Exhibit 10.14
January 7, 2003
J. Larry Robertson
Lurgi PSI, Inc.
1790 Kirby Parkway, Suite 300
Subject: Oregon Trail Ethanol Coalition, L.L.C. ("OTEC")
Ethanol Plant
Davenport, Nebraska
Notice to Proceed
Dear Larry:
Please accept this as our Notice to Proceed for the pre-engineering stage of the
OTEC ethanol project subject to and in accordance with the terms set forth
herein. The scope of work for this project includes the Preliminary Engineering
services set forth in the Preliminary Engineering Agreement between Lurgi PSI,
Inc. ("Lurgi PSI") and OTEC dated January 7, 2003, a copy of which is attached
hereto as Exhibit A and incorporated herein by this reference.
The following outlines the conditions of this letter:
. OTEC and Lurgi PSI will agree that the Preliminary Engineering
Agreement has been mutually negotiated and this Notice to
Proceed will be subject to all terms set forth therein except
as expressly limited or modified by this Notice to Proceed.
. Lurgi PSI understands and agrees that this Notice to Proceed
is limited to the Phase 1 Preliminary Engineering services as
set forth in the Preliminary Engineering Agreement which are
budgeted to cost $140,000. Lurgi PSI agrees to notify OTEC in
writing if the costs budgeted for the Phase 1 Preliminary
Engineering services are expected to exceed $140,000. Lurgi
PSI further agrees to notify OTEC in writing prior to
performing any Phase 2 Preliminary Engineering services or
incurring any costs or expenses in connection with the Phase 2
Preliminary Engineering services.
Signature at the bottom of this document will indicate acceptance of this letter
and authorize Lurgi PSI to proceed with the agreed scope of work as set forth
herein and in the Preliminary Engineering Agreement.
Sincerely,
Accepted:
Oregon Trail Ethanol Coalition, L.L.C. Lurgi PSI, Inc.
/s/ Mark L. Jagels /s/ J. Larry Robertson
Mark L. Jagels J. Larry Robertson
Chairman of the Board and President Chief Executive Officer
PRELIMINARY ENGINEERING AGREEMENT
THIS PRELIMINARY ENGINEERING AGREEMENT, entered into as of the 7th day of
January 2003, by and between
OREGON TRAIL ETHANOL COALITION, LLC
102 West 6th Street
P.O. Box 267
Davenport, Nebraska 68335-9429
(hereinafter called "OWNER")
and LURGI PSI, INC.
1790 Kirby Parkway, Suite 300
Memphis, Tennessee 38138
(hereinafter called "CONTRACTOR")
WITNESSETH THAT:
WHEREAS, OWNER desires CONTRACTOR to furnish all materials, supplies and
equipment and perform design, engineering, procurement, construction,
commissioning, start-up and testing services for the installation, on a turnkey
basis, of an ethanol plant to be located in Davenport, Nebraska (the "Plant");
and
WHEREAS, CONTRACTOR desires to make such installation upon terms and conditions
to be agreed to with OWNER; and
WHEREAS, OWNER and CONTRACTOR for this purpose have entered into a Memorandum of
Understanding executed by the parties as of February 4, 2002 (the "MOU"), and
intend to enter into an Engineering, Procurement and Construction Agreement
(hereinafter referred to as the "EPC Agreement") for the supply of such
engineering, procurement and construction services, which EPC Agreement will
become effective only upon its execution by both parties and fulfillment of
certain conditions and requirements still outstanding; and
WHEREAS, OWNER desires, and CONTRACTOR has agreed, that CONTRACTOR shall start
immediately with certain preliminary engineering for the Plant before the EPC
Agreement has become effective;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 The services to be performed by CONTRACTOR under this Preliminary
Engineering Agreement are referred to herein as the "Preliminary
Engineering".
1.2 Unless otherwise noted, capitalized terms used in this Preliminary
Engineering Agreement shall have the same meaning as assigned to them
in the MOU.
