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Exhibit 10.1
July 18, 2001
ICM, Inc.
310 N. First Street
Colwich, KS 67030
Re: CONFIDENTIAL LETTER OF INTENT
Gentlemen:
This Letter of Intent is intended to summarize the principal terms upon
which Heartland Ethanol LLC and its successors (the "Company") would retain ICM,
Inc. ("ICM") to provide a variety of services related to the design and
construction of a facility to process corn or grain sorghum into ethanol to be
located in Northwestern Kansas (the "Facility"). The Company will provide
services related to the business issues and financing of the Facility. ICM will
provide services related to the design and construction of the Facility. The
terms upon which ICM will provide their services will be included in a
"Design/Build Agreement" between and among the Company and ICM.
The completion of such agreements, which are sometimes referred to as
the "definitive agreements," is subject to and contingent upon the Company and
ICM (and their respective legal counsels) reaching agreement on the form of such
documents and the terms and conditions set forth therein.
The Company and ICM expressly state their intention that this Letter of
Intent do(es) not and shall not constitute a legal and binding obligation,
contract or agreement between and among the parties to this Letter of Intent.
Instead, the parties hereby agree that they will enter into good faith
negotiations for the preparation of definitive agreements containing
substantially the provisions described below. However, the Company and ICM may
each unilaterally withdraw from negotiation toward the foregoing agreements or
dealing with the other parties at any time, in such withdrawing party's sole
discretion. The parties do, however, expressly intend that the provisions of
Section 6 of this letter, governing confidentiality, shall constitute a legal
and binding agreement of the parties upon execution of this letter by each
party.
The principal terms of the proposed agreements are as follows:
SECTION 1. SCOPE OF SERVICES.
A. COMPANY PROVIDED SERVICES (NOT PART OF ICM'S SCOPE). The Scope of
Services to be provided by the Company shall include, but not be limited to the
following areas:
a) Implement a legal business structure and hold regular meetings
for the purpose of developing and operating an ethanol plant
in northwestern Kansas.
b) Development and implementation of a financing strategy for the
capital needs of the Company.
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c) Develop financial options, including associated costs and
technical aspects.
d) Provide credit and rating analyses, submissions,
presentations, etc.
e) Develop a Pre Financial Close Budget and Schedule
f) Prepare a Development Business Plan
g) Negotiate key contracts including insurance, marketing and/or
sales contracts.
h) Other items agreed to between the Company and ICM.
B. ICM SERVICES. The Scope of Services to be provided to the Company by
ICM shall include, but shall not be limited to, performance of services in the
following areas:
a) Providing a Preliminary Schedule and Guaranteed Maximum Price
("GMP") Design-Build contract for the design and construction
of the Facility.
b) Assist in the development of a business plan.
c) Assist with the financing of the facility.
d) Assist the Company in the process of site evaluation and
selection
e) Assist the Company in all phases of the permitting process
including taking a lead role in obtaining all required permits
for the construction and operation of the Facility.
f) Design and build the Facility in accordance with a Design
Build Contract, based upon the Engineers Joint Contract
Documents Committee for a total price not to exceed
thirty-four million dollars ($34,000,000).
g) Management services on terms mutually agreeable including
management fees not to exceed $320,000 annually.
h) Other items agreed to in writing between the Company and ICM.
It is understood that ICM will not limit its assistance to the services
specifically enumerated above, but will extend their services and assistance as
reasonably required and requested by the Company to provide for the successful
implementation of the plan of financing and the design and construction of the
Facility.
SECTION 2. COMPENSATION.
A. ICM COMPENSATION. The definitive agreements between and among the
Company and ICM shall provide that, for their respective efforts in designing
and constructing the Facility, ICM shall receive the following compensation:
For a turnkey ethanol plant, $34,000,000 (THIRTY FOUR MILLION DOLLARS).
For out of pocket expense provided under this agreement, up to $250,000 (TWO
HUNDRED FIFTY THOUSAND DOLLAR), payable if the project is discontinued for any
reason or if the Company wishes to terminate this Letter of Intent in favor of
another entity to fulfill ICM's role, but then only to the extent that seed
money has not been spent on other developmental costs. The extent of this
liability for these out of pocket expenses will be limited to the assets of the
company. If the project proceeds, a Design/Build contract is executed with ICM
or its designate and the plant achieves commercial scale production, these
expenses shall not be payable by the
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company and ICM will absorb costs associated with this Letter of Intent in the
Design Build contract.
In no case will the ICM share or split the fees delineated in the prior
paragraphs with any other party currently assisting the Company in other
endeavors. However, the ICM may, at its sole discretion, choose to engage other
companies in order to effect the necessary transactions and may choose to share
a portion of its fees for said services.
