Document:

exv10w3

 

Exhibit 10.3

Letter of Intent

between

Bratney Companies

3400 109th Street

Des Moines, IA 50322

Hereinafter referred to as “Contractor/Engineer”

and

Northwest Iowa Renewable Energy LLC

of

Akron, IA

Hereinafter referred to as “Owner”

 

 

Letter of Intent Agreement

This letter of Intent Agreement confirms Owner’s intention to enter into a contract agreement
with Contractor/Engineer for Contractor/Engineer to provide “Connemann Diesel” process technology,
engineering, design, procurement, and construction services necessary to build and commission a 60
million gallon per year Biodiesel production facility with associated glycerine recovery in Akron,
IA.

This Agreement authorizes Contractor/Engineer to begin preliminary engineering and design work to
that end as defined in a Phase 1 Engineering Services Contract. The scope of work in Phase 1
Engineering is aimed at defining sufficient project detail and scope and associated costs to reach
a firm price and develop a construction contract with the Owner.

With this signed Letter of Intent and the associated Phase 1 Engineering Services Agreement, and
payment by the Owner, the Contractor/Engineer will develop process flow sheets, flow diagrams, mass
and energy balance calculations, utility requirements and consumptions, develop a plant lay-out,
define a detailed project scope definition, generate an equipment list, and a project schedule.
All needed equipment will be appraised for procurement lead-time requirements. In addition, the
Contractor/Engineer will assist the Owner’s Environmental Engineer by providing information needed
to permit the facility’s construction and operation by state agencies. The internal layout of the
equipment in an enclosed process building will be defined.

The target completion date for this Phase 1 Engineering is 3-5 months from the date of this signed
agreement.

Owner agrees to compensate Contractor/Engineer in the sum of $400,000 for the above services. This
amount will be fully credited to the “turn-key” contract price for the facility.

Should the Owner elect to not move forward with Contractor/Engineer beyond the Phase 1 work list or
to cancel work prior to completion of Phase 1 activities, Contractor/Engineer will retain ownership
of all technology specific information (process equipment and chemistry specific information such
as mass and energy balances, metallurgy, process conditions and layout of process equipment)
generated to that date of cancellation of work. Non-technology specific information (site lay-out,
logistics information, rail design, office layout and environmental information already provided)
developed will be given to the Owner. Unused portions of the initial payment will be refunded to
the Owner as well.

 

 

IN WITNESS THEREOF the parties have caused this letter of Intent to be executed by their
respective authorized representatives.

	 	 	 	 	 	 	 
	7-12-06
	 	9/7/06

	 

	 	 	 	 	 	 
	Date	 	Date
	 
	 	 	 	 	 	 
	/s/ John E. Lucken

	 	 	 	/s/ Dwain A. Dodson	 	 
	 

	 	 	 	 	 	 
	For and in behalf of Owner	 	For and in behalf of Engineerexv10w4

 

Exhibit 10.4

 

PHASE I DESIGN SERVICES AGREEMENT

BETWEEN OWNER AND CONTRACTOR/ENGINEER

 

This Agreement is made this 17th day of July, in the year
2006, by and between Northwest Iowa Renewable Energy LLC, OWNER and the CONTRACTOR
BRATNEY COMPANIES, 3400 109TH Street, Des Moines, IA 50322 for Phase I Design
Services in connection with the following project:

60 MM Gallon Per Year Biodiesel Plant

Previous Agreement

As of May 22, 2006, the Contractor and the Owner discussed that the project cost would be $46.6 MM
(+10%/-10%) to the best of our knowledge prior to developing this Phase I Design Services
Agreement.

Project Scope

The Contractor and the Owner enter into this Agreement to do Phase 1 Design Services for a
Biodiesel facility with the following attributes:

	 	§	 	60 MM GPY capacity guaranteed based on 330 operating days/year.
	 
