CONTRACT# On Creation of Bio-Energetic Units on Processing and Utilization of
Live-Stock Farming Wastes
Dnipropetrovsk City 1999
This contract supersedes all prior oral and written agreements between the
parties
regarding the Aerobic Bio-Energetic Units "ABEU" and technology.
1. PARTIES OF THE CONTRACT:
1. 1. US side, as a Customer, is represented by:
- Consortium Service Management Group, Inc., 500 No. Shoreline, suite 701 No.
Tower, Corpus Christi, TX 78471 (hereinafter referred to as CSMG) as a Customer
in the person of Xxxxxx X. Xxxxxxx, President and CEO;
1.2. Ukrainian side, as an Executor, is represented by:
- Joint Stock Company "United Engineering Company", Dnipropetrovsk City, Ukraine
(hereinafter referred to as JSC UEC) in the person of Director General Xx.
Xxxxxxx X. Xxxxxx,;
- Xx. Xxxx X. Xxxxxxxxx, Surny, Ukraine (hereinafter referred to as Inventor);
2. Preamble
2. 0.Xx CSMG and AFW have a great experience in arranging marketing technologies
and equipment for this joint project in order to bring the ABEU equipment to the
USA and other world markets; and
2.2. as UEC is a joint stock company with a great experience in the field of
engineering, construction -installation work and adjustment work; and
2.3 Inventor has technical "know-how" and may have some patentable works that
have been developed during several years in the sphere of anaerobic Animal waste
plant for the various functional animal wastes processing purposes;
2.4. As CSMG has organized the first equipment markets in the USA. All parties
agree CSMG shall have the exclusive world rights to the ABEU technology and
inventor Semenenko, Semenenko technology and upgrades, patents, including
upgrades,
2.5. As CSMG in cooperation with AFW as the USA side is ready to cooperate with
the JSC UEC, the SPA FRUNZE, and Semenenko as the Ukraine side which represents
the USA and Ukraine temporary technological team in order to determine the first
USA farm location retrofitting and equipment need, determine a price for the
equipment, provide testing, patenting if necessary, marketing, manufacture,
licensing, servicing and distribution of the products to be manufactured within
the "ABEU Complex" project;
3. THE PURPOSE OF THE CONTRACT
The purpose of this Contract is to bring Ukraine design of the "Anaerobic
Bio-Energetic Unit" to the USA and other world markets as soon as possible.
4. DEFINITION
ANAEROBIC BIO-ENERGETIC UNITS. Inventor has developed ABEU which is designed for
processing of liquid and solid manure in anaerobic conditions into high
efficient, disinfected, deodorized organic
Exhibit 10.4
Page 1 of 7 Pages
fertilizers suitable for immediate use without additional processing and for
obtaining biogas as electric energy source. The ABEU is a closed system which
processes the manure in a closed environment and provides methane for electric
generation or other purposes, allows the elimination of the waste lagoon, cleans
water to drinking water standard if elected by the location and processes the
waste to a level that the processed product is not harm the environment, animals
or humans. The ABEU also obtains dewatered, disinfected organic fertilizers,
obtain purified discharge (in regard to sanitary indications) which is suitable
for repeated use in manure disposal system on live-stock farm, reduce
consumption of energy for farm needs by using the obtained biogas, increase
sanitary work atmosphere and working conditions on farm, and reduce infectious
germs and micro organisms thus reducing human and cattle disease rate. It is
supposed to solve a very important ecological problem of utilization and
processing of animal wastes, that is to reduce the odor level by 90-95%, to
reduce quantity of hazardous for ozone stratum gases by 90-95%, elimination of
penetration of polluting animal farm wastes into the ground waters, reservoirs
and rivers.
5. PRODUCTS TO BE RECEIVED ON THE "ANAEROBIC BIOENERGETIC
COMPLEX" PROJECT.
5.1 ABEU will be equipped a with system for collecting and utilization of
biogas, generating electric energy decontaminated, solid fertilizer, and with
system for additional water treatment to the level of service water (according
to sanitary indications) which is suitable for repeated use in manure flush
system on livestock farm or may be treated to drinking water level if so
selected by the location needs.
5.2 ABEU for the territory of the USA and other countries that are capable of
processing the farm's wastes of several thousand hogs or dairy head of cattle
with the observance of all ecological norms, fixed by the government at this
territory. It is understood by all parties that the units are very similar and
the actual plants purchased will have the same anaerobic processing components,
however the actual number and size of components needed by each concrete plant
will be determined by the size of the respective needs of the animal farm
location.
