Exhibit 10.1
February 4, 2002
Lurgi PSI, Inc.
1790 Kirby Parkway
Suite 300
Memphis, Tennessee 38138
Re: Memorandum of Understanding
Dear Sirs:
Oregon Trail Ethanol Coalition L.L.C. (hereinafter referred to as "Oregon
Trail") is currently in the process of developing an ethanol production facility
having a design capacity of 40 million gallons of ethanol per year including
DDGS and CO2 as co-products utilizing corn as the feed stock to be constructed
in south central Nebraska (the "Project"). Oregon Trail is agreeable in
principle to having Lurgi PSI, Inc. (hereinafter referred to as "Lurgi PSI")
perform engineering, procurement, construction ("EPC") and related services for
the Project.
Lurgi PSI, as a result of its research and commercial practice, has
process, design and construction experience and expertise in the areas of
ethanol production. Lurgi PSI has designed and/or constructed similar facilities
in the United States.
As a result of discussions between their respective representatives, Oregon
Trail and Lurgi PSI agree that it would be mutually advantageous to define and
enter into a commercial relationship for the engineering, procurement and
construction of the Project. The terms of such relationship are expected to be
mutually negotiated by the parties. At the present time, each of the parties is
seriously contemplating the following arrangements as set forth in this
Memorandum of Understanding ("MOU").
A. Responsibilities of Oregon Trail
Oregon Trail will undertake to consummate the contracts necessary to
achieve financial closing of the Project and such other efforts including but
not limited to the following:
Memorandum Of Understanding
Dated: 02/04/02
Page 2 of 7
1. Secure financing from an established project lender or syndicate of
lenders, which shall include funds for an EPC contract having a fixed
total lump sum value of approximately $44.5 million.
2. Establish and maintain an organizational structure for the purpose of
developing the Project and conducting the activities necessary to
bring the Project to financial closing.
3. Submit the necessary permit applications for the Project to the proper
authorities for approval.
4. Conclude contracts for management, operation and maintenance, energy
and feedstock supply and off-take of products.
5. Make the necessary equity contributions to the Project as determined
by Oregon Trail and its lenders.
6. Negotiate and develop an EPC contract with Lurgi PSI to be signed at
financial closing for a plant with a design capacity of 40 million
gallons of ethanol per year including DDGS and CO2 as co-products (the
"Plant") based on an 8000 hour operating year for a fixed total lump
sum price of approximately $44.5 million.
B. Responsibilities of Lurgi PSI
Lurgi PSI agrees to support Oregon Trail in its efforts to achieve
financial closing of the Project and will undertake to do the following:
1. Perform certain preliminary engineering and design services for the
Plant.
2. Conclude an EPC contract with Oregon Trail for the Plant for a fixed
total lump sum price of approximately $44.5 million.
3. Develop a project schedule of approximately 12 to 14 months from
notice to proceed for the engineering and construction of the Plant.
Liquidated damages for delay will be negotiated by the parties,
subject to a maximum amount. An early completion bonus will also be
negotiated.
4. Establish with Oregon Trail performance criteria for the Plant to
achieve, together with a schedule of liquidated damages in the event
of under performance. Offsets of certain performance parameters will
be negotiated by the parties based on a frozen cash flow base case
model.
5. Provide to Oregon Trail periodic updates of Lurgi PSI's development
activities.
6. Assist Oregon Trail during the Project execution by making
recommendations for project personnel.
Memorandum Of Understanding
Dated: 02/04/02
Page 3 of 7
7. Provide the necessary technical and administrative support to Oregon
Trail for required permits. Provide permits required for construction.
8. Assist and participate in local community meetings by presenting
information regarding Lurgi PSI, the Project, the Plant, Lurgi PSI's
involvement in the Project and general information regarding the
ethanol industry.
9. Assist Oregon Trail in the analysis and selection of an appropriate
site for the Plant.
10. Assist Oregon Trail in the drafting of provisions regarding Lurgi PSI,
its licensors, and the EPC services for the Plant in connection with
the Oregon Trail private placement memorandum and prospectus.
