Exhibit 10.38
Revised Memorandum of Understanding
Agreement to Jointly Develop a 2 by 50 Tons Per Day
Plant for the Treatment of Industrial Wastes
In Taipei, Taiwan
between
IDM Environmental Corp. - 000 Xxxxxxxxx Xxx. Xxxxx Xxxxx, XX 00000, XXX
Xxx Xxxxx Technology Consultants, Inc. - 00000 Xxxxxx Xxxxx, Xxxxxxx, XX 00000,
XXX
Hereinafter, collectively, IDM Asia
and
Five - Nines Technology Company - Xx. 00 0, Xxxx 000, Xxx 2 Wen Hwa Road, Xxxx
Xxxxx, Taipei County, Taiwan, R.O.C.
Hereinafter Five - Nines
Whereas,
1. The Republic of China has an urgent need to develop permanent solutions to
deal with a serious environmental and social problems presented by the ever
increasing and accumulated volumes of industrial wastes. To this end, the
government of Taiwan has instituted policies, legislation and regulations
to encourage (and simplify) the private sector development of waste
processing and waste to energy facilities. Among the regulations instituted
is the requirement that any electric power produced from cogeneration (or
waste to energy plants) must be purchased by the utility for a minimum
equivalent of $0.04 per kw-hr.
2. Five - Nines and IDM Asia have expressed a keen and urgent interest in
developing a facility to process industrial wastes from Taipei City, Taipei
County and other locations within Taiwan as secured by Five - Nines through
their core waste handling and disposal business.
3. IDM Asia brings engineering and construction expertise and resources as
well as access to proprietary technology for the processing of a wide range
of conventional, industrial and hazardous wastes and thus has a deep
interest in developing waste to energy facilities in partnership with Five
- Nines .
Therefore, the parties agree as follows:
1. Five - Nines and IDM Asia agree to establish a Joint Venture partnership
for the development of waste to energy and waste processing facilities in
Taiwan for sites owned by and designated by Five - Nines.
2. The facility will be jointly developed and owned by both parties, each
party sharing the project risks and rewards in accordance with the
following ownership structure: Five - Nines will own 60% of the Project and
IDM Asia will own the remaining 40%. The Parties recognize, and agree, that
Five - Nines also brings an additional, unique and essential benefit to the
Project in the form of its existing waste contracts, contacts within the
industry and access to the waste with the highest value to the project. As
such, the Parties agree that these benefits entitle Five - Nines to an
additional level of ownership percentage over and above that corresponding
to the value of its cash (or cash equivalent) equity contribution to the
project. The Parties agree that the value of this benefit will be up to 5%
The attached Conceptual Project description provides a tabulation of the
value of the equity investments envisioned by both parties. The parties
agree that this ownership breakdown will be subject to revision if there
are any changes to the value of equity investment contributions from either
party following completion of the feasibility study.
3. As presently envisioned the equity contributions from each party will be
based in accordance with the following activities and provisions:
a. Five - Nines will contribute the land for the project. The
parties currently estimate that this contribution is
approximately $ 5.0 million USD (160 million NTD).
b. IDM Asia will contribute the equipment for generating thermal and
electrical energy that will be sourced from its inventory of
power generating equipment. The parties estimate that the value
of the power equipment and technical services is approximately $
4.3 million USD (138 million NTD).
The value of these equity contributions will be verified by third party
appraisals to be performed during the feasibility study phase.
4. Based on current estimates of the Project costs described in the attached
Conceptual Project Description, the Parties agree that the project will be
financed by securing third party (non-recourse) project financing for the
costs of the project net of the equity contributions described in # 3
above. The Parties estimate that the amount to be financed will be
approximately $ 13 million USD (416 million NTD).
5. The role of each Party in this joint venture partnership is envisioned as
follows:
a. Five - Nines will have majority ownership of the plant(s) and
will provide the land and the contracts for waste processing in
accordance with established tipping and processing fees.
b. IDM Asia will be responsible for the design, construction and
start-up and operation of the plant(s).
c. Five - Nines and IDM Asia will work together to secure the most
advantageous terms for third-party project financing for the
project(s).
