Exhibit 10.17
MUTUAL TERMINATION AGREEMENT
by and between
HUMAN BIOSYSTEMS,
HBS BIOENERGY,
HBS BIOENERGY DDG CORCORAN, LLC,
THE EXL III GROUP CORPORATION
and
CLAUDE LUSTER III
January 5, 2008
TABLE OF CONTENTS
Page
ARTICLE 1
TERMINATION OF CONTRACTS
1
1.1
Asset Purchase Agreement
1
1.2
Consulting Services Agreement
2
1.3
Escrow Agreement
2
ARTICLE 2
TRANSFER OF PORT OF MORROW PROJECT
2
2.1
Pursuit of Port of Morrow Option
2
2.2
Transfer of Contracts
2
2.3
No Obligation to Maintain Contracts
3
2.4
Assumption of Liabilities
3
2.5
Purchase Price
3
2.6
Security Interest
4
2.7
Payment of Sales Tax
4
2.8
Third Party Consents; Further Assurances
4
2.9
Closing
4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF HBS BIO
4
3.1
Organization and Good Standing
4
3.2
Authorization and Binding Effect of Documents
4
3.3
Absence of Conflicts
5
3.4
Consents and Notices
5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF EXL
5
4.1
Organization and Good Standing
5
4.2
Authorization and Binding Effect of Documents
5
4.3
Absence of Conflicts
5
4.4
Consents and Notices
5
ARTICLE 5
ADDITIONAL COVENANTS
6
5.1
Release of Claims by HBS, HBS Bio and BioDDG
6
5.2
Release of Claims by EXL
6
5.3
Release of Claims by Luster
7
5.4
Resignation of Luster
8
5.5
No Rights in Corcoran Property
8
5.6
Transaction Costs
8
5.7
Further Assurances
8
ARTICLE 6
INDEMNIFICATION AND TERMINATION
9
6.1
Survival of Representations and Warranties
9
6.2
Indemnification by HBS Bio
9
6.3
Indemnification by HBS
9
6.4
Indemnification by BioDDG
9
TABLE OF CONTENTS
(continued)
Page
6.5
Indemnification by EXL
9
ARTICLE 7
GENERAL PROVISIONS
9
7.1
Attorneys’ Fees
9
7.2
Entire Agreement
10
7.3
Amendments and Waivers
10
7.4
Notices
10
7.5
Binding Effect; Third Party Benefits
11
7.6
Assignment
11
7.7
Severability
11
7.8
References and Construction
11
7.9
Governing Law
12
7.10
Counterparts
12
MUTUAL TERMINATION AGREEMENT
This Mutual Termination Agreement (the
“Agreement”) is made effective as of January 5, 2008
by and among Human BioSystems, a California corporation
(“HBS”), HBS BioEnergy, a California corporation and
wholly-owned subsidiary of HBS (“HBS Bio”), HBS
BioEnergy DDG Corcoran, LLC, a California limited liability
company (“BioDDG”), The EXL III Group Corporation, a
Delaware corporation (“EXL”), and, as to Sections
1.2, 2.1, 5.3, 5.4, 5.5, 5.6 and 5.7, and Article 7,
Claude Luster III (“Luster”).
RECITALS
A.
In September 2006, (i) HBS, HBS Bio, and EXL
entered into that certain Asset Purchase Agreement, (ii) HBS Bio
and EXL entered into that certain Consulting Services Agreement,
and (iii) HBS Bio, EXL and Silicon Valley Law Group, a
California law corporation, entered into that certain Escrow
Agreement. The principal purpose of these three agreements was
for HBS Bio and EXL to work together to develop and construct
ethanol production facilities. HBS Bio and EXL have decided to
pursue separate business interests and mutually wish to
terminate these agreements and to restructure the existing
projects that they have been developing together, all on the
terms and conditions contained in this Agreement.
B.
HBS Bio incurred significant expenses developing
plans to create an ethanol production facility in the Port of
Morrow located in the state of Oregon (the “Port of Morrow
Project”). HBS Bio has agreed to grant to EXL the option
to continue to develop and to fully exploit such plans upon
EXL’s agreement to reimburse HBS Bio certain of these
expenses and for other consideration specified herein.
C.
BioDDG was formed in January 2007. HBS Bio owns
65% of BioDDG and Dairy Development Group, LLC, a Nevada limited
liability company, owns the remaining 35%. BioDDG was also
involved in developing ethanol production facilities with
certain parties to this Agreement and wishes to join this
Agreement on the terms and conditions contained herein.