11. Provide up to $4,000,000 of subordinated debt to assist Oregon Trail
in financing the Project upon terms mutually agreed upon by Lurgi PSI
and Oregon Trail in a definitive loan agreement. Such amount may be
provided by means of a deferral of a portion of the lump sum price.
It is intended that the EPC contract will include:
1. A limitation on liquidated damages for either schedule or performance.
2. A total cumulative limitation of liability of Lurgi PSI.
3. A mutual exclusion of consequential and similar damages.
4. Alternative dispute resolution procedures.
5. Assist Oregon Trail in developing an operation and maintenance plan,
which will include a periodic review of the plans, execution, and
notification to lender of discrepancies. Fees for the operation and
maintenance services are to be mutually negotiated under a separate
operation and maintenance contract.
6. Provide training on the operation and commissioning of the Plant.
C. Definitive Agreements to be Negotiated
1. The definitive EPC contract and the definitive loan agreement will be
negotiated by the parties consistent with the terms described above, and would
include other terms customarily included in similar agreements of those types.
2. Except for Sections D, E, F, and G, this MOU is not binding or legally
enforceable and imposes no obligations upon and grants no rights to Oregon Trail
or Lurgi PSI with respect to the matters covered in this letter, it being
intended that all such obligations and rights shall be contained in binding,
definitive agreements signed by the parties.
Memorandum Of Understanding
Dated: 02/04/02
Page 4 of 7
D. Reimbursement of Expenses
1. Should Oregon Trail choose to develop or pursue a relationship with a
company other than Lurgi PSI to provide the preliminary engineering or EPC
services for the Project or intentionally fail or refuse to perform its
commitments contained in this MOU prior to the expiration of the term of this
MOU, then Oregon Trail shall reimburse Lurgi PSI for all expenses Lurgi PSI has
incurred in connection with the Project based on Lurgi PSI's attached standard
rate schedule plus all third party costs incurred from the date of this MOU.
These expenses include but are not limited to labor rates and reimbursable
expenses such as legal charges for document review and preparation, travel
expenses, reproduction costs, long distance phone costs, and postage. In the
event Lurgi PSI's services are terminated by Oregon Trail title to the technical
data, which may include preliminary engineering drawings and layouts and
proprietary process related information prepared by Lurgi PSI shall remain with
Lurgi PSI; however, Oregon Trail shall have the right to use the above described
technical data, excluding the proprietary process related information for
construction, operation, repair and maintenance of the Project.
2. Should Lurgi PSI intentionally or negligently fail or refuse to comply
with its commitments contained in this MOU, Lurgi PSI shall absorb all of its
own expenses, and Oregon Trail shall have the right to terminate the MOU
immediately upon written notice to Lurgi PSI, and Oregon Trail shall be released
from its obligations contained in Sections A, C and D.
E. Governing Law, Dispute Resolution and Related Matters
1. In the event of a dispute arising out of or relating to this MOU or
the services to be rendered hereunder, Lurgi PSI and Oregon Trail agree to
attempt to resolve such disputes through direct negotiations. If such
negotiations are not successful, then the parties agree to attempt to resolve
any remaining dispute by formal, nonbinding mediation conducted in accordance
with rules and procedures to be agreed upon by the parties. If such dispute is
not resolved within 30 days by mediation, then the parties may submit the
dispute to binding arbitration to be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association.
2. This MOU is made under and shall be construed and enforced in
accordance with the laws of the State of Nebraska.
Memorandum Of Understanding
Dated: 02/04/02
Page 5 of 7
3. In no event shall either party be liable to the other for any form of
indirect, incidental, consequential or special damages under or relating to this
MOU or resulting from the services performed under this MOU, whether based on
contract, warranty, tort (including negligence of any nature), strict liability
or otherwise.
4. Nothing in this MOU shall restrict or prohibit either party from
seeking or obtaining injunctive relief in any court of competent jurisdiction
with respect to the confidentiality obligations set forth in Section G below.
