OPERATING AND LICENSING AGREEMENT
EXHIBIT
10.4
This
Operating and Licensing Agreement (referred to as the “Agreement” or “Contract”)
is made and entered into this ____ day of March, 2009, to be effective as of the
Effective Date, as set forth below, by and between Cedar Marine Terminals, L.P.
(hereinafter referred to as “CMT”) and Vertex Energy, Inc., (hereinafter
referred to as “Vertex Nevada”). Collectively, both contracting
entities are referred to as “Parties” to the Contract. All references
to Sections are references to sections in this Agreement unless otherwise
provided herein.
I. GENERAL TERMS, FACILITIES
AND PURPOSE
1. CMT
has agreed to provide to Vertex Nevada, the right to use of certain land as
otherwise described in and subleased pursuant to the Sublease Agreement between
the Parties attached hereto as Exhibit A (the
“Sublease Agreement”).
2. CMT
has also agreed to sell Vertex Nevada certain assets as set forth in the
Purchase and Sale Agreement between the Parties attached hereto as Exhibit B (the
“Assets” and the “Purchase Agreement”).
3. The
contractual obligations between the Parties pursuant to this Agreement will be
performed at CMT’s leased Terminal Storage and Process Facilities at the Cedar
Marine Terminal Facilities, 000 Xxxxxxxx Xxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxx
Xxxxxx, Xxxxx, 00000; located at the entrance of Cedar Bayou (hereinafter
referred to as the “Terminal”).
4. CMT
has also agreed to allow Vertex Nevada to license the rights to and use of
certain proprietary technology relating to the re-refining of certain oil
feedstocks referred to as its “Thermal/chemical extraction technology” also
known as “OP#2”, described in greater detail in the “Cedar Marine Terminal –
Project OP II Study,” dated February 23, 2009.
5. The
Parties desire to enter into this Agreement to set forth the terms and
conditions pursuant to which CMT will serve as the operator of Vertex Nevada’s
operations at the Terminal and in connection with the Assets and OP#2 located at
the Terminal (the “CMT OP#2”).
II. SERVICES
1. CMT
shall provide services to Vertex Nevada pursuant to the terms of this Agreement
in connection with the operation of the Terminal, the Assets and CMT OP#2 and
the loading and unloading of trucks at the Terminal, as may be reasonably
requested by Vertex Nevada from time to time (the “Services”) which can be found
in the “Terminaling Agreement,” dated November 1, 2008, by and between CMT and
Vertex Holdings, L.P. (formerly Vertex Energy, L.P.), as amended from time to
time.
2. All
Services rendered under this Agreement shall be furnished in accordance with all
ordinances, resolutions, statutes, rules and regulations of any federal, state
or local governmental agency of competent jurisdiction.
3. CMT
shall obtain at its sole cost and expense such licenses, permits and approvals
as may be required by law for the performance of this Agreement. CMT shall also
have the sole obligation to pay for any fees, assessments and taxes, plus
applicable penalties and interest, which may be imposed by law and arise from or
are necessary for CMT’s performance of this Agreement.
4. CMT
shall adopt reasonable methods during the life of the Agreement to furnish
continuous protection to the Assets and other materials and components thereof
in its care, custody, control or possession to prevent losses or
damages.
5. The
Parties agree that services and the costs of such services separate from the
Services shall be mutually agreed to between the Parties prior to CMT rendering
any such services.
6. The
feedstock that Vertex Nevada provides to CMT OP#2 shall be Used Oil and Fuel Oil
Cutterstock, and shall comply with the standards set forth in Title 40, Section
279.11 of the Code of Federal Regulations (“CFR”)(as well as Title 30, Chapter
324 of the Texas Administrative Code (“TAC”)) as used oil burned for energy
recovery, and any fuel produced from used oil by processing, blending, or other
treatment shown not to exceed any of the allowable levels of the constituents
and properties as specified (defined herein as “Conforming
Feedstock”).
7. The
Conforming Feedstock will not be a mixture of used oil and hazardous waste that
would be regulated as a hazardous waste set forth in 40 CFR 279.10 (in
concurrence with 30 TAC Chapter 325).