	 	§	 	The facility will be capable of processing feeds of soybean oil, animal fat
and corn oil. This facility will be equipped with units for feedstock
blending, oil degumming, oil deacidification, esterification,
transesterification, methanol recovery, glycerine concentration to 85%. The
process target for the quality of the input oil into transesterification will
be:

	 	-	 	Target of 0.1 to 0.15% FFA
	 
	 	-	 	Target of 10-15 phosphorous content
	 
	 	-	 	Target of 500-1000 ppm moisture

	 	§	 	Enclosed process area building
	 
	 	§	 	Utilities (steam, compressed air, treated water, cooling water, nitrogen,
and electricity)
	 
	 	§	 	Tank farm for raw materials, intermediate products, and final product storage
	 
	 	§	 	Truck load/unloading racks
	 
	 	§	 	Railcar load/unloading racks
	 
	 	§	 	Control room, lab, and office areas
	 
	 	§	 	Site paving

			
	 	 	 
	Phase I Design Services Agreement
	 	Page 1 of 7
	Revised 2/7/05	 	 

 

	 	§	 	Site fencing
	 
	 	§	 	Site weigh scale
	 
	 	§	 	Site rail siding

The Owner is providing a site location to build the facility on. The Contractor is under the
understanding the site has no inherent attributes that would impede the financial success or
scheduled delivery of the facility. Any changes to this scope should be communicated to both
parties and discussed immediately upon recognition.

ARTICLE 1

Contractor’s Responsibilities

The person or entity providing design services shall be referred to as the Contractor/Engineer. The
Contractor/Engineer shall exercise reasonable skill and judgment in the performance of its
services. Design services shall be performed under the direct supervision of design professionals
retained by the Contractor/Engineer and/or furnished by the Contractor.

The Contractor/Engineer is responsible for the following Phase I Design Services:

	 	 	 	 	 	 	 	 	 
	 	 	YES	 	NO
	Project Cash Flow Projection for the project (with definition of payment terms)
	 	 	X	 	 	 	 	 
	Utility Equipment Details (sufficient to place equipment orders)
	 	 	X	 	 	 	 	 
	Site Lay-out Plan (with utilities, rail, road, building orientations)
	 	 	X	 	 	 	 	 
	Process Area Lay-out (equipment orientation by level in the structure)
	 	 	X	 	 	 	 	 
	Process Engineering Package (Material and Energy Balance)(utility consumption rates)
	 	 	X	 	 	 	 	 
	Process Information transfer to Owner’s Environmental Engineer
	 	 	X	 	 	 	 	 
	Design development of Process Building necessary for construction permits and construction bidding
	 	 	X	 	 	 	 	 
	Project Milestone Schedule and full project Scope defination
	 	 	X	 	 	 	 	 
	Determine Project Max Price
	 	 	X	 	 	 	 	 
	Design/Build Construction Contract Developed
	 	 	X	 	 	 	 	 
	Identifying Long Lead Time Equipment and Procurement Plan to procure equipment
	 	 	X	 	 	 	 	 

Note: Phase 1 Design Services included in this scope of work may be classified as
“preliminary” engineering in nature are a sub-set of all of the initial and detailed engineering
that will be done during the course of completing the total Biodiesel plant. Later engineering
work will complete all remaining Phase 1 (process engineering) and Phase 2 (detailed engineering)
items (defined in later construction contract). These Phase 1 Design Services items above are
aimed at initiating the project work and providing the owner with all information need to fully
understand and permit the facility with state agencies.

Project Schedule. The schedule shall show the activities of the Owner and the Contractor necessary
to meet the Owner’s completion requirements to extent possible.

			
	 	 	 
	Phase I Design Services Agreement
	 	Page 2 of 7
	Revised 2/7/05	 	 

 

Firm Turnkey Project Proposal. A firm project price will be developed using project specific mass
balance calculations, building and site requirements, utility availability and development, etc.
If the proposal exceeds the Owner’s budget per Article 6, the Contractor shall make recommendations
to the Owner. This proposal will be considered a Design-Build guaranteed maximum price.

ARTICLE 2

Ownership of Documents

All technology related documents generated under this Phase I Agreement shall remain the property
of the Contractor. This includes notes, photos, memorandums, drawings generated as part of the
scope of work described in Article 1. The ownership of technology specific information and/or
information regarding the Connemann Process Patent will remain in ownership by the Contractor in
the event the project is stopped during or after the duration of this work phase.

