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EXHIBIT 10.13
WATER AND SANITARY SEWER AGREEMENT
This Agreement is made between the City of Big Stone City, South Dakota,
("the City"), having its principle office at 651 Main St., Big Stone City, South
Dakota, and Northern Lights Ethanol, LLC, having its principle office at 1303
East Fourth Avenue, Milbank, South Dakota 57252 ("Northern Lights").
RECITALS
The parties recite and declare:
A. Northern Lights is to be the owner and operator of an ethanol facility
consisting of a plant and supporting elements located near Big Stone City, South
Dakota, which ethanol facilities are herein referred to as the "project."
B. To operate the project, Northern Lights will need water and sanitary
sewer services, both of which the City is willing and able to provide.
C. The parties desire to enter into an agreement to formally establish
Northern Lights' agreement to purchase, and the City's agreement to sell and
provide, water and sanitary sewer services to the project.
Now, therefore, in consideration of the mutual covenants and agreements set
forth below, the City and Northern Lights agree as follows:
SECTION ONE. WATER
1.1 The City will:
a. Permit Northern Lights to attach to the water-main located at the
northeast corner of the intersection of Cross Street and State Highway 109 ("the
Main") a pipeline, plumbing and other facilities necessary to obtain and
transport water from the Main to the project.
b. Permit Northern Lights to install near the Main a water meter pit to
house a water meter to be installed by the City that will measure the volume of
water delivered by the City to the project.
c. Deliver to the project potable water with water pressure of not less
than 10 psi and in such an amount as to permit Northern Lights to maintain
continuous operation of the project with a minimum usage estimate of 10GPM, a
maximum usage estimate of
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550 GPM, and an average rate of approximately 155,000 gallons per day, but not
to exceed 500,000 gallons per day.
d. Determine, by reading of the water meter installed on the Main, the
amount of water delivered to the project and bill Northern Lights for such water
at the rates set forth in Attachment A attached hereto and made a part of this
Agreement.
e. Grant Northern Lights access to inspect the water meter installed on the
Main. City will furnish, inspect and maintain the water meter to control
accuracy.
1.2 Northern Lights will:
a. Construct and maintain at its cost the pipeline, plumbing and other
facilities necessary to connect to, and obtain water from, the Main and to
transport water from the Main to the project, including the construction and
maintenance of a pipeline runnning parallel to the northern side of County Road
34.
b. Install at its costs a water meter pit near the Main that will allow the
City to install a water meter that will measure the volume of water delivered by
the City to the project.
c. Obtain all approvals and permissions required to construct and maintain
the pipeline, plumbing and other facilities necessary to transport water from
the Main to the project, including but not limited to the approval or permission
of Grant County, South Dakota.
d. Pay within 30 days of receipt of the City's invoice for water delivered
to the project at the rates set forth in Attachment A.
1.3 Metering Testing:
a. The City shall make at any reasonable time at Northern Lights' request a
special meter test on the meter installed near the Main. The costs of the tests
shall be borne by the City; provided, however, that if any special meter test
made at Northern Lights' request shall disclose that the meter is recording
accurately, Northern Lights shall reimburse the City for the cost of such test.
If the meter registers not more than 2% above or below accurate, then the meter
shall be deemed to be recording accurately. The readings of the meter which have
been disclosed by tests to be inaccurate shall be corrected for the 90 days
previous to such test in accordance with the percentage of inaccuracy found by
such test. If the meter should fail to register for any period, the City and
Northern Lights shall agree as to the amount of water furnished during such
period and Northern Lights shall pay said amount.
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b. The City shall notify Northern Lights in advance of the time of any
special meter reading or test so that Northern Lights' representative may be
present at such meter reading or test.
SECTION TWO. SANITARY SEWER SERVICES
2.1 The City will:
a. Permit Northern Lights to attach to the sewer line running to the
project and parallel to the southern side of County Road 34 a pipeline, plumbing
and other facilities necessary to obtain sanitary sewer services from the City.
b. Collect, transport and dispose of all sanitary sewage produced by the
project.
c. Determine, by reading of the meter referred to in Section 2.2(c) of this
Agreement, the amount of sanitary sewage and waste water produced by Northern
Lights, and collected, transported and disposed of by the City, and bill
Northern Lights for the collection, transport and disposal of such sewage and
waste water according to the rates set forth in Attachment A attached hereto and
made a part of this Agreement.
