Document:

exv10w18

 

Exhibit 10.18

March 20, 2007

Mitch and Hank Thompson

323 Ist St SW

Mahnomen, MN 56557

Dear Mitch and Hank:

Enclosed is a $20,000 check from Agassiz Energy to extend the option to purchase your homestead for
another year. The company appreciates the opportunity to extend the option and continue planning
for construction of an ethanol plant.

Agassiz has identified a building, KL Process Design Group from Rapid City, SD. We are working on a
revision to the Security Exchange Commission and upon their approval will conduct an equity drive.
The Environment Assessment Worksheet is being revised with equipment specifications from the new
builder. We hope to complete the EAW within a couple months. If all goes well we could begin
construction this fall.

If any questions, don’t hesitate to call or drop a note.

	 	 	 
	Sincerely,
	 	 
	/s/ Donald Sargeant
 

	 	 
	Donald Sargeant 

Chief Managerexv10w19

 

Exhibit 10.19

Bio-Fuels
Engineering

& Project Development

April 12, 2007

Agassiz Energy, LLC

ATTN: Donald Sargeant

Re: Proposed 55 Million Gallon Ethanol

Production Facility

Dear Mr. Sargeant:

KL Process Design Group, LLC hereby proposes to furnish design-build and other services for the
following described project:

Project Description

This project is described as a dry-grind ethanol production facility to convert corn (raw material)
into liquefied finished product to be located in Erskine, Minnesota. Engineering and construction
will provide piping, tanks, pumps, heat exchangers and instrumentation sufficient to run at a
capacity of 55 million gallons of anhydrous ethanol per year. Associated equipment will be
sufficient to handle and process bi-product material in the form of DDGS for sale back to the open
market; vertical silo grain storage; rail spur; ethanol storage and load-out skid package for rail
and truck; ancillary utility support infrastructure and administrative building. It is anticipated
that the proposed plant will be fueled by a fluidized-bed boiler fueled by coal and possibly
biomass, with propane backup, with sufficient pollution control measures to meet the State of
Minnesota pollution control standards.

Scope of Services by KL Process Design Group

Services shall be conducted in three phases:

Phase I—Permit Completion and Up-Front Engineering; Possible Debt Financing Assistance:

Services will include State and Federal permitting, any changes based on process design required
for the current Air and Water Quality permit applications and construction storm water prevention
plan; Alcohol Tobacco and Trade Bureau Permitting (TTB) and any local construction permits and
up-front process design to support the permitting process. Deliverables will include, but are not
limited to, Process Flow Diagrams (PFD’s) with integrated heat and material balance, Aspen Plus®
software process simulation modeling results, Process Description (Design Basis Document), and the
completed/amended permit applications listed above.

Additional services may include, at the request of Agassiz, locating debt financing to include
presenting

KL Process Design Group, LLC

2693C Commerce Road, Rapid City, SD 57702 (605) 718-0372 Fax (605) 718-1372

www.klprocess.com

1461991.1

+Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.

 

 

			
	Donald Sargeant 

Agassiz Energy, LLC
	 	Apr 12, 2007

Page 2 of 8

the project to known lending institutions. Deliverables may include bank commitment
letters and financing alternatives.

Phase II—Construction: Process Engineering and Construction Management: Deliverable will include
but are not limited, Piping and Instrumentation Diagrams/Drawings (P&ID’s), Equipment List,
Civil/Structural Drawings, Engineering and Construction Quality Assurance Programs, Site
Management, Scheduling and Budget Management, Construction Site Safety Program, Instrumentation
Ladder Logic, Process Buildings, Process Equipment, Engineering Liaison Project Engineer and Site
Administrator and Construction Manager. KL Process will provide a license agreement to Agassiz
related to any process technology utilized by KL Process in the design, construction or operation
of the Plant. Equipment and Service Acquisitions will be through an open-bid process available for
inspection by Agassiz Energy, LLC. As general contractor, KL Process will be responsible for
overseeing the construction of the Plant and construction sub-contractors. Sub-contractors will
include, but are not limited to, mechanical, electrical and instrumentation, excavation, concrete,
tank fabrication and HVAC services. KL Process will be responsible for insuring the operating
facility is constructed in accordance with prudent engineering, plans, drawings and specifications.

Phase III—Start-up and Operations: Equipment Check-out, Punch-List, Operator Training, Plant
Start-up, Human Resources, Management, Co-Product Marketing and Accounting Structure and Plant
Operations. Deliverables will include but are not limited to a staffed and efficient operating
ethanol plant producing 55 million gallons per year, a related amount of distillers grains,
Construction Operations Manuals, Safety Manuals, Employee Handbooks, and Environmental Reporting
Schedule.