8. All
Conforming Feedstock will also be required to fall into a viscosity range of
greater than 60,000 cps @ 70o F;
liquids with vapor pressures which exceed the limitations imposed by any
federal, state or local statute, permit, or regulation will not exceed 280o F;
capable of passing through a Number 3 Sieve (0.223 inches); water content not to
exceed 7% of total volume of feedstock, and a specific gravity of no lower than
20 Degrees API.
9. Any
material received not within the specified guidelines will remain the property
of Vertex Nevada and all cost and/or expenses will be the sole responsibility of
Vertex Nevada.
10. Any
materials received from Vertex Nevada which are not Conforming Feedstock shall
be referred to herein as “Non-Conforming Feedstock”.
III. USE OF CMT OP#2 at the
Baytown, Texas Facility
1. Vertex
Nevada shall be provided the first right to use 33,000 barrels of capacity
(62.3% of estimated production capacity), of the total capacity of the Baytown,
Texas CMT OP#2 Facility per month during the Term of this Agreement (the
“Reserved Capacity”).
2. CMT
shall be provided the right to use the next 20,000 barrels of capacity (37.7% of
estimated production capacity) of the Baytown, Texas CMT OP#2
Facility after the Reserved Capacity has been met by Vertex
Nevada.
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3. The
disposition of any capacity in excess of 53,000 barrels at the Baytown, Texas
CMT OP#2 Facility shall be allocated pro rata based on the percentages described
in (1) and (2) above. Once the CMT OP#2 process is up and running at
the Baytown, Texas Facility for at least 30 days (the “Operation Date”), and
continuing throughout CMT OP#2’s operations at the Baytown, Texas Facility,
Vertex Nevada and CMT will analyze the allocation of production capacities and
may mutually agree to different production allocations than as provided above,
provided that any such changes must be approved by the Related Party
Transactions Committee of the Vertex Nevada Board of Directors (the
“RPTC”).
4. CMT
shall be provided the reasonable right to use the CMT OP#2 at the Baytown, Texas
Facility at any time that Vertex Nevada is not using OP#2, and/or not using the
full daily capacity of the CMT OP#2 at the Baytown, Texas Facility,
notwithstanding the fact that the Reserved Capacity has not yet been met by
Vertex Nevada.
5. Vertex
Nevada shall be provided the reasonable right to use the CMT OP#2 at the
Baytown, Texas Facility at any time that CMT is not using/or not using the full
daily capacity of the CMT OP#2 at the Baytown, Texas Facility, notwithstanding
the fact that the Reserved Capacity has been met by Vertex Nevada.
6.
Vertex Nevada shall have a right of first refusal to deploy OP#2 in locations
outside the current OP#2 Facility at Baytown, Texas.
IV. COORDINATION OF
SERVICES
1. Control
and operation of the Terminal, the Assets and OP#2 shall rest exclusively with
CMT. CMT may suspend operations at the Terminal if CMT reasonably
believes that any person, equipment or the environment is at risk of injury or
damage.
2. The
following representative of CMT is hereby designated as being the representative
of CMT authorized to act on its behalf with respect to the work specified herein
and make all decisions in connection therewith: Xxxx Xxxxxx. The foregoing
representative may be changed by CMT only upon prior written notice to Vertex
Nevada.
3. The
“Contract Officer” shall be such person as may be designated by Vertex Nevada.
It shall be CMT’s responsibility to assure that the Contract Officer is kept
informed of the progress of the performance of the services and CMT shall refer
any decisions which must be made by Vertex Nevada to the Contract Officer.
Initially, Vertex Nevada designates its Contract Officer for day-to-day
operational matters to be Xxxx Xxxxxxx.
4. The
experience, knowledge, capability and reputation of CMT, its officers, agents,
employees and subcontractors were a substantial inducement for Vertex Nevada to
enter into this Agreement. Therefore, neither this Agreement nor any interest
herein may be assigned or transferred, voluntarily or by operation of law,
without the prior written approval of Vertex Nevada. Unless specifically stated
to the contrary in any written consent to any assignment, no assignment will
release or discharge CMT from any duty or responsibility under this Agreement.
