exv10w13



 







Exhibit 10.13




PROCESS GUARANTEE




          THIS AGREEMENT, effective as of the 1st day of May, 2006 by and between VOGELBUSCH U.S.A.,
INC., a corporation duly organized and existing under the laws of the State of Texas, with its
principal place of business at 10810 Old Katy Road, Suite 107; Houston, Texas 77043; United States
of America (hereinafter referred to as “LICENSOR”), and AGASSIZ ENERGY LLC., a corporation duly
organized and existing under the laws of the State of Minnesota, having its principal place of
business at 510 County Road 71 Valley Technology Park Crookston, MN 56716 (hereinafter referred to
as “LICENSEE”).




WITNESSETH




     WHEREAS, LICENSOR is duly authorized to act as commissioned agent for Vogelbusch GmbH., a
corporation duly organized under the laws of the Republic of Austria.



     WHEREAS, LICENSOR and LICENSEE entered into a License Agreement effective as of the 24th
day of April 2006, where LICENSOR has agreed to provide certain proprietary Know-How and Technical
Information and to perform certain work and services for LICENSEE in connection with a fuel alcohol
plant located in Erskine, Minnesota (hereinafter referred to as the “Plant”) for operation under
said License Agreement between the parties hereto; and,



     WHEREAS, LICENSEE desires that the Plant meet certain standards of performance, and LICENSOR is
willing, as hereinafter provided, to guarantee the standard of performance of the Plant;



     NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as
follows:



ARTICLE 1 Scope of Agreement




          This Agreement shall be considered part of the License Agreement and should there be a conflict
between the terms of this Agreement and the License Agreement, the terms of the License Agreement
shall prevail.




ARTICLE 2 Definitions




          (2.1) The defined terms in the License Agreement shall have the same meanings when used herein and
shall apply to this Agreement.




          (2.2) The terms defined in Schedule A annexed hereto shall, for all purposes of this Agreement,
have the meanings specified in said Schedule A.



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ARTICLE 3 Application of Guarantees




          (3.1) LICENSOR’S guarantees as herein made shall apply to the Plant, only when the Plant is
installed, erected, operated and maintained under the design conditions and in accordance with the
engineering design specifications and instructions furnished or approved by LICENSOR.




          (3.2) When LICENSOR’S guarantee shall have been met as herein provided, such guarantee shall no
longer apply to the Plant and LICENSOR’S obligations with respect thereto shall be deemed satisfied
and shall cease.




ARTICLE 4 Performance Guarantee




          LICENSOR guarantees that during a Performance Test conducted as herein provided, the Plant will
process the Fresh Substrate Charge and produce therefrom “anhydrous alcohol”, as set forth in
Schedule B annexed hereto.




ARTICLE 5 Start-Up Assistance




          (5.1) LICENSEE shall give at least thirty (30) days notice in writing to LICENSOR specifying the
estimated date of Mechanical Completion of construction of the Plant. LICENSOR’S Senior
Technologists shall be in attendance at the Plant site two (2) weeks prior to startup, as
necessary, to inspect the Plant to determine if the Plant is ready to operate and that the
conditions as set forth in Article 3.1 have been met, and will inform LICENSEE in writing of any
required modifications. After such modifications are complete, LICENSOR will advise LICENSEE that
the plant is ready to commence initial operations.




          (5.2) LICENSOR’S personnel as described in Schedule B of the License Agreement shall assist
LICENSEE in the start-up and initial operation of the Plant in order to establish operating
conditions, and to carry out the Performance Guarantee Tests of Article 6.




          (5.3) LICENSOR’S personnel shall also provide technical and operation training for technical
representatives of LICENSEE.




          (5.4) LICENSEE agrees that it shall pay LICENSOR for Engineering Services, as set forth in Schedule
C of the License Agreement until the completion of the initial 180 operating day of the Plant,
during which LICENSOR’S personnel are in attendance, or the first successful Performance Test,
whichever occurs earliest. Thereafter, all LICENSOR’S expenses up to the limit set out in Article
12 of the License Agreement shall be paid by LICENSOR if failure to meet the Process Guarantee is
solely due to LICENSOR’S design and services, as defined in Schedule B of License Agreement.





