Exhibit 10.9
SERVICES CONTRACT BETWEEN THE WYOMING
BUSINESS COUNCIL, ENERGY SECTION, INVESTMENT
READY COMMUNITIES DIVISION, AND RENTECH, INC.
THIS SERVICES CONTRACT ("Contract") made this 30th day of January,
2001, between the Wyoming Business Council (hereinafter "WBC"), whose
address is Becker Building, 214 West 15th Street, Cheyenne, Wyoming
82002, and Rentech, Inc., 1331 17th Street, Suite 720, Denver, Colorado
80202 (hereinafter "Contractor"), in which the Contractor undertakes to
conduct a feasibility study to convert a portion of the Cheyenne Coastal
Chemical plant from the production of MTBE, a fuel additive to the
production of super clean, environmentally friendly liquid fuels and
chemicals.
RECITALS
1. The Energy Section, WBC, has received concurrence from the U.S.
Department of Energy, on the use of eight hundred thousand dollars
$800,000) of Stripper Well petroleum violation escrow funds.
2. The U.S. Department of Energy has approved the program proposed by
the Contractor to study the feasibility of plant conversion, and
super clean liquid fuel/chemical stock production.
3. Negotiations have occurred between the Contractor and WBC, following
the U.S. Department of Energy's concurrence, wherein the terms of
this Contract were agreed upon.
TERMS AND CONDITIONS BETWEEN THE WYOMING
BUSINESS COUNCIL AND CONTRACTOR
ARTICLE 1. CONTRACTOR'S RESPONSIBILITIES
1. SCOPE OF SERVICES
1.1 The Contractor shall conduct a feasibility study, the scope of
which is listed on slide #14 found in Attachment A, at the Cheyenne
Coastal Chemical Plant to determine the opportunities to convert part
Of the plant to the production of super clean liquid fuels and chemical
feed stock such as super clean diesel. In conducting the feasibility
study, Rentech will attempt to determine the number of jobs to be lost
if the MTBE plant is closed, and how many employees might be required
if the plant is converted, and clean fuels are produced.
1.2 The Contractor will complete the feasibility study within nine (9)
months of the last signature on this Contract.
1.3 The Contractor will identify any appropriate opportunities to use
State of Wyoming owned natural gas or coal bed methane as partial feed
stock for any future diesel production.
1.4 The Contractor will certify that neither they, nor any of their
partners who will benefit from the feasibility study for any reason, are
parties to the original Stripper Well litigation and were required to
pay restitution to the American public.
1.5 If Contractor determines that it is not feasible to proceed with
the conversion of the plant, Rentech will repay the grant at the rate of
one hundred twenty percent (120%) of the original eight hundred thousand
dollars ($800,000.00) for a total of nine hundred sixty thousand dollars
($960,000.00) over a period of time not to exceed six (6) years. The
repayment will be from a five percent (5%) share of royalties from the
conversion of methanol facilities to Rentech GTL technology worldwide.
If Contractor chooses to proceed with the conversion and/or purchases
the Coastal Chemical Methanol/MTBE facility the grant will be repaid at
financial closing at the rate of 100%. In addition to the repayment of
the grant at closing, Rentech would provide a royal of fifteen cents
($.15)/barrel of Rentech Fisher Tropsch liquid produced (C5+) from the
plant after conversion is complete using the Rentech Fisher Tropsch
technology. The royalty would be paid based on monthly production of
the Fisher Tropsch liquids (C5 + fraction) starting at the date of
Commercial Operation as defined by the engineers/constructors and
contract documents for plant commercial acceptance. The royalty would
be paid for the first four years of commercial operation of the Wyoming
facility.
1.6 Failure to meet any of the conditions of the scope of services may
result in the immediate cancellation of the contract and the
requirement that all funds previously paid be returned.
2. TERM OF CONTRACT
2.1 For the sake of this grant, this Contract will be in effect from
the date of last signature on this Contract until nine (9) calendar
months have passed. It may be extended for a period of three (3) months
with the agreement of both parties and if funding is still available.
