof:
(a) The Seller is a corporation duly and validly organized and
existing in good standing under the laws of the state of its organization; the
115
Seller has all necessary power and authority to own its properties and carry on
its business in the places where the ownership of such properties and the
conduct of such business so requires; the Seller has the necessary power and
authority to enter into the Agreements and to carry out the transactions
contemplated hereunder and thereunder; the execution and delivery of the
Agreements by the Seller and the performance of its obligations hereunder and
thereunder, including the conveyance of its rights under the Project Documents
and the acceptance of the purchase price in exchange therefor and the sale of
the Project Properties, have been duly authorized by all necessary action of the
Seller and do not violate or conflict with (i) any provision of the Articles of
Incorporation or By-Laws of the Seller, (ii) any law or any order, writ,
injunction, decree, rule or regulation of any court, administrative agency or
any other governmental authority, or (iii) any agreement to which the Seller is
a party or by which the Seller's interest in the Project Properties is bound;
the Seller is not subject to any restriction or agreement which (with or without
the giving of notice or passage of time or both) prohibits or would be violated
by, and the Seller has obtained all of the consents of the parties necessary
for, the consummation of the transactions contemplated hereby; and the
Agreements constitute, and when executed and delivered will constitute, the
valid and binding obligations of the Seller enforceable in accordance with their
terms.
(b) The Seller is the sole owner of the leasehold estate and
Landfill Gas rights created or granted by the Project Documents all of which
upon transfer to Buyer shall be free and clear of all liens, claims and
encumbrances of any kind or nature whatsoever. With respect to the Equipment,
the Seller has not transferred any interest in the Equipment, nor made or
suffered any lien, claim or encumbrance, to or by any person.
(c) The District has entered into a Construction Contract (the
"Construction Contract") with O.W.T. Construction Company effective as of
December 31, 1996 to build an addition to the Landfill Gas Recovery Project in
the Expansion Area. A true and complete copy of this Construction Contract is
attached to this Agreement as Exhibit C. The Construction Contract is in full
force and effect, is valid and subsisting, and no party is in default
thereunder. The Project Documents, including, without limitation, the
Amendments, and the Construction Contract, are valid and subsisting and in full
force and effect, no party is in default thereunder, and the Project Documents
grant all rights necessary for the conduct of the Landfill Gas Recovery Project
upon the lands described therein.
(d) The Seller has good and lawful right to assign rights under the
Project Documents and to assign the Landfill Gas lying in and under the Landfill
to the Buyer as done in the Assignment and to sell the Equipment as is done by
the Bill of Sale.
(e) The Buyer shall have the exclusive right to recover and remove
the Landfill Gas in and under the Landfill (including any areas of the Landfills
not yet developed), subject to the terms of the Project Documents.
(f) The Seller has granted to the Buyer its entire economic
interest in the Landfill Gas in the Landfill subject to the terms hereof.
(g) The Project Properties will be kept free from any adverse lien,
security interest or encumbrance attributable to the acts of the Seller and the
Seller warrants specially its title to the leasehold estate granted herein and
hereby subject to the terms of the Project Documents.
(h) All income, sales, use, value added, or other taxes, licenses,
tolls, inspection or other fees, permits or certificates ("Imposts") which were
or may be required to be paid or obtained in connection with the Seller and the
Seller's business operations have been, or when due will promptly be, paid in
full or obtained.
116
(i) There is no action, suit or proceeding pending or threatened
against the Seller or any other party before or by any court, administrative
agency or other governmental authority affecting the Project Properties, the
Landfill Gas Recovery Project or the transactions contemplated by the
Agreements. In connection with its operation of the Landfill Gas Recovery
Project, the Seller has complied with all applicable laws, statutes,
regulations, ordinances and rules, including those relating to the environment
and the Seller and the District have secured all necessary Permits, copies of
which have been heretofore furnished to the Buyer.
(j) The Seller has furnished or will, upon request, furnish to the
Buyer a true, correct and complete copy of the Project Documents, the
Amendments, the agreement with the User relating to the sale by the Seller to
the User of electricity and of each and every material document delivered to or
by the Seller, as the case may be, in connection with the purchase of the
Project Properties by Seller.
(k) To the best of Seller's knowledge, the Equipment is in good
working order and operating condition.
