Exhibit 10.9
STATE of DELAWARE
LIMITED LIABILITY COMPANY
CERTIFICATE of FORMATION
First: The name of the limited liability company is Virtex Air Systems, LLC.
Second: The address of its registered office in the State a Delaware is 15 East
North Street, Dower, DE in the city of Dover County of Kent. The name of its
Registered agent at such address is Paracorp Incorporated.
Third: (Use this paragraph only if the company is to have a specific effective
date of dissolution "The latest date on which the limited liability company is
to dissolve is ___________."
Fourth: (Insert any other matters the members determine to include herein.)
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In Witness Whereof, the undersigned have executed this Certificate of Formation
of Virtex Air Systems, LLC this 20th day of July 1999.
By:
/s./Spencer Brown Jr.
Spencer Brown Jr.
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "VIRTEX AIR SYSTEMS LLC", FILED IN THIS OFFICE ON THE
TWENTY-FIRST DAY OF JULY, A.D. 1999, AT 9 O'CLOCK A.M.
/s./Edward J. Freel, Secretary of State
Edward J. Freel
AUTHENTICATION: 9878713
DATE:07-21-99
ADDENDUM
VAC and NDC agree to amend the Escrow Fund Agreement ('the Agreement by deleting
the present Section 4.08 of the Agreement and replacing it with the following
addendum:
4.08 Whereas VAC is contributing earmarks totaling $11,250,000 to VIRTEX Air
Systems, L.L.C. (the Company) that will result in the construction and operation
of several assets; each asset will be: the equivalent to the 50 MWe e-SCRUBTM
Technology Demonstration (the Unit). Whereas the Unit will be carried on the
balance sheet of the Company as an asset of approximately $11,250,000; and this
Unit is projected to generate earnings before income taxes, depreciation &
amortization (EBITDA) of approximately $1,780,000 per annum. Whereas the final
construction costs will not be determined until after the Unit is completed and
the actual EBITDA. will not be known until after the Unit is placed in
operation.
In return for its share of the ownership of this asset, NDC agrees to pay VAC a
Management Fee (the VAC Fee) equal to one-half of the actual DOE earmark funds
received. NDC we'll pay the VAC Fee in five equal installments over a
thirty-month period (bi-annual payment). The first installment will be due
within twelve months after the facet earmarked f reds are received. However, in
no case will the payments start until after the completion of the Unit. In
addition if no earnings are achieved in a bi-annual period, then no bi-annual
payment will be due.
NDC agrees to pay the Fee to VAC is live equal installments over a thirty month
period (bi-annual payment). However, in no case will any payments to VAC start
until after the completion of construction of the Unit and the Unit is
operating. In addition if no earnings ate achieved in a bi-annual period, then
no bi-annual payment will be due to VAC.
NDC's obligation under this agreement will in no event exceed profit
distributions to NDC paid out of VIRTEX to NDC. It profit distributions to NDC
are less than the Management Fee referred to above, then the excess Management
Fee aver the profit distribution amount will be deferred until profit
distributions to NDC from VIRTEX will cover the Management Fee payable to VAC.
It is understood that this scenario may extend the payment time frames PAO the
above mentioned 30-mouth period.
4-09 The newly formed company Virtex shall have the right to purchase
e-SCRUB equipment and related components directly from either VAC or
its manufacturers, sub-contractors, vendors and other direct sources.
Virtex agrees that it will pay VAC at 6% management fee for handling on
any such purchases on a case by cue basis.
ESCROW FUND AGREEMENT
This Escrow Fund Agreement dated this 3rd of June, 1999, ("Escrow Agreement"),
is entered into by and between Virginia Accelerators Corporation ("VAC"),
located at 301 Southwest Street, Alexandria, Virginia; National Diversified
Company ("NDC"), located at 1700 N. Valley Mills Drive, Suite 1, Waco, Texas;
and Bernhard P. Molldrem located at 2nd Floor, Maurice Bldg. 333 East Onendaga
Street, Syracuse, NY ("Escrow Agent").