2. OBJECT OF THIS AGREEMENT
2.1 OWNER herewith authorizes and instructs CONTRACTOR, and CONTRACTOR
agrees, to start with the design, engineering and related services for
the Plant in accordance with the terms and conditions specified in this
Preliminary Engineering Agreement.
2.2 The scope of the Preliminary Engineering to be performed by CONTRACTOR
under this Preliminary Engineering Agreement is described in Exhibit A
attached to and made a part hereof.
3. PERFORMANCE OF PRELIMINARY ENGINEERING BY CONTRACTOR
3.1 CONTRACTOR shall commence the Preliminary Engineering within five (5)
days after CONTRACTOR receives the down payment provided for in Article
4.2. The Preliminary Engineering shall be completed within fifteen (15)
weeks of the date CONTRACTOR receives the down payment provided for in
Article 4.2.
3.2 All Preliminary Engineering shall be performed by CONTRACTOR in such a
manner that it shall become part of the engineering intended to be
performed by CONTRACTOR under the EPC Agreement once the EPC Agreement
shall come into full force and effect.
3.3 CONTRACTOR shall perform the Preliminary Engineering in a professional
and good and workmanlike manner and with that degree of care, skill and
judgment that is normally exercised by professional engineering firms
of national reputation in performing like services.
3.4 Title to all technical data furnished by OWNER to CONTRACTOR under this
Preliminary Engineering Agreement shall remain with OWNER, and title to
all technical data furnished by CONTRACTOR to OWNER under this
Preliminary Engineering Agreement shall remain with CONTRACTOR.
3.5 All reports, drawings, specifications, computer files, field data,
notes and other documents and instruments prepared by CONTRACTOR for
the Project (collectively "Materials") shall remain the property of
CONTRACTOR. However, upon termination of the Project and OWNER's
reimbursement to CONTRACTOR of any amounts payable under this
Preliminary Engineering Agreement, OWNER shall have the right to use
Materials (except for CONTRACTOR's confidential information) for
further development and construction of a substitute project at OWNER's
sole risk. In the event OWNER uses the Materials for development and
construction of a substitute project as provided in this section, OWNER
agrees to the fullest extent permitted by law to indemnify and hold
harmless CONTRACTOR against any damages, liabilities or costs including
reasonable
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attorneys' fees and defense costs in any way connected with the use or
modification of the Materials by OWNER or any person or entity that
acquires the Materials from OWNER.
3.6 At the written request of either party, the parties shall terminate
this Preliminary Engineering Agreement by a writing signed by both
parties indicating the effective date of termination. In the event of
any termination under this Article 3.6, OWNER shall pay to CONTRACTOR
prior to the effective date of termination any amounts owed for
Preliminary Engineering performed prior to the effective date of
termination.
3.7 In the event CONTRACTOR breaches this Preliminary Engineering Agreement
and such breach is not cured within thirty (30) days after written
notice of such breach, OWNER may, at its election, terminate this
Preliminary Engineering Agreement.
3.8 CONTRACTOR agrees to defend, indemnify and hold harmless OWNER from and
against any and all claims, demands, liabilities and costs incurred by
OWNER, including reasonable attorneys' fees, arising out of (a)
CONTRACTOR'S performance or nonperformance of the Preliminary
Engineering, or (b) the negligence or the intentional misconduct of
CONTRACTOR.
3.9 OWNER agrees to defend, indemnify and hold harmless CONTRACTOR from and
against any and all claims, demands, liabilities and costs incurred by
CONTRACTOR, including reasonable attorneys' fees, arising out of
OWNER's negligence or intentional misconduct.
3.10 The Preliminary Schedule in Exhibit C, attached to and made a part
hereof, identifies the major activities and associated timelines for
the Preliminary Engineering. OWNER and CONTRACTOR each agree to use
reasonable efforts to complete these activities in a timely manner.