F. Duration
1. This MOU will be in effect for a period of one (1) year after the date
hereof. Either Oregon Trail or Lurgi PSI may terminate this MOU upon 30 days'
written notice to the other at the end of such period; and if no such notice is
given, then this MOU shall continue in effect for successive periods of six
months until a 30 days' written notice of termination is given prior to the end
of any such six-month extended term. In addition, Oregon Trail shall have the
right to terminate this MOU as set forth in Section D.2 above.
G. Confidentiality
1. The Receiving Party (Oregon Trail or Lurgi PSI, as the case may be),
for itself and its employees and agents, agrees to hold in strict confidence and
not to disclose to any third party except as permitted under Section G-4 below,
and shall not use for any purpose other than in connection with the activities
described in Section A above, any confidential or proprietary information of the
Disclosing Party (Oregon Trail or Lurgi PSI, as the case may be) or its
affiliates ("Confidential Information") disclosed to or acquired by the
Receiving Party prior to and during the term of this MOU. Confidential
Information includes, but is not limited to, business information, information
concerning plant and equipment designs, flow sheets, drawings, processing
equipment and requirements, processing conditions, reactants, ingredients, raw
materials, material balances, intermediate and processed product or by-product
and other matters generally pertaining to the Disclosing Party's products,
processes and business activities. Confidential Information also includes
samples of materials that are, or relate to, such reactants, ingredients,
materials and intermediate and processed products or by-products, which may be
provided to the Receiving Party as well as any information generated by the
Disclosing Party using such samples. Confidential Information may be disclosed
orally or in writing or may be learned during visits to or work at the
Disclosing Party's facilities.
Memorandum Of Understanding
Dated: 02/04/02
Page 6 of 7
2. The Receiving Party's obligations of confidentiality and restricted
use shall not apply to information which: (a) is at the time of the disclosure
in the public domain or becomes part of the public domain by publication or
otherwise through no fault of the Receiving Party and its employees and agents;
(b) at the time of the disclosure was in the Receiving Party's possession as
shown by written records and was obtained from a source other than the
Disclosing Party on a non-confidential basis by a third party entitled to
disclose it, provided that the Receiving Party uses its best efforts to identify
Confidential Information that may be offered by such third party and inform the
Disclosing Party thereof; (c) is permitted by the Disclosing Party to be
disclosed or used by the Receiving Party provided such permission is first
obtained in writing from an officer of the Disclosing Party; or (d) is required
to be disclosed in connection with any governmental applications or filings, or
pursuant to a valid order of a court or other governmental body, or by law or
regulation, including, without limitation, state and federal securities laws and
regulations.
3. The Receiving Party shall not be relieved of its obligations of
confidentiality because Confidential Information is embraced by more general
information that falls within any one or more of the foregoing exclusions, nor
shall any combination of items of Confidential Information be deemed to be
within the exclusions merely because individual items of information are within
the exclusions.
4. The Receiving Party will limit access to Confidential Information to
those of the Receiving Party's employees, agents, representatives, consultants,
prospective investors and/or lenders for the Project, who need to have such
information for the purposes contemplated in this MOU. The Receiving Party will
inform such persons of the obligations of the Receiving Party hereunder and will
require such persons to assume obligations of confidence and restricted use
consistent with those set forth herein.
5. No license, express or implied, to use in any manner any Confidential
Information or any patents, processes or know-how of the Disclosing Party, is
granted by the Disclosing Party to the Receiving Party hereunder except as
expressly set forth herein.
6. Under no circumstances shall the Receiving Party use in any manner any
proprietary process related Confidential Information in the event an EPC
contract is not concluded as contemplated in this MOU.
Memorandum Of Understanding
Dated: 02/04/02
Page 7 of 7
If you are agreeable to proceeding on the foregoing basis, please confirm
your agreement by signing and returning to us the enclosed copy of this letter.
Very truly yours,
OREGON TRAIL ETHANOL
COALITION L.L.C.
By: /s/ Mark L. Jagels
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Title: Chairman
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Understood and Agreed To:
LURGI PSI, INC.
By: /s/ Mark Hamnett
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Title: VP Sales & Marketing
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Date: Feb 5, 2002
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