EXHIBIT 10.1 - JOINT VENTURE AGREEMENT

Exhibit 10.1

EXECUTION COPY

 

 

 

 

 

 

 

JOINT VENTURE AGREEMENT

 

Dated as of November 9, 2006

Among

INTERNATIONAL POWER GROUP, LTD.,

SISTEMAS ECOLOGICOS PARA LA PROTECCION AMBIENTAL S.A. DE C.V.

AND

MARIO SALGUERO ROSSAINZZ

 

 

 

 

 

 

 

 

 

Table of Contents

 

 

 

CHAPTER I.  DEFINITION OF TERMS

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CHAPTER II.  OBLIGATIONS OF THE PARTIES; CONDITIONS

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This Chapter II sets forth certain obligations of the Parties with respect to the Project.  These obligations are subject to the express conditions set forth herein as applicable pursuant to the terms and conditions of this Agreement.  - 3 -

2.1

JOINT VENTURE MILESTONES

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2.2

WASTE HANDLING AGREEMENT

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2.3

LEASE AGREEMENT

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2.4

PERMITS TO BUILD AND OPERATE THE PLANT

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2.5

SEPA TO PROVIDE THEIR CONTACTS AND RELATIONS WITH AUTHORITIES AND LOCAL BUSINESS COMMUNITY  - 5 -

2.6

EXPERTISE STUDIES AND TECHNOLOGY

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2.7

BUILDING PROCESS

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2.8

PROJECT FINANCING

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2.9

PROJECT INSURANCE

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2.10

PLANT OPERATION

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2.11

PLANT INDUSTRIAL RESIDUES PROVIDERS

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2.12

TEMPORARY INDUSTRIAL RESIDUES STORAGE

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2.13

NON-COMPETITION

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CHAPTER III.  ORGANIZATION AND BUSINESS OF THE JOINT VENTURE

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3.1

BUSINESS PURPOSES

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3.2

CHARTER AND BY-LAWS

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3.3

EQUITY STRUCTURE

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3.4

LIMITED LIABILITY

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CHAPTER IV.  GENERAL MEETING

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4.1

GENERAL EQUITY HOLDER’S MEETINGS

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4.2

QUORUM

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4.3

RESOLUTION

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4.4

IMPORTANT MATTERS

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CHAPTER V.  DIRECTORS AND OFFICERS

- 8 -

5.1

ELECTION OF DIRECTORS

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5.2

QUORUM AND RESOLUTION

- 8 -

5.3

OFFICERS

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5.4

OTHER POSTS

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5.5

DEADLOCK RESOLUTION

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5.6

OCCURRENCE OF DEADLOCK

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5.7

MEDIATION

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5.8

OFFER AND SALE OF EQUITY INTERESTS

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CHAPTER VI.  AUDITORS

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6.1

AUDITOR

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CHAPTER VII.  ACCOUNTING

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7.1

ACCOUNTING PERIOD

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7.2

INSPECTION OF ACCOUNTING RECORDS AND BOOKS

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CHAPTER VIII.  INCREASE OF CAPITAL

- 12 -

8.1

CAPITAL CALLS

- 12 -

CHAPTER IX.  TRANSFER OF EQUITY INTERESTS

- 13 -

9.1

DISPOSAL OF EQUITY INTERESTS

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9.2

EFFECT OF TRANSFER

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9.3

INSOLVENCY

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9.4

CHANGE IN CONTROL

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9.5

RIGHT TO PURCHASE EQUITY INTERESTS IN JV

- 15 -

CHAPTER X.  [RESERVED]

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CHAPTER XI [RESERVED]

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CHAPTER XiI.  GOVERNMENT APPROVALS AND PROTECTIVE MEASURES

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12.1

APPLICATION

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CHAPTER XIII.  PAYMENTS AND BEARING OF COST AND EXPENSES

- 15 -

13.1

DISTRIBUTIONS

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13.2

COSTS AND EXPENSES

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CHAPTER XIV.  NON-DISCLOSURE PROVISION

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14.1

CONFIDENTIALITY

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CHAPTER XV.  OBLIGATIONS, REPRESENTATIONS AND WARRANTIES

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15.1

OBLIGATIONS OF THE EQUITY HOLDERS

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15.2

REPRESENTATIONS AND WARRANTIES

- 17 -

CHAPTER XVI.  COMPLIANCE

- 19 -

16.1

COMPLIANCE WITH LAWS AND STANDARDS OF CONDUCT

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CHAPTER XVII.  INDEMNIFICATION