ICM reserves the right, but is not offering to invest seed money in the Company,
but only with the mutual agreement of the Company and only during such time
periods as the Company may, in its discretion, be seeking seed money financing
to commence its organizational activities.
SECTION 3. EXPENSES. The Company will be responsible for all of ICM's
out-of-pocket expenses, including travel, communication, and reports prepared in
fulfilling its duties outlined herein. If travel is required, ICM would expect
to be reimbursed for those expenses, all of which would be pre-approved by the
Company. The Company will be responsible for the payment of all fees and
expenses commonly known as "Development Expenses," including but not limited to:
Assistance to the Company for Company provided items such as land, surveys,
soils testing and reports, permits, utility services, rail road services and
equipment, equity, financing, public and private meetings and the like. In the
event a financing does not occur, the Company may be responsible for paying a
portion or all of the aforementioned expenses to the extent of the then
remaining seed capital funds, provided, however, that prior to incurring any
such expenses, ICM shall inform the Company of the nature and estimated amount
of such expenses, as well as the Company's obligation, if any, with respect to
such expenses in the event a financing is not completed.
SECTION 4. TERM OF AGREEMENT. The term of the various definitive agreements
shall begin on the date of execution of such definitive agreements between and
among the Company and ICM, and shall continue until the Facility has begun
"commercial scale production." For the purposes of the definitive agreements,
"commercial scale production" shall mean the commercial operation of the
Facility (after initial startup and testing is complete) to produce ethanol and
related by-products for sale to the Company's customers on a commercial scale as
per the required specifications set forth in the Design/Build Agreement and/or
other contracts relating to the construction and operation of the Facility.
The parties to this letter of intent specifically agree that the definitive
agreements between and among the Company and ICM will contain provisions
allowing each party to terminate the applicable definitive agreement in the
event that the other party to any such agreement has failed to adequately
perform its obligations under such definitive agreement and has not cured such
failure within a period specified in such definitive agreement. Cancellation of
the definitive agreements by the Company prior to the expiration of the
contracts for any reason (including for reasons that are out of the control of
Company and within the control of ICM, resulting in ICM terminating its
involvement with the Heartland Ethanol LLC, will result in a termination fee
payable to ICM equal to all fees that would have otherwise been earned by ICM
during the term of the definitive agreements.
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The parties to this letter of intent also specifically agree that the definitive
agreements between the company and ICM will contain provisions to convey to the
Company, a single, plant specific license of ICM's proprietary technology as
generally defined in Section 6.
The Company agrees to provide to ICM Marketing, Inc., the opportunity to provide
a quotation for distillers grain marketing service upon start up of the plant.
SECTION 5. INDEPENDENT CONTRACTOR. ICM is independent contractor and nothing
herein contained shall constitute any of their employees or agents as employees
or agents of the Company.
SECTION 6. CONFIDENTIALITY. During the period beginning on the date hereof and
ending five (5) years after termination of each of the definitive agreements,
the members the Company agree not to use or disclose any information regarding
the Company or the Facility not previously available to the public. During the
period beginning on the date hereof and ending five (5) years after termination
of each of the definitive agreements (other than any management contract with
ICM), the Company agrees not to use or disclose any proprietary information or
technology exclusively owned by ICM not previously disclosed to the public.
Notwithstanding the foregoing, ICM may disclose information as required in the
performance of the definitive agreements or by law, or as otherwise authorized
by the Company.
The proprietary information and technology exclusively owned by ICM includes:
1. Mass and Energy Balance
2. Product Flow Diagrams (PFD)
3. Process and Instrument Diagrams (P&ID)
4. The combination of the distillation, evaporation and alcohol
dehydration technology, specifications and operating
procedures.
5. The combination of the dryer, thermal oxidizer and heat
recovery steam generations (HRSG) technology, specifications
and operating procedures.
6. The configuration of the plant computer system commonly known
as the Distributed Control System (DCS) including set points,
high and low set points, ranges, alarms, graphical interfaces
and other designs provided by ICM.
SECTION 7. LEGAL AND FINANCIAL ADVICE. None of the Services contemplated in this
Agreement shall be construed as or a substitute for legal, investment banking or
accountings services.
SECTION 8. EXCLUSIVITY. Upon execution of this letter of intent and except as
provided above with respect to financing obtained by the Company, the Company
agrees that ICM will be the exclusive party to provide the respective services
for the Company in connection with the design and construction of the Facility.
ICM agrees that it will not solicit additional plants in Kansas within a
fifty-mile radius of the Heartland Ethanol/Campus, Kansas area for a period of
180 days from the date of this agreement.