Notwithstanding the foregoing, Vertex Nevada understands that CMT shall use
certain subcontractor suppliers for service and materials in the performance of
this Agreement. In such instances, CMT shall be as fully responsible to Vertex
Nevada for the acts and omissions of its subcontractor(s) as it is for the acts
and omissions of persons it directly employs. Nothing contained in this
Agreement shall create any contractual relationship between any subcontractor
and Vertex Nevada.
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5. CMT
shall perform all services required herein as an independent contractor of
Vertex Nevada and shall remain at all times as to Vertex Nevada, a wholly
independent contractor with only such obligations as are consistent with that
role. CMT shall not at any time or in any manner represent that it or any of its
officers, agents, subcontractors or employees are agents or employees of Vertex
Nevada.
6. Neither
party shall be liable for evaporation, shrinkage, line loss, clingage,
discoloration, contamination, damage to, or destruction of, any product or
property, or for any delay or non-performance, when any of the foregoing is
caused in whole or in part by any cause not within the control of said party,
whether now or hereafter existing, including without limitation, any act of God
or of a public enemy, acts of terrorism, tropical storms and hurricanes,
non-availability of machinery, embargos, congestions or interventions, or
failure or delay of manufacturers or suppliers to deliver same, except that
Vertex Nevada shall be responsible to pay all charges arising from the
Agreement. CMT shall in no event be liable for loss of, or damage to,
any product or property of Vertex Nevada except when caused by CMT’s failure to
use reasonable care in the safekeeping and handling of any product or property
of Vertex Nevada. Notwithstanding the foregoing, the failure by
either party to perform any of its obligations under this Agreement shall be
deemed not to have been caused by circumstances reasonably outside its control
and therefore not an event of Force Majeure, if such failure results from
breakdown, or failure of, or accident to, storage tanks, facility pipelines,
dock or docks, machinery and equipment, or other property, or the partial, or
entire extraordinary failure thereof, or the necessity to make repairs, or
alterations thereto, which result from (i) normal wear and tear which would be
reasonably anticipated by a prudent operator, or in circumstances where a
reasonably prudent operator would have standby equipment, or spare parts, or
(ii) the lack of the proper operation, maintenance, quality control, design,
engineering and/or procurement of such storage tanks, facility pipelines, dock
or docks, machinery and equipment, or other property. If a Force
Majeure condition persists for a period of thirty (30) consecutive days, then
either party may terminate the Agreement on five (5) days prior written notice
to the other.
7. If
either party is unable to perform under this Agreement as a result of Force
Majeure, the party will provide the other party with written notice of such
inability to perform as soon as practicable after the occurrence of the event
causing such inability and describing in reasonable detail the nature of the
event constituting Force Majeure.
8. The
Parties covenant and agree that from and after the Effective Date of this
Agreement, each party will carry and maintain, at its sole cost and expense, the
insurance set forth in paragraphs (i), (ii), (iii), and (iv).
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(i) Commercial
General Liability insurance coverage including personal injury, bodily injury,
property damage, operations hazard and contractual liability, such insurance to
insure both the insured and the other party, as an additional insured, and to
afford protection to the limit of not less than $2,000,000.00, combined single
limit, in respect to injury or death to any number of persons and all property
damage arising out of any one (1) occurrence.
(ii) Property
Insurance on an all risk, full replacement cost basis (including coverage
against fire, wind, tornado, malicious mischief and flood) covering the
Premises, all improvements on the Premises and all fixtures, and equipment. Such
policy will be written in the names of the insured, the other party and any
other parties reasonably designated by the other party from time to time, as
their respective interests may appear.
(iii) Employer’s
Liability Insurance. Employer’s liability insurance, including
co-employee coverage, in an amount not less than $1,000,000.00.
(iv) Additional
Insurance. Any other form of insurance or any increase, change or endorsement to
the insurance required herein as any mortgagee of CMT may request or as CMT may
request, provided additional coverage required at the request of CMT shall be
limited to such forms and changes as customarily required for industrial
properties in Xxxxxxxx County, Texas.