(l) The gas flow projections prepared by John Pacey, dated December
12, 1996, attached to this Agreement as Exhibit F, represent Seller's best
estimate of the flow of Landfill Gas to be produced at the Landfill Gas Recovery
Project from January 1, 1997 to 2020. Buyer acknowledges that projections and
the related representations herein are not to be construed as a guarantee of the
actual flow of Landfill Gas to be provided at the Landfill Gas Recovery Project
after the closing. The attached Exhibit H represents Seller's accurate statement
of income received from the sale of LFG to the District for the period indicated
in Exhibit H. In addition, the Section 29 Credits generated by the Landfill Gas
Recovery Project for the period January 1, 1994 through November 30, 1996 are as
follows:
1994 - 12 months - $126,588
1995 - 12 months - $173,562
1996 - 11 months - $120,621
(m) In connection with the construction, fuel supply, power
generation and transmission and other operations and processes relating to the
Landfill Gas Recovery Project, no release, emission, or discharge into the
environment of petroleum or petroleum products, or hazardous substances as
defined under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. ss.9601 et seq., or hazardous waste as defined
under the Solid Waste Disposal Act, 42 U.S.C. ss.6901 et seq., or air pollutants
as defined under the Clean Air Act, 42 U.S.C. ss.7401 et seq., or toxic
pollutants as defined under the Clean Water Act, 33 U.S.C. ss.1251 et seq., has,
to the best of the Seller's or the Seller's Affiliate's knowledge and after
inquiry, occurred, is presently occurring, or is expected to occur other than
federally permitted releases or those equal to or less than reportable
quantities, or other than releases, emissions or discharges that do not or would
not exceed applicable standards or limitations under any other applicable
federal, state, or local laws or regulations. The Landfill Gas Recovery Project,
the Project Properties, and the Seller's use and proposed use thereof are not in
violation of any environmental or occupational safety and health laws, or other
applicable law now in effect, the effect of which violation, in any case or in
the aggregate, would materially adversely affect the Landfill Gas Recovery
Project or the Seller's use thereof, or which, in any case or in the aggregate,
would impose a material liability on or jeopardize the interest of the Seller in
the Landfill Gas Recovery Project. Seller has no knowledge of any past or
existing violations of any such laws, ordinances or regulations issued by any
governmental authority.
117
(n) Except with respect to the Equipment, as to which Seller makes
no representation, there are no liabilities or obligations affecting the Project
Properties or the Landfill Gas Recovery Project, except as specifically set
forth in this Agreement or the Project Documents.
(o) To the best of their knowledge, neither EMCON nor Seller is
aware of any fact or circumstance through the date hereof that would prevent the
Landfill Gas to be recovered from the Landfill Gas Recovery Project to be
eligible for Section 29 Credits at least through December 31, 2002. For purposes
hereof, the liability of EMCON and Seller for a breach of this warranty shall in
the aggregate not exceed the total purchase price actually paid to Seller
pursuant to Section 4 above.
6. BUYER'S WARRANTIES. the Buyer represents and warrants to the Seller:
(a) The Buyer is a limited partnership duly and validly organized
and existing in good standing under the laws of the state of Delaware; the Buyer
has all power and authority to own its properties and carry on its business in
the places where the ownership of such properties and the conduct of such
business so requires; the Buyer has the power and authority to enter into the
Agreements, and to carry out the transactions contemplated hereunder and
thereunder; the execution and delivery of the Agreements by the Buyer and the
performance of its obligations hereunder and thereunder, including the payment
of the purchase price in exchange for the assignment of the Seller's rights
under the Project Documents, have been duly authorized by all necessary action
of the Buyer and do not violate or conflict with (i) any provision of the
Buyer's limited partnership agreement or certificate of limited partnership,
(ii) any law, or any order, writ, injunction, decree, rule or regulation of any
court, administrative agency or any other governmental authority, or (iii) any
agreement to which the Buyer is a party or by which the Buyer is bound; the
Buyer is not subject to any restriction or agreement which (with or without the
giving of notice or the passage of time or both) prohibits or would be violated
by, and the Buyer has obtained all of the consents of third parties necessary
for, the consummation of the transactions contemplated hereby; and the
Agreements constitute and when executed will constitute, the valid and binding
obligations of the Buyer enforceable in accordance with their terms.
7. INDEMNIFICATION BY SELLER.
(a) The Seller hereby indemnifies and holds the Buyer harmless from
and against any and all loss, cost, damage, injury or expense (including,
without limitation, court costs and reasonable attorneys' fees) wheresoever and
howsoever arising which the Buyer or its officers, directors, shareholders,
agents, employees, successors or assigns may incur by reason of any breach by
the Seller of any of the warranties or representations by, or obligations of,
the Seller set forth in this Agreement, up to and including the date of this
Agreement. The Seller further indemnifies and holds the Buyer harmless from and
against any loss sustained or reasonable expense incurred by the Buyer as the
direct result of, or arising out of, the imposition on the Equipment of any tax
lien, or the foreclosure of such lien, by virtue of the Seller's failure to pay,
or the underpayment of, any tax required to be paid by the Seller pursuant to
this Agreement.