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17.1

INDEMNIFICATION

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CHAPTER XVIII.  GENERAL PROVISIONS

- 20 -

18.1

DEFAULT

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18.2

TERMINATION

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18.3

FORCE MAJEURE

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18.4

NOTICE

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18.5

NO WAIVER

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18.6

DIVISIBILITY OF PROVISIONS

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18.7

ASSIGNMENT

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18.8

ARBITRATION

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18.9

GOVERNING LAW

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18.10

ENTIRE AGREEMENT

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18.11

HEADINGS

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18.12

CUMULATIVE REMEDIES

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18.13

NO GUARANTEES OF SUCCESS

- 25 -

18.14

LANGUAGE

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18.15

COUNTERPARTS

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18.16

PRECEDENCE OF AGREEMENT

- 25 -

18.17

RELATIONSHIP OF THE PARTIES

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18.18

NO PUBLICITY

- 25 -

18.19

SURVIVAL

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18.20

LABOR MATTERS

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EXECUTION COPY

 

JOINT VENTURE AGREEMENT

This Joint Venture Agreement (the “Agreement”) is made and entered into on this 9^th day of November, 2006 (the “Effective Date”) by and between INTERNATIONAL POWER GROUP LTD., a corporation duly organized and existing under the laws of the State of Delaware, United States of America, and having its principal place of business at 950 Celebration Boulevard Suite A, Celebration, Florida 34347, USA (“IPWG”), SISTEMAS ECOLOGICOS PARA LA PROTECCION AMBIENTAL S.A. DE C.V., a corporation duly organized and existing under the laws of the Mexican Republic, and having its principal place of business at Calle Juan Ugarte No. 11062-4, Fraccionamiento Garita de Otay, Tijuana, North Baja California, Z.C. 22440, Mexico (“SEPA”), and Mr. Mario Salguero Rossainzz, a citizen of Mexico and the General Director of SEPA, with an address of Calle Juan Ugarte no. 11062-4, Fraccionamiento garita de Otay, Tijuana, North Baja California, Z.C. 22440, Mexico (“Salguero”).  IPWG, SEPA and Salguero are alternatively referred to herein as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, IPWG is marketing and plans to build and operate waste-to-energy facilities to process solid and hazardous wastes by incineration, which facilities would produce marketable electricity, drinking water and ash for use in construction materials including cement and road beds;

WHEREAS, SEPA is engaged in, among other things, the business of transporting hazardous and non-hazardous industrial residues to temporary storage facilities and transporting such residues for final disposal, and is engaged in the collection and transportation of burn oil, flammable liquids and corrosive liquids, as well as waste water, to storage facilities;

WHEREAS, Salguero is the General Director of SEPA;

WHEREAS, the Parties have decided to form a joint venture in order to build, fuel and operate a waste-to-energy facility in Mexicali, North Baja California, Mexico; and

WHEREAS, IPWG and SEPA desire to enter into this Agreement to set out certain terms and conditions relating to the establishment and management of such joint venture entity and the construction, fuel and operation of such waste-to-energy facility, all subject to certain terms and conditions as set forth herein.

NOW, THEREFORE, in consideration of the above recitals and the promises, covenants and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which the Parties acknowledge, the Parties agree as follows:

CHAPTER I.  DEFINITION OF TERMS

1.1

In this Agreement and in the recitals hereto:

(a)

“Affiliate” means any entity that controls, is controlled by, or is under common control with an entity.  For purposes of this definition, “control” means:  (i) ownership of more than 50% of the voting ownership interests of an entity; and/or (ii) the right under contract to select a majority of the members of the board of directors or other governing body of an entity, or similarly to control and direct the management of the entity.

(b)

“Appraised Value” means the fair market value of one hundred percent (100%) of the Equity Interests of JV as a going concern without any minority discount or control premium.  The Appraised Value of any particular Percentage Interest shall mean the

 

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Appraised Value of JV times such Percentage Interest, reduced by an appropriate minority discount or increased by any premium appropriate in the event the Percentage Interest represents a controlling interest in the JV.

(c)

“Equity Holder” means any entity that holds an Equity Interest in JV.

(d)

“Equity Interest” means a unit of capital in JV.

(e)

“Financial Close Date” means the date on which JV and Project Company have entered binding, irrevocable commitments with third-party lenders and investors to provide financing for the construction of the JV Facility, the lease of the Premises, and the operation of the JV Facility in accordance with the financing plan to be developed by IPWG in its sole discretion on behalf of JV.