V. TERM
1. This
Agreement shall be effective as of the closing of the Amended and Restated
Agreement and Plan of Merger entered into on or around about May 19, 2008 (as
amended and extended from time to time, the “Merger Agreement”), by and between
World Waste Technologies, Inc., a California corporation (“WWT”), Vertex Energy,
L.P., a Texas limited partnership, Xxxxxxxx X. Xxxxxx, Vertex Nevada and Vertex
Merger Sub, LLC, a California limited liability company (the “Effective Date”).
The term of this Agreement shall follow the term of the Sublease Agreement
between the Parties, and it shall expire on February 28, 2017 at 5:00 P.M.
C.S.T. time (the “Term”).
2. The
Parties agree that this Agreement may be terminated during the Term of this
Agreement:
(i) By
the mutual consent of both Parties at any time;
(ii) In
the event any term of this agreement is breached, this Agreement may be
terminated by the non-breaching party upon thirty (30) days prior written notice
to the breaching party of such breach and provided that such breach is not
reasonably cured during such thirty (30) day period; or
(iii) At
any time at the option of either party upon five (5) days prior notice in the
event that Vertex Nevada has paid the R&D Costs (as defined below) to CMT
and Xxxxxxxx X. Xxxxxx’x employment has been terminated by Vertex Nevada, that
Xxxxxxxx X. Xxxxxx would have the right to terminate Vertex Nevada’s use of CMT
OP#2 at CMT.
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VI. CONSIDERATION
FOR SERVICES
1. As
consideration for agreeing to perform the Services hereunder, Vertex Nevada
shall pay CMT all of its costs and expenses associated with CMT OP#2 (the
“Expenses”), plus the payment to CMT of a fee equal to 10% of the
Expenses (the “Fees”). It is understood by both parties
that the per gallon cost associated with this Section VI(b) shall not exceed
$0.40 per gallon (except as provided in Article VI(5), below) without written
approval by Vertex Nevada (the “Maximum Price Per Gallon”).
2. The
Fees shall be paid monthly in arrears within ten (10) business days from the
date such Fees are billed by CMT.
3. In
the event the Fees are not paid as provided above, CMT shall have no obligation
to render the Services.
4. The
Fees shall be reviewed and approved by Vertex Nevada’s Related Party Transaction
Committee on a quarterly basis and/or as needed.
5. In
the event Vertex Nevada’s Conforming Feedstock throughput of CMT OP#2 is less
than 25,000 barrels per month, the Maximum Price Per Gallon shall not
apply.
6. Vertex
Nevada and CMT will analyze the Fees and Maximum Price Per Gallon and may
mutually agree to different Fees and/or a different Maximum Price Per Gallon
than as provided above, provided that any such changes must be approved by the
RPTC.
VII.
LICENSING OF
OP#2
1. Subject
to the terms and conditions of this Agreement, Vertex Nevada is hereby granted a
non-revocable, non-transferable, royalty-free, perpetual (except as otherwise
provided below) license (the “License”) to use the technology associated with
the operations of CMT OP#2 (the “Technology”) in any market in the World,
including the right to duplicate CMT OP#2 and/or use the Technology in any
future processes built by Vertex Nevada anywhere in the World; provided however,
that the requirements of Article VII(2) are complied with as described
below.
2. Vertex
Nevada agrees to pay CMT the documented R&D Costs of up to a maximum of $1.4
million dollars as of the Effective Date, which both parties agree is an
obligation due to Vertex Nevada at the Effective Date. Vertex Nevada
agrees to use its best efforts to remit the R&D Costs as soon as possible in
a commercially reasonable manner. Vertex Nevada and Vertex LP
will designate an individual to negotiate the terms of payments, with the RPTC
approving such terms before they are finalized.
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3. “R&D
Costs” shall mean the first $1.4 million of CMT’s documented net development
costs relating to the Technology, including, but not limited to CMT OP#2, which
shall be reasonably approved by the Related Party Transaction
Committee. The Related Party Transaction Committee shall have the
right, but not the obligation to audit such R&D Costs.
