**Exhibit 10.4**

 

**DEVELOPMENT AGREEMENTFORUNITED WISCONSIN GRAIN PRODUCERS, LLCETHANOL PLANT**

 

**AGREEMENT** made andentered into this 7th day of June, 2004, by and between the Town of Randolph, abody politic (hereinafter referred to as “Town”) and United Wisconsin GrainProducers, LLC, a Wisconsin limited liability company (hereinafter referred toas “UWGP”),

 

**WITNESSETH:**

 

**WHEREAS,** UWGP isintending to construct and operate a dry mill, fuel grade ethanol plant andproduction facility (“Plant”) on land located within the Town of Randolph,Columbia County, Wisconsin; and

 

**WHEREAS,** inconjunction with the construction of the infrastructure to serve the Plant, theTown has applied for and received approval for certain grants or other economicassistance including a Community Development Block Grant, Public Facilities forEconomic Development, from the Wisconsin Department of Commerce (“DOC”),(“Block Grant”) and a Transportation Facilities Economic Assistance andDevelopment Grant from the Wisconsin Department of Transportation (“TEAGrant”); and

 

**WHEREAS,** the Blockand/or TEA Grants require that a Development Agreement be entered into betweenthe Town and UWGP containing certain provisions; and

 

**WHEREAS,** theutilization of the grant funds and ongoing monitoring of the grant requirementswill require the Town to incur certain costs and expenses; and

 

**WHEREAS,** asinducement to have the Town apply for, receive, and administer the grant funds,UWGP has agreed to reimburse the Town for all of its direct and indirect costsrelated to the grants and to be responsible for all of the construction andother work and costs to be performed in connection therewith;

 

**NOW, THEREFORE**, forgood and valuable consideration, the receipt and sufficiency of which is herebyacknowledged, the Town and UWGP agree as follows:

 

1.                                       Subjectto the conditions set forth in this paragraph 1, the Town shall enter into acontract with the DOC for a $271,000.00 Block Grant, which funds, whenreceived, shall be used to provide infrastructure improvements to Plantincluding, but not limited to, an interior asphalt roadway, approximately 1,750feet long and approximately 30 feet wide originating from County Highway EF tothe Plant, an asphalt turn lane approximately 600 feet long by approximately 15wide to be constructed on County Highway EF, and a 250,000 gallon water towertank to be located on the north side of the Plant and a fire hydrant to beconstructed off the southwest portion of the

 

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plant.  The Town shall only berequired to enter into the contract provided the form of the contract meetswith the approval of the Town Attorney.

 

2.                                       Asa condition of the receipt of the Block Grant, UWGP agrees as follows:

 

A.                                   UWGP shall createand fill at least 32 full-time positions at the Plant no later than December 31,2006, and shall, thereafter, maintain each of those full-time positions untilDecember 31, 2008.  Of the 32full-time positions created, at least 51% shall be made available to low tomoderate income (“LMI”) persons as defined using the most recent income figurespublished by the US Department of Housing and Urban Development for theCommunity Development Block Grant program. UWGP acknowledges and agrees that the creation and continuation of thisemployment constitutes the major inducement for the DOC granting funds to theTown.  UWGP acknowledges and understandsthat if the DOC, in its reasonable discretion, determines that UWGP has failedto comply with these employment obligations, then for each full-time positionthat UWGP fails to create, UWGP shall pay to the Town the following:

 

(i)                                     $500.00 for eachnew full-time position created less than 32, plus

 

(ii)                                  $1,000.00 for eachfull-time position not made available to LMI persons.

 

For purposes of this Agreement, the term“full-time position” means a regular full-time position where the employee isrequired, as a condition of employment, to work at least 40 hours per week and2,080 per year, including holidays and paid vacations.

 

B.                                     All of the BlockGrant shall only be used by the Town and UWGP for the road and waterinfrastructure set forth above.

 

C.                                     UWGP warrants andrepresents that in connection with the construction of the Plant in the Town,including all start-up costs and initial grain acquisition, it shall invest andspend a minimum of $40,000,000.00 for all of the required improvements and,further, agrees that in connection with such investment, it will expendsufficient match amounts to support the receipt of the entire Block Grantapplied for and received by the Town.