(f)

“Industrial Residues” means waste of a kind and nature described in Exhibit A to this Agreement, and does not include Municipal Waste.

(g)

“JV Facility” means a WTE Plant to be built and operated by the Project Company as contemplated by this Agreement.

(h)

“Lease Agreement” means a contract between SEPA and the Project Company for the lease of the Premises.

(i)

“Municipal Waste” means waste under the control of local authorities or agents acting on their behalf, but not including Industrial Residues. Examples of Municipal Waste include household waste, street litter, waste delivered to recycling points, municipal parks and garden wastes, and commercial waste from small commercial enterprises where local authority waste collection agreements are in place.

(j)

“Non-Recourse Project Financing” means financing arrangements that provide a lender or investor with recourse, if any, only against assets and capital stock of JV and/or the Project Company.

(k)

“Percentage Interest” means all of an Equity Holder’s Equity Interests in JV, expressed as a percentage of the aggregate of 100% of the outstanding Equity Interests of JV.

(l)

“Premises” means that certain eighteen (20) Hectare parcel of real property described further in Exhibit B.

(m)

“Project” means the construction and operation of the JV Facility on the Premises.  

(n)

“Project Company” means the entity that builds and operates the JV Facility.  The “Project Company” will be organized and existing under the laws of Mexico and may be the JV or may be a direct or indirect subsidiary of JV.

(o)

“Transaction Documents” means those agreements referenced herein to be entered by one or more of the Parties and JV or the Project Company after the Effective Date, including the Lease Agreement and the Waste Handling Agreement.

 

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(p)

“Waste-to-Energy Plant” or “WTE Plant” means a facility that incinerates solid waste and from such operations generates electricity, drinking water and ash for use in construction materials including cement and road beds.

1.2

Any reference in this Agreement to a “Clause” or “Schedule” is a reference to a clause hereof or a schedule hereto.

1.3

In this Agreement:

(a)

 “Hectare(s)” denotes 10,000 m2. or 2.471053 acres.

(b)

 “Ton(s)” denotes a metric ton.

CHAPTER II.  OBLIGATIONS OF THE PARTIES; CONDITIONS

This Chapter II sets forth certain obligations of the Parties with respect to the Project.  These obligations are subject to the express conditions set forth herein as applicable pursuant to the terms and conditions of this Agreement.

2.1

JOINT VENTURE MILESTONES

Each Party shall use commercially reasonable efforts to support the operations of JV and Project Company and to achieve the milestones set forth in Exhibit C (Joint Venture Milestones) by the corresponding milestone dates set forth in Exhibit C.

2.2

WASTE HANDLING AGREEMENT

On or before November 15, 2006, SEPA and IPWG shall have agreed to the terms of a Waste Handling Agreement (the “Waste Handling Agreement”), to be entered by SEPA and the Project Company subsequent to the formation of the Project Company and prior to the Financial Close Date, that is consistent with the terms and conditions of this Agreement including the following:

(a)

SEPA INDUSTRIAL RESIDUES PROGRAM COMMITMENT.  SEPA shall provide and pay Project Company to process at least 450 Tons per day of Industrial Residues, which amount may increase over time.  SEPA will adhere to an Industrial Residues Program Schedule that provides the schedule for SEPA to achieve its commitment under this Section 2.2(a), a copy of which is attached as Exhibit D.

(b)

SEPA INDUSTRIAL RESIDUES DELIVERY TO THE PLANT.  SEPA shall deliver the Industrial Residues directly to the JV Facility at its sole expense, using its own transportation or hiring outsourced transportation or other means.  SEPA will be responsible for the transportation of the Industrial Residues to the JV Facility and Project Company will be in charge of the final disposal and will use commercially reasonable efforts to obtain a “Destruction Certificate” for such Industrial Residues if necessary to comply with applicable law.

(c)

PRICES.  The prices to be paid by SEPA to the Project Company for the Project Company’s services with respect to Industrial Residues under the Waste Handling Agreement are set forth in Exhibit E.  The prices in Exhibit E are in consideration of market prices, volumes and qualities of the Industrial Residues, and other relevant technical and operational factors, and are subject to increase on a calendar yearly basis as a result of increases in the cost of supplies and labor and other reasonable business factors.  The prices are in US Dollars and will apply to SEPA and other

 

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Industrial Residue customers of the Project Company, subject to the requirements of applicable law; provided, however, that the Project Company may enter into agreements with municipalities for the processing of Municipal Waste at pricing that is different than the pricing set forth in Exhibit E.

