Exhibit 10.1
AGREEMENT
(South Canyon Landfill, Glenwood Springs, CO)
     This Agreement is made and entered into as of the 10TH day of January,
2011, by and between SOUTH CANYON WASTE SYSTEMS, LLC, a Colorado limited
liability company (“Waste Systems”) and CONVERTED ORGANICS INC., a Delaware
corporation (“Converted Organics”).
     WITNESSETH:
     WHEREAS, Waste Systems has entered into that certain Agreement for
Operations Management for South Canyon Landfill dated as of June 1, 2009 (as
amended, the “South Canyon Contract”) with the Glenwood Springs Landfill
Enterprise (“Enterprise”) pursuant to which Waste Systems is to provide
operations management and other services for Enterprise’s South Canyon Landfill
(the “Landfill”) as more fully set forth in the South Canyon Contract;
     WHEREAS, in order to more effectively provide liquid waste management
services under the South Canyon Contract, Waste Systems is installing an
approximately 12,000 gpd LM-HT™ Concentrator Model 12K-WB waste water
concentrator, an enhanced misting system in connection with pond evaporation, a
wood burner and related equipment (as more fully described on Attachment A
hereto, the “Equipment”) for use at the Landfill; and
     WHEREAS, Waste Systems desires to sell the Equipment to Converted Organics,
and Converted Organics desires to purchase the Equipment from Waste Systems; and
     WHEREAS, during the Term (as defined below) of this Agreement, the parties
further desire for Converted Organics to keep and maintain the Equipment on the
Landfill in good working order and state of repair and to fulfill all liquid
waste management services under the South Canyon Contract in accordance with the
terms of such Contract, except to the extent specific obligations and duties in
connection therewith are delegated to Waste Systems under the terms of this
Agreement.
     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Equipment. Waste Systems shall provide, at its sole cost and expense, all
labor and materials necessary to install, start-up and commission the Equipment
in a good and workmanlike manner, in compliance with all applicable laws and
permits, and in a manner that will not cause a default under the South Canyon
Contract. The parties acknowledge and agree that the Enterprise has received the
necessary permits for the operation of the Equipment upon the Landfill (See
Attachment B hereto).

 

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2. Payment of Purchase Price — Converted Organics to Waste Systems. The purchase
price for the Equipment shall be One Million Six Hundred Thousand Dollars
($1,600,000). Converted Organics shall pay such amount in three scheduled
payments to Waste Systems by cashier’s check, wire transfer or other immediately
available funds as follows:

  •   Scheduled Payment 1. Six Hundred Thousand Dollars ($600,000) due
January 1, 2011;     •   Scheduled Payment 2. Five Hundred Thousand Dollars
($500,000) due April 1, 2011; and     •   Scheduled Payment 3. Five Hundred
Thousand Dollars ($500,000) due July 1, 2011, or such later date as the final
CDPHE Air Permit is issued.

Buyer shall also be responsible for the payment to Waste Systems of all
applicable sales, use or similar tax related to the purchase of the Equipment;
such payment shall be made by Converted Organics as and when required under
applicable state and local law.
3. Operation; Payment — Waste Systems to Converted Organics. During the entire
Term of this Agreement, Converted Organics shall (except to the extent that such
obligations and duties have been delegated to Waste Systems under the terms of
this Agreement) keep, operate and maintain the Equipment on the Landfill in good
working order and state of repair and shall fulfill all liquid waste management
services under the South Canyon Contract in accordance with the terms of such
Contract. In consideration of Converted Organics’ ownership, maintenance and
operation of the Equipment on the Landfill and fulfillment of all liquid waste
management services under the South Canyon Contract, from and after January 1,
2011 and during the remainder of the Term, Waste Systems shall pay to Converted
Organics 100% of all payments from Enterprise for water waste services under the
South Canyon Contract, subject to and within five (5) days after Waste Systems’
receipt of same, less the following deductions for the provisions of the
following services by Waste Systems on behalf of Converted Organics:

  (a)   The sum of $5,616.00 per month to reimburse Waste Systems the cost of
labor to operate the Equipment; provided, however, such sum shall increase by
two percent (2%) on April 1 of each calendar year during the Term;     (b)   The
sum of $3,333.33 per month for marketing services provided by Waste Systems to
bring water waste into the Landfill (in accordance with the scope of work
attached hereto as Attachment C); provided, however, such sum shall increase by
two percent (2%) on April 1 of each calendar year during the Term;     (c)   A
sum equal to all costs (calculated based on the actual cost to Waste Systems for
such costs without any mark-up) of repair and maintenance, laboratory supplies,
third-party laboratory testing, and miscellaneous expenses incurred by Waste
Systems in servicing, operating, maintaining and repairing the Equipment,

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      however not including those costs associated with the initial testing of
the Equipment that is required for the final permit;     (d)   The sum of
$833.00 per month for use of the existing employee building and the existing
maintenance building on the Landfill;     (e)   The cost of all thermal energy
required to power the concentrator at the rate of $2.20 per MMBtu; provided,
however, such sum shall increase by two percent (2%) on April 1 of each calendar
year during the Term;     (f)   A sum equal to all costs (calculated based on
the actual cost to Waste Systems for such costs without any mark-up) of all
utilities used in the operation, maintenance and repair of the Equipment and
operation of the waste water treatment systems at the Landfill, except any costs
covered by applicable warranty(ies); and     (g)   Any and all sales, use or
similar taxes, if any, payable in connection with the payments from Waste
Systems to Converted Organics under this Section 3.

Waste Systems shall provide Converted Organics with reasonable documentation
supporting all deductions under paragraphs (c), (e) or (f) above from payments
otherwise payable to Converted Organics under the provisions of this Section 3.
Converted Organics shall be entitled to all applicable carbon credits and waste
heat credits that may be generated from the operation of the Equipment.
4. Title. Waste Systems and Converted Organics agree that title to the Equipment
will pass to Converted Organics immediately following full payment by Converted
Organics to Waste Systems of the entire purchase price set forth in Section 2
above, together with any applicable sales, use or similar tax. If Converted
Organics fails to pay the entire purchase price to Waste Systems, together with
any applicable sales, use or similar tax, title to the Equipment shall remain in
Waste Systems, Converted Organics shall forfeit any installments of the purchase
price previously paid by Converted Organics to Waste Systems, and Waste Systems
shall have the right to terminate this Agreement by written notice to Converted
Organics. Waste Systems covenants and agrees that all payments of the purchase
price from Converted Organics shall be used to pay down the debt currently
encumbering the Equipment. Converted Organics shall have the right to file in
the appropriate UCC records, and/or record in the appropriate real property
records relating to the Landfill, UCC or other statements evidencing and giving
notice of such contract to purchase and, when the entire purchase price has been
paid, ownership in Converted Organics. Waste Systems agrees to reasonably
cooperate with Converted Organics in making any such filings, including the
execution of any appropriate UCC or other statements.
5. Operation by Waste Systems. During the Term of this Agreement, Waste Systems
shall operate the Equipment on the Landfill on behalf of Converted Organics in a
manner intended to