 

D.                                    UWGP shall, pursuantto §106.16, Wis. Stats., notify the Department of Work Force Development, thelocal job service office, and the area Private Industry Council of any vacantfull-time positions at the Plant.  UWGPagrees that it shall at all times provide at least two weeks advance notice tothe above agencies prior to advertising for such full-time positions.

 

E.                                      UWGP shall, asrequired by DOC, provide the payroll records for all employees at the Plant tothe Town necessary to establish the base level of

 

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employment.  Thereafter, UWGPshall periodically provide to the Town, as from time to time requested andrequired, a record of the full-time positions that are created and maintainedat the Plant up to and through December 31, 2008, to determine the numberof new full-time positions.  UWGP shallbe required to prepare, for the Town’s review and execution, each and everydocument and other report required to be submitted to DOC in connection withthe receipt and subsequent monitoring of compliance in connection with theBlock Grant Contract between DOC and Town.

 

3.                                       UWGPshall, at its sole cost, post a notice at a location to be determined by theTown, stating that a portion of the Plant was funded through a grant from theWisconsin Department of Commerce using a DOC Block Grant.

 

4.                                       Subjectto the conditions set forth in this paragraph 4, the Town shall enter into aTransportation Economic Assistance Agreement with the Wisconsin Department ofTransportation (“DOT”) for the $160,000.00 TEA Grant, which funds, when received,shall be used to provide infrastructure improvements to the Plant consisting ofa multiple track, mini-rail yard railroad spur approximately 10,421 feet fromthe point of the switch on the Union Pacific track to the end of the track atthe Plant (“Project”).  The conditionsthat must be met before the Town shall be required to enter into the Agreementinclude, among others, the following:

 

A.                                   UWGP executing aFacility Use Agreement with the Town in a form satisfactory to the Town and theTown’s attorney for the construction and use of the Project.

 

B.                                     UWGP executing aTrack Easement for the Project with the Town in a form satisfactory to the Townand Town’s attorney granting easement rights on, over, and across the realestate upon which the Project will be located.

 

C.                                     UWGP providing andexecuting an Industry Track Agreement in a form acceptable to the Town andTown’s attorney between the Town, UWGP, and Union Pacific providing for serviceand maintenance of the Project.

 

D.                                    UWGP executing anyand all documents required by the Town or DOT in a form satisfactory to theTown and Town’s attorney granting a first priority lien position in favor ofDOT for all of the Project construction material purchased in whole or in partwith the TEA Grant for the Project to be maintained for the duration of theplacement of the Project materials within the easement.  The first lien will be perfected by arecording with the office of the Columbia County Register of Deeds and filingwith the Wisconsin Department of Financial Institutions.

 

E.                                      UWGP preparingfor and on behalf of the Town any and all necessary environmental reports orobtain any and all necessary approval letters from the Wisconsin Department ofNatural Resources, Wisconsin State Historical

 

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Society, or other state or federal agencies which are required toreview the Project all at no cost to the Town.

 

F.                                      The Town Attorneyapproving the form of the TEA Agreement between the Town and DOT.

 

5.                                       UWGPacknowledges that as a condition of the receipt of the TEA Grant, the Town isrequired to sign a job guarantee in favor of DOT.  UWGP acknowledges that in the event that it does not expandemployment by 32 jobs as contemplated and required by the TEA Agreement by theTown for mini-rail yard construction and retain the 32 jobs for another four(4) years, the Town may be required to reimburse DOT up to the full TEA Grantamount.  In the event that the Town isever required to reimburse DOT as a consequence of UWGP’s failure to expand andmaintain the 32 jobs for a total of seven (7) years from the date the TEAAgreement is executed, UWGP shall promptly reimburse the Town for any and allsums repaid by the Town to DOT.  Forpurposes of this paragraph, a job is defined to be consistent with Trans. 510of the Wisconsin Administrative Code and shall include all non-retail jobs andexclude jobs obtained through geographical job transfers within Wisconsinexcept those that would be lost to the state. Eligible jobs may include full time equivalents.

 

6.                                       UWGPagrees that it shall be solely responsible to provide all of the constructionand funds to support the 50% matching funds required as a condition of the TEAGrant.  The Town shall not be requiredat any time to expend Town funds in connection with the Project and UWGP shallindemnify and hold Town harmless in connection therewith.