Repayment fees will be enforceable until all funds have been returned as
outlined in the repayment schedule in paragraph 4.5.
3. PAYMENT
3.1 The total cost for providing the scope of services shall not exceed
eight hundred thousand dollars ($800,000.00).
3.2 Payment shall be made in two phases. The first payment, seven
hundred fifty thousand dollars ($750,000.00), will be paid no later than
thirty (30) calendar days after receipt by WBC of a signed copy of this
Contract and a request for payment. The second and last payment of
fifty thousand dollars ($50,000.00) will be paid no later than thirty
(30) calendar days after receipt by the WBC of a copy of the final
feasibility report.
4. EMPLOYMENT OF CONTRACTOR
4.1 Contractor is an independent contractor, and neither Contractor nor
Contractor's principals, partners, employees or agents are servants,
gents, or employees of WBC. Contractor shall perform all work by its
own means and methods and WBC shall have no direct control of the work,
it being understood that WBC is interested only in the ultimate results
of the completed job. Contractor shall be solely responsible for its
own acts and the acts of its employees while engaged in the work. As an
independent contractor, Contractor shall be responsible for (i) all
applicable state, federal, and other payroll taxes, including
contributions and taxes assessed against any amounts paid to its
employees, and (ii) any and all taxes or charges imposed by governmental
authorities based upon or measured by Contractor's income or receipts,
including without limitation any federal, state or local income of
franchise taxes. Except where expressly authorized in writing by WBC,
no employee, agent, subcontractor, or representative of Contractor shall
represent himself to be an agent or authorized to act in the name or on
behalf of WBC, nor at any time enter into any contract that shall
purport to bind WBC in any way.
4.2. The Contractor shall assume sole responsibility for any debts or
liabilities that may be incurred by the Contractor in fulfilling the
terms of this Contract.
5. ASSIGNMENT
5.1 Contractor's rights and obligations hereunder are deemed to be
personal and may not be delegated or assigned and any attempt at
delegation or assignment without so complying shall be void.
6. INDEMNITY AND LIABILITY
6.1 Contractor shall indemnify, defend and hold WBC harmless from and
against any and all claims, to the extent caused by or resulting from
the negligent acts or omissions of Contractor or Contractor's willful
misconduct, or any entity or person retained or employed by the
Contractor, in connection with the work for this Contract. "Claims"
shall mean suits, actions, legal or administrative proceedings, claims,
causes of action, demands, damages of every kind and type, liabilities,
fines, penalties, losses, costs and expenses, including costs of defense
and attorney's fees.
6.2 Contractor shall indemnify, defend and hold WBC harmless from and
against any and all claims arising from any actual or threatened
infringement of any patent, service, trademark, copyright or other
intellectual property right in connection with any material, article, or
process embodied in the work or performance of the work provided by the
Contractor, or anyone performing the work on behalf of the Contractor.
7. COMPLIANCE WITH LAWS
7.1 Contractor shall comply with all federal, state and local laws,
regulations, requirements, decrees, codes, ordinances, resolutions, and
other acts of any governmental authority which are applicable to this
Contract and any work provided or undertaken by Contractor pursuant to
or in furtherance of this Contract, including, but not limited to, all
federal, state and local labor, safety and environmental laws.
8. OWNERSHIP OF DOCUMENTS
8.1 All reports, publications and other material prepared by the
Contractor specifically for this Contract, which are not general in
nature, shall become the joint property of the WBC and the Contractor.
The WBC shall have unrestricted authority to publish, disclose,
distribute and otherwise use in whole or in part any reports, data or
other materials prepared by the Contractor under this Contract. All
data, material and information generated by the Contractor shall become
the joint property of the WBC and the Contractor, regardless of whether
the terms of this Contract are fulfilled.