RECITALS
1. The parties have agreed to entered into negotiations to establish a business
entity,("The Company"), in the form of a limited liability company that will be
RDG incorporated in Delaware or in another state at least as favorable to the
owners of the Company, for the purpose of designing, manufacturing, selling,
constructing, and installing e-SCRUBTM air pollution control system throughout
the world (with the exception of any existing VAC territorial agreements in
place as of June 11, 1999. This agreement will be effective immediately upon its
execution and shall govern relationship between the parties until such time as
the new entity has been formed and a separate or related agreement has been
reached providing for the management and operation of the new company.
2. VAC desires to engage process of designing, manufacturing, selling,
constructing, and installing e-SCRUBTM air pollution control systems, and to
offer related engineering services throughout the world, in conjunction with
NDC, within the framework of the organization of the new company. VAC is willing
to make available certain proprietary information for NDC for use in its
evaluation of the future business relationship contemplated by the parties. This
technology will also be made available to the new company to be formed pursuant
to the subsequent agreements.
3. NDC desires to engage in the designing, manufacturing, selling, constructing,
and installing e-SCRUBTM air pollution control systems and other related
engineering services throughout the world, in conjunction with VAC within the
framework of the new company.
4. This Escrow Agreement is entered into to create as escrow fund to secure
VAC's agreement to negotiate exclusively with NDC during the term of this
agreement.
In consideration of the promises and agreements of the parties, and for other
good and valuable consideration, the receipt of which is acknowledged, the
parties agree as follows:
ARTICLE 1
ESCROW DEPOSIT
1.01 NDC contemporaneously with the execution of this agreement shall deposit
$250,000.00 with Escrow Agent, to secure their obligations as described in this
agreement. This amount shall be known as the "escrow fund".
DISBURSEMENT
1.02 The assets in the escrow fund are to be retained by the escrow agent as an
escrow trustee pursuant to this agreement. The assets (and income earned on
them) may be disbursed from the escrow fund only in accordance with Article 2,
below.
INVESTMENT DECISIONS
1.03 The assets in the escrow fund shall be invested at the sole discretion and
direction of the escrow agent, in a Trust account.
ARTICLE 2
DUTIES OF ESCROW AGENT
INVESTMENT BY AGENT
2.01 The Escrow Agent shall receive and hold the escrow fund pursuant to the
terms of this escrow agreement and shall invest the escrow funds as provided in
Paragraph 1.03, above. Interest or other income earned by the assets held in the
escrow fund shall also be invested in accordance with the same procedures, until
the escrow fund is disbursed as provided below.
DISBURSEMENTS
2.02 The Escrow Agent shall disburse the escrow fund only in accordance with the
joint written instructions signed by all parties. All interest and other income
earned on the escrow fund at the time of disbursement shall be
distributed in the same proportion as the distribution of the escrow fund. Upon
disbursement of all of the escrow fund, including interest, or other income
earned on it, the escrow agreement shall terminate.
(.0)
ARTICLE 3
OPERATION
OBLIGATIONS
3.01 The Escrow Agent shall be obligated only for the performance of the duties
that are specifically set forth in this agreement. The Escrow Agent shall be
protected and acting or refraining from acting on any instrument believed to be
genuine and to have been signed or presented to the proper party or parties. The
Escrow Agent shall not be liable for any action taken or omitted in good faith
and believed to be authorized by this escrow agreement nor for any action taken
or omitted in accordance with the advice of the escrow agent's counsel.
LIMITATION OF LIABILITY
3.02 The Escrow Agent shall have no liability under, or duty to inquire into the
terms and provisions of the future agreement contemplated herein. It is agreed
that the Escrow Agent's duties are purely administrative in nature and that the
escrow agent shall incur no liability whatsoever except willfull conduct or
gross negligence, so long as the Escrow Agent has acted in good faith. The
Escrow Agent shall not be bound by any modification to this Agreement, unless it
is in writing, signed by all of the parties to the Escrow Agreement.