ARTICLE 3

Owner’s Responsibilities

The Owner shall provide to the Contractor all relevant information for the Project, including the
Owner’s Program, which is an initial description of the Owner’s objectives, including budgetary and
time criteria, space requirements and relationships, flexibility and expandability requirements,
special equipment and systems, and site requirements.

The Owner shall review and timely approve schedules, estimates, schematic design documents and
other documents that are provided under this Agreement.

If the Owner elects to proceed with the Project beyond the Phase I Design Services provided in this
Agreement, the Owner and the Contractor shall enter into a Design-Build Construction Agreement.

If the Owner elects not to proceed with the Project, the Owner shall have no further obligation to
the Contractor other than the payment of compensation as set forth in this Agreement.

The Owner shall provide the Contractor all known information regarding site and the site attributes
that are needed to complete the project scope.

			
	 	 	 
	Phase I Design Services Agreement
	 	Page 3 of 7
	Revised 2/7/05	 	 

 

ARTICLE 4

Contract Time

The services provided by the Contractor/Engineer under this Agreement will take 3-5 months to
complete. All prudence will be exercised to move progress forward in all areas in an effort to
shorten the delivery time for this phase of project work and that of the over-all project schedule,
but not at the sacrifice of quality performance. Work will begin at the date of acceptance of this
agreement by both parties.

ARTICLE 5

Compensation

The Owner shall compensate the Contractor/Engineer for Phase I Design Services performed under this
Agreement on a time and material basis. The amount shall be a not to exceed amount of Four
Hundred Thousand Dollars (400,000.00) due upon acceptance of this agreement. This sum will be
credited to the turn-key project cost. This sum acts as a retainer for Contractor/Engineer to
cross charge engineering time and materials during the course of work in this phase. Portions of
this sum will be distributed to Westfalia Separator and Cimbria/Sket to confirm project delivery
schedule and receive several deliverables required by this phase of engineering.

The Contractor/Engineer is fully expected to complete all Phase 1 deliverables.

The Contractor will maintain records of cash disbursed (to Westfalia Separator, Cimbria/Sket or
other firms) and hours incurred by Bratney. The Contractor will publish a spending report monthly
of to-date expenses and services against the project. At such point expenses and services value
expended totals $400,000, and no construction contract is in place, a discussion between Owner and
Contractor/Engineer will be held to agree on how future tasks necessary for project completion will
be billed and payed.

After completion of this Phase 1 scope of work, a discussion will be held between
Contractor/Engineer and Owner to design next steps of work on the project. Normally, this will be
the signing of a turn-key construction contract to initiate field construction and start-up of the
facility. If Phase 1 work is complete, and the Owner decides not to proceed with Contractor to a
construction contract phase, a refund of unused retainer will be made to the owner.

Should the Owner request the Contractor/Engineer to cease work on this scope or other circumstance
become apparent to dictate that the work should cease, a refund of the unused funds (based on
monthly progress reporting to Owner) will be made to the Owner after discussion(s) and agreement by
the Contractor/Engineer.

			
	 	 	 
	Phase I Design Services Agreement
	 	Page 4 of 7
	Revised 2/7/05	 	 

 

ARTICLE 6

Basis of Discussion of Concerns

Should the Contractor identify any cost element that could prohibit later execution of the project
at a spending level greater than $46.6 MM, this/these concerns will immediately be brought to the
Owner’s attention for discussion. Areas of concern existing at this time are:

	 	§	 	Prevailing area labor rates (initial cost estimates are based on the merit
shop hourly rates)
	 
	 	§	 	Governing authority requirements of any environmental mitigation hardware
other than that normally specified by Cimbria/Sket
	 
	 	§	 	Any site attribute (soils, etc.) found not viable for use.

Article 7

Nondiscrimination/Sexual Harassment Clause

During the term of this agreement, the Contractor agrees as follows:

	 	§	 	In the hiring of any employee(s) for the manufacture of
supplies, performance of work, or any other activity
required under this scope of work, or any subcontract, the
Contractor, subcontractor, or any person acting on behalf of
the Contractor or subcontractor shall not, by reason of
gender, race, creed, or color, discriminate against any
citizen who is qualified and available to perform the work
to which the employment relates.
	 