ARTICLE II WBC RESPONSIBILITIES
9. COMPLIANCE WITH FEDERAL FINANCING REGULATIONS
9.1 WBC will provide technical assistance on the use of PVE Funds and
will submit any required federal reports.
10. PAYMENT
10.1 WBC shall pay Contractor per the payment schedule under Article I,
6.2.
ARTICLE III GENERAL PROVISIONS
11. USE OF WYOMING FIRMS, AGENCIES AND RESIDENTS
11.1 t is the intention of the Contractor to use Wyoming firms, State
agencies and Wyoming residents as much as possible fulfilling the terms
of this Contract.
12. CHOICE OF LAW PROVISION
12.1 The laws of the State of Wyoming and rules and regulations issued
pursuant thereto shall be applied in the interpretation, execution and
enforcement of this Contract.
13. CONFLICT OF INTEREST
13.1 The signatories swear that, to their knowledge, no WBC employee
has any personal or beneficial interest whatsoever in the services
described herein. No staff member of the Contractor, compensated
either partially or wholly with funds from the Contract, shall engage in
any contract or activity which would constitute a conflict of interest,
as related to this Contract.
14. TERMINATION
14.1 WBC may terminate this Contract for any reason upon fifteen (15)
calendar days written notice. Upon such termination, WBC shall pay
Contractor, in full satisfaction of all obligations owed to Contractor
payments due for work actually performed in accordance with the
requirements of this Contract.
14.2 In the event of a breach or default of this Contract, either
party, in addition to the right of termination, shall have all other
remedies available at law or in equity. All such remedies shall be
cumulative, and the waiver of one right or remedy hereunder shall not
constitute the waiver of any other right or remedy hereunder.
15. CHANGES/MODIFICATIONS TO CONTRACT
15.1 WBC and the Contractor may from time to time request changes in
the scope of services to be performed hereunder. Such changes which
are mutually agreed upon by and between both parties shall be
incorporated by written amendment to this Contract, signed by an
authorized employee of WBC and an authorized agent of the Contractor
15.2 The failure of WBC to insist upon or enforce strict performance of
any of the terms of this Contract or to exercise any rights herein
shall not be construed as a waiver of rights on any future occasion.
No waiver or modification of any of the terms or conditions of this
Contract shall be effective unless said waiver shall be in writing and
signed by the CEO of the WBC. If any action at law or in equity is
necessary to enforce or interpret the terms of this Contract, the
prevailing party shall be entitled to its reasonable attorneys' fees,
costs and necessary disbursements, in addition to any other relief to
which that party may be entitled.
15.3 This Contract, consisting of seven (7) pages, Attachment A,
consisting of two (2) pages, and Attachment B, consisting of ten (10)
pages, represents the entire and integrated Contract between the
parties and supersedes all prior negotiations, representations, and
agreements, whether written or oral.
16. SOVEREIGN IMMUNITY
16.1 The State of Wyoming and the WBC do not waive sovereign immunity
by entering into this Contract, and specifically retain immunity and
all defenses available to them as sovereigns pursuant to WYO. STAT.
Section 1-39-104(a) and all other state law.
ARTICLE IV. SIGNATURES
By signing this Contract, the parties certify that they have read
and understood it, that they agree to be bound by the terms of the
Contract, that they have the authority to sign it.
This Contract is not binding on either party until approved by the
Governor of the State of Wyoming or his designee, if required by WYO.
STAT. Section 8-2-1016(b)(iv).
WYOMING BUSINESS COUNCIL
/s/ Tucker Fagan, CEO 01/30/01
__________________________________ ____________________________
Tucker Fagan, CEO Date
RENTECH INC.
/s/ Richard Sheppard 01/26/01
________________________________ ____________________________
Richard Sheppard, Date
Director, GTL Marketing
ATTORNEY GENERAL'S OFFICE APPROVAL AS TO FORM
/s/ Michael L. Hubbard 01/23/01
__________________________________ ____________________________
Michael L. Hubbard, Date
Deputy Attorney General
ATTACHMENT A
RENTECH
GAS TO LIQUIDS
FEASIBILITY ASSESSMENT PROPOSAL
FOR THE
COASTAL CHEMICAL FACILITY
CHEYENNE, WYOMING
- - Fischer-Tropsch (F-T) is a proven technology which converts natural
gas to premium liquids (GTL).