4. PRELIMINARY ENGINEERING PRICE
4.1 OWNER agrees to pay to CONTRACTOR for the Preliminary Engineering the
time and material not to exceed price of $450,000 ("Price") in
accordance with the Manhour Rate and Reimbursable Cost Schedule in
Exhibit B, attached to and made a part hereof.
4.2 OWNER shall pay to CONTRACTOR an initial payment of $45,000 ("Down
Payment") upon execution of this Preliminary Engineering Agreement. The
Down Payment will be credited against the first monthly request for
payment described in Article 4.3.
4.3 On a monthly basis CONTRACTOR shall submit to OWNER a request for
payment showing cost incurred, per Exhibit B, but not billed during
the prior billing period. Payment is due and payable by OWNER in U.S.
dollars within ten days of the date of the request for payment. In the
event a request for payment remains unpaid for more than thirty (30)
days, then CONTRACTOR shall have the right, at its option, to suspend
its performance hereunder or to terminate this Preliminary Engineering
Agreement upon ten (10) days' notice to OWNER. Late
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payments will incur interest charges of 1-1/2% per month. To avoid the
penalty late charge, any questionable disputed charges should be subtracted
from the invoice and the remainder paid within the ten (10) day period. The
remit to address shall be: Lurgi PSI, Inc., 1790 Kirby Parkway, Suite 300,
Memphis, Tennessee 38138.
4.4 The Price shall be credited toward the first monthly progress payment to be
made by OWNER to CONTRACTOR under the EPC Agreement.
5. LIMITATION OF LIABILITY
5.1 Except as provided in Article 5.2, all warranties, guarantees and
liabilities of CONTRACTOR with respect to or in connection with the
Preliminary Engineering provided by CONTRACTOR under this Preliminary
Engineering Agreement shall only come into existence upon the EPC Agreement
having become effective and then shall be limited as agreed therein, and
nothing in this Preliminary Engineering Agreement shall be construed as
expressing or implying the contrary.
5.2 ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR USE FOR THE PURPOSE INTENDED, ARE EXPRESSLY
EXCLUDED. THE LIABILITY OF CONTRACTOR UNDER AND IN CONNECTION WITH THE
PRELIMINARY ENGINEERING IS LIMITED TO THE CORRECTION OF ANY DEFECTS IN THE
ENGINEERING SERVICES OR DOCUMENTS DELIVERED TO OWNER UNDER THIS PRELIMINARY
ENGINEERING AGREEMENT, PROVIDED NOTICE OF ANY DEFECTS IS GIVEN TO
CONTRACTOR WITHIN 180 DAYS FROM PERFORMANCE OF SUCH SERVICES OR DELIVERY OF
SUCH DOCUMENTS.
5.3 CONTRACTOR's total cumulative liability to OWNER under or relating to this
Preliminary Engineering Agreement shall in no event exceed the Price
actually paid to CONTRACTOR, exclusive of CONTRACTOR's obligations under
Article 5.2.
5.4 Except for CONTRACTOR's obligations under Article 3.8, notwithstanding any
other provision of this Preliminary Engineering Agreement, neither
CONTRACTOR nor OWNER shall have any liability whatsoever for loss of
production, loss of income, loss of profit, loss caused by plant shutdown,
delayed opening, business interruption or other delay or for any other
special, indirect, incidental or consequential loss or damage, or for any
exemplary or punitive damages.
5.5 The limitations on and exclusions of damages set forth in this Article 5
shall apply under any theory of law including breach of contract or
warranty, tort (including negligence of any nature), strict liability or
otherwise, and even in the case of CONTRACTOR's sole or concurrent
negligence.
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6. INSURANCE
6.1 CONTRACTOR shall furnish Workman's Compensation Insurance as required by
law; Comprehensive General Liability Insurance at limits of $500,000 per
occurrence; Automobile Liability coverage at limits of $100,000 each
accident for property damage; and Professional Liability Insurance in an
amount not less than the Price payable under this Preliminary Engineering
Agreement.