GOVERNING LAW
3.03 This Escrow Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
EXCLUSIVITY
3.04 VAC will not seek discussions, negotiations, or contacts with any other
parties to form any other entity, or venture used to exploit the "e-SCRUB
technology", and will cease and disengage from any existing discussions with any
parties other than NDC.
TERM OF ESCROW AGREEMENT
3.05 This Agreement shall terminate upon the formation of the new company,
satisfaction of all contingencies described herein, and the disbursement of
funds pursuant to the terms of this Agreement. Unless extended in writing, this
Agreement shall terminate 60 days following the date of its execution.
ARTICLE 4
CONTINGENCIES TO BE MET PRIOR TO RELEASE OF ESCROW MONEY TO VAC
4.01 Completion of due diligence examination, in a form acceptable to NDC. In
this regard, VAC agrees to make available all relevant material with respect to
present or future products, research and development, inventions, processes,
techniques, designs or technical information and data, marketing plans,
financial statements, patent information, etc., relating to the operation and
development of the E-SCRUBTM systems. The due diligent examination will include,
at a minimum, an examination of business operations of VAC, its business plan
and technology, and all related agreements and intellectual property rights.
Upon verification of the following items, the escrow funds will be released to
VAC according to the schedule, which gives the number of days after the Escrow
Agreement is signed, and amounts that are listed below:
Item Amount # of Days
a) Business Plan with Projected Financial Statement. $25,000 5
b) Verification of DoE earmark in the amount of
$1,250,000 for the design of the 50 MWe Technology
Demonstration e-SCRUBTM project. $25,000 5
c) Verification of DoE earmark in the amount of
$10,000,000 for the construction of the 50 MWe
Technology Demonstration e-SCRUBTM project. $25,000 30
d) Verification of interest in e-SCRUBTM process
by one of the following power plants (or such other
plant acceptable to NDC): $25,000 30
1) Homer City, Pennsylvania;
2) Alexandria, Virginia;
3) Chalk Point or Morgantown, Maryland.
e) Verification of interest by one of the following
members of Congress to establish a 50 MWe
Technology Demonstration e-SCRUBTM project in
his respective district. $25,000 30
1) Congressman John P. Murtha
2) Congressman James P. Moran
3) Congressman Steny Hoyer
f) Formation of the Company. $75,000 60
g) Any one of the following events occur: $50,000 60
1) allocation of DoE money for a demonstration, or 2) a contract with a utility
to install a demonstration project, or 3) a letter of intent with a utility to
install a demonstration project.
4.02 After the formation of the company, the $250,000 will be credited against
letter of credit as provided in item 4.07.
FORMATION OF NEW COMPANY
4.03 The New Company will be owned in accordance with the following percentages:
a. VAC 50%
b. NDC 50%
4.04 The Company will be incorporated in Delaware or in another state at least
as favorable to the owners of the Company.
4.05 VAC and NDC will execute all necessary documents to register the company
with the proper governmental offices in the Commonwealth of Virginia and any
other states that all parties being necessary.
4.06 The Company shall establish a board of directors; VAC shall appoint 50% of
the directors and the Chairman of the Board, and NDC shall appoint 50% of the
directors and vice Chairman of Board. The Company shall establish a management
organization to be in charge of the daily management. One general manager shall
be chosen by VAC, and one deputy general manager will be chosen by NDC.