6. SUBJECT MATTER OF THE CONTRACT.
6. 1. Parties have come to an agreement about mutual cooperation in order to
develop and realize the program on creation of the aerobic bio-energetic units
(complexes) ABEU.
6.2. CSMG, as a Customer commissions and Ukraine side as an Executor binds
itself to perform the development, installation and commissioning of the
ecologically pure and economically efficient ABEU Units for processing a great
quantity of animal industry's wastes in the USA and other countries.
7. USA First Plants Plan:
7.1 First Stage: The bringing over of Ukraine experts to the USA to visit the
locations where first plants may be installed. The development of ABEU plant
costs and schematics or drawings for the specific locations based on the animal
size of the location within three weeks of the Ukraine experts visit.
7.2 Second Stage: The delivery of the schematics or drawings and plant costs to
the USA location for approval by the grower, regulatory authorities, insurers
and bankers for final approval.
7.3 Third stage: Upon approval of second stage and posting of the C SMG letter
of Credit begin manufacture of the ABEU equipment with the intent of the
equipment being manufactured and loaded on a vessel within 90 days of such
Letter of Credit posting
7.4 Fourth stage: Upon equipment arriving to the location in the USA, UEC and
Xxxxxxx and shall visit
Exhibit 10.4
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the USA for the propose of overseeing the prudent installation and start up
operation of the plants and training of USA personnel to successfully operate
the plants.
8. OBLIGATIONS OF THE CONTRACT PARTIES.
As the Executor of the work on the Contract the Ukrainian side binds itself to
the following obligations:
o to perform the development of technical offer, development of the detail
design of each bio-energetic unit, development of the construction part of the
working design;
o mange for appropriate personnel to go to the United states to review the needs
of the grower location; tAr
o to perform start-up and adjustment works;
o to perform the oversight of the construction works;
o to carry out the oversight of the completion of electric equipment
installation;
o to provide warranties and product guarantees acceptable to the USA side;
o to provide CSMG copies of all contracts between the Ukraine side;
o to mange the legal support of the project in accordance with the laws of
Ukraine with the legislation of Ukraine, including signing contracts and
agreements for fulfilling the works of this project;
o to mange business trips and accommodation of the specialists, working on the
Project o to perform the development of the working design, including working
drawings for the USA plants;
o to manufacture ABEU equipment and to carry out completing of mechanical
equipment and shipment of the equipment to the location.
o to provide operations manuals and equipment manuals to CSMG in English
o be responsible for all Ukraine customs costs, problems and all Ukraine taxes;
o to perform all duties described in USA first plants plan (paragraphs 7.3,7.4);
8.3. CSMG, as a Customer, binds itself to the following:
o to conclude a separate contract with Ukraine side on each bio-energetic unit
for the USA and other countries markets and determination of cost for the
location unit after completion of paragraphs 7.1 and 7.2 mentioned above;
o to pay, in accordance with concluded agreements, -it cost for executed and
accepted works on its creation, installation and adjustment as completed by the
Ukraine side and accepted by the USA side;
o to carry out delivery of cable products, electric motors; electric power
generator, construction of buildings, facilities, foundations for ABEU,
installed in the USA and other countries;
o to arrange the expenses of the Ukraine specialists for travel, food and
lodging while in the USA and other countries;
o to arrange the site visits at the USA locations for the Ukraine team of 2 to 3
experts;
Exhibit 10.4
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o arrange for and coordinate the USA requirements and specifications between the
USA specialists and Ukraine team;
o to market the ABEU technology and equipment
9. RIGHTS OF THE PARTIES
9.1 CSMG will have the exclusive world rights to patent, market, distribute,
license,
service the products of the ABEU project and technology and the Author or other
members of the team including any ABEU technology upgrades servicing and
licensing to begin in the territory described below.
9.2 New patents will be issued in the name of the inventor / inventors but will
be assigned
to C SMG within 5 days of filing a patent application or issuance of a patent
9.3 CSMG may assign its exclusive rights to the Animal I- Waste, Inc. as a
participant
of the present Contract from the US side, or other business entity, CSMG deems
necessary for the success of the ABEU project, after coordination with the
Ukrainian side.