2.2 Northern Lights will:
a. Construct and maintain at its cost the pipeline, plumbing and other
facilities necessary to connect the project to the sewer line running to the
project and parallel to the southern side of County Road 34.
b. Construct and maintain at its cost a lift station at the project to
ensure safe and efficient disposal of the sanitary sewage and waste water
produced by the project.
c. Allow to be installed one water meter on a pipeline delivering water to
the three (3) buildings of the project which will use water received from the
City for potable purposes, such as drinking, toiletry, and other personal
purposes, which meters shall measure the water used by Northern Lights for
potable purposes and which measurements shall be used in conjunction with the
rates set forth in Attachment A to determine Northern Lights' required payment
to the City for sanitary sewer services under this Agreement.
d. Obtain all approvals and permits required to construct and maintain the
lift station and any pipelines, plumbing or facilities on the project premises
used in the disposal of sanitary sewage and waste water produced by the project.
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e. Pay within 30 days of receipt of the City's invoice for sanitary sewer
services at the rates set forth in Attachment A.
f. Grant the City access to maintain and inspect the water meter used to
measure the water used by Northern Lights for potable purposes.
g. Only dispose of potable water waste in the City's sanitary sewer system.
2.3 Metering Testing:
a. Northern Lights shall make at any reasonable time at the City's request
a special meter test on the meters installed to measure the water used by
Northern Lights for potable purposes. The costs of the tests shall be borne by
Northern Lights; provided, however, that if any special meter test made at the
City's request shall disclose that the meter is recording accurately, the City
shall reimburse Northern Lights for the cost of such test. If the meter
registers not more than 2% above or below actual, then the meter shall be deemed
to be accurate. The readings of the meter which have been disclosed by tests to
be inaccurate shall be corrected for the 90 days previous to such test in
accordance with the percentage of inaccuracy found by such test. If the meter
should fail to register for any period, the City and Northern Lights shall agree
as to the amount of water furnished during such period and Northern Lights shall
pay said amount.
b. Northern Lights shall notify the City in advance of the time of any
special meter reading or test so that the City's representative may be present
at such meter reading or test.
SECTION THREE. TERM
This Agreement shall continue in force for the term of 10 years from, and
after January 1, 2002, and shall be followed by two (2) additional 5 year terms,
and thereafter from year to year; provided however that either party shall have
the right to terminate this Agreement on any of the following dates: (a) date of
expiration of the initial term upon 12 months' advance notice by the terminating
party; or (b) date of expiration of any subsequent contractual term upon 12
months' advance notice by the terminating party.
SECTION FOUR. INTERRUPTIBILITY
The City shall not interrupt any of the services provided herein, or any
component thereof, except for material breach of this Agreement by Northern
Lights or in the case of casualty damage, or in the case of a need to make
repairs and systems enhancement, and in this later event only upon notice to
Northern Lights adequate to permit Northern Lights
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to provide back-up services when required in Northern Lights' sole discretion.
All repairs, whether routine or due to casualty, and all enhancements shall be
made as timely as possible so as to provide as little disruption to Northern
Lights' operations as possible. Notice shall be given to the Northern Lights'
Plant Manager on duty when the notice is given.
SECTION FIVE. GOOD FAITH BILLING DISPUTES
If Northern Lights disputes in good faith any billings or adjustments to
any billings for services rendered under this Agreement, then Northern Lights
shall pay the undisputed amount to the City and pay the disputed amount into a
separate interest-bearing account at a federally insured financial institution
mutually agreed upon by the parties. This financial institution will be the
account agent on behalf of the City and Northern Lights. The disputed funds
shall be held in this account during the pendency of the dispute. After
resolution of the dispute, both parties will jointly designate to the account
agent the proper distribution of all deposits, funds and accumulated interest.
Any expenses by the account agent shall be borne equally by the City and
Northern Lights. The City shall not have the right to suspend or terminate the
services provided herein as a result of any or all good faith disputes.
SECTION SIX. BREACH OF AGREEMENT
6.1 If any of the following events of default shall occur: (a) if Northern
Lights shall fail to pay any amount due hereunder and such failure shall
continue for more than 30 days after written notice thereof from the City to
Northern Lights; (b) if Northern Lights shall fail to perform or comply with any
other term hereof and such failure shall continue for more than 30 days after
written notice thereof from the City to Northern Lights (or, if such failure is
of such a character as to require more than 30 days to cure and if Northern
Lights continues to use reasonable diligence in curing such failure for more
than that period of time reasonably necessary to cure such failure); or (c) be a
debtor in a voluntary or involuntary bankruptcy; then and in any such event the
City may, at its option, terminate this Agreement and pursue any other legal
rights or remedies at law or equity to which the City is entitled.