- - The liquids include low emissions diesel fuels and other chemical
feedstocks.
- - The F-T diesel exceeds all the new EPA proposed diesel standards.
- - Rentech owns proprietary F-T catalyst technology.
- - Rentech and Coastal Chemical desire to complete a feasibility analysis
for conversion of the Coastal MTBE Facility in Cheyenne to produce F-T diesel.
- - MTBE, a gasoline additive, is being banned because it pollutes ground
water.
- - Forty (40) existing technical jobs are at risk should Coastal close
its MTBE operations.
- - In working with the Wyoming Business Council (WBC), Rentech has
developed a feasibility assessment plan for the conversion of the
Coastal Facility; cost of the assessment is estimated at $800,000.
- - The assessment would include:
MTBE plan conversion costs and schedule
Market evaluation for clean diesel and other products
Gas supply methodologies
Options for using Wyoming's in-kind gas royalties
Determine financial feasibility and implementation plan
- - Rentech requests that the WBC loan $800,000 from the petroleum
overcharge restitution fund to conduct the feasibility assessment.
- - Rentech shall repay the loan from proceeds from the construction
financing of the conversion at Coastal, or from royalties received by
Rentech from other methanol or MTBE conversions worldwide.
BENEFITS TO WYOMING
- - Establish Wyoming as a world leader in clean fuel technologies.
- - Retain skilled, well paying jobs for Wyoming workers.
- - Enhance the competitiveness of Coastal's ammonia operation.
- - Create high value added products from Wyoming's commodity natural gas
resources.
- - Induce substantial capital investment in Wyoming;
- - Approximately $35 million for the Coastal conversion;
- - Additional $200 million to expand the GTL capacity
- - Provide super-clean diesel fuel for Wyoming's state vehicles and other
crucial vehicles, such as locomotives, from in-kind gas royalties.
- - Create incremental demand for other Wyoming suppliers of gas
compressors, engineering and construction services, contract operations
and natural gas.
- - Establish the precedent for coal gasification and subsequent GTL
conversion using Texaco coal gasification process.
ATTACHMENT B
AWARD DOCUMENTS
WYOMING BUSINESS COUNCIL LETTERHEAD
To: Steve Achter
Bob Ugland
Tucker Fagan
Governor Geringer
Subject: Request for $800,000 of Petroleum Violation Escrow (PVE) funds
to be used by Rentech, Inc. in order to determine the feasibility of
converting part of the Coastal Chemical plant located in Cheyenne
Wyoming from the manufacture of MTBE, an additive originally thought to
make automotive fuel burn with less environmental problems, to the
manufacture of super clean diesel fuel, using Wyoming natural gas.
Background:
The Environmental Protection Agency has mandated the use of MTBE as a
fuel additive in automotive gas in order to produce a less
environmentally destructive automotive fuel. This fuel must be used in
non-attainment areas. As a result of this mandate, a number of plants
across the nation spent hundreds of millions of dollars converting
portions, or all, of their plants in order to be able to produce this
additive. The Coastal Chemical plant in Wyoming is one of these.
However, since the introduction of MTBE as a fuel additive, it has been
discovered that MTBE, as a result of the combustion process, has begun
to accumulate in ground water aquifers, causing taste and odor problems
and long term health concerns. It has been banned in California and it
is expected that the Environmental Protection Agency will son ban its
use nationwide. As result of this expected ban, Coastal is in the
unenviable position of having a substantial portion of their plant
which is unusable and with no reasonable way to recover their capital
costs. However, an opportunity has been presented to them by Rentech,
Inc., which will help to offset their potential losses and more
importantly to Cheyenne and Wyoming, the loss of jobs that will
otherwise occur. Rentech has proposed to lease or purchase the portion
of the plant that will soon be unusable by Coastal. With the
installation of some additional equipment, and with the modification of
some existing equipment, Rentech will be able to use Wyoming natural
gas, or coal bed methane gas, to produce an extremely clean and
environmentally friendly diesel fuel. Rentech needs to perform a
feasibility study in order to determine the reasonableness of this
course of action.