Now, therefore, in consideration of the mutual
representations, warranties, covenants and agreements contained
herein, and for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE 1
TERMINATION OF CONTRACTS
1.1
Asset Purchase Agreement .
Effective as of August 22, 2007, that certain Asset
Purchase Agreement dated September 1, 2006, as amended on such
same date, by and between HBS, HBS Bio, and EXL is cancelled and
terminated in its entirety and all terms and provisions therein
shall be of no force and effect. For the avoidance of doubt, any
purported transfer of assets or liabilities under such Asset
Purchase Agreement is deemed reversed and to be of no force and
effect.
1.2
Consulting Services Agreement .
Effective as of August 22, 2007, that certain Consulting
Services Agreement dated September 1, 2006 by and between HBS
Bio and EXL is cancelled and terminated in its entirety and all
terms and provisions therein shall be of no force and effect.
The parties to this Agreement agree that HBS Bio is not
obligated to pay for any services provided by EXL under the
Consulting Services Agreement after August 31, 2007. As of
August 31, 2007, HBS Bio owed EXL $16,583.32 under the
Consulting Services Agreement, which HBS Bio shall pay to EXL as
follows, without interest or penalty: $8,291.66 within three (3)
business days following the date of this Agreement and $8,291.66
within two (2) weeks following the date of this Agreement. Upon
the making of each payment, each such payment amount shall be
added to the purchase price as described in Section 2.5
below. The parties to this Agreement agree that, except for the
payments specified above in this Section 1.2, no other payments,
expenses, costs or reimbursements of any nature whatsoever are
owed to EXL or any of its affiliates under the Consulting
Services Agreement.
1.3
Escrow Agreement . Effective as of
August 22, 2007, that certain Escrow Agreement dated September
1, 2006 by and between HBS Bio, EXL and Silicon Valley Law
Group, California law corporation, is cancelled and terminated
in its entirety and all terms and provisions therein shall be of
no force and effect. The parties to this Agreement acknowledge
and agree that no shares of stock of HBS were released from
escrow under the Escrow Agreement and that all such shares are
hereby cancelled. Concurrent with the execution of this
Agreement, HBS Bio and EXL shall notify the escrow agent under
the Escrow Agreement that such agreement is terminated and that
all shares held in escrow are to be returned to HBS. Such notice
shall be in the form attached hereto as Exhibit A .
ARTICLE 2
TRANSFER OF PORT OF MORROW PROJECT
2.1
Pursuit of Port of Morrow Option .
If either EXL or Luster desires or takes any action to,
directly or indirectly, by themselves or through any affiliated
entity, plan, pursue, develop, or construct an ethanol plant in
or near the Port of Morrow located in the state of Oregon (any
such project, a “Port of Morrow Option”), then EXL
shall deliver written notice (the “Option Notice”)
to HBS Bio informing HBS Bio of such intention.
2.2
Transfer of Contracts . Within a
reasonable time following receipt of the Option Notice, HBS Bio
shall use commercially reasonable efforts to transfer from HBS
Bio to EXL all of HBS Bio’s rights, title, interests and
obligations in and to the Port of Morrow Project, including
without limitation the following contracts, to the extent that
any such contract has not expired or been terminated
(collectively referenced as the “Transferred
Assets”):
(a)
Ethanol Merchandising Agreement dated May 3,
2007, by and between HBS Bio and Lansing Ethanol Services, LLC
for the project located in the Port of Morrow, Oregon;
(b)
Corn Procurement and Consulting Services
Agreement dated May 3, 2007, by and between HBS Bio and Lansing
Trade Group, LLC for the project located in the Port of Morrow,
Oregon;
(c)
Distillers Grains Marketing and Consulting
Services Agreement dated May 3, 2007, by and between HBS Bio and
Lansing Trade Group, LLC for the project located in the Port of
Morrow, Oregon; and
(d)
Letter of Intent and Term Sheet dated May 11,
2007 by and between EXL and Tomsa Destil S.L., as assigned to
HBS Bio pursuant to the Assignment and Assumption Agreement and
Bill of Sale dated May 18, 2007, by and between EXL and HBS
Bio.