 

7.                                       Atall times from and after the date of this Agreement, UWGP shall be solelyresponsible for all costs of construction, maintenance, repair, orreconstruction of the infrastructure improvements contemplated by the BlockGrant (except the turn lane within the road right-of-way) and TEA Grant.  The Town shall have no responsibility at anytime with respect to any improvements of any kind constructed in connectionwith the Plant.

 

8.                                       UWGPagrees that all work utilizing the Block Grant and, as set forth below, the TEAGrant funds undertaken by UWGP and its contractors shall be completed inaccordance with all applicable federal, state, and local laws.  UWGP acknowledges and agrees that the Townshall draw and disburse funds only after receipt of contractors’ bills andverification by the supervising engineer that all work contemplated by theBlock Grant and TEA Grant has been properly performed and that sufficient andsuitable matching funds have been paid by UWGP to support the Block Grant.

 

9.                                       UWGPacknowledges and agrees that in the event the cost of the infrastructureimprovements contemplated to be made by the Block or TEA Grants exceeds theamount budgeted, all of the excess costs shall be the sole and exclusiveresponsibility of UWGP.

 

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10.                                 Inthe event that DOC or DOT ever determines that the Town has not satisfied thematch funds requirement contained in the Block or TEA Grants and requires theTown to refund all or a part of the Block or TEA Grants, UWGP shall be requiredto immediately reimburse and compensate the Town for any and all of thematching funds required to be repaid. In addition, to the extent that the Town is required to pay attorneyfees or other costs incurred to recover the amount to be repaid, UWGP shallpromptly reimburse the Town said amount. If any amounts owed by the Town are not reimbursed by UMGP within thirty(30) days of the date of written demand, all such sums shall accrue interest atthe rate of prime plus five (5) percent.

 

11.                                 UWGPshall always maintain sufficient staff to ensure the proper administration ofthe construction of the infrastructure contemplated by the Block and TEAGrants.  In addition, UWGP shallmaintain all files and records, including all contracts relating to theconstruction and implementation of the infrastructure contemplated by the Blockand TEA Grants for at least four (4) years or longer as required by theContract between the Town and DOC and/or DOT and prepare and file all necessaryreports with the DOC or DOT.

 

12.                                 UWGPshall at all times be required to maintain adequate comprehensive liabilityinsurance on the real estate upon which the Track Easement is located in theminimum amount of $2,000,000.00.  TheTown shall be listed as an additional insured on said liability policy so longas the Track Easement remains in place. UWGP shall provide the Town, upon request from time to time, proof ofthe existence of the liability insurance and that the Town is listed as anadditional insured.  UMGP shall, at alltimes, hold harmless and indemnify the Town from any and all liability ordamages for injuries of any kind or nature arising out of the rail operationson or in the vicinity of the Track Easement. The hold harmless and indemnification shall encompass any and all costsincurred by the Town in defending against any claims, including all reasonableattorney fees.

 

13.                                 Attachedhereto and incorporated herein as Exhibit A are certain requirements imposedupon the Town (referenced as “Grantee” in Exhibit A) in connection with thereceipt and administration of the Block Grant funds.  UWGP acknowledges and agrees that in connection with theconstruction of all of the infrastructure contemplated by the Block and TEAGrants, to the extent applicable, it shall comply with each and everyrequirement imposed upon the Town set forth in Exhibit A and shall indemnifyand hold the Town harmless in connection with any and all violations of saidrequirements in connection with the construction of the infrastructure.

 

14.                                 Tothe extent that the Town is required to conduct audits in connection with theBlock and TEA Grants, any and all costs of the audit shall be promptlyreimbursed to the Town by UWGP within thirty (30) days of billing.

 

15.                                 UWGPshall prepare, keep, and maintain records allowing Town to determine whether itis complying with the terms of this Agreement. Such records shall include, at a minimum, bills, invoices, and otherdocuments sufficient to evidence and

 

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support the investment of $40,000,000.00 in infrastructure and otherimprovement or acquisition costs for the Plant and payroll records for eachfull-time employee employed. Town shall have reasonable access to all of therecords relating to this Agreement as from time to time requested.  UWGP shall prepare, at its sole cost, allreports that must from time to time be filed by the Town with DOT or DOC.