Description:
There has long existed a process that is used to convert gas to liquids.
This process is called the "Fisher-Tropsch" process. Over some period
of time, different companies and individuals have experimented with and
refined the process in order to improve the conversion efficiency.
Rentech is one such company. The result of this research has left
Rentech with their own proprietary Fisher-Tropsch process which they
feel is at least 50% more efficient than anything currently being used
by their competitors. Using their process, Rentech is able to convert
natural gas and coal bed methane gas into premium liquid hydrocarbons
such as clean diesel fuel, naptha, waxes, and other valuable products.
Environmental Testing Corporation of Aurora Colorado has tested Rentech
Diesel against standard commercial diesel available at any pump in the
area, and found the following: Rentech "Diesel" has a cetane (power)
rating of 67, compared to commercial diesel which has a rating of 46,
has 35% less particulate emissions, 53% less hydrocarbon emissions, and
41% reduction in carbon monoxide. Rentech "Diesel" is less than .001%
sulphur by weight as compared to approximately .35% sulfur by weight.
Rentech proposes to conduct a feasibility study to determine if it would
be appropriate to convert part of the Cheyenne Coastal Chemical plant
so that clean diesel can be produced. If the feasibility study points
to a positive conclusion that such a project should be undertaken,
Rentech proposes to convert the plant in two phases. Phase I will
result in the production of 1600-2000 bbl/day of product using coal bed
methane. The capital cost for this phase will be $35 million.
Successful market penetration will result in Phase II, which will see
the production of over 5000 bbl/day of product at a capital cost of $200
million.
Rentech will have several partners in order to proceed with Phase I and
Phase II developments. These partners will include Coastal Chemical,
and Jacobs Engineers and Constructors. Rentech has nineteen year
experience in gas to liquid technologies and has designed, built, and
operated five (5) Fisher-Tropsch pilot plants. Jacobs, an
international engineering company has 23,000 employees worldwide, some
at the Cheyenne refinery, and is well versed in gas synthesis
technology. Coastal Chemical has several plants throughout the west,
and, in addition to MTBE and other chemicals, produces fertilizer.
Need:
Rentech needs $800,000 in order to conduct the feasibility study needed
to determine if the Coastal facilities should be converted or not.
Rentech has requested that they be given a loan or grant from currently
available Petroleum Violation Escrow funds in order to meet this
financial requirement. They key goals to be derived from the
feasibility study include:
1. Estimated Phase I conversion costs
2. Define project schedule
3. Evaluate products market
4. Develop gas supply methodology
Rentech has offered to repay the loans in either of two ways. If Phase
I does not proceed, Rentech will repay the loan from royalties gained
from converting other plants worldwide. The payment would be 5% of
Rentech's royalties until Wyoming receives 120% of the feasibility
study loan. If Phase I proceeds, Rentech will repay the loan at time
of financial closing at the rate of 120% of the amount borrowed.
Discussion:
Rentech has met with Wyoming Business Council employees on a number of
different occasions in order to discuss this request specifically, and
the project in general. In view of the benefits to Wyoming, and the
opportunity to use, and yet recover, the requested PVE funds, the
discussions have always been favorable to all parties involved.
Benefits to Wyoming:
Funds in the PVE account will actually grow over a period of time if
reimbursed at the rate proposed by Rentech.
The technology and the production of the super clean diesel will show
that Wyoming is environmentally sensitive and willing to put forth
effort and money in order to help our own environment as well as that
of our sister states which may end up the recipient of our fuels. We
would be seen as a leader in clean fuels.