4.07 VAC shall contribute any exclusive, royalty free license covering the
intellectual property for the e-SCRUBTM system and sub-systems, including
trademarks, licensing agreements, patents, engineering designs and equipment
specifications. NDC shall contribute capital in the form of cash or financing,
in an amount to be determined following the completion of the due diligence
examination, and a reasonable valuation of the assets contributed, or to be
contributed by VAC, in light of the future capital requirements which may be
necessitated by operations of the new entity. The final contribution amount will
be an amount determined following negotiations between the parties, as a minimum
amount necessary to secure bonds according to a schedule agreed upon by the
parties. The contribution may be made all, or substantially all, in the form of
a letter of credit, which will be retired over time by NDC's contributions from
their respective shares of the profits. The letter of credit will be totally
retired when the New Company's accumulated profits equals twice the amount of
the letter of credit. The full contribution by NDC will be computed following an
audit by NDC of existing VAC operations, including, specifically all assets to
be transferred to the New Company, verification by NDC of the VAC team members
and any existing contracts VAC has with each member, verification by NDC of all
existing licensing agreements, including, but not necessarily limited to R-C,
Inc., Helfritch, and Allied Signal, and verification of the ammonia/fertilizer
contract with Royster Clark, Inc.
4.08 Whereas VAC is contributing earmarks totaling $11,240,000 to the Company
that will result in the construction and operation of an asset, the 50 MWe
Technology Demonstration e-SCRUBTM treatment facility. Whereas this facility
will be carried on the Company's balance sheet as an $11,250,000 asset and will
produce earnings before income tax, depreciation and amortization of $1,780,000
per annum. In return for its share of the ownership of this asset, NDC will pay
VAC one half of the earmark funds. As these funds are paid to VAC, NDC will pay
within 30 days one half of amounts that are tendered by the DoE.
MISCELLANEOUS PROVISIONS
5.01 It is agreed that VAC and NDC have not formed a partnership by this
agreement, and no party authorizes the other to act as its general agent or
partner for any purpose whatsoever.
5.02 This agreement may not be assigned by any party without the prior written
consent of all other parties.
5.03 It is acknowledged by all parties that each may be furnished with, or may
otherwise receive or have access to certain proprietary information or material
which relate to past, present, or future products, research and development,
inventions, processes, techniques, designs, or technical information and data,
marketing plans, financial statements, proforma statements, etc., relating to
the business and operation of the various parties to this agreement. All parties
to this agreement agree not to disclose such proprietary information to third
parties, unless specifically authorized to make such disclosure by the other
parties, in writing.
5.04 This agreement shall be binding on and enure to the benefit of the parties
to this agreement and their respective successors and permitted assigns. No
other person shall have any rights under this escrow agreement.
5.05 Any notice, statement or other communication that is required or that may
be given under the terms of this agreement shall be writing and shall be
sufficient in all respects if properly addressed and delivered personally, of
the United States Certified Mail, postage pre-paid as follows:
if to VAC: 301 Southwest Street, Alexandria, Virginia
if to NDC: National Diversified Company, Attention: Spencer Brown,
1700 N. Valley Mills Drive, Suite 1, Waco, Texas 76710
if to Escrow Agent: Bernhard P. Molldren, 2nd floor Monroe Building, 333 East
Onoxdaga Sreet, Syracuse, NY
or to any other address that any party shall designate in writing to the
other parties in accordance with this provision.
5.06 This agreement constitutes the entire agreement between the parties hereto
pertaining to the subject matter described herein, and supersedes, except for
Appendix A, Proprietary Information Agreement, all prior and contemporaneous
agreements, representations, warranties and understandings of the parties. No
supplement, modification or amendment of this agreement shall be binding unless
executed in writing by all parties. No waiver of any of the provisions of this
agreement shall be deemed or shall constitute a waiver of any other provision,
whether similar or dissimilar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless in writing and signed by the party
making such waiver.
5.07 This agreement is executed by agents having full authority to act on behalf
of their respective corporations.
Dated to be effective as of June 30, 1999.
VIRGINIA ACCELERATORS CORPORATION
BY: /s./ Ralph D. Genuario
Ralph D. Genuario, President
NATIONAL DIVERSIFIED COMPANY
By: /s./ Spencer Brown, Jr.