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ARTICLE 6 Performance Test




          (6.1) After the plant has been started up per Article 5.2 and has reached nameplate
capacity, but no longer than 90 (ninety) days from the date LICENSEE has completed the
required modifications per Article 5.1, LICENSOR shall notify LICENSEE that the Plant is ready for
the Performance Test.




          (6.2) LICENSEE shall then have the obligation of calling for the first Performance Test by setting
a date for same not less than fourteen (14) days nor more than thirty (30) days from the date of
the Notice from LICENSOR mentioned above. Delays caused by other portions of the plant outside the
“Battery Limits” of the Licensed Process shall not be deemed to constitute a material cause for a
delay of Performance Test, unless LICENSOR accepts such a delay.




          (6.3) The Performance Test shall be conducted by LICENSEE according to instructions by LICENSOR and
the guarantee made in Article 4 shall be deemed to have been met as soon as the Plant has satisfied
the requirements of the Performance Test.




          (6.4) LICENSOR shall have the right to conduct two (2) Performance Tests at LICENSEE’S expense.
Thereafter, LICENSOR shall have the right and LICENSEE shall permit LICENSOR to conduct as many
Performance Tests as LICENSOR deems necessary, at LICENSOR’S expense, provided LICENSEE shall not
be obligated to permit a Performance Test 180 days beyond the date of the first test; further
provided, however, that such time limit shall be exclusive of periods of delay caused by LICENSEE
or by matters beyond the control of either party.




          (6.5) Within a reasonable period of time after completion of each Performance Test, LICENSOR shall
submit to LICENSEE in writing the results thereof, and shall certify in writing whether the
guarantee relating to such Performance Test has been met. Such guarantee shall be deemed to have
been met if LICENSOR certified that the Performance Test was successful and if LICENSEE, within 30
(thirty) days after notification by LICENSOR of the results of such Performance Test, does not
respond in writing to LICENSOR in what respect, in LICENSEE’S opinion, such guarantee has not been
met.




          (6.6) LICENSEE shall furnish, at no cost to LICENSOR, Fresh Substrate Charge, yeast culture,
enzymes, chemicals, utilities, operating and maintenance personnel, maintenance materials and
necessary services, such as adequate laboratory inspection, operating supplies as are required for
the operation of the Plant in order to meet the guarantees as herein made. LICENSEE will be
responsible to process “fresh substrate charge” at a rate as required by LICENSOR during the
Performance Test, provided that such rate shall not exceed 115% of daily capacity, as specified in
Schedule B, Product Guarantee.



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          (6.7) Failure of LICENSEE to call for the Performance Test within a period of 3 (three) years after
the effective date of this Agreement or 6 (six) months after start of commercial operation,
whichever comes earlier, or to perform any of its other obligations under this Article 6 shall
constitute a waiver of the requirement of a Performance Test or LICENSEE may voluntarily waive the
requirement for such test, in which either event shall result in LICENSOR’S guarantees being deemed
met, as per Article 3.2 of this Agreement.




ARTICLE 7 Responsibility and Liability




          (7.1) Until such time that LICENSOR gives notice per Para. 6.1 of this Agreement that the Plant is
ready for the Performance Test, or until the obligations of LICENSOR and LICENSEE to conduct
Performance Tests under Article 6 hereof shall have ceased, whichever first occurs, LICENSOR, at
LICENSEE’S expense, shall render such design and engineering services in order to permit LICENSEE
to make such changes, modifications or additions to the Plant to conform to the engineering
specifications furnished by LICENSOR as contemplated under the License Agreement.




          (7.2) Prior to the last Performance Test permitted under Article 6.4 hereof, LICENSOR shall have
the right to request such reasonable changes to the design specifications as are required to meet
the guarantees specified in this Agreement. LICENSOR will furnish the necessary design engineering
documentation at no charge to LICENSEE. LICENSEE shall be required to implement such changes or
modifications at its expense up to a maximum limit of
[ * ] for each such change or [ * ] in
aggregate.




          (7.3) If the guarantee made in Article 4 hereof is not met at the conclusion of any Performance
Test prior to the last of the Tests permitted under Article 6.4 hereof, LICENSOR at its sole option
shall have the right to request such reasonable modifications to the “Process Design” as per
Schedule B, Para. 2 of the License Agreement as it deems necessary for the Plant to meet the
Performance Guarantee. LICENSEE shall promptly on request implement such modifications provided,
however, that LICENSOR shall pay to LICENSEE all costs in connection with design engineering,
equipment, parts, labor and other costs arising directly out of such modifications.