	 	§	 	Neither the Contractor nor any subcontractor nor any
person on their behalf shall in any manner discriminate
against or intimidate any employee involved in the
manufacture of supplies, the performance of work, or any
other activity on account of gender, race, creed, or color.
	 
	 	§	 	The Contractor and subcontractors shall establish and
maintain a written sexual harassment policy and shall inform
their employees of the policy. The policy must contain a
notice that sexual harassment will not be tolerated and
employees who practice it will be disciplined.
	 
	 	§	 	The Contractor shall not discriminate by reason of
gender, race, creed, or color against any subcontractor or
supplier who is qualified to perform the work.
	 
	 	§	 	The Contractor and each contractor shall furnish all
necessary employment documents and records to and permit
access to their books, records, and accounts for the
purposes of investigation, to ascertain compliance with

			
	 	 	 
	Phase I Design Services Agreement
	 	Page 5 of 7
	Revised 2/7/05	 	 

 

	 	 	 	provisions of this Nondiscrimination/Sexual Harassment
Clause.
	 
	 	§	 	The Contractor shall include the provisions of this Non
discrimination/Sexual Harassment Clause in every subcontract
so that such provisions will be binding upon each
subcontractor.

Article 8

Feedstock Risk Assessment

During Phase 1 Engineering, a Feedstock Risk Assessment activity will be completed as soon as
possible. This assessment will be completed as an expense of Phase 1 engineering. This step is
being made due to the influx of potential feedstock for Biodiesel production that is highly
variable in quality.

The Owner will be asked to provide liquid samples of all feedstock types planned other than soybean
oil. These samples must be considered representative and “typical” of the supply that will
eventually be resourced to supply the operating Biodiesel facility.

The Contractor/Engineer will engage a third party testing laboratory to analyze these materials in
detail. Properties such as wax content, free fatty acid content, phosphorous content, sulfur
content, moisture level, unsaponifiables and other impurities will be measured.

A review session of the test results will be coordinated by the Contractor/Engineer with the Owner
and the Owner’s representative if desired. Cimbria/SKET and Westfalia representatives will be
involved in the data review also.

The test results will be reviewed and if concerns are raised regarding the viability of any
feedstock to successfully produce in-specification Biodiesel using the Connemann Diesel process,
any of several next steps may be completed. For example:

	 	-	 	additional testing
	 
	 	-	 	repeat testing
	 
	 	-	 	pilot scale testing to produce Biodiesel for analysis and review
	 
	 	-	 	same or additional testing by another lab

These additional steps will be made at Contractor/Engineer expense. Additionally, technical
adjustments may be possible to the processing steps and/or conditions of processing to mitigate the
concerns and should be considered.

If concerns persist regarding the feedstock’s viability, Owner and Contractor/Engineer will discuss
options such as removal of the feedstock from consideration in the supply of materials and from the
project scope or in a worst case, cancellation of the project.

			
	 	 	 
	Phase I Design Services Agreement
	 	Page 6 of 7
	Revised 2/7/05	 	 

 

If no concerns exist, the Phase 1 Engineering will continue as per planned content and schedule.

This Agreement is entered into as of the date set forth above.

	 	 	 	 	 	 	 
	ATTEST:

	 	 	 	OWNER:	 	 
	 
	 	 	 	 	 	 
	/s/ Mike J. Hohenstein

	 	 	 	Northwest Iowa Renewable Energy
 
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ John E. Lucken
 

Print Title Chairman of the Board
Of Directors
	 	 
	 
	 	 	 	 	 	 
	ATTEST:

	 	 	 	CONTRACTOR:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Bratney Companies, Inc.	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	By: J. Paul Bratney	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ J. Paul Bratney
 

Print Title Pres. & CEO
	 	  

			
	 	 	 
	Phase I Design Services Agreement
	 	Page 7 of 7
	Revised 2/7/05

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