Spencer Brown, Jr., Chariman & CEO
APPENDIX A
NON-DISCLOSURE AGREEMENT
A. During the cooperation between National Diversified Co. located at 1700 North
Valley Mills Drive, Suite #1, Waco, TX 76710 and Virginia Accelerators
Corporation, located at 301 South West Street, Alexandria, VA 22314, it may be
necessary for either party to provide proprietary information to the other, and,
with respect to such information, the parties agree as follows:
(1) Proprietary information is defined as, but not limited to, performance,
sales financial, contractual and special marketing information, ideas, technical
data and concepts originated by the disclosing party, not previously published
or otherwise disclosed to the general public, not previously available to the
receiving party of others without restriction, nor normally furnished to others
without compensation, and which the disclosing party desires to protect against
unrestricted disclosure or competitive use, and which is furnished pursuant to
this Agreement and appropriately identified as being proprietary when furnished.
(2) The receiving party of proprietary information agrees to hold such
information in confidence for a period of three years from that date of its
receipt.
(3) The parties each will designate in writing one or more individuals within
their own organization as the only person(s) authorized to receive proprietary
information exchanged between the parties pursuant to this Agreement.
(4) Proprietary information must be submitted in writing and shall be clearly
identified as such.
(5) Each party is authorized to incorporate such proprietary information i n any
analysis contemplated by this Agreement, provided such analysis bears a
restrictive legend similar to that provided for in their normal course of
business.
(6) Proprietary information which is exchanged may be used only by the receiving
party in connection with the analysis or in the performance of any contract
award thereunder.
(7) Neither party shall divulge or use, for any purpose not connected with the
analysis contemplated in this Agreement, any program or system concept of other
information disclosed to it by the other party in connection with the
performance of this Agreement, and marked with a proprietary legend, to any
person or office other than such persons(s) and offices) appropriate for the
execution of this agreement.
(8) Each party receiving proprietary or confidential information will require
that all third parties to this Agreement, if any, to which it may give such
proprietary or confidential information protect the same in accordance with the
provisions contained herein.
(9) The standard of care for protecting such information, imposed on the party
receiving such information, will be that degree of care the receiving party uses
to prevent disclosure, publication, or dissemination of its own proprietary
information.
(10) Neither party shall be liable for the inadvertent or accidental disclosure
of proprietary information, if such disclosure occurs despite the exercise of
the same degree of care as such party normally takes to preserve its own such
data.
B. The obligation with respect to the protection, handling and non-disclosure of
proprietary information imposed in the preceding paragraphs shall terminate
three years from the date of its receipt, unless the parties enter into a
definitive subcontract, in which case, the rights and obligations of the parties
shall be governed by the contractual arrangements, or
(1) Information which becomes lawfully known or available to receiving party
from a source other than the disclosing party and without breach of this
Agreement by the recipient.
(2) Information developed independently by the receiving party.
(3) Information which becomes available to the receiving party by inspection or
analysis of products available in the market.
(4) Information which is within, or later falls within, the public domain
without breach of this Agreement by the recipient.
(5) Information furnished to the parties with unlimited rights.
(6) Information disclosed with written approval of the other party.
(7) Information disclosed by the party providing the same to others on a
non-restricted basis.
(8) Nothing herein shall restrict either party from disclosing any portion of
such information on a restricted basis pursuant to a judicial or other lawful
Government order, but only to the extent of such order.
C. Any information, other than proprietary information identified as provided
above, shall not be restricted by either party as to the other party is use
thereof.
D. No license to the other party, under any trademark, patent or copyright, or
applications which are now or may thereafter be owned by such party, is either
granted or implied by the conveying of information to that party. None of the
information which may be submitted or exchanged by the parties shall constitute
any representation, warranty, assurance, guarantee, or inducement by either
party to the other with respect to the infringement of trademarks, patents,
copyrights, or any right of privacy, or other rights of third persons.
Date: June, 30, 1999
National Diversified Co.
1700 North Valley Mills Drive
Suite #1
Waco, TX 76710
/s./ Spencer Brown, Jr.
Spencer Brown, Jr., President
Date: May 28, 1999
Virginia Accelerators Corporation
301 S. West Street
Alexandria, VA 22314
(703) 836-1760
/s./ Ralph D. Genuario
Ralph D. Genuario, President