          In order to enable LICENSOR to determine, prior to making such changes, modifications or additions
to the Plant, the nature of the defects in the Plant, if any, LICENSEE shall, upon reasonable
notice and request by LICENSOR, operate the Licensed Process under safe operating conditions as may
be specified by LICENSOR from time to time during the Performance Test.




          Material failure on the part of LICENSEE to operate and maintain the Plant under safe operating
conditions as requested by LICENSOR shall constitute a waiver of the requirements for Performance
Tests and thereupon LICENSOR’S guarantee made in Article 4 hereof shall be deemed to have been met.




MAY 1,
2006




[ * ] Portions
omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.



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          (7.4) Should the Plant not meet the guarantee made in Article 4 hereof at the conclusion of the
last of the Performance Tests permitted under Article 6.4 hereof, due to fault of LICENSOR,
LICENSOR shall, within sixty (60) days after the submission by LICENSOR of the results of such
Performance Test as required under Article 6.5 hereof, pay to LICENSEE as liquidated damages, at
the office of LICENSEE designated on Page 1 of this Agreement, in lawful money of the United States
of America, a sum of money determined in accordance with the provisions of Schedule D annexed
hereto.




          (7.5) Except as may otherwise be provided herein and subject to Article 5.4, LICENSEE shall assume
all expenses of operation of the Plant, and shall have complete control of the Plant at all times.




          (7.6) LICENSEE shall indemnify and hold and save LICENSOR, its officers, directors and employees,
harmless from and against any and all actions or causes of action, claims, demands, liabilities,
loss damage or expense of any kind or nature whatsoever, including attorney’s fees, court costs and
costs of appeal, which arise out of or related to any activities supervised or directed by LICENSEE
under the terms and conditions of this Agreement, or any negligent act or omission of LICENSEE or
of any of its subcontractors or the employees of either, provided such actions, causes of action,
claims, demands, liabilities, loss or damage do not arise out of the fault, negligence, or strict
liability of LICENSOR.




          (7.7) LICENSOR shall indemnify and hold and save LICENSEE, its officers, directors and employees,
harmless from and against any and all actions or causes of action, claims, demands, liabilities,
loss damage or expense of any kind or nature whatsoever, including attorney’s fees, court costs and
costs of appeal, which arise out of or related to any activities supervised or directed by LICENSOR
under the terms and conditions of this Agreement, or any negligent act or omission of LICENSOR or
of any of its subcontractors or the employees of either, provided such actions, causes of action,
claims, demands, liabilities, loss or damage do not arise out of the fault, negligence, or strict
liability of LICENSEE.




          (7.8) LICENSEE expressly relieves LICENSOR, its officers, agents and employees and their
underwriters and insurers from any claims or responsibility arising out of injury to LICENSEE’S
personnel providing that such injury is not sustained due to willful act or gross negligence of
LICENSOR.




ARTICLE 8 Insurance




          (8.1) LICENSOR agrees to maintain in full force and effect during the entire time any work is
performed at the Plant by LICENSOR or by Vogelbusch GmbH. or the employees, agents or
subcontractors of either, a policy or policies of public liability and property damage insurance
under which LICENSOR and Vogelbusch GmbH. are




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named as
insureds. Each such policy shall be noncancellable without thirty (30) days written Notice
to all insureds. The minimum limits of coverage of such policies in the aggregate shall be Two
Million and no/100 Dollars ($2,000,000.00) for injury or death to any one person, and One Million
and no/100 Dollars ($1,000,000.00) with respect to damage to property.




ARTICLE 9 Attachments




          The following documents are incorporated herein by reference and made a part hereof:



Schedule A, Definitions

Schedule B, Product Guarantee

Schedule C, Specifications of Chemicals and Utilities

Schedule D, Liquidated Damages




          IN WITNESS WHEREOF, the parties have agreed to the foregoing on the 1st day of May 2006.




	 	 	 
	AGASSIZ ENERGY LLC

	 	VOGELBUSCH U.S.A., INC.
	 
	 	 
	/s/ Donald Sargeant

	 	/s/ G. B. Brodl
	 

	 	 
	By: 
	 	By: Gunter B. Brodl
	Title: Chief Manager

	 	Title: President






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PROCESS GUARANTEE

SCHEDULE A

DEFINITIONS



1. The term “Performance Test” as used herein shall mean a period of seven (7) consecutive
Operating Days of the Plant, scheduled for the purpose of comparing its performance with the
guarantees made as per the Process Guarantee Agreement to which this Schedule is attached.



