Exhibit 10.4
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("Agreement") is entered into between
the Biodiesel Development Corporation ("BCD"), a Delaware corporation, and
Xxxxxxx Petroleum Distributing ("Xxxxxxx"), a Nevada corporation, for the
purpose of establishing a mutually exclusive relationship for the distribution
of biodiesel in Southern Nevada ("Territory"). BDC and Xxxxxxx shall be referred
to jointly as the "Parties."
The term of this Agreement shall be for one year beginning upon the
date of this Agreement, and continuing thereafter with the mutual written
consent of the Parties.
BDC agrees to sell to Xxxxxxx in the Territory, and on an exclusive
basis and to no other customers, retailers or distributors, biodiesel which
meets the ASTM PS 121 specifications for biodiesel as a motor fuel. BDC agrees
to guarantee a minimum supply volume of one rail car per month (@ 20,000
gallons) for the term of this Agreement, at an initial delivered price of $1.90
per gallon, by railcar to Xxxxxxx'x location on Bonanza Boulevard in Las Vegas,
Nevada. Said price shall not be inclusive of any applicable taxes, but shall be
modified after the first three (3) months of this Agreement to reflect any
changes in prices for feedstocks used for making biodiesel.
Xxxxxxx agrees to purchase biodiesel exclusively from BDC during the
term of this Agreement, and to provide for the storage of delivered railcars at
its location on Bonanza Boulevard in Las Vegas, Nevada. Xxxxxxx shall be
responsible for the safe handling, storage and distribution of the biodiesel
once it has been received at its location. Xxxxxxx agrees to pay the agreed upon
price for the biodiesel, as evidenced by its written purchase order to BDC,
within thirty days of receiving confirmation of shipment, or confirmation of
availability in the event of pickup by Xxxxxxx, and to be solely responsible for
the collection and payment of any and all applicable taxes on its purchase and
subsequent sale of biodiesel. Xxxxxxx agrees to use its best efforts to
distribute and market biodiesel within its Territory.
The Parties agrees that any and all disputes regarding this Agreement
shall be resolved by binding arbitration conducted by and in accordance with the
commercial rules then in effect of the American Arbitration Association in Las
Vegas, Nevada, in accordance with the laws of the State of Nevada.
This Agreement can only be modified with the mutual written consent of
the Parties.
As consideration for this Agreement BDC agrees to sell, and Xxxxxxx
agrees to purchase an initial order for biodiesel at a price of $1.65 F.O.B.
Cold Springs, Kentucky, as evidenced by the attached Purchase Order.
Agreed to this 14th day of March, 2000 at Las Vegas, Nevada.
/s/ Xxxxxxx Xxxxx /s/ Xxxx Xxxxxxx
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Xxxxxxx Xxxxx, Chairman Xxxx Xxxxxxx, President
on behalf of BDC on behalf of Xxxxxxx
Biodiesel
Development
Corporation
Xxxxxx Unit Proposal, November 3, 2000
This proposal is made in conjunction with the Draft Private Placement Memorandum
("PPM") dated October 14, 2000 and describes the intended use of a minimum
funding level of $175,000. Said funding to be provided by Xxxxxxx/Xxxxxx as a
convertible loan, the terms of which provide for repayment of the loan plus
interest from profits generated by the unit to be constructed and which allows,
at the lender's discretion, for the unpaid balance of the loan to be converted
to shares of stock in BDC of Southern Nevada upon the same terms as the offering
described in the PPM. BDC of Southern Nevada will be operated as a subsidiary
division of BDC, instead of as a separate corporation for tax purposes, and will
be supported by a special class of stock and directed by a divisional board of
directors upon which Xxxxxxx/Xxxxxx may designated a director until such time as
the loan is repaid. The terms of the convertible loan will be fully described in
a mutually agreed upon document, including a mutual noncircumvention clause.
Objective: To build and operate a biodiesel production facility at Xxxxxxx
Petroleum's Xxxxx location which will be capable of profitably producing 150,000
gallons of biodiesel per year (operating on a 40 hour week for 50 weeks) from
used cooking oil, commonly known as the "Xxxxxx Unit." It is the intention of
BDC of Southern Nevada to expand its operations to their full potential as
described in the PPM, and to extend an exclusive license to distribute its
product in the designated territory to Xxxxxxx Petroleum.
Fundamentals: Fabrication of the Xxxxxx Unit will be undertaken by Xxxx Xxxxxx
of Pahrump, Nevada according to specifications provided by BDC and under license
to use BDC's proprietary technology. The unit will be designed to produce a
minimum of 150,000 gallons of biodiesel per yer utilizing used cooking oil as a
feedstock. Cost of construction and placement at the Xxxxxxx site is $135,000 to
be paid in mutually agreed upon progress payments, with final payment due upon
successful demonstration of the unit's design capabilities. Estimated
construction time is 90 days.
With the assistance of Xxxx Xxxxxx, BDC has been able to acquire sample
used cooking oil from the MGM Grand, and has successfully made biodiesel from
it. The MGM Grand has extended an offer to give BDC all of its used cooking oil,
which is currently estimated at 200 to 800 gallons per week. With similar
arrangments from other hotels, BDC should be able to acquire high quality used
cooking oil feedstocks for free in sufficient volumes to support the Xxxxxx
Unit.
Labor for the first Xxxxxx Unit will be disproportionately high because
a single operator will be capable of operating multiple units.
Site preparation will consist of providing a graded paved area
approximately 20' x 60' with waste water drain, fresh water and possible
containment if required by permitting.
Use of Proceeds:
Construction $135,000
Consummables (methanol, NaOH) 10,000
Consulting by Xxxxxx (stock options)
Permit engineering 10,000
Site preparation 20,000
Profitability:
Materials cost per gallon
Feedstock costs $.00
Consumables $.20
Energy $.05
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Total materials cost per gallon $.25
Revenues
150,000 gallons at $1.20 per gallon $180,000
Materials cost @ $.25 per gallon (37,500)
Plant operator @ 25% of revenues (45,000)
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Net Revenues $ 97,500
Net Revenues distribution
50% to loan repayment and 50% to project management
These numbers represent projections based upon numerous assumptions
which may or may not actually occur and are subject to the risks outlined in the
PPM. This is not intended as a guarantee of returns but rahter as a projection
based upon conditions which BDC feels are most likely to exist.
Submitted by,
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
Chairman