7. ARBITRATION AND GOVERNING LAW
7.1 In case of any dispute or controversy arising between the parties hereto
under or relating to this Preliminary Engineering Agreement or CONTRACTOR's
performance or nonperformance of its obligations hereunder ("Dispute"), the
parties shall endeavor to settle any such Dispute in an amicable way.
7.2 If a Dispute cannot be settled amicably, then the Dispute shall be finally
decided by arbitration under the Commercial Arbitration Rules of the
American Arbitration Association by three (3) arbitrators appointed in
accordance with such Rules. Arbitration shall take place in St. Louis,
Missouri.
7.3 This Preliminary Engineering Agreement shall be governed by, and
interpreted in accordance with, the substantive law of Nebraska, exclusive
of its choice of laws principles.
8. GENERAL CONDITIONS
8.1 This Preliminary Engineering Agreement shall become binding and effective
upon its having been signed by both parties hereto.
8.2 This Preliminary Engineering Agreement represents the entire agreement of
the parties as to the subject matter hereof, and all oral and written
statements, documents, letters or other communications between OWNER and
CONTRACTOR and any representations and warranties made in connection with
the subject matter of this Preliminary Engineering Agreement prior to its
execution are superseded and shall become null and void upon execution of
this Preliminary Engineering Agreement.
8.3 Any modifications or supplements to this Preliminary Engineering Agreement
must be executed in writing and signed by both parties. Any verbal
agreement must be confirmed by both parties in writing in order to be
valid.
8.4 Should any provision of this Preliminary Engineering Agreement be or become
invalid or unenforceable or prohibited by law or otherwise all other
provisions of this Preliminary Engineering Agreement shall be unaffected
thereby and shall nevertheless remain effective. Any invalid or
unenforceable provision of this Preliminary Engineering Agreement shall be
replaced by a valid and enforceable provision to be agreed upon between the
parties hereto approaching as close as possible to that which both parties
would have intended had they known of such invalidity or unenforceability
when entering into this Preliminary Engineering Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Preliminary Engineering
Agreement to be executed and signed as follows on the day and the date first
above written.
For and on behalf of For and on behalf of
OREGON TRAIL ETHANOL COALITION, L.L.C. LURGI PSI, INC.
/s/ Mark L. Jagels, Chairman of the Board /s/ William R. Bellamy,
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Vice President-Operations
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PRELIMINARY ENGINEERING AGREEMENT
EXHIBIT A
SCOPE OF SERVICES
Lurgi PSI shall provide the following preliminary engineering services and
deliverables:
Phase One: Site Work Design (Budget $140,000)
Site Work Design necessary to allow site to be prepared for construction,
including, but not limited to:
. Grading
. Soil preparation/remediation
. Utility Water Discharge
. Plant Fire Protection and Emergency Requirements (Appropriate
Coordination with Local and State Authorities)
. Storm Water and Water Discharge Permit Assistance
. Plant Water Discharge and Treatment (if required by OWNER)
. Plant Building Layout and General Arrangement
. Plant Site Plan Reflecting Underground Utility, , , Sewer, and
Fire Loop, Roads, etc.
. Underground Utility Design and Fire Protection Loop
. Bid Package Preparation for Site Work (to be issued no later than
February 14 to bidders)
. Project Development Activities
. Provide information to Air Resource Specialists, Inc. for permitting
required prior to starting Site Work
. Estimated time line will be January 10, 2003 through February 14,
2003
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Phase Two: Pre Construction Design (Budget $310,000)
The intent of this phase of work is to complete major design for areas that are
on the critical path for overall plant construction, which include but are not
limited to:
Preliminary P&ID's
Major Equipment Specifications
Major Tank Sizes (Fermenters, Storage Tanks)
Preliminary General Arrangement Drawings
Design and Specify DDGS Storage Building
Foundation Design and Structural Steel Design Consists of the following:
. Develop Process P&ID's and Control Strategies
. Equipment Performance Specifications and RFQ Development
. Process Equipment Evaluation
. Detailed Equipment List and Horsepower
. Electrical Equipment Specifications and RFQ's
. Instrumentation List
. Instrumentation Specifications
. Computer Hardware Requirements and Specifications
. Critical Process Equipment Specifications
. Plant Standardization Guidelines
. Process Description
. Cooling Water Requirements and Make-Up Source
. Provide design drawings for the concrete foundation, and provide RFQ
documents necessary to procure the design, detailing, fabrication,
delivery and erection of the DDGS building structural steel, siding,
roofing and related components. This facility should be completed
as soon as practical in order to provide weatherproof areas for
material storage and fabrication. Foundation design for process
building will begin as time allows during this phase.