4. The
License shall expire automatically in the event Vertex Nevada:
(a) Shall
(i) become insolvent or take any action which constitutes its admission of
inability to pay its debts as they mature; (ii) make an assignment for the
benefit of creditors, file a petition in bankruptcy, petition or apply to any
tribunal for the appointment of a custodian, receiver or a trustee for it or a
substantial portion of its assets; (iii) commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation or statute of any jurisdiction, whether now or hereafter in effect;
(iv) have filed against it any such petition or application in which an order
for relief is entered or which remains undismissed for a period of ninety (90)
days or more; (v) indicate its consent to, approval of or acquiescence in any
such petition, application, proceeding or order for relief or the appointment of
a custodian, receiver or trustee for it or a substantial portion of its assets;
or (vi) suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of ninety (90) days or more; or
(b) Shall
dissolve or wind-up its operations.
5. The
License granted by this Section VII and the terms and conditions of the License,
including the expiration of the License, shall survive the Term of this
Agreement.
VIII. MODIFICATION
1. This
Agreement shall not be modified, amended, or changed, except by written
instrument executed by the duly authorized officers, or representatives, of the
Parties hereto. If any law, rule, or regulation, is adopted, or
rescinded, CMT and Vertex Nevada agree to comply with such law, rule, or
regulation.
IX. INDEMNIFICATION
1. CMT’s
Indemnification. CMT agrees to and does hereby indemnify, hold
harmless and defend Vertex Nevada, and each of its respective shareholders,
members, partners, directors, officers, managers, employees, agents, attorneys
and representatives (each a “Related Person” and collectively the “Related
Persons”), from any and all judgments, orders, decrees, claims, costs or
expenses arising out of the performance or breach by CMT of its obligations
under this Agreement, including on account of but not limited to the
following:
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(i)
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damage
to property of CMT, Vertex Nevada or third
parties;
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(ii)
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personal
injury, including death;
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(iii)
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any
violation by CMT or its Related Persons of any government, departmental,
or local law, order or regulation;
and
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(iv)
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any
environmental condition occurring during the term of this Agreement to the
extent caused by CMT or its Related
Persons;
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provided,
however, that this indemnification provision shall not apply to the extent that
any such damage to property, personal injury, including death, any violation of
any such law, order or regulation or environmental condition results from the
gross negligence or willful misconduct of Vertex Nevada, its agents or
employees.
2. Vertex
Nevada’s Indemnification. Vertex Nevada agrees to and does hereby
indemnify, hold harmless and defend CMT and its Related Persons, from any and
all judgments, orders, decrees, claims, costs or expenses arising out of the
performance or breach by Vertex Nevada of its obligations under this Agreement,
including on account of but not limited to the following:
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(i)
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the
transmittal Non-Conforming Feedstock or the operation of CMT OP#2 with
Non-Conforming Feedstock;
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(ii)
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damage
to property of CMT, Vertex Nevada or third
parties;
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(iii)
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personal
injury, including death;
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(iv)
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any
violation by Vertex Nevada or its Related Persons of any government,
departmental, or local law, order or regulation;
and
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(v)
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any
environmental condition occurring during the term of this agreement to the
extent caused by Vertex Nevada or its Related
Persons;
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provided,
however, that this indemnification provision shall not apply to the extent that
any such damage to property, personal injury, including death, any violation of
any such law, order or regulation or environmental condition resulting from the
gross negligence or willful misconduct of CMT, its agents or
employees.
X.