6.2 If any of the following events of default shall occur: (a) if the City shall
fail to provide any of the services required hereunder, and such failure shall
continue for more than three days after written notice thereof from Northern
Lights; or (b) if the City shall fail to perform or comply with any other term
hereof and such failure shall continue for more than 30 days after written
notice thereof from Northern Lights (or, if such failure is of such a character
as to require more than 30 days to cure and if the City continues to use
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reasonable diligence in curing such failure for more than that period of time
reasonably necessary to cure such failure), then and in any such event, Northern
Lights may, at its option, terminate this Agreement and pursue any other legal
rights or remedies at law or equity to which Northern Lights is entitled.
SECTION SEVEN. INDEMNIFICATION, WAIVER OF SUBROGATION AND INSURANCE
7.1 Northern Lights shall protect, indemnify and save harmless the City from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, judgments, costs and expenses (including without limitation reasonable
attorneys' fees and expenses) imposed on or incurred by or assessed against the
City or the City's property during the term of this Agreement, for any of the
following: (a) any accidents or injury to or death of persons or loss of or
damage to property of third persons occurring on or about Northern Lights'
project site, along the pipelines installed by Northern Lights, and/or the
City's facilities due to the negligence or tortious act on the part of Northern
Lights or any of its employees, agents, contractors, sublessees, licensees or
invitees; or (b) any failure on the part of Northern Lights to perform or comply
with any of the terms of this Agreement; (c) any mechanic's or supplier's claim
or lien in connection with work done or materials furnished relating to the
Northern Lights' project site, along the pipelines installed by Northern Lights,
and/or the City's facilities; or (d) Northern Lights improperly uses the sewer
system by putting toxic or hazardous waste in the City Sanitary system. If any
action, suit or proceeding is brought against the City by reason of any such
occurrence, Northern Lights, on request of the City, shall at Northern Lights'
expense defend the action, suit or proceeding with counsel designated by
Northern Lights and approved by the City, which approval shall not be
unreasonably withheld.
7.2 Both parties hereby waive any and all rights of recovery which either of
them may have against the other for any loss of property which is covered by
insurance carried by the other party pursuant to the provisions of this
Agreement.
7.3 Each party may, at their own expense, procure and maintain, or cause to be
procured and maintained, in force throughout the term of this Agreement, hazard
insurance with extended coverage endorsement against loss or damage to their
respective facilities and property located therein, with coverage for perils as
set forth under the Causes of Loss-Special Form in an amount equal to the full
insurable replacement cost of said facilities and property. Said policy if
obtained shall require the insurer to give the other party at least 30 days'
advance written notice of any cancellation of any such policy.
7.4 Both parties shall, at their own expense, keep in effect commercial general
liability insurance, including contractual liability insurance, covering their
respective operations
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on and about their respective facilities and properties, with such limits of
liability as each shall reasonably determine from time to time, but not less
than combined single limits of $1,000,000.00 per occurrence for bodily injury,
death or property damage. The policies shall be written on an "occurrence" basis
and not on a "claims made" basis, and Certificates of Insurance shall be issued
by the respective insurance carriers and shall provide that the insurance
policies shall not be cancellable without at least 30 days' prior written notice
to the other party.
SECTION EIGHT. FORCE MAJEURE
The City shall not be liable to Northern Lights for its failure to deliver
services hereunder, and Northern Lights shall not be liable to the City for its
failure to receive said services, when such failure shall be due to accident to
or breakage of pipelines or equipment, failure of generating equipment or lines,
fires, floods, storms, weather conditions, strikes, lockouts, or other
industrial disturbance, riots, legal interference, governmental action or
regulation, acts of God or public enemy, or, without limitation by enumeration,
any other cause beyond the City's or Northern Lights' reasonable control;
provided the City or Northern Lights shall promptly and diligently take such
action as may be necessary and practicable under the then existing circumstances
to remove the cause of failure and resume delivery and use of service, except
that any labor disturbance may be settled at the City's or Northern Lights'
discretion. The party seeking to invoke this provision shall provide notice
within 24 hours or such other time as is reasonable under the circumstances. The
party shall further notify the other party as to the time when a force majeure
condition is no longer in effect.