Commercialization efforts and the implementation of Phases I and II will
result in the retention of jobs that will be lost due to the closing of
the MTBE plant as well as the addition of jobs and revenues that will
result due to the construction phases and any additional permanent jobs
that will arise due to more manpower requirements for the Phase I and
II operations.
A guaranteed return of the PVE funds regardless of the outcome of the
feasibility study.
The opportunity to increase the value of State owned natural gas.
If Phase I implemented, super clean diesel will be available for State
and other Wyoming fleets.
Potential Downfalls:
Possibility of Rentech going out of business and not repaying the PVE
funds.
Time for repayment of loan based on royalties from sales worldwide
cannot be determined and may be considerable.
If Rentech is given a loan, as opposed to a grant, and for any reason
defaults on this loan, the State, i.e. The Governor's office would have
to make up any principal not recovered from Rentech.
Recommendations:
The Energy Conservation Staff, Investment Ready Communities, recommends
the funding of this proposal. It is our feeling that the opportunity
for technological growth in the state along with the benefits to be
accrued by Rentech far outweigh the consequences of the PVE funds not
being returned. We further recommend that we make this award a grant
rather than a loan, and that we make arrangements for some sort of
payment from Rentech back to the PVE account a condition of the grant.
An outright loan is not out of the question, but we must feel extremely
comfortable with this position since the Federal Courts have stated
that a State cannot lose PVE funds in bad loans and must make up any
unrecoverable amounts. By making a grant and then coming to some
understanding on a suitable arrangement for returning our funds at some
later date, the issue of loans and loan losses is eliminated.
Furthermore, we would recommend that instead of accepting a 20% return
on our funds, that we take a small equity position in the over all
royalties for the life of the plant. For instance, using Rentech's
figures of 1600BBL/day for a period of ten years, if we received
$.50/bbl, we would stand to recover a minimum of $2,420,000 on our
investment of $800,000. If the plant grows as Rentech projects, the
bbl/day output should actually approach 5,000 bbl/day. In Rentech's
initial proposal to the energy office, in which they requested twice
the amount they are seeking now, Rentech had offered a payback derived
from 5% of royalties until the State had received a 300% return on the
funding. The suggested $.50/bbl would insure at least a similar
return. While this would most likely result in a much longer payback
of the funds into the appropriate PVE account, it should result in a
much higher rate of return over the course of the lifetime of the
plant. Frankly, we would like to see a greater return than 20% given
that we don't know how long it will take Rentech to repay a loan, if
that is the instrument used, or return funds based on a grant, based
off of royalties collected from worldwide sales at other plants, and
given Rentech's initial offer of a 300% return. The terms of any grant
or loan require the services of the Attorney General's Office.
The Energy Conservation Staff specifically recommends that Rentech be
given a grant and that Rentech later repay the grant to the appropriate
e PVE account at a rate equivalent to at least a 300% return. We will,
however, accept whatever instrument and rate of return the reviewers so
choose prior to the final recommendation to the Governor. If the
Governor wishes, he could okay the use of the funding, and leave the
terms up to the Business Council to be negotiated at a later date.
Once concurrence on the use of the funds is received from the Governor,
the U.S. Department of Energy will have to be approached for their
concurrence on the use of the funds. This is a requirement set by the
Federal Courts in order for any State to use its petroleum violation
funds.
Stripper Well Funding:
Current Balance: $5,704,600.00
Open Obligated Projects:
Remaining SEP funds $ 79,350.00
Wheatland Energy Park $ 229,000.00
Rocky Mountain Oilfield $ 100,000.00
Testing Center
Current Available Funds: $5,296,250.00
Other Potential Projects:
SEP Program Match $ 650,000.00
Rough Rider Dual Fuel Demo $ 156,000.00
TMA Wind Demonstration $ 950,000.00
Derek Resources Crude Recovery $ 800,000.00
Governor's Action:
JG August 30, 2000
__________________ Approve ____________ Disapprove