(d)

THIRD PARTY CUSTOMERS.  Project Company will negotiate waste handling agreements and tipping fees for Industrial Residues or Municipal Waste with other customers including municipalities to the extent commercially reasonable.  Exhibit F contains a list of current SEPA customers and prospective customers for use of the services of the Project Company.  SEPA undertakes to notify the Project Company from time-to-time of other prospective Project Company customers that SEPA identifies.

2.3

LEASE AGREEMENT

On or before December 15, 2006, SEPA and IPWG shall have agreed to the terms of the Lease Agreement to be entered by SEPA and the Project Company, which Lease Agreement shall be consistent with the terms and conditions of this Agreement including the following:

(a)

SEPA, as a contribution to the JV, shall lease the Premises at a rate below fair market value for the entire term of the Lease Agreement.  The Lease Agreement shall have a term of thirty (30) years or the maximum period permitted by law, if less.  SEPA represents and warrants to IPWG that SEPA has or prior to entry into the Lease Agreement will have the necessary power and authority to enter into the Lease Agreement in accordance with the terms and conditions of this Agreement.

(b)

Neither the Project Company nor its Affiliates (including IPWG or JV) shall have any obligation to enter the Lease Agreement unless and until: (i) SEPA and Project Company have negotiated the terms and conditions of The Lease Agreement which are consistent with this Section 2.3 (Lease Agreement) and are otherwise to the satisfaction of IPWG and the Project Company in their sole discretion; and (ii) IPWG and the Project Company are satisfied in their sole discretion with the results of their due diligence investigation of the Premises which may include, without limitation, an investigation to determine whether in the sole discretion of IPWG and the Project Company: (A) the accesses are adequate; (B) the Tons of Industrial Residues produced in the vicinity of the JV Facility are adequate; (C) the Premises may be connected through reasonable efforts to the electrical, sewage, and other public utility grid, and (D) the Premises will have access to sufficient water.

(c)

SEPA shall cooperate with Project Company’s and its Affiliates’ due diligence investigation of the Premises and will provide and ensure that Project Company and its Affiliates have sufficient access to the Premises to perform such tests and examinations of the Premises that Project Company and its Affiliates deem advisable in their sole discretion.

(d)

Upon satisfactory completion of its due diligence investigation, the Project Company will notify SEPA and SEPA, in coordination with IPWG will petition the Comisión Federal de Electricidad (“CFE”) and the Comisión Nacional del Agua (“CNA”) for approval of the proposed construction and operation of the JV Facility; and, notwithstanding anything to the contrary in the Lease Agreement to be entered by SEPA and the Project Company, the Project Company shall have no obligation to make payments under the Lease Agreement unless and until such condition is satisfied among such other customary and reasonable conditions to be agreed by the Parties.

(e)

The Lease Agreement shall contain representations and warranties to the satisfaction of the Project Company in its sole discretion as to the absence of environmental or hazardous substance

 

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contamination of the Premises, including, without limitation, soil, substrata and acquifers underlying the Premises, and other adverse environmental conditions, and shall provide for indemnification of Project Company and its Affiliates for any losses and liabilities incurred due to any such environmental conditions.

2.4

PERMITS TO BUILD AND OPERATE THE PLANT

SEPA shall transfer and assign and contribute, at its sole expense, to the Project Company all permits, licenses and government approvals (“Permits”) that SEPA already possesses and which are necessary or helpful to the construction of the JV Facility or the operations of the Project Company on or before December 15, 2006, and will assist Project Company with securing all other Permits that are necessary or helpful to the construction of the JV Facility or the operations of the Project Company.  The costs of such new Permits (not Permits transferred and assigned by SEPA) and extensions thereof will be absorbed by the Project Company.  Exhibit G identifies the Permits to be transferred and assigned by SEPA to the Project Company, and those other Permits that will be required for the operation of Project Company.

2.5

SEPA TO PROVIDE THEIR CONTACTS AND RELATIONS WITH AUTHORITIES AND LOCAL BUSINESS COMMUNITY

SEPA shall at no expense to IPWG or JV provide strategic advisory services in connection with the establishment and operations of the Project Company, including knowledge and strategic advisory services regarding the Industrial Residues market of the locality and surrounding area, introductions to and coordination with SEPA’s contacts with government and industry authorities and representatives, assistance with applying for and securing the Permits, and assistance with the construction of The JV Facility and launch and continuing operations of the Project Company.