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SECTION 9. NOTICES. Any written notice or communications required or permitted
by this letter of intent, the definitive agreements or by law to be served on,
given to, or delivered to either party hereto, by the other party shall be in
writing and shall be deemed duly served, given, or delivered when personally
delivered to the party to whom it is addressed or in lieu of such personal
services, when deposited in the United States' mail, first-class postage
prepaid, addressed to the Company at:
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<Caption>
Heartland Ethanol LLC ICM, Inc.
Jeff Torluemke Jeff Roskam
State Bank Senior Vice President
745 Main Street 310 N. First Street
Hoxie, KS 67740 Colwich, KS 67030
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SECTION 10. CONTROLLING LAW. The laws of the State of Kansas will govern this
letter of intent and the definitive agreements.
If the above letter correctly sets forth our understanding with respect to the
proposed delivery of services by the various members of the Development Services
Team, please sign and return four copies of this letter. Following receipt, the
Company will work with each of you to begin preparation of the appropriate
definitive agreements.
Heartland Ethanol LLC
By: /s/Jeff Torluemke, Chairman
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Jeff Torluemke, Its: Chairman
Duly executed and agreed to (as to the binding provisions of Section 6) this 18
day of July, 2001.
ICM, Inc.
By: /s/Dave Vander Griend
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Dave Vander Griend Its: President
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$34,000,000 EXHIBIT A
HEARTLAND ETHANOL LLC
PROJECT FINANCING
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<Caption>
GENERAL ESTIMATE
INTERSTATE LIMITED LIABILITY COMPANY
SEED MONEY BUDGET
(Amount must be adjusted for the Heartland Ethanol Project)
Item Amount
Legal Costs $150,000
Accounting Costs $50,000
Promoters Expense $60,000
Feasibility/Market Studies $10,000
Consulting Engineers $15,000
Meeting Expenses $10,000
Printing and Distribution $30,000
Advertising Expense $50,000
Permitting $75,000
Miscellaneous $50,000
TOTAL $500,000
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$34,000,000 EXHIBIT B
HEARTLAND ETHANOL LLC
PROJECT FINANCING
GENERAL TIMETABLE - SUBJECT TO CHANGE
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6/25/2001 Retention of Design/Build/Finance/Construction team of consultants HEL
6/25/2001 Retention of Attorney for the provision of legal services HEL, ICM
7/2/2001 Retention of US Energy for the provision of consulting services HEL, ICM
8/1/2001 Seed capital raised by the Company for initial project costs HEL
8/1/2001 First Draft of business plan including cost estimates, pro-forma HEL, ICM
financial projections and marketing plan description
8/1/2001 Completion of Operating Agreement HEL
8/15/2001 First draft Securities Registration statement to be reviewed by the ATT
project team
8/20/2001 First draft equity document for registered offering of LLC units HEL, ATT
9/15/2001 Procurement of the land HEL, City of
10/1/2001 Finalize Securities Registration statement and file with the HEL, ATT
Securities and Exchange Commission
9/15/2001 Write and submit the air permit to the State of Kansas DNR ICM, ARS
9/15/2000 Completion of marketing plan inclusive of the following: HEL
- Grain Procurement and Hedging Strategy documented
- Ethanol Marketing/Off-take arrangements
- DDGS/DWG Marketing/Off-take arrangements
- CO2 Marketing/Off-take arranged
11/15/2001 Receive SEC comments and begin preparation of amendments and responses ATT, HEL
1/2/2002 Equity Offering Document Finalized simultaneous with the end of quiet HEL
period and commencement of road show for equity raising
1/2/2002 Completion of private placement memorandum/lender presentation folder HEL
for dissemination to potential providers of senior and subordinated
debt.
1/2/2002 - Road show to potential banks and insurance companies interested in HEL
2/15/2002 purchase of debt
2/1/2002 Air Permit received from the State of Kansas after full statutory ICM
review and comment periods have elapsed
2/15/2002 Receipt of term sheets backed by credit approval from HEL
prospective HEL banks and insurance companies interested in
funding the debt for the project.
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3/1/2002 End of equity offering period with a closing into escrow, exclusive HEL
of financing fees, of the amount of dollars raised
3/15/2002 Negotiate final price and term associated with debt and commence HEL
documentation of the loans
3/25/2002 Complete documentation of loans HEL, ATT
3/22/2002 Pre-Closing Activity All
4/1/2002 Financial Close All
5/1/2003 Plant reaches mechanical completion and start up occurs with the HEL, ICM
To successful passage of operational tests
6/15/2003
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HEL: Heartland Ethanol LLC
ICM: ICM
ATT: Company Attorney
ARS: Air Resources Specialists
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