9.4 CSMG may seek other suppliers of certain parts of the ABEU plant if such
parts are needed for prudent operation of the plant or if such parts are less
costly to manufacture in the USA or other location when taking into account
costs of shipping, freight, installation, manufacturing and other costs relating
to the part.
9.5. Ukraine side shall have the exclusive rights to provide all the bank and
customs operations on the territory of Ukraine.
10. COST OF WORKS, PROCEDURE OF PAYMENT.
10. 1 Cost of units, created under separate contracts for each location and
procedure of payments are determined by the parties of these contracts in
accordance with the technical specifications of the Unit and other contract
terms. 10.2 Upon final approval as described in paragraph 7.2. of the delivery
of the schematics or drawings and plant costs to CSMG of the USA location for
approval by the grower, regulatory authorities, insurers and bankers CSMG shall
pay the costs as arranged by the parties for the schematic or drawings within 20
days of notification to CSMG from the grower, regulatory authorities, insurers
and bankers. 10.3 Upon final approval as described in paragraph 7.2 CSMG shall
post a Letter of Credit for the purchase of the ABEU equipment with delivery
terms agreed to by the parties for the manufacturer and delivery of the ABEU
equipment
11. PATENTS
In the event it is determined by all parties to this agreement that there are
important patentable inventions which make economic sense, the patent shall be
issued in the name of the individual inventor(s) and assigned to CSMG
immediately upon patent filing and
issuance.
12. Royalty Payments
12.1 The sum of royalty payments paid to the Ukrainian side, are based on
equipment costs stated by the
Exhibit 10.4
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manufacturer at the factory, FOB agreed port of departure in Ukraine.
12.2. The sum of royalty payments for CSMG exclusive world rights paid to the
Ukrainian side shall be at the rate of 5 % of the equipment costs described in
12. 1.
13. Exclusive Rights Assignment.
CSMG may assign its exclusive marketing rights to Anaerobic Farm Waste, In_
Oklahoma City, OK (hereinafter called AFW) as an affiliated company in the
person of Xxxxxx X. Xxxxxxx President and CEO or other business entity as CSMG
deems necessary for the success of the ABEU project#
The future royalty payments described in paragraph 12 made under this contract
shall be considered payment in full for exclusive rights to CSMG so long as CSMG
meets the requirements to supply orders of at least $ 1,000,000 (one million US
dollars) of ABEU equipment to the Ukraine side.
14. PROVISION OF CONFIDENTIALITY
14.1 Contract parties bind themselves to keep confidentiality of information
acquired within realization of the present contract. Contract parties agree to
divulge such
information only to those persons inside the organization who have to be -are of
it;
or to divulge such information to the third party with the written consent of
the second
party of the present contract only.
14.2. Confidential information is as follows:
o Technical data - drawings, prototypes of equipment, models, principles of
construction and description of the manufacturing methods of assemblies and the
unit, as a whole;
o Commercial information about the cost of the unit, possibilities of units'
sale;
o Commercial information regarding the who and where of plant installations and
locations
15. LIABILITIES OF THE PARTIES.
15. 1. In case of breach of terms of the Contract, signed up between the
Customer and some Executor from the Ukrainian side, on particular ABEU Unit
because of the Executor's fault the latter pays the Customer penalty at the rate
of 10% of cost of works on the portion of the contract in which the default
occurred.
15.2. 1n case of delay in execution of works for 10 days, the Customer has the
right to cancel a contract or demand full cure of the default within 3 0 days of
notification of default.
15.3. For the delay on payment with the Executor of more than 10 days, the
Customer pays the Executor penalty at the rate of 10% of cost of the portion of
works the works on the contract in which the default occurred.
16. RELEASE FROM LIABILITIES.
16. 1. Neither Party is responsible for the failure to realize the project or
for the delay in realization the
Exhibit 10.4
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responsibilities described in this Contract, in case when a breach of the
obligations or delay is caused directly or indirectly by any forcemajeur
situation. 16. 2 The following circumstances are considered to be force-majeur:
fire, flood, explosions, accidents, social unrest, breach of the peace,
lockouts, wars
and other critical situations, Government resolutions;
any damages of the main equipment that cause closing of the enterprises; or any
industrial conflict, strike, lockout or other situations that can not be
controlled by
the Party.
16.3 The Party that announces about the force-majeur situation shall inform the
other party immediately in writing and shall do its best to ease the situation
and continue its responsibilities.