6. Five Nines will retain majority ownership of the plant(s) with a 60 %
equity interest in the project(s). IDM Asia will have a 40% equity interest
in the project(s), subject to the provisions of # 2 above. The equity
contributions are in accordance with the provisions described in # 3
7. The Parties agree to develop this project in a mutually exclusive fashion
and that neither party will commit to bring in any other equity partner
without the express consent and approval of the other party. The Parties
further agree not to circumvent each other. Five - Nines agrees not to
contact any suppliers of waste to energy or waste processing technologies
or any contractors or engineering companies in regards to these projects
without the express knowledge and consent of IDM Asia. IDM Asia agrees not
to contact any waste handling and disposal companies or incinerator
developers without the express consent and approval of Five - Nines.
8. Upon execution of this MOU, Five - Nines and IDM agree to immediately begin
the development of a detailed feasibility study. The feasibility study will
build upon the Conceptual Project Description (attached to this MOU) and
will include the following major tasks:
a. Waste fuel profile and analysis for Industrial Solid Wastes,
Industrial solvents and other liquid wastes and other
(non-hazardous) organic products and Industrial waste sludges.
b. Develop a more detailed preliminary design of the facility,
including a more refined and detailed project cost estimate and
project schedule.
c. Develop the preliminary technical and environmental data required
to initiate discussions and submittals to secure the required
Taiwan EPA and Ministry of Construction permits. Review all
applicable regulations and requirements and will include the
development of a draft Environmental Impact Assessment (EIA).
d. Develop the required technical and design information required
for submittals to the Taiwanese Government_s Energy Committee to
secure government approval as a _co-generator._ Following this
approval, the parties will initiate discussions with Taipower to
secure a long-term (e.g. 20 year) Power Purchase Agreement (PPA)
in accordance with the provisions of the Taiwanese Cogeneration
Law (requiring that Taipower purchase the electric power produced
by approved cogeneration facilities).
e. Based on the project design developed above, a detailed financial
analysis and profile will be developed as a basis to begin
discussions with potential sources of third-party financing.
The costs for the feasibility study will be shared by the parties
in accordance with the equity ownership breakdown described in #
3 above with IDM Asia taking the lead responsibility for the
development of this study and financing its share of the costs
with in-kind contribution for engineering. The costs associated
with the development of the feasibility study will be carefully
tabulated and controlled and fully reported to the Parties. Prior
to commencing the performance of the feasibility study the
parties will establish a cost structure for engineering manhours
and out-of-pocket (e.g. travel) expenses that will be considered
allowable costs on the project. Based on a monthly review of the
expenditures of each party associated with the feasibility study,
the parties agree to reinburse each other in accordance with the
breakdown of equity ownership breakdown described in # 3 above.
The parties currently estimate that the total cost of this
feasibility study will not exceed $ 300,000 USD (9.6 million
NTD).
9. The parties acknowledge that in connection with the development of the
project disclosures will be made by Five - Nines to IDM Asia and by IDM
Asia to Five - Nines , orally and in writing, of a wide variety of
information and documents, a substantial part of which is confidential and
proprietary in nature (_Confidential Information_). The Confidential
Information is of special and unique order and constitutes valuable assets.
Accordingly, the parties agree that, prior to the closing of the project
agreement, the Confidential Information will be held in strict confidence
at all times, provided that in furtherance of the project, the parties may
make the Confidential Information available to their respective agents and
advisors and to a limited number of financial institutions and other
investors and their agents and advisors (_Institutions_), each of which
shall agree to hold the Confidential Information in strict confidence. In
the event discussions concerning the project are terminated for any reason,
the parties and their respective agents and advisors and the institutions
and their agents and advisors will continue to maintain in strict
confidence and will not use any of the Confidential Information learned
from the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding on this _______ day of February,1998
IDM ENVIRONMENTAL CORP Five - Nines
Name: Name:
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Title: Title:
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XXX XXXXX TECHNOLOGY CONSULTANTS, INC.
Name:
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Title:
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