FORCE
MAJEURE
CMT shall
not be obligated to perform Services pursuant to this Agreement and Vertex
Nevada shall not be required to pay any Fees to CMT to the extent that any one
or more of the following events prevent, restrict or delay the operation of CMT
OP#2 in the customary manner, whether the event affects CMT or Vertex Nevada
directly or affects Vertex Nevada indirectly by affecting Vertex Nevada's
suppliers:
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(a)
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Compliance,
voluntary or involuntary, with a direction or request of any government or
person purporting to act with governmental authority, including without
limitation acquiescence in and voluntary agreement to a change in the
present relationships with any government resulting from the Initiative of
such government or a person purporting to act for such
government;
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(b)
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Total
or partial expropriation, nationalization, confiscation, requisitioning or
abrogation or breach of a government contract or
concession;
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(c)
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Closing
or restriction on the use of a port, pipeline or
railroad;
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(d)
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Maritime
peril, storm, earthquake, flood;
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(e)
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Accident,
fire, explosion;
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(f)
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Hostilities
or war (declared or undeclared), embargo, blockade, riot, civil unrest,
sabotage, revolution, insurrection;
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(g)
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Strike
or other labor difficulty (whomsoever’s employees are involved), even
though the strike or other labor difficulty could be settled by acceding
to the demands of a labor group;
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(h)
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Loss
or shortage of producing, delivery or transportation facilities,
equipment, labor or material caused by circumstances beyond the reasonable
control of the Party affected; or
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(i)
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Any
event reasonably beyond the control of the Party affected, whether or not
similar to those listed above.
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As used
in this Section, “in the customary manner" means in accordance with the general
practices of the petroleum industry; and “government” shall include without
limitation any company controlled by a government.
XI. NOTICES
1. Any
notice required or permitted hereunder by one party, to the other, shall be in
writing and the same shall be given, and shall be deemed to be served, and
given, if delivered in person to the address set for hereinafter for the party
to whom the notice is given, or if placed in the United States mail, postage
prepaid, registered or certified mail, address to the party at the address
hereinafter specified.
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The
address for Vertex Nevada shall be:
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Vertex
Nevada
Attn:
0000
Xxxxxx Xxxxx 000
Xxxxxxx,
Xxxxx 00000
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The
address for CMT shall be:
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Cedar
Marine Terminal, L.P.
Attn:
000
Xxxxxxxx Xxxx Xxxx Xx.
Xxxxxxx,
Xxxxx 00000
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XII. MISCELLANEOUS
1. If
any section of provision of this Agreement shall be determined to be invalid by
applicable law, then, for the period that it is invalid, it shall be deemed to
be deleted from this Agreement; however, all remaining portions of this
Agreement shall remain in full force and effect.
2. The
failure of a party hereunder to assert a right, or enforce an obligation of the
other party, shall not be deemed a waiver of that right, or obligation, in the
event that right, or obligation, becomes effective, or is asserted
thereinafter.
3. This
Agreement shall be deemed to have been entered into the State of Texas, and the
laws of the State of Texas (without giving effect to any principles of conflicts
of law) shall be applicable in the construction of the terms, and provisions
hereof, and in determining the rights and obligations of the Parties
hereunder.
4. The
Agreement constitutes the entire agreement of the Parties regarding the matters
contemplated herein, or related thereto, and supersedes all prior and
contemporaneous agreements, and understandings of the Parties in connection
therewith. No covenant, representations, or conditions, which is not
expressed in the Agreement shall affect, or be effective to interpret, change,
or restrict, the express provisions of this Agreement.
5. No
failure on the part of any Party to enforce any provisions of this Agreement
will act as a waiver of the right to enforce that provision.
6. Section
headings are for convenience only and shall not define or limit the provisions
of this Agreement.
7. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
such counterparts have been signed by each party and signature pages from such
counterparts have been delivered. This Agreement may be executed by
facsimile transmission or by e-mail transmission in PDF format. A
photocopy of PDF of this Agreement shall be effective as an original for all
purposes.
[Remainder
of page left intentionally blank. Signature page follows.]
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EXECUTED and effective this
______day of March 2009.
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“CMT”
Cedar
Marine Terminals, L.P.
a
Texas limited liability partnership
By VTX, INC. It's
General Partner
By:
/s/
Xxxxxxxx X. Xxxxxx
Its: President
Printed
Name:
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“Vertex
Nevada”
Vertex Energy, Inc.
a
Nevada corporation
/s/
Xxxxxxxx X. Xxxxxx
Xxxxxxxx
X. Xxxxxx
Chief
Executive Officer
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