. Investigate existing rail siding, prepare drawings showing tie in to
existing track, and analyze rail car traffic patterns to locate in
plant switches in the appropriate locations. Finalize locations of
tank farm, ethanol load out, DDGS load out and their relationship to
the railroad and the in plant truck traffic.
. Prepare calculations to size and place reinforcing steel in the
foundations. Prepare drawings of foundations in plan and section
views. Locate the foundations on the proper coordinates on the site
plan. Locate elevations of the foundations with respect to the plant
benchmark.
. Project Development Activities
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EXHIBIT B
LURGI PSI, INC.
MANHOUR RATE AND REIMBURSABLE COST SCHEDULE
EFFECTIVE SEPTEMBER 16, 2002
Lurgi PSI, Inc. executes its contract work for construction and engineering
services under a standard reimbursement schedule for manhour expenditures,
direct expenses, and in-house services. We invoice all projects in accordance
with a standard invoice procedure which includes a separate listing of manhour
expenditures, direct expenses, and scheduled expense items. Lurgi PSI, Inc.
keeps full and detailed accounts and records in accordance with established
accounting procedures.
1. PERSONNEL COST REIMBURSEMENT SCHEDULE
All personnel are charged to a project on an hourly basis for actual time
spent in direct support of the project. Overtime hours required by Lurgi
PSI, Inc. to support a project schedule are invoiced at standard rates
without any premium time for overtime. All classifications will be invoiced
listing the individuals who have worked on the project and number of hours
worked.
2. COSTS REIMBURSABLE AS DIRECT EXPENSES
The following items are reimbursed at Lurgi PSI's direct cost without any
additional charges for overhead or profit:
2.1 Travel expense.
2.2 Living expenses away from our office for any of our personnel.
2.3 Long distance or toll telephone calls.
2.4 Telegrams, teletype, express mail, and postage.
2.5 Any special forms of printing and office supplies.
2.6 Car mileage at 34 cents per mile.
2.7 Special client requested legal services.
2.8 Rent of offices other than Lurgi PSI, Inc. home office.
2.9 Outside reproduction, blueprint, photographic supplies or
services.
2.10 Additional professional liability insurance beyond that
provided in Section 7.
2.11 Broad Form Endorsement CGL insurance for construction
activities.
2.12 Additional Umbrella Liability insurance and specialized
insurance.
2.13 Losses not covered by insurance maintained to jointly protect
Owner and Lurgi PSI, Inc.
2.14 Permits, licenses, inspections, and other fees.
2.15 Replacement of work not covered by project insurance.
2.16 Additional automobile liability insurance.
2.17 Field personnel costs including:
. Transportation and travel expenses for husband and wife
relocation trips to evaluate housing.
. Moving expense per field employee for relocation to the job site
based on
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three competitive quotes.
. Per diem expenses for each day of assignment beginning with two
weeks from date of relocation and terminating upon end of
assignment. Per diem rates will be calculated in accordance with
federal guidelines Publication 1542, Per Diem Rates for Travel
within the Continental United States. Should field employees be
required for a duration in excess of 12 months a taxable
allowance will be negotiated.
. Moving expenses per field employee for relocation from the job
site.