2.6

EXPERTISE STUDIES AND TECHNOLOGY

The JV shall be responsible for commissioning and securing all necessary and appropriate feasibility and engineering studies in connection with the construction and operation of the JV Facility, following IPWG technical, financial and operational policies.  SEPA will have the right to make suggestions based on its knowledge of the local market and technology, but the final decision will be made by the JV based on the recommendations of IPWG.  IPWG or an Affiliate of IPWG further shall license certain technology and provide certain technical assistance to the Project Company in connection with the planning, construction and operation of the JV Facility in accordance with a technology agreement to be entered between IPWG or such Affiliate of IPWG and the Project Company.

2.7

BUILDING PROCESS

Subject to the timely satisfaction of the milestones set forth in Exhibit C (Joint Venture Milestones) and the approval and issuance of all necessary Permits by government authorities for the construction and operation of the JV Facility, the Project Company will use commercially reasonable efforts to construct the JV Facility.  Subject to the conditions set forth in the preceding sentence, the Project Company will supervise the construction and operation of the JV Facility.  IPWG will develop the specifications and plans for the construction of the JV Facility in its sole discretion.

2.8

PROJECT FINANCING

Subject to the timely satisfaction of the milestones set forth in Exhibit C (Joint Venture Milestones) and the approval issuance of all necessary Permits by government authorities for the construction and operation of

 

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the JV Facility, IPWG shall use commercially reasonable efforts to assist JV with obtaining Non-Recourse Project Financing for the Project.  

IPWG and JV have the right to use any method they deem reasonable or appropriate in their sole discretion to secure non-recourse Project Financing for the Project including borrowing money or selling any of IPWG’s Equity Interests in JV.

2.9

PROJECT INSURANCE

JV shall be responsible for securing reasonable and appropriate insurance coverages for the Project Company.

2.10

PLANT OPERATION

The JV Facility will be operated and managed by IPWG on behalf of the Project Company and IPWG may charge a reasonable management fee to the JV consistent with other IPWG facilities subject to any distinguishing factors from such facilities, and if no such other facilities are then in operation, IPWG may charge a reasonable fee based on relevant factors. This Section 2.10 shall be superseded by a Management Agreement to be negotiated between IPWG and JV.

2.11

PLANT INDUSTRIAL RESIDUES PROVIDERS

SEPA acknowledges that it will be a very important provider of Industrial Residues to the JV Facility.  In parallel, Project Company may have its own sales force that will promote the JV Facility services in order to acquire more customers.  The Project Company will prioritize the handling of Industrial Residues from SEPA over Industrial Residues of other customers of the Project Company, as further described in the Waste Handling Agreement to be agreed and entered by the Project Company and SEPA.  

2.12

TEMPORARY INDUSTRIAL RESIDUES STORAGE

The Project Company and SEPA agree to negotiate in good faith as part of the Waste Handling Agreement for the Project Company to provide the capabilities for six (6) months Industrial Residues temporary storage following the launch of the JV Facility and, in order for the JV Facility and Project Company to initiate income to the extent Permits allow for Industrial Residue temporary storage at the JV Facility.  SEPA will provide a Temporary Industrial Residue Storage Permit to the Project Company, which SEPA represents is valid for the Premises, and will provide the necessary Industrial Residues according to the Schedule that is attached to this Agreement as Exhibit D, in order to comply with the 450 Tons per day commitment in an agreed period.

2.13

NON-COMPETITION

As an integral part of this Agreement, on or before November 15, 2006, SEPA shall enter into a non-competition and restrictive covenant agreement with IPWG that is satisfactory to IPWG.

CHAPTER III.  ORGANIZATION AND BUSINESS OF THE JOINT VENTURE

3.1

BUSINESS PURPOSES

The business purpose of this Agreement is a joint venture by the Parties, to build and operate a WTE Plant in the City of Mexicali, North Baja California, Mexico, and for this purpose, as further described in and

 

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subject to the terms and conditions of this Agreement, the Parties agree to establish the JV as a new company, in accordance with this Agreement.

3.2

CHARTER AND BY-LAWS

The Parties agree to draft the by-laws and Articles of Incorporation or other applicable organizational documents of JV (collectively, the “Charter Documents”), and to execute or cause to have executed the Charter Documents in accordance with applicable law, all on or before December 15, 2006.  In the event of any conflict between this Agreement and the Charter Documents, the terms of this Agreement shall prevail as between the Parties hereto.  The Charter Documents shall be in the English language.

3.3

EQUITY STRUCTURE

Each Party shall mak