2. The term “Operating Days” as used herein shall mean consecutive days of 24 hours per day
continuous operation during which the Plant is on stream.



3. The term “gallon” as used herein shall mean the U.S. gallon of 231.0 cubic inches each,
measured at 60 degrees Fahrenheit.



4. The term “anhydrous alcohol” as used herein shall mean alcohol recovered from fermented mash by
Distillation followed by Dehydration in a Molecular Sieve Dehydration System. “Anhydrous alcohol”
shall contain no more than 0.8% w/w water and not more than 1.5% v/v organic impurities other than
the chemical “ethyl alcohol.” “Anhydrous alcohol” shall conform to current ASTM specifications for
fuel alcohol with respect to acidity, color and non-volatile residue. For the purpose of all
calculations in the context of this agreement, one (1) gallon of anhydrous alcohol measured at 60°F
shall be deemed to be equivalent to 6.640 lbs.



5. The term “starch” as used herein shall mean soluble forms of carbohydrates suitable for further
processing to hexose monosaccharides by saccharification with commercial enzymes
(Amyloglucosidase). The concentration of starch shall be expressed in percent of weight (%w/w) and
shall be determined by analysis according to the attached sample preparation method and the
modified method of the American Association of Cereal Chemists attached hereto (Modified Method No.
AACC 76-11 of AACC Methods) or such other analytical method as may be approved by LICENSOR.



6. The term “fresh substrate charge” as used herein shall mean a cleaned grain (U.S. No.2 corn and
up to 20% U.S. No 2 hulless barley) which has undergone a milling process. Such milled grain shall
not contain more than 5% w/w of particles retained on a 16 mesh tyler screen and shall have no
particles retained on a 12 mesh tyler screen. The moisture content of fresh substrate charge shall
not exceed 16% w/w. The starch content (as described in Article 5) of fresh substrate charge shall
not be less than 67% w/w average on a dry basis.



7. The term “fermented mash” as used herein shall mean an alcohol containing mash derived by
cooking, enzymatic conversion and saccharification and fermentation of fresh substrate charge.
“Fermented mash” shall contain alcohol at a concentration of not less than 9.0% w/w.




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8. The term “Battery Limits” as used herein shall mean the extent and limits of the process for
which Vogelbusch U.S.A., Inc. assumes design liability. Those Battery Limits are described in
Schedule B of the License Agreement.



9. The term “safe operating condition” as used herein shall mean adherence to OSHA, State and
local codes and regulations and to sound engineering practice.




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PROCESS GUARANTEE

SCHEDULE B




PRODUCT GUARANTEE



The following Product Guarantees are subject to the conditions as specified in Schedule C.



Fresh Substrate Charge and Products



Not more
than [ * ] pounds of starch content in fresh substrate charge average, per pound anhydrous
alcohol produced.



Daily Capacity



Not less
than an average of [ * ] pounds ([ * ] gallons at 60°F) of anhydrous alcohol per day
on the basis of an average of seven consecutive days of Process Guarantee Test Run.



Energy Consumption



For LICENSOR’S process areas 1300, 1400, 1500, 1550 and
1900: Not more than [ * ] lbs. of steam per
pound of anhydrous alcohol produced. (Steam shall be saturated and at a pressure of not less than
[ * ] psig at the battery limits.)



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[ * ] Portions
omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.



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PROCESS GUARANTEE

SCHEDULE C




SPECIFICATIONS OF AUXILIARIES, CHEMICAL AND UTILITIES

AS PRE-CONDITION FOR PERFORMANCE TEST




1. Auxiliaries and Chemicals




     Auxiliaries, Enzymes and chemicals necessary for acceptable performance shall be provided by
LICENSEE in quality and quantity as specified by LICENSOR. Substandard performances due to
unavailability of auxiliaries, enzymes or chemicals in sufficient quantity or quality are not
within the responsibility of LICENSOR.



2. Utilities




     LICENSEE will be required to supply to the Licensed Process all utilities in quantity and quality
as specified by LICENSOR according to the design information, as per Schedule B of License
Agreement. Production stoppages or substandard performances due to unavailability of utilities in
sufficient quantity or quality are not within the responsibility of LICENSOR.