Compensation

Our compensation for these Services:

Phase I: $100,000 in up-front engineering and project development costs prior to project funding.
These costs to be invoiced Agassiz on the 20th of each month. To be paid within 30 days
of a final proposal. In the event Agassiz requests KL Process assist with debt financing, Agassiz
will pay $50,000 for out of pocket expenses in acquiring lender proposals for the Project.

Phase II: Approximately $100,707,500 including working capital, interest, labor, inventory and
other indirect construction costs, also known as “soft costs”. It is expected that KL and Agassiz
will enter into a fixed price contract not to exceed $100,707,500. See Appendix A for the
estimated budget detail.

Phase III: Start-up and Plant management costs (to be determined and mutually agreed upon in a
definitive agreement). Start-up cost estimates are listed at Appendix A . Estimated plant
management costs are $300,000 per year along with 4% of net profit assuming all operating
conditions are met or exceeded.

KL shall use its best efforts to inform Agassiz of any potential or actual material increases in
the any price increase, including in the fixed price contract amount and the reasons for such
increases.

KL Process Design Group, LLC

2693C Commerce Road, Rapid City, SD 57702 (605) 718-0372 Fax (605) 718-1372

www.klprocess.com

1461991.1

+Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.

 

 

			
	Donald Sargeant 

Agassiz Energy, LLC
	 	Apr 12, 2007

Page 3 of 8

Additional Services Compensation

In addition to the above listed compensation items and in exchange for the value KL Process Design
Group, LLC brings to Agassiz in the form of value-engineering, equipment procurement and fund
raising, KL Management, LLC, a related party to KL Process Design Group, LLC will receive 4.5%
equity ownership in Agassiz Energy. KL understands that the current SEC-regulated offering in place
must be amended to reflect KL ownership. KL will also be granted a management contract to operate
the Agassiz Energy, LLC plant.

Beyond those costs defined as Project Basic Services, and when these Additional Services have been
approved in writing by the Client, our compensation will be hourly at the normal rate of (___)+
per hour.

Notice to Proceed

If this proposal is acceptable to you, please authorize us to proceed by signing both original
documents and returning one to our office. We will proceed with our work upon receipt of your
signed proposal.

Thank you for the opportunity to provide you with this proposal. We look forward to working with
you on this project.

Sincerely,

Randy Kramer

KL Process Design Group, LLC

Miscellaneous Provisions that follow this proposal are part of this agreement.

	 	 	 
	ACCEPTED for KL Process Design Group, LLC

	 	Date: April 12, 2007
	 
	 	 
	Partner: David B. Litzen,   /s/ David B. Litzen  
	 	 
	 
	 	 
	ACCEPTED for the Client

	 	Date - April 17, 2007

	By   /s/ Donald Sargeant  
	 	 

KL Process Design Group, LLC

2693C Commerce Road, Rapid City, SD 57702 (605) 718-0372 Fax (605) 718-1372

www.klprocess.com

1461991.1

+Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.

 

 

			
	Donald Sargeant 

Agassiz Energy, LLC
	 	Apr 12, 2007

Page 4 of 8

Miscellaneous Provisions

Insurance

KL Process Design Group shall endeavor to keep in force for the term of the project, a professional
liability insurance policy insuring it against negligent acts, errors, or omissions in the maximum
amount of (___)+. KL Process Design Group will maintain a current copy of Proof of Insurance
with Agassiz Energy, LLC at all times and will notify Agassiz Energy, LLC within 30 days of policy
cancellation of changes.

Allocation of Risk

The risk involved in this project, has been allocated such that the Client agrees that KL Process
Design Group’s total liability to the Client for any and all injuries, claims, losses, expenses,
damages or claims expenses arising out of this Agreement from any cause or causes, shall not exceed
the total amount of the design fee. Such causes include but are not limited to: design
professional’s negligent acts, errors or omissions, strict liability, breach of contract, or breach
of implied or express warranty. The estimated design fee is $3,000,000.

Hazardous Materials

Both parties acknowledge that KL Process Design Group’s scope of services does not include any
services related to asbestos or hazardous or toxic materials. In the event KL Process Design Group
or any other party encounters asbestos, hazardous or toxic materials, PCBs, combustible gases or
material, petroleum or radioactive materials or any substance or any material and in any quantities
as would pose a substantial danger to persons or properties at the jobsite, or should it become
known in any way that such materials may be present at the jobsite or any adjacent areas that may
affect the performance of KL Process Design Group’s services, KL Process Design Group may, at their
option and without liability for consequential or any other damages, suspend performance of
services on the project until the Client retains appropriate specialist consultant(s) or
contractor(s) to identify, abate and/or remove the asbestos or hazardous or toxic materials, and
warrant that the jobsite is in full compliance with applicable laws and regulations.