 

16.                                 UWGPagrees to be responsible for and reimburse the Town for its reasonable fees andcosts incurred for any consulting, legal, or other services required to beincurred by the Town in connection with the construction of the Plant includingall services incurred in connection with the review, negotiation,implementation, ongoing administration, and closeout of the Block and TEAGrants.  The Town shall periodicallybill UWGP for such expenses and payment shall be made by UWGP within thirty(30) days of billing.  Any amountsremaining unpaid beyond 30 days shall bear interest at the rate of twelve (12)percent per annum.

 

17.                                 Inthe event that UWGP defaults on any of its obligations under this Agreementafter its execution, UWGP shall be liable to the Town for all of its costs andexpenses, including all reasonable attorney fees, incurred by the Town as adirect result of such breach, whether incurred prior to or after thecommencement of any lawsuit of enforce this Agreement.

 

18.                                 ThisAgreement shall be construed according to the laws of the State of Wisconsin.

 

19.                                 Eachof the signators to this Agreement warrants and represents that they are dulyauthorized this Agreement for and on behalf of the Town or UWGP, respectively.

 

20.                                 ThisAgreement contains the entire agreement of the parties and supersedes any andall prior agreements or oral understandings between same.

 

21.                                 ThisAgreement shall be binding between the parties hereto together with theirrespective successors and assigns.

 

**IN WITNESS WHEREOF,**the parties have set their hands and seals on the date and year first writtenabove.

 
|   |    | TOWN OF RANDOLPH                |
|--------|---------|---------------------------------|
|   |    |                            |
|   |    |                            |
|   | By:     |   /s/ David J. Hughes |   |
|   |    | David J. Hughes, Chair          |
|   |    |                            |
|   |    |                            |
|   | Attest: |   /s/ Rodney Kok      |   |
|   |    | Rodney Kok, Clerk               |
|        |         |                                 |  |  |

 

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|   |    | UNITED WISCONSIN GRAIN  PRODUCERS, LLC |
|--------|---------|----------------------------------------|
|   |    |                                   |
|   |    |                                   |
|   | By:     | /s/ Kevin Roche                        |   |
|   |    | Kevin Roche, its                       | President |   |
|   |    |                                   |
|   |    |                                   |
|   | Attest: | /s/ William Herrmann                   |   |
|   |    | William Herrmann, its                  | VICE PRESIDENT |   |
|        |         |                                        |  |  |  |  |  |

 

Contents: Exhibit A—Requirements of Town

 

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LABOR STANDARDS

 

The Grantee shall comply with and assure compliance of all Projectcontractors and subcontractors with the Davis-Bacon Act, as amended 40 U.S.C.276a-276a-5, the Contract Work Hours and Safety Standards Act, 40 U.S.C.327-333, other applicable Federal laws and regulations pertaining to laborstandards, and the Labor Standards section of the Implementation Handbook.

 

ACQUISITION/RELOCATION

 

The Grantee shall:

 

•                                          Complywith ch. 32, Stats., and related administrative rules issued by the Departmentof Workforce Development.

 

•                                          Complywith the Uniform Relocation Assistance and Real Property Acquisition PoliciesAct of 1970, as amended, and Department of Transportation ImplementingInstructions in 49 CFR Part 24.

 

•                                          Referto the Acquisition/Relocation section of the Implementation Handbook forfurther requirements.

 

BIDDING

 

In advertising for and letting bids, the Grantee shall comply with sec.66.29, Stats., and, if a county, sec. 59.52 (29), Stats.; if a town, sec. 60.47(1m), Stats.; if a village, sec. 61.54 through 61.56, Stats.; and, if a city,sec. 62.15, Stats.

 

ACQUISITION AND DISPOSITION OF PROPERTY AND EQUIPMENT

 

The Grantee shall comply with the Procurement Policy section ofthe Implementation Handbook and account for any tangible personal propertyacquired with CDBG funds.  All proceedsderived from the disposition of real property acquired with CDBG funds shall betreated as program income under paragraph 5 of this Agreement.

 

LOBBYING

 

The Grantee shall comply with Section 319 of Public Law 101-102,and 24 CFR 87.  The Grantee shallmaintain a file containing signed copies of 24 CFR 87 Appendix A,“Certification Regarding Lobbying,” and 24 CFR 87 Appendix B, “Disclosure ofLobbying Activities”.