3. Suitability of Machinery and Apparatus




     To reach the guaranteed values of the Performance Test, it is necessary that the machines,
apparatus and equipment utilized in the Licensed Process are capable of operating at their design
capacities and nominal values as specified by LICENSOR. Production stoppages and substandard
performances due to defects in materials, workmanship and installation of machines, apparatus and
equipment or delays due to lack of spare units are not within the responsibility of LICENSOR.



4. Qualification of Operation Personnel




     LICENSEE’S personnel to be used for the operation, maintenance and supervision of the portion of
the Plant covered by the Licensed Process shall be pre-trained by LICENSOR and shall, in LICENSOR’S
reasonable opinion, be capable of operating said Plant according to LICENSOR’S instructions.
Production stoppages and substandard capacities of the Plant due to failure of personnel to follow
LICENSOR’S recommendations during the Performance Test period are not within the responsibility of
the LICENSOR.



5. Stoppages or substandard performance due to no fault of LICENSOR



Any such delays, production stoppages or substandard performances due to no fault and not within
the responsibility of LICENSOR during the conduct of the Performance Test shall terminate the Test,
and the Test shall not be counted as a Performance Test, as per Article 6.4 of the Process
Guarantee Agreement. The procedure for the conduct of a Performance Test, as described in Article 6
of the Process Guarantee Agreement, shall then be repeated. Any time limits imposed on LICENSOR
shall be extended by the time lost due to such events.



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6. Measurement of Quantities and Production Analysis for the Performance Test Run




     Tolerances in flow measuring devices and standard values of deviation in laboratory sample analysis
can result in an average measured tolerance of approximately 1%, which are to be applied to the
guaranteed values as stated in Schedule B of the Process Guarantee Agreement. Therefore, deviation
up to 1% in guaranteed values shall not be applied for liquidated damages claims against the
Process Guarantee Agreement. Claim for liquidated damages (according to Schedule D) shall only be
allowed if the deviation in guaranteed quantity exceeds this 1% tolerance.



7. Suitability of Materials of Construction




     LICENSOR will recommend in its specifications materials of construction based on its experience and
data. Because of the known corrosive nature of components and products in the process, such
recommendations have to be based on economic considerations. LICENSOR shall therefore accept no
liability for defects caused by corrosion to stainless steel except for equipment specified by
LICENSOR which fails beyond repair due to the improper specification of material when such failure
occurs within two (2) years from the date the equipment was first operational.



     LICENSOR shall not be liable for any defects caused by corrosion to carbon steel equipment.



8.
Quality of Process water supply.




     All process water which is added directly to the process shall be of drinking water
quality and shall be substantially free of microorganism. Process water shall comply
with specification as defined in section 1.6.3 of Schedule B of the License Agreement




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PROCESS GUARANTEE

SCHEDULE D




LIQUIDATED DAMAGES




     In the event that LICENSOR’S obligations under Article 4 and 6 of the Process Guarantee
shall not have been met, then in such event, for each pound of
Alcohol product less than [ * ] percent
of daily capacity guaranteed in Schedule B hereof, averaged over the seven consecutive day period
of the final Performance Test permitted under Article 6 hereof,
LICENSOR shall pay the sum of $[ * ]
dollars for each such pound less than [ * ] percent of guaranteed daily capacity. Under no
circumstances shall the amount guaranteed under this Schedule D be interpreted as more than average
daily capacity over the seven day period of the final Performance Test production of “anhydrous
alcohol” product, equivalent to [ * ] pounds, during the final Performance Test.


For purposes of computing liquidated damages for guaranteed values as set forth in Schedule B,
other than capacity, the following method shall be used:



For all values specified as “not less than” and “not more than,” the difference of actual values to
guaranteed value expressed in percent to two decimal fractions of the guaranteed value (for
example, a 5% differential shall yield a multiplier of 5) shall be
multiplied by [ * ] to
determine the dollar amount eligible for damages herein.



THE TOTAL LIABILITY OF LICENSOR UNDER THIS SCHEDULE D SHALL NOT EXCEED THE LIMITS OF LIABILITY
OF LICENSOR AS SPECIFIED IN ARTICLE 12 OF THE LICENSE AGREEMENT.





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2006




[ * ] Portions
omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.



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