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reasonably maximize payments from Enterprise for waste water services under the
South Canyon Contract. Subject to reimbursement for the cost thereof as provided
in Section 3 above, Waste Systems shall use, service and maintain the Equipment
in good condition and state of repair, in accordance with the instructions and
recommendations contained in the Operating Manual for the Equipment and in
compliance with all applicable laws and permits. Waste Systems shall at all
times keep the Equipment free from all liens, security interests and other
encumbrances created by or imposed on Waste Systems or its property. Converted
Organics and its officers, employees, agents and guests shall have the right, at
any reasonable time during normal working hours and subject to the prior
approval of Waste Systems, to enter upon the Landfill to examine the Equipment.
6. Term and Termination. The term of this Agreement (“Term”) shall begin on the
date set forth in the first paragraph of this Agreement, and shall continue
until the expiration or earlier termination of the South Canyon Contract, as
such South Canyon Contract may be renewed pursuant to one or more of the four
(4) 5-year renewal periods thereunder. Upon the expiration or earlier
termination of this Agreement, Converted Organics shall, at its sole cost and
expense, promptly disassemble and remove the Equipment from the Landfill and
leave the area upon which the Equipment was installed in a neat and orderly
condition, substantially similar as to that which such area was in prior to
installations of the Equipment.
     Any and all obligations of either party which have accrued prior to the
expiration or earlier termination of this Agreement (including all indemnity
obligations), shall survive such expiration or earlier termination.
7. Risk of Loss; Insurance. Until such time as title to the Equipment is
transferred to Converted Organics, Waste Systems shall maintain with respect to
the Equipment “special form” property/casualty insurance in an amount equal to
the full replacement cost of the Equipment insuring against damage to or
destruction of the Equipment from those causes of loss normally insured by a
standard policy of “special form” insurance. During the period that Waste
Systems is required to insure the Equipment, Converted Organics shall have no
liability with respect to, and Waste Systems hereby releases Converted Organics
from any liability with respect to, any damage to or destruction of the
Equipment arising from causes of loss insurable by such “special form”
insurance; provided, however, Converted Organics shall be liable to Waste
Systems for any and all damage to or destruction of the Equipment arising from
acts or omissions of Converted Organics, its agents and employees which are not
insurable by “special form” insurance. Waste Systems shall cause its policies of
“special form” or other property/casualty insurance with respect to the
Equipment to contain a provision or endorsement waiving the insurer’s rights of
subrogation against Converted Organics and its agents and employees.
     From and after the date that title to the Equipment is transferred to
Converted Organics, Converted Organics shall maintain with respect to the
Equipment “special form” property/casualty insurance in an amount equal to the
full replacement cost of the Equipment insuring against damage to or destruction
of the Equipment from those causes of loss normally

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insured by a standard policy of “special form” insurance. During the period that
Converted Organics is required to insure the Equipment, Waste Systems shall have
no liability with respect to, and Converted Organics hereby releases Waste
Systems from any liability with respect to, any damage to or destruction of the
Equipment arising from causes of loss insurable by such “special form”
insurance; provided, however, Waste Systems shall be liable to Converted
Organics for any and all damage to or destruction of the Equipment arising from
the gross negligence or intentionally destructive acts of Waste Systems, its
agents and employees which are not insurable by “special form” insurance.
Converted Organics shall cause its policies of “special form” or other
property/casualty insurance with respect to the Equipment to contain a provision
or endorsement waiving the insurer’s rights of subrogation against Waste Systems
and its agents and employees.
     Following the transfer of title to the Equipment from Waste Systems to
Converted Organics, Converted Organics agrees that while the Equipment is
present on the Landfill or Converted Organics’ agents or employees are
performing work in connection with the Equipment or otherwise present on the
Landfill, Converted Organics shall maintain in full force and effect a
policy(ies) of commercial general liability insurance, including contractual
liability coverage, with a minimum combined single limit of Three Million
Dollars ($3,000,000) with respect to Converted Organics’ activities upon the
Landfill (such coverage to be afforded utilizing one or more commercial general
liability and/or umbrella liability policies). Similarly, at all times while
this Agreement is in effect, Waste Systems shall maintain in full force and
effect a policy(ies) of commercial general liability insurance, including
contractual liability coverage, with minimum limits as prescribed by the South
Canyon Contract with respect to the Landfill (such coverage to be afforded
utilizing one or more commercial general liability and/or umbrella liability
policies). All such policies of commercial general liability insurance carried
by Converted Organics shall name Waste Systems and the Enterprise/City of
Glenwood Springs as additional insureds and shall: (i) be issued by financially
responsible insurance companies having at least an A/VIII rating with Best
Insurance Reports and licensed and authorized to do business in the State of
Colorado; (ii) provide that such policies shall not be subject to cancellation
or reduction in coverage except after at least twenty (20) days (ten (10) days
in the event of cancellation due to nonpayment of premium) prior written notice
to Waste Systems and the Enterprise/City of Glenwood Springs; and (iii) shall be
primary, and any insurance carried by Waste Systems or the Enterprise/City of
Glenwood Springs shall be noncontributing.
All insurance required to be carried by Converted Organics and Waste Systems
hereunder may be carried under blanket policies covering the Equipment, Landfill
and other locations, provided that the coverage afforded by reason of the use of
such blanket policy(ies) shall not be reduced or diminished from the
requirements for such insurance set forth in this Section 7. The parties shall
each, within five (5) days after request by the other party, provide such party
with reasonable evidence that the policies of insurance required to be
maintained under this Section 7 are currently in place.