(b) Without limiting the generality of the provisions of Section
7(a) above, the Seller further indemnifies and holds the Buyer harmless from any
loss, liability, claim, damage or expense resulting from any defect of title as
specially warranted herein and further agrees to assume and bear the reasonable
expense of the defense of any action brought against the Buyer as a result of
118
such title defect; and the Seller covenants that it will take no action or omit
to take any action which would result in the amendment, modification,
cancellation or termination either of the Project Documents unless such
amendment, modification, cancellation or termination shall not diminish the
Buyer's rights under this Agreement. If the Seller fails to perform any of such
covenants and agreements within a reasonable time after written notice thereof,
the Buyer shall have the right to make the same and to perform such obligation
and cause Seller to reimburse Buyer for its cost in so doing.
8. INDEMNIFICATION BY BUYER. The Buyer hereby indemnifies and holds the
Seller harmless from and against any and all loss, cost, damage, injury or
expense (including, without limitation, court costs and reasonable attorneys'
fees) wheresoever and howsoever arising which the Seller or its officers, agents
or employees may incur by reason of any breach by the Buyer of any of the
warranties or representations by, or obligations of, the Buyer set forth in this
agreement. The Buyer further indemnifies and holds the Seller harmless from and
against any loss incurred by the Seller as the direct result of, or arising out
of, the imposition on the Equipment of any tax liens, or the foreclosure of such
lien, by virtue of the Buyer's failure to pay, or the Buyer's underpayment of,
any federal, state or local income tax liability, franchise tax, capital tax,
value added tax or other taxes or fees.
9. NOTICES.
Any notice, consent, communication or delivery which is permitted
or required hereunder shall be duly and properly given if in writing and either
delivered personally to the person to whom it is authorized to be given or if
sent by nationally recognized over-night courier (including express mail) or
registered or certified mail, return receipt requested, postage prepaid, as
follows:
If to the Seller:
Monterey Landfill Gas Corporation
c/o EMCON
400 S. El Camino Real, Suite 1200
San Mateo, California 94402
Attention: R. Michael Momboisse, Esq.
Telecopy Number: 415-375-0763
If to EMCON:
EMCON
400 S. El Camino Real, Suite 1200
San Mateo, California 94402
Attention: R. Michael Momboisse, Esq.
Telecopy Number: 415-375-0763
If to the Buyer:
119
Biomass Energy Partners V, L.P.
c/o ZFC Energy, Inc.
40 Tower Lane
Avon, Connecticut 06001
Attention: Mr. Martin F. Laughlin
Telecopy Number: (860) 677-4036
With a copy to:
Newman Tannenbaum Helpern Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022
Attention: Stephen Rosenberg, Esq.
Telecopy Number: (212) 371-1084
Changes of address or parties to be notified shall be accomplished in
like manner.
10. BEST EFFORTS; FURTHER ASSURANCES. Each of the Buyer and the Seller
agree to use their best efforts in good faith to consummate the transactions
provided for and contemplated by this Agreement. Each of the Buyer and the
Seller further agree to execute and deliver to the other party such documents or
instruments as shall be reasonably requested by such other party in order to
carry out the transactions contemplated by this agreement.
11. MISCELLANEOUS.
(a) SURVIVAL. The covenants, agreements, representations and
warranties made herein of each of the Seller and the Buyer shall survive the
execution and delivery of this Agreement, the other Agreements, and the
consummation of the transactions described herein or therein.
(b) AMENDMENTS. This Agreement may not be altered, modified, or
amended except by a writing signed by the parties.
(c) SUCCESSORS. The rights and obligations of the parties hereto
shall inure to the benefit of, and be binding and enforceable upon, their
respective legal representatives, successors, assigns, and transferees. Without
limiting the foregoing, the Buyer shall have the right to assign all of its
rights and obligations under this Agreement to a limited partnership of which
the Buyer is the general partner. Upon any such assignment, the Buyer shall give
notice thereof to the Seller.
(d) GOVERNING LAW. This Agreement shall be governed by, and
interpreted under, the laws of the State of California applicable to contracts
made and to be performed therein, without giving effect to the principles of
conflict of laws.
(e) GENDER. All terms and words used in this Agreement, regardless
of the number or gender in which they are used, shall be deemed to include any
other number and any other gender, as the context may require.
(f) CAPTIONS. Captions used herein are inserted for reference
purposes only and shall not affect the interpretation or construction of this
Agreement.
120
(g) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
121
IN WITNESS WHEREOF, the Buyer and the Seller have executed this
Agreement on the date first above written.
SELLER:
MONTEREY LANDFILL GAS CORPORATION
By: /s/ R. Michael Momboisse
--------------------------
Name: R. Michael Momboisse
Title: Chief Financial Officer
Vice President - Legal
BUYER:
BIOMASS ENERGY PARTNERS V, L.P.
By: ZFC Energy, Inc., General Partner
By: /s/ Martin F. Laughlin
------------------------
Name: Martin F. Laughlin
Title: Vice President
EMCON:
EMCON, a California corporation
By: /s/ R. Michael Momboisse
-------------------------
R. Michael Momboisse
Chief Financial Officer
Vice President -Legal
122