For the avoidance of doubt, the Transferred
Assets do not include (i) the Ethanol Merchandising Agreement
dated May 3, 2007, by and between HBS Bio and Lansing Ethanol
Services, LLC for the project located near Corcoran, California;
(ii) the Corn Procurement and Consulting Services Agreement
dated May 3, 2007, by and between HBS Bio and Lansing Trade
Group, LLC for the project located near Corcoran, California;
and (iii) the Distillers Grains Marketing and Consulting
Services Agreement dated May 3, 2007, by and between HBS Bio and
Lansing Trade Group, LLC for the project located near Corcoran,
California.
2.3
No Obligation to Maintain Contracts .
The parties to this Agreement acknowledge and agree that
any or all of the contracts listed in Sections 2.2(a)
through 2.2(d) may be expired, terminated, or modified prior to
the date that HBS receives the Option Notice. HBS Bio is under
no obligation to maintain any of such contracts and may modify,
terminate or let any or all of such agreements expire in its
absolute discretion. Any such contract that has expired or been
terminated prior to the date of transfer under this
Article 2 shall not be deemed a Transferred Asset.
Notwithstanding the modification of any contract included as a
Transferred Asset or the non-transfer of any contract listed in
Sections 2.2(a) through 2.2(d), all other terms of this
Agreement shall remain in force and effect, including without
limitation, EXL’s obligation to pay for the right to
pursue its Port of Morrow Option pursuant to
Section 2.5.
2.4
Assumption of Liabilities . Upon
the exercise by EXL of its Port of Morrow Option pursuant to
Section 2.1, EXL shall assume and duly perform only the
following obligations and liabilities of HBS and HBS Bio (the
“Assumed Liabilities”):
(a)
obligations and liabilities of HBS and HBS Bio
arising from any and all of the Transferred Assets; and
(b)
all expenses, fees and costs related to
development of the plans for the Port of Morrow Project that
were incurred on behalf of HBS Bio after August 31, 2007, or
that were incurred by any third party after August 31, 2007 and
chargeable to HBS Bio.
Except for the Assumed Liabilities identified
above, EXL shall not assume, nor does EXL agree to pay,
discharge or otherwise be responsible for any other liabilities
or obligations of HBS Bio.
2.5
Purchase Price . Upon the exercise
of its Port of Morrow Option pursuant to Section 2.1, in
addition to assuming the Assumed Liabilities, EXL shall pay to
HBS Bio (i) $449,320.55 plus annual interest of 10%,
calculated as provided in Exhibit B attached hereto, plus
(ii) the amount of each payment made by HBS Bio in accordance
with Section 1.2, plus annual interest of 10% on such
amounts calculated from the date such payments were made, minus
(iii) a $100,000 credit which shall be deducted from the
aggregate of all amounts owed, including interest, under clauses
(i) and (ii) above (collectively, the “Port of Morrow
Purchase Price”). The Port of Morrow Purchase Price shall
be paid within five (5) business days following the date which
EXL obtains long term financing (i.e., construction financing)
for its Port of Morrow Option.
2.6
Security Interest . As security for
EXL’s payment of the Port of Morrow Purchase Price, upon
EXL’s exercise of its Port of Morrow Option, EXL shall,
without any further action and by operation of this Agreement,
grant to HBS Bio a security interest in the Transferred Assets.
EXL agrees to cooperate promptly with HBS Bio to execute and
file any and all documents and instruments, including filings
under applicable Uniform Commercial Codes, as reasonably
requested by HBS Bio to further document and establish such
security interest.
2.7
Payment of Sales Tax . EXL agrees
to timely pay any and all sales tax to the State of California
and of any other applicable government entity that arises out of
or is incurred in connection with the consummation of the
transactions contemplated by this Article 2.
2.8
Third Party Consents; Further Assurances
. EXL, with the cooperation of HBS Bio, agrees to use all
reasonable efforts to obtain any necessary third party consents
that may be required to transfer the Transferred Assets. The
parties to this Agreement shall execute such other documents,
instruments, certificates and agreements as may reasonably be
required, including for the obtaining of any necessary third
party consents and the execution of a bill of sale, to give
effect to the transactions contemplated by this
Article 2.
2.9
Closing . The closing of the
transfer of any Transferred Assets shall be within a reasonable
time following receipt by HBS Bio of the Option Notice and shall
be conditioned upon the receipt of any necessary third party
consents.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF HBS BIO
HBS Bio hereby represents and warrants to EXL
that the statements contained in this Article 3 are correct
and complete as of the date hereof.
3.1
Organization and Good Standing .
HBS Bio is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.
HBS Bio has full corporate power and authority to enter into
this Agreement and to perform its