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     6. Default. Upon a default or breach of any term or provision of this
Agreement by either party which is not cured within ten (10) days after the
defaulting party’s receipt of written notice of default or breach from the
non-defaulting party (or if such default or breach is of such a nature that it
cannot reasonably be cured within such 10-day period, then if the defaulting
party fails to commence to cure such default or breach within such 10-day period
or fails to thereafter cure such default or breach within thirty (30) days after
the defaulting party’s receipt of written notice of default or breach from the
non-defaulting party), the non-defaulting party shall have all rights and
remedies provided for in this Agreement and/or at law or in equity. All such
remedies shall be cumulative.
     7. Miscellaneous.

  (a)   This Agreement, and the respective rights and obligations of the parties
hereunder, shall be construed under and be governed by the laws of the State of
Colorado without regard to principles of conflict of laws. Any action, claim or
proceeding brought by any party hereunder shall be commenced exclusively in any
state or federal court located in Denver or Denver County, Colorado, and the
parties hereto each hereby irrevocably and unconditionally consent to the
exclusive jurisdiction and venue of such courts in any action, claim or
proceeding brought under this Agreement.     (b)   This Agreement shall be
binding upon and shall inure to the benefit of the successors and assigns of the
parties hereto; provided, however, Converted Organics shall not have the right
to assign this Agreement to any other person or entity without the prior written
consent of Waste Systems, which consent shall not be unreasonably withheld,
conditioned or delayed.     (c)   This Agreement, including the Attachments
hereto, which are incorporated herein by reference, sets forth the entire
agreement and understanding of the parties hereto with respect to the subject
matter of this Agreement and supersedes all prior agreements, if any, written or
oral.     (d)   Should this Agreement become the subject of litigation between
Waste Systems and Converted Organics, the prevailing party shall be entitled to
recovery of all actual costs in connection therewith, including but not limited
to, attorneys’ fees and expert witness fees.     (e)   This Agreement may be
executed in counterparts, including any facsimile copies, each of which shall be
deemed an original and all of which together shall constitute one and the same
instrument.     (f)   All notices hereunder shall be valid when given if
personally delivered or two (2) days after deposit in the United States mail,
postage prepaid, certified mail, return

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      receipt requested and addressed as follows or to such new or additional
address(es) as either party may from time to time designate in writing to the
other:

     
If to Waste Systems:
  South Canyon Waste Systems, LLC
 
  9870 Big Bend Blvd.
 
  P.O. Box 221090
 
  Kirkwood MO 63122
 
  Attention: Manager
 
   
If to Converted Organics:
  Converted Organics Inc.
 
  137A Lewis Wharf
 
  Boston, MA 02110
 
  ATTN: Edward J. Gildea

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

                      “Waste Systems”       “Converted Organics”
 
                    SOUTH CANYON WASTE SYSTEMS, LLC   CONVERTED ORGANICS INC.
 
                    By:   /s/ Larry Giroux   By:   /s/ Edward J. Gildea
 
                   
 
  Print Name:   Larry Giroux       Print Name:   Edward J. Gildea
 
                   
 
  Title:           Title:   President and CEO
 
                   

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Attachment A — Equipment

     
LM-HTTM Concentrator Model 12K-WB
  SN # 10851-002
Flex Fuel Wood Burner and Control System
   
Heavy Duty Vibrating Conveyor
  SN # 21167
Rotophase
   

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Attachment B — Permits

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