 

REPORTING

 

The Grantee shall prepare semiannual narrative reports as required bythe Implementation Handbook, together with a detailed narrative and financialreport within 30 days after the end of this Agreement.  Financial Reports shall be submitted witheach request for funds.  Copies of suchreports shall be maintained in the Grantee’s file.  The Department reserves the right to withhold CDBG funds if suchreports are not submitted on time or if they do not demonstrate adequateprogress on the Project.

 

FINANCIAL MANAGEMENT

 

The Grantee shall maintain a financial management system that complieswith the provisions of the Implementation Handbook.

 

**EXHIBIT**A

 

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ENVIRONMENTAL PROTECTION

 

The Grantee’s chief executive officer shall assume the status of aresponsible Federal official under the National Environmental Policy Act of1969 (NEPA) and other provisions of Federal law, as specified in 24 CFR 58. TheGrantee and its chief executive officer hereby consent to the jurisdiction ofthe federal courts for the purpose of enforcement of theirresponsibilities.  The Grantee shallcomply with the terms in the Environmental Review section of theimplementation Handbook.

 

EQUAL OPPORTUNITY/AFFIRMATIVE ACTION

 

The Grantee shall comply with:

 

A.                                   Title VI of theCivil Rights Act of 1964 (P.L. 88-352) and 24 CFR 1.

 

B.                                     Title VIII of theCivil Rights Act of 1968 (P.L. 90-284), as amended.

 

C.                                     Section 109of the Housing and Community Development Act of 1974, 24 CFR 570.601, the AgeDiscrimination Act of 1975, Section 504 of the Vocational RehabilitationAct of 1973, and the Americans with Disabilities Act of 1991.

 

D.                                    Executive Order11246, 24 CFR 130, and 41 CFR Chapter 60.

 

E.                                      Section 3of the Housing and Urban Development Act of 1968, as amended.

 

F.                                      The Equalopportunity Section of the Implementation Handbook.

 

NONDISCRIMINATION IN EMPLOYMENT

 

In connection with the Project, the Grantee agrees not to discriminateagainst any employee or applicant for employment because of age, race,religion, color, handicap, sex, physical condition, developmental disabilitiesas defined in sec. 51.01(5), Stats., sexual orientation or nationalorigin.  This provision shall include,but not be limited to, the following: employment, upgrading, demotion ortransfer, recruitment or recruitment advertising, layoff or termination, ratesof pay or other forms of compensation, and selection for training, includingapprenticeship.  Except with respect tosexual orientation, the Grantee further agrees to take affirmative action toensure equal employment opportunities. The Grantee agrees to post in conspicuous places available for employeesand applicants for employment, notices to be provided by the contracting officersetting forth the provision of the nondiscrimination clause.

 

PUBLICITY

 

Any publications, news releases, public notices, placards or signsrelating to the Project shall state that it is supported and financed by theWisconsin Department of Commerce with federal Community Development Block Grantfunds.  During the term of thisagreement, the Grantee shall post a notice in a conspicuous location in thecity or village hall and, upon the Department’s request, in the vicinity of theproject, stating that the Project was funded in part through a grant from theWisconsin Department of Commerce using federal Community Development BlockGrant funds.

 

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AUDIT

 

The Grantee shall conduct an annual, single, or program-specific auditin accordance with Office of Management and Budget (OMB) Circular A-133,“Audits of States, Local Governments and Non-Profit Organizations,” and the *State**SingleAudit Guidelines* issued by the Department of Administration, ifrequired to do so under the Single Audit Act (31 U.S.C §§7501-7507), as amendedby the Single Audit Act Amendments of 1996 (P.L. 104-156).  The audit shall be performed by anindependent auditor in accordance with generally accepted government auditingstandards.  The audit shall includefunds passed-through the Department and expended by the Grantee under theCommunity Development Block Grant - State’s Program (Catalog of FederalDomestic Assistance number 14.228), as well as funds expended under selectedstate financial assistance programs.

 

Records of the Grantee, subgrantees, if any, and contractors relatingto this Agreement shall be available for review or audit upon request by theDepartment, the U.S. Department of Housing and Urban Development, the GeneralAccounting Office, and made their duly authorized representative.  (See the “Audit Requirements” chapter of theHandbook for additional discussion of single or program-specific audits.)

 

CLOSEOUT

 

The Grantee shall closeout this Agreement in accordance with theProgram Closeout section of the implementation Handbook.

 

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