Disputes

All claims, disputes, and other matters in question arising out of or relating to this agreement or
the breach thereof shall be decided in accordance with the laws of the State of Minnesota. Any
controversy or claim arising out of or related to the contract, or the breach thereof, shall first
be submitted to the American Arbitration Association Mediation Department. A mutually agreed upon
qualified alternative dispute organization may be used. Mediation shall continue until resolution
of the dispute or until the mediator notifies the parties that it is unlikely that the dispute will
be resolved through mediation.

In the event that any litigation arising from or related to this Agreement or the services provided
under this Agreement, the prevailing party shall be entitled to recover from the non-prevailing
party all reasonable costs incurred, including staff time, attorney fees and all other related
reasonable expenses in such litigation. In the event of a non-adjudicative settlement of
litigation between the parties or a resolution of a dispute by arbitration or mediation, the term
“prevailing party” shall be determined by that process.

Indemnification

KL Process Design Group and Agassiz Energy, LLC mutually agree, to the fullest extent permitted by
law, to indemnify and hold each other harmless against damages, liabilities or costs, including
reasonable attorney fees and defense costs, arising from their own negligent acts in performance of
their services under this Agreement, to the extent that each party is responsible for such damages,
liabilities, and costs on a comparative basis of fault.

Termination

Either party, giving written notice to the other party ten days prior to the termination date, may
terminate this agreement with cause, defined as either party’s failure to perform any material act
required of it pursuant to this agreement. KL Process Design Group shall be paid for work
completed through the date of the termination notice for the services performed on an hourly basis
at the normal hourly rate plus reimbursable expenses incurred up to the termination date, plus any
reasonable termination expenses including but not limited to demobilization, reassignment of
personnel, associated overhead costs and all expenses directly related to the termination. In the
event KL Process Design Group was terminated for cause by Agassiz Energy, KL Process shall not be
entitled to any expenses incurred after the termination date.

Lien Rights

All lien rights as and if necessary shall be invoked for nonpayment of services rendered. Any
notification of lien rights if required by law will be sent to the Owner prior to commencing work
on this project.

KL Process Design Group, LLC

2693C Commerce Road, Rapid City, SD 57702 (605) 718-0372 Fax (605) 718-1372

www.klprocess.com

1461991.1

+Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.

 

 

			
	Donald Sargeant 

Agassiz Energy, LLC
	 	Apr 12, 2007

Page 5 of 8

Verification of Existing Conditions

Inasmuch as the existing construction site requires that certain assumptions be made regarding
existing conditions, and because some of these assumptions may not be verifiable without expending
additional sums of money, Agassiz Energy, LLC agrees to bear all costs, losses and expenses,
including the cost of the Design Professional’s additional services, arising or allegedly arising
from the discovery of concealed or unknown conditions at the existing construction site. Potential
existing conditions requiring additional funding to remedy include but are not limited to toxic
waste; abandoned or undiscovered sub-surface utilities; undisclosed property encumbrances or unsettled boundary disputes adjacent to the
construction site.

Payments

Invoices will, in most cases, be submitted bimonthly and are due upon presentation. The invoice
shall be considered past due if not paid within 30 calendar days of the due date as posted on the
invoice. If payment is not received within 30 calendar days of the due date, invoices shall bear
interest at one (1%) percent of the past due amount per month. Payment thereafter shall first be
applied to the accrued interest and then to the unpaid principal. If the Client fails to make
payments when due and we incur costs in order to collect the overdue sums from the Client, the
Client agrees that all reasonable collection costs incurred shall immediately become due and
payable. Collection costs shall include, without limitation, reasonable legal fees, reasonable
collection agency fees, and expenses including court costs. This obligation of the client to pay
the collection fees shall survive the terms of this agreement or any early termination by either
party.

Satisfaction with Services

Payment of any invoice by the Client shall mean that the Client is satisfied with the services to
the date of payment and is not aware of any deficiencies in those services.

Contractor and Subcontractor Claims

The Client agrees, to the fullest extent permitted by law, to limit the liability of the KL Process
Design Group and their employees and sub-consultants to all construction contractors and
subcontractors on the Project for claims, losses, costs, damages of any nature whatsoever or claims
expenses from any cause or causes, including attorney’s fees and costs and expert witness fees and
costs, so that the total aggregate liability of the KL Process Design Group and their
sub-consultant to all those named shall not exceed the amount of the design fee rendered on this
project. It is intended that this limitation apply to any and all liability or cause of action
however alleged or arising unless otherwise prohibited by law.

Jobsite Safety

KL Process Design Group and its personnel have no authority to exercise control over the
construction contractor or its employees in connection with their work or any health or safety
programs or procedures. The presence of KL Process Design Group at