16.4 If the force-majeur situation continues and, probably, will continue for
more than three months, the Party that was not informed about the force-majeur
situation may terminate the contract in 30 days after a written notification
about its intentions.
16.5 In case if the force-majeur situations affect the possibilities of one of
the Parties to meet its responsibilities, the fulfillment by the Parties of
their responsibilities shall be suspended till the moment of termination the
force-majeur situation. In this case none of the Parties will be responsible for
the breach of its duties during this period.
16.6 After the elimination of the force majeur situation the Parties may
consider this Contract resumed; all the specific conditions making for
resumption of this Contract after the force- majeur situation shall be described
in the minutes subject to approval by both Parties.
16.7. If the circumstances, specified in item 14.2. of the present contract, go
on for more than three months, each party will have a right to cancel a contract
and, in this case no one of the parties will have the right to demand
compensation fro. another party for the possible losses that incurred.
17. TERM OF A CONTRACT.
17. 1. The present contract is valid to the moment of its complete execution,
from the moment of its signing by parties.
17.2. The present contract is for a period of 20 years and may be prolonged by
mutual agreement of parties.
18. ORDER OF SETTLEMENT OF DISPUTES.
18. 1. Parties settle disputes that occurred under present contract by way of
negotiations.
18.2. If the parties can not come to an agreement the dispute will be settled in
accordance with Legislation of Ukraine at the Arbitration Court of the Chamber
of Commerce of the Ukraine if the disagreement is a Ukraine dispute.
18.3. If parties can not come to an agreement the dispute will be settled in
accordance with the laws of the State of Texas, Nueces County, USA, if the
disagreement is a US dispute.
19. CHANGE OF CONTRACT TERMS.
Exhibit 10.4
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19. 1. The terms of present contract equally legally binding for both parties
can be changed and supplemented by mutual agreement with making a document in
written form, without fail.
19.2. Any amendments to this contract must be applied in writing and signed by
authorized representatives of all parties. 19.3. No one of the parties has the
right to transfer its rights under present contract to the third party without
approval of the other party in written form.
20. TERMS OF EXECUTION OF WORKS.
20. LA term of the performance of works under present contract will be stated in
the associated contracts for the particular location.
20.2. Executor has the right to perform work ahead of schedule on those
contracts.
21. ORDER OF ACCEPTANCE OF THE EXECUTED WORKS.
2 1. 1. Acceptance of the executed works is legalized by the Certificate, signed
by the parties of the present contract.
21.2 .Finished design documents are handed over to the to CSMG for final
approval as described in paragraph 7.2.
21.3. CSMG within 30 working days after the day of receiving the design
documents provide the Executor with the signed Acceptance Certificate of the
executed works or with the reasonable refusal of the acceptance of design
documents.
21.4. CSMG's reasonable remarks are legalized by bilateral Statement with
indication of the required changes and terms of their performance by the
Executor of the works.
21.5. If, within the execution of works, it will be cleared out the
inevitability of negative result or the inexpediency of further execution of
works, the Executor has to lay off the works and to inform the CSMG in written
form within 3 days after laying-off the work. In this case the parties have to
consider the question about feasibility and further lines of development of
works.
The given contract is made in eight (8) copies equally legally binding, four
copies - in Russian and four copies - in English language. The Customer has two
copies (in English and in Russian language) each and the Executor from Ukraine
side has two copies (in Russian and in English language) each. The English
version shall be the dominant contract in all territories outside the Ukraine.
22. LEGAL ADDRESSES OF THE PARTIES:
CUSTOMER EXECUTORS
Consortium Service Management Group, Inc. Joint Stock Company "United
Engineering 000 # Xxxxxxxxx, Xxxxx 000, Xxxxxx Xxxxxxx, Xxxxxxx" Xxxxx, USA Xxxx
Xxxx Xxxxxx, 00/00, Xxxxxxxxxxxxxx xxxx, 000000, Xxxxxxx THE BANK OF NEW YORK
NEW YORK, USA SWIFT: XXXXXX0X XXX. 000-0000-000 ZEMELNY CAPITAL COMMERCIAL BANK
ACC. 2600700100014 840 UNITED ENGINEERING COMPANY DNIPROPETROVSK, UKRAINE SIGNED
BY: CSMG President JSC UEC Direct
Exhibit 10.4
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