SECTION NINE. GOVERNING LAW
This Agreement shall be governed by, construed, and enforced in accordance
with the laws of South Dakota.
SECTION TEN. WAIVERS
No waiver of any breach of this Agreement shall constitute a waiver of any
other breach of the same or other provisions of this Agreement, and no waiver
shall be effective unless made in writing. In the event that any provision
herein shall be illegal or unenforceable, such provisions shall be severed and
the entire Agreement shall not fail, but the balance of the Agreement shall
continue in full force and effect.
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SECTION ELEVEN. ENTIRE AGREEMENT
This Agreement shall constitute the entire agreement between the parties,
and any prior understanding or representation of any kind preceding the date of
this Agreement shall not be binding upon either party, except to the extent
incorporated in this Agreement.
SECTION TWELVE. MODIFICATION OF AGREEMENT
Any modification of this Agreement or additional obligation assumed by
either party in connection with this Agreement shall be binding only if
evidenced in writing, signed by each party or an authorized representative of
each party.
SECTION THIRTEEN. ATTORNEYS' FEES
If any action at law or in equity shall be brought to recover any amounts
due under this Agreement, or for or an account of any breach of, or to enforce
or interpret any of the covenants, terms, or conditions of this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
costs from the other party.
SECTION FOURTEEN. EASEMENTS
Each party hereby grants to the other easements for ingress and egress to
and from their respective properties for the purpose of installing, maintaining,
inspecting, repairing the lines, meters and equipment to be installed pursuant
to the terms of this Agreement. Property damaged as a result of installing,
maintaining, inspecting and repairing a party's lines, meters and equipment
shall be reasonably restored to its condition immediately prior to the
occurrence of such damage at the expense of the party causing the damage.
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In witness whereof, each party to this Agreement has caused it to be
executed on the dates indicated below.
Dated: 12-26-01 NORTHERN LIGHTS ETHANOL, LLC
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By: /s/ Delton Strasser
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Title: President of the Board of Managers
Dated: 12-7-01 THE CITY OF BIG STONE CITY
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By: /s/ James McFarlene
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Title: Mayor
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ATTACHMENT A
RATES
WATER
Northern Lights shall pay to the City for the delivery of water as follows:
a. A monthly fee of $1,500.00; and
b. A fee of $2.75 for each one-thousand gallons per day not in excess of
50,000 gallons; and
c. A fee of $1.80 for each one-thousand gallons per day in excess of
50,000 gallons.
The parties also recognize that Big Stone City purchases its water from the City
of Ortonville. Big Stone City pays an increased rate for excess gallons used if
it uses more than 250,000 gallons in any given day. In the event that Big Stone
City's usage exceeds 250,000 gallons per day, Big Stone City and Northern Lights
shall each pay a proportionate share of the increase in the rate for the gallons
used by both parties on a combined basis in excess of 250,000 gallons per day.
Each party's proportionate share shall be determined in accordance with the
following calculation:
FOR NORTHERN LIGHTS
Gallons used by Northern Lights less 150,000 gallons DIVIDED BY (total
actual gallons used by both parties less 250,000 gallons) X the increased
rate charged by the City of Ortonville = Northern Lights' proportionate
share of the increased rate on gallons used by both parties in excess of
250,000 gallons per day.
FOR BIG STONE CITY
Gallons used by Big Stone City less 100,000 gallons DIVIDED BY (total
actual gallons used by both parties less 250,000 gallons) X the increased
rate charged by the City of Ortonville = Big Stone City's proportionate
share of the increased rate on gallons used by both parties in excess of
250,000 gallons per day.
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SANITARY SEWER SERVICES
Northern Lights shall pay to the City for sanitary sewer services $1.50 for each
one-thousand gallons of water used solely for potable purposes, as determined
from the three (3) meters referred to in Section 2.2(c) of this Agreement.
RATE RENEGOTIATION
These rates shall remain in effect until December 31, 2004. Thereafter the
parties shall renegotiate the rates in good faith.
PREPARED BY: /s/ Steven Street
James M. Wiederrich -----------------------------------
Daniel J. Harmelink Notary Public - South Dakota
Woods, Fuller, Schultz & Smith P.C. My commission expires: 10-12-2002
300 South Phillips Ave, Suite 300
Sioux Falls SD 57117-5027
605-336-3890