3. COSTS REIMBURSABLE AS A SCHEDULED EXPENSE ITEM
The following items are internally produced and billed at the approximate
cost per unit (square foot, copy, hour, etc.) to Lurgi PSI, Inc. including
materials and machine time utilized:
3.1 DRAWING REPRODUCTION COSTS
3.1.1 Bond $ .17 per sq. ft.
3.1.2 Vellum $1.00 per sq. ft.
3.1.3 Mylar $1.75 per sq. ft.
3.2 PHOTOCOPIES $ .10 per copy
3.3 CD CREATION $10.00 each CD
3.4 VIDEO CONFERENCING $2.00 per minute ($120 per hour)
4. COSTS REIMBURSABLE AS DIRECT EXPENSES PLUS A FEE
The following items are expenses which are to be reimbursed at cost plus a
fixed fee:
4.1 Owner Requested Subcontracts
4.2 Purchased Equipment
4.3 Rental Equipment
5. INVOICING
Normal invoicing procedures call for manhours completed on the project and
reimbursable expenses to be billed monthly. The invoice will list all
manhour charges and reimbursable expenses against the project to date, both
billed and current. Standard invoices will detail the charges to the
project and will not contain copies of any receipts or documentation.
Sample invoices are available upon request. Documentation for all billable
items will be included with standard invoices for a fee of $2.00 per
8 1/2 x 11 sheet.
6. SCHEDULE REVISIONS
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The rate schedule is subject to yearly revisions during the first billing
period containing the first day of September. These adjustments will
reflect increased costs due to promotions, merit increases, etc. Any other
changes in the Rate Schedule are subject to approval of the Owner.
7. COSTS ASSOCIATED WITH INSURANCE
Lurgi PSI, Inc. provides the following level of insurance as standard on
all projects without any additional reimbursement under our Standard
Agreement for Professional Services:
7.1 Workman's Compensation Insurance as required by law.
7.2 Comprehensive General Liability Insurance at limits of $500,000 per
occurrence for bodily injury and property damage with a broad form
endorsement for property damage, products, completed operations,
premises, blanket contractual, independent construction and XCU.
7.3 Comprehensive Automobile Liability Insurance covering all owned,
non-owned, and hired vehicles at limits of $100,000 each person;
$300,000 each accident for bodily injuries and $100,000 each accident
for property damage.
7.4 Umbrella Liability is provided to cover any legal liability that may
exceed the underlying limits of insurance coverages. The aggregate
limit of the Umbrella liability policy shall be $1 million.
7.5 Professional liability insurance is provided through self-insurance by
Lurgi PSI, Inc. for $100,000 or up to the full value of Lurgi PSI's
fee for services to a maximum of $1,000,000, as a standard part of our
Professional Services Agreement. Any additional Professional Liability
Insurance requested by the Owner will be furnished as a direct
reimbursable expense per paragraph 2.0 above.
7.6 Project Professional Liability, Wrap-up Insurance, or any other
additional insurance requested by Owner will be furnished as a direct
reimbursable expense per paragraph 2.0 above.
8. RATE SCHEDULE BY CLASSIFICATION
Consolidated Rate Schedule, effective September 16, 2002:
SENIOR PROJECT ENGINEER/SPECIALIST AND ABOVE $105
PROJECT ENGINEER/SPECIALIST $99
PROJECT/AREA COORDINATOR $88
ESTIMATOR $82
SENIOR ENGINEER/SPECIALIST $78
PROJECT SUPERINTENDENT $78
SENIOR DESIGNER $76
COST CONTROL $76
SUPERINTENDENT $76
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SAFETY COORDINATOR $76
QA/QC COORDINATOR $76
EQUIP/TOOLS SUPERINTENDENT $76
PURCHASING AGENT/EXPEDITOR $68
ENGINEER/SPECIALIST $68
STEEL DETAILING $68
DESIGNER $61
CADD SPECIALIST $53
ADMINISTRATIVE COORDINATOR $53
ACCOUNTING $53
SUPPORT $45
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