Exhibit 10.5
World Waste of Anaheim, Inc.
Taormina Industries, LLC.
Waste Recycle Agreement
This Waste Recycle Agreement (hereinafter "Agreement"), dated June 27,
2003 (the "Effective Date") is made by and between World Waste of Anaheim, Inc.,
a California Corporation, (hereinafter "WWA") having its principal offices at
5567 Calumet Avenue, La Jolla, California 92037 and Taormina Industries, L.L.C.
(hereinafter "TI" as further defined below herein) a Delaware limited liability
company having it's principal place of business at 1131 North Blue Gum Street,
Anaheim, California 92806.
A. RECITALS
1. TI operates a large volume Material Recovery Facility (MRF) and
Transfer Station in Orange County and is a leading processor and
recycler of the solid waste stream in Southern California.
2. As a solid waste collection services provider for a number of cities,
TI is responsible for implementing diversion programs to reduce the
amount of solid waste from landfill disposal in order to assist its
public agency customers to meet the diversion goals and mandates of
AB939.
3. TI currently employs many proprietary and commercially available means
to recover material from the waste stream in order to provide diversion
for its customers who utilize the facility.
4. TI is continually exploring means to enhance recovery efforts, provide
additional diversion for its existing customers and provide diversion
opportunity for future customers.
5. WWA is the exclusive licensee of a process, which recovers materials
from the waste stream beyond the recovery levels of traditional solid
waste processing.
6. WWA has worked closely with TI for several years to develop and test
the viability of its exclusive licensed patented recovery process.
7. WWA is seeking a location for their first commercially viable facility
that can receive, process and recover material from the residuals
stream of the MRF.
8. TI desires to engage WWA's services on the terms and conditions set
forth herein.
9. WWA desires to process waste materials received from TI and is willing
to do so on the terms and conditions set forth herein.
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - 1
10. It is TI's intention to deliver the agreed upon average tonnage as it
is WWA's intention to receive and process the agreed upon tonnage;
however, from time to time circumstances may occur, such as holidays,
which could briefly interrupt the intended even flow of waste
materials. Both parties to this Agreement will make their best efforts
to deliver and receive the agreed upon tonnage as it is in the best
interest of both parties to do so.
THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this agreement, it is agreed as follows:
B. TERM OF CONTRACT
The term of this agreement shall be ten (10) years, with options for
three additional extensions of five (5) years each, exercisable by mutual
agreement of the parties, for a total potential term of 25 years. TI may agree
to extend the term of this Agreement pursuant to a written notification of the
extension served on WWA pursuant to section K(11) of this Agreement.
C. LEASE OF RECYCLING FACILITY
1. During the term of this Agreement the location of the recycling
facility shall be a structure on the TI property located at 2740 East
Coronado Street, Anaheim, California, or an equivalent and compatible
building approved in writing by both parties. TI agrees to cooperate
with and assist WWA in obtaining all required land use approvals and
modifications of existing TI permits; permits for modifications to the
existing buildings, easements, utility services, and permits to
construct, install equipment and operate the WWA facility on the above
identified TI property. The costs of all permits, authorizations or
approvals for the use of the TI facility, including without limitation
all capital and maintenance expenditures associated with making the
site suitable for the implementation of the terms of this Agreement,
shall be the sole expense of WWA.
2. WWA and TI agree that WWA will lease the proposed building for a term
of ten (10) years at the rental rate of $.53 per square foot ("the Base
Rent"), adjusted annually on a calendar year basis on January 1 of each
year using 100% of the "Los Angeles-Anaheim-Riverside CPI Index, All
Urban Consumers", as determined in the month of November preceding the
January anniversary date for adjustment of the Base Rent. WWA shall
have the option to renew the lease to coincide with the TERM OF
CONTRACT as delineated in section B of this Agreement. The parties
agree that the square footage of the facility under lease shall be
approximately 30,000 square feet, with an initial Base Rent of a
minimum of $15,900.00 per month (30,000 X $.53/ft.). In addition to the
Base Rent, the parties agree that WWA shall be responsible for the
payment of any additional or supplemental real estate taxes or
incremental operating costs directly associated with the WWA operation
resulting from the leased facility. Additionally WWA shall be
responsible for monthly service costs of all utilities serving the
leased facility. At TI's option, the additional taxes and incremental
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - `2
operating expenses may be assessed on a monthly basis as additional
rent in addition to the Base Rent, or may be separately invoiced to WWA
on an annual or more frequent basis.
3. TI agrees to defer the Base Rent for the first twelve months of the
lease term as an accommodation to WWA. This first year's deferred Base
Rent shall be paid in 48 equal interest-free payments spread over the
next 48 months (4 years) of the 10 year term of the lease beginning in
the 13th month of the lease term.
4. TI agrees to assist to make any necessary changes to the existing
building for accommodation of the addition of the WWA processing
facility, so long as such changes do not impair or impede the conduct
of TI's other business operations at the TI site. WWA agrees that TI
has final approval of any and all building modifications, material
flows and the overall processing which takes place on TI property.
5. TI and WWA agree that they shall enter into a standard form of
commercial lease agreement with the provisions in this section C
included, in substantially the same form as set forth in the attached
Exhibit A and incorporated by reference as though fully set forth
herein.
D. TI'S DUTIES AND OBLIGATIONS:
1. TI shall provide to WWA a mutually agreed upon mix of Residual
Municipal Solid Waste ("RMSW") on a 24 hour, 6 day per week basis as
requested by WWA. For purposes of this Agreement, RMSW shall mean the
MSW remaining after TI's sorting operation. TI will endeavor to remove
from MSW large bulky items such as pallets, engine blocks, bicycle
frames, tires, and similar types of bulky materials, which will not be
processed by WWA. RMSW may also include mixes of non-sorted commercial,
apartment and household waste as mutually agreed to by WWA and TI in
writing.
2. TI will deliver an average of 3,500 tons per week to the on-site
facility leased by WWA pursuant to this Agreement at a schedule to be
mutually agreed upon in writing by WWA and TI.
3. TI shall deliver up to an additional 14,000 tons per week on average,
adjusted for holidays, of RMSW to WWA's proposed new off-site facility
upon WWA's written notification to TI. Delivery by TI to the new
off-site facility is contingent upon TI's approval of the proposed
facility, and the facility being located within a mutually agreed upon
location, and distance from TI's Anaheim facility, as determined in a
written modification to this Agreement.
4. TI can deliver loads 24 hours per day, 6 or 7 days per week, at TI's
option, excluding major holidays.
5. The composition of the RMSW may be adjusted as mutually agreed upon in
writing by WWA and TI.
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - 3
6. TI will haul away all unprocessible wastes and RMSW process residuals
(hereinafter "WWA Residual") from the WWA facility on a mutually agreed
upon commercially acceptable schedule.
7. TI will have final design review in accordance with paragraph C. 4
above on how vehicles enter and exit the facility and how WWA Residual
is picked up/loaded, as well as the exterior appearance of the facility
(if on TI's property) along with all regulatory compliance issues.
8. TI has the option in its sole discretion to remove any waste material
that is deemed by TI to be a potential threat to public or worker
health and safety, or the presence of which would cause or threaten to
cause TI to be in non-compliance with any term or condition of any
permit or entitlement for operation of TI's facility.
9. Each and every obligation of TI as set forth herein is subject to TI's
ability to maintain compliance with its permits and entitlements for
operation of the TI facility in Anaheim. Nothing in this Agreement
shall be construed to require or result in TI's non-compliance with its
permits and entitlements, or to place it in breach of any law or
regulation governing operation of the TI facility.
10. "TI" shall mean TI, its parents, other subsidiaries of TI's parent and
affiliates.
11. TI agrees that it will indemnify, defend and hold harmless WWA, its
directors, officers, employees, agents and consultants from any claims
or causes of action, including without limitation any claims for
personal injury, property damage or civil or criminal fines or
penalties arising from TI's operations pursuant to this Agreement.
E. WWA DUTIES AND OBLIGATIONS
1. WWA shall comply with all laws and regulations, which apply to the WWA
process, and the leased facility described above. WWA agrees that it
will indemnify, defend and hold harmless TI, its directors, officers,
employees, agents and consultants from any claims or causes of action,
including without limitation any claims for personal injury, property
damage or civil or criminal fines or penalties arising from WWA's
operations pursuant to this Agreement.
2. WWA shall obtain and maintain throughout the term of this Agreement
(including any extensions thereof), all permits and entitlements
required by law for operation of the leased facility as well as the
proposed new off-site facility. If, as a result of a future change in
law or a change in the interpretation of existing law as a result of a
judicial order from a federal or state court of competent jurisdiction,
the recovered materials do not qualify for full and unqualified
diversion credits under California law, then TI shall have the right to
reopen this Agreement and renegotiate the per ton tip fee in effect at
that time.
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - 4
3. Upon expiration or termination of the lease, WWA shall, at TI's
election, remove all equipment and/or restore the leased facility to
leaseable condition less commercially acceptable wear and tear.
4. WWA shall obtain and maintain authorization from the California
Integrated Waste Management Board ("CIWMB") stating that operations in
the leased facility and the proposed new off-site facility constitute
material recovery operations pursuant to California laws and
regulations governing solid waste and materials recovery facilities.
WWA represents and warrants that no amendment to TI's existing solid
waste SWFP or a new solid waste facilities permit shall be required for
operation of the leased facility. WWA further represents and warrants
that it shall guarantee a WWA residual of no more than 40% by weight of
TI waste delivered to and processed at the WWA facility.
5. WWA shall provide a written report to TI annually, in January of each
year, detailing the use and re-use of the recovered materials produced
using RMSW from TI. WWA has represented that the initial anticipated
markets are pulp and LCM (loss circulation mud). Upon request, WWA
shall provide any necessary documentation to TI on the use of the WWA
recovered material as may be required for TI to comply with regulations
regarding qualification for diversion or other obligations imposed on
TI by regulatory agencies regarding the use of recovered materials.
6. If TI determines that WWA's operations are not in compliance with any
applicable law or regulation or determines that WWA's continued
operation would place or threaten to place TI's operations in
non-compliance with its permits and approvals, then TI may suspend
delivery of RMSW to WWA until such time as TI determines that WWA has
fully remedied the non-compliance or threat of non-compliance.
7. As used herein, the term "law" includes, without limitation, statutes,
regulations, administrative orders and decrees, judicial decisions and
orders of courts of the State of California and the United States.
8. WWA's facilities to be constructed and operated pursuant to this
Agreement shall be for the exclusive use of TI and its affiliate
entities, and no other person, firm or entity shall have any right or
entitlement to utilize the WWA facilities without TI's written
approval. WWA agrees that it will accept and process all of the waste
materials that TI is obligated to deliver under the terms of this
Agreement.
F. COMPENSATION
1. WWA will sell its "Standard" recyclables (steel, aluminum, plastic)
through TI under the conditions outlined below. TI will pay WWA ten
percent (10.0)% less than TI's average monthly market price. The term
"average monthly market price" means the average monthly price TI is
paid for each of the standard recycled materials in the recycled
materials market within the geographic territory of Orange County,
California.
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - 5
2. Pick Up Schedule: "On Call"--WWA will call TI to pick up recyclables
from the WWA facility and deliver them to its Material Recovery
Facility. A weight ticket will be generated to record the incoming net
material weight - Gross less Tare/Empty weight. The load will be
inspected to the specifications of the commodity it is receiving. All
required commodity specifications will be agreed upon prior to the
delivery of any loads. TI shall achieve pick-ups within eight hours of
notification by WWA.
3. TI agrees to pay WWA an initial base tip fee of $30.00 per ton of Net
Processed Waste. Net Processed Waste equals the total RMSW tons
delivered to the WWA facility less the total Residual/non-processed
tons removed by TI for handling and disposal by TI. Payments will be
made monthly on total tonnage of Net Processed Waste. The initial base
tip fee of $30.00 per ton shall be increased or decreased as necessary
for the remainder of the Term such that the tip fee shall increase or
decrease on a dollar for dollar basis in accordance with any change to
the Orange County landfill disposal fees from a base year of 2003,
which is $22.00 per ton.
4. Delivery Procedures/Payment Calculation: All incoming RMSW to WWA will
be weighed on one of TI's scales or another certified scale and a
weight ticket generated. The Gross and Tare/Empty, and Net Weight will
be shown in addition to the date and truck #. A copy of the incoming
weight ticket will be given to WWA and one kept at the CVT Scalehouse.
All outgoing residual waste will be handled in the same manner. All
weight tickets need to be clearly marked as Incoming or Outgoing. At
the end of the month, the total outgoing residual net weight will be
subtracted from the Incoming RMSW weight to determine the Net Processed
weight.
G. WWA's OWNERSHIP OF INTANGIBLES
All processes, inventions, patents, copyrights, trademarks, and other
intangible rights that may be conceived or developed by WWA, either alone or
with others, during the term of this Agreement, whether or not conceived or
developed during WWA's working hours, and with respect to which the equipment,
supplies, facilities, or trade secret information of WWA was used, or that
relate at the time of conception or reduction to practice of the invention to
the business of WWA or to actual or demonstrably anticipated research and
development, or that result from any work performed by WWA shall be the sole
property of WWA.
H. CONFIDENTIALITY OF PROPRIETARY INFORMATION
TI and WWA agree that this Agreement and the contents thereof
constitute valuable trade secret information that shall not be disclosed to any
third party without the prior written consent of the Parties hereto. TI agrees
that neither it nor any agent of TI will disclose any Proprietary Information
(as hereinafter defined) to any individual or entity at any time during the term
of this Agreement, except as is necessary and appropriate in the ordinary course
of performing duties for WWA during the term of this Agreement, or unless such
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - 6
disclosure is required by law. For purposes of this Agreement, the term
Proprietary Information shall mean any information that was developed by or was
assigned to WWA, and which has commercial value in WWA's business. Proprietary
Information includes, but is not limited to, trade secrets, financial
information, customer lists and information, marketing plans, strategies,
business forecasts, computer programs, source code, product plans, research and
development information, testing methods and results, inventions, improvements,
formulas, processes, techniques, designs, know-how and data. TI and WWA agree
that violation of this Section H will cause irreparable harm to TI and/or WWA,
as the case may be, therefore in addition to any and all other legal remedies
available to it, WWA or TI shall be entitled to equitable and injunctive relief.
I. NON-COMPETITION AND RIGHT OF FIRST REFUSAL FOR CO-OWNERSHIP OF FUTURE
PROJECTS
1. During the term of this Agreement, WWA will not directly or indirectly,
compete with the facilities or business opportunities of TI for any
solid waste or recyclable materials, including receipt of MSW or RMSW
within TI's market areas. WWA agrees that it will not take any action
that would impair or impede the ability of the 500 TPD and the off-site
facility to meet the performance requirements of those facilities.
2. (a) TI shall have a first right of refusal with respect to
participation with WWA as an equity partner in any Project proposed by
WWA within TI's market areas of (i) Orange County, Los Angeles County,
San Bernardino County, Riverside County, and (ii) Alameda County, Santa
Clara County, Contra Costa County, Solano County, Marin County, and San
Joaquin County. Equity participation shall mean that TI shall have an
equity share of fifty-one percent (51%) or greater in any Project
proposed by WWA, in exchange for contributing fifty-one percent (51%)
or greater of the capital funding required for the Project. "Project"
as used herein, shall mean each separate business opportunity in the TI
market area(s) set forth in this paragraph 2.(a) that WWA proposes to
engage in, which Projects shall be capitalized as separate legal
entities on a Project by Project basis. As used in (a) herein, "first
right of refusal" shall mean that TI shall have the right, at its
election, to participate in a Project within the market areas set forth
in (i) and (ii) above, after WWA has presented a bona fide proposal for
a Project to TI. Once a bona fide Project proposal is presented to TI
in writing, TI shall then have a period of ninety (90) days to
determine if it will exercise its right and elect to participate as an
equity partner in any such Project.
(b) TI will have a first right of refusal to participate with WWA, or
utilize WWA in materials processing, in any governmental solicitation
for proposals (i.e., Requests For Proposals, Invitation for Bids, etc.)
within the State of California. WWA agrees that it will consult with TI
at least forty five (45) days prior to WWA either (i) responding to any
RFP, IFB or similar process, or (ii) WWA proposing to joint venture or
otherwise collaborate with any competitor of TI in connection with any
such RFP or IFB response. As used in (b) herein, "first right of
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - 7
refusal" shall mean that TI shall have the right, at its election, to
participate with WWA on a joint cooperative basis in making a proposal
in response to any governmental solicitation for proposals.
(c) As used herein, the term "bona fide proposal" means that all
material terms and conditions of a proposed agreement have been fully
and finally negotiated and memorialized in a draft written agreement as
between WWA and a third party, and presented in writing to TI for its
review.
3. During the period of this agreement TI will not utilize any of the WWA
processing technology in its operations without express written
permission from WWA.
J. INSURANCE PROVISIONS.
For purposes of this agreement WWA and TI shall carry the following
types of insurance in at least the limits (which may be a combination
of primary and excess coverage) specified below:
Coverages Minimum Limits of Liability
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Workers' Compensation Statutory
Employer's Liability $1,000,000/occurrence
Automobile Liability $2,000,000/occurrence
Comprehensive General Liability, $2,000,000/occurrence
Including Bodily Injury, Property Damage $2,000,000/general aggregate
Excess Coverage $3,000,000/occurrence
$3,000,000/aggregate
TI and WWA shall be named as an additional insured on all policies of
insurance, and WWA agrees to provide certificates of coverage from its
carrier(s). The Comprehensive General Liability, Excess and Automobile
policies shall contain a waiver of subrogation against TI.
K. GENERAL PROVISIONS
1. Governing Law and Venue. This Agreement will be governed by and
construed in accordance with the laws of the State of California. Venue
for any dispute arising out of or from this Agreement, whether in tort,
contract or both, shall be in a State court of competent jurisdiction
in Orange County, California. This Agreement shall be subject to all
applicable laws and regulations concerning the subject matter of the
Agreement.
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - 8
2. Assignment. Neither WWA or TI may assign, pledge or encumber its
interest in this Agreement or any part thereof without the prior
written consent of the other Party. The term "Assignment" shall not
include any changes (1), in corporate structure or (2), resulting in
less than a 50 percent (50%) change in the beneficial ownership of
either Party.
3. Applicability. This Agreement, unless and except where expressly
limited, inures to the benefit of and shall be binding upon the Parties
and their successors and assigns as may be authorized pursuant to
paragraph 2 above.
4. No Waiver of Breach. The failure to enforce any provision of this
Agreement will not be construed as a waiver of any such provision, nor
prevent a party thereafter from enforcing the provision or any other
provision of this Agreement. The rights granted the parties are
cumulative, and the election of one will not constitute a waiver of
such party's right to assert all other legal and equitable remedies
available under the circumstances.
5. Severability. The provisions of this Agreement are severable, and if
any provision will be held to be invalid or otherwise unenforceable, in
whole or in part, the remainder of the provisions shall be construed
and enforced so as to give effect to the remaining provisions of the
Agreement.
6. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter of this Agreement, and
supersedes all prior and contemporaneous negotiations, agreements and
understanding between the parties, oral or written.
7. Modification, Waivers, Amendment. No modification, termination,
amendment or attempted waiver of this Agreement will be valid unless in
writing, signed by both parties.
8. Fees and Expenses. If any proceeding is brought for the enforcement or
interpretation of this Agreement, or because of any alleged dispute,
breach, default or misrepresentation in connection with any provisions
of this Agreement, the prevailing party in any such proceeding shall be
entitled to recover from the other party reasonable attorney's fees and
other costs incurred in that proceeding (including expert witness fees
and costs), in addition to any other relief to which such party may be
entitled.
9. Duplicate Counterparts. This Agreement may be executed in duplicate
counterparts, each of which shall be deemed an original; provided,
however, such counterparts shall together constitute only one
instrument.
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - 9
10. Drafting Ambiguities. Each party to this Agreement has had the
opportunity to consult with counsel regarding the advisability of
signing this Agreement and the meaning of the terms herein. Each party
(and, if applicable, his or its counsel) have participated fully in the
review and revision of this Agreement. Any rule of construction to the
effect that ambiguities are to be resolved against the drafting party
shall not apply to interpreting this Agreement.
11. Notices. Any notice to the parties required or permitted under this
Agreement shall be given in writing by certified mail sent to the then
principal place of business.
12. Force Majeure. "Force Majeure" shall mean any event or condition having
a material and adverse effect on the rights, duties and obligations of
either party hereunder, or on the Facility, or on the lease, design,
construction, equipping, start-up, operation, ownership or possession
of any or all of them, if such event or condition is beyond the
reasonable control, and not the result of willful or negligent action
or omission or a lack of reasonable diligence, of the party asserting
the Force Majeure; provided that the contesting in good faith of any
event or condition constituting a change in law shall not constitute or
be construed as a willful or negligent action or a lack of reasonable
diligence of such party. The foregoing provisions shall not be
construed to require that either party observe a higher standard of
conduct than required by the usual and customary standards of the
industry in question, as a condition to claiming the existence of a
Force Majeure. Such events or conditions may include, but shall not be
limited to, circumstances of the following kind: an act of God,
epidemic, landslide, lightning, hurricane, earthquake, fire, explosion,
storm, flood or similar occurrence, an act of war, effects of nuclear
radiation, blockade, insurrection, riot, civil disturbance or similar
occurrences, strikes, lockouts, work slowdowns or stoppages, or similar
labor difficulties affecting either party hereunder, or the operation
of the leased Facility, or otherwise affecting or impacting the
performances of either party's contractors and suppliers; a change in
law.
Taormina Industries, LLC World Waste of Anaheim, Inc.
/s/ Thomas Vogt /s/ Steven L. Racoosin
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Thomas Vogt, President Steven L. Racoosin, President
June 27, 2003 June 27, 2003
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Date Date
Executed by the parties as of the day and year first above written.
Confidential and Proprietary
Subject to Confidentiality Agreement
Prohibiting Disclosure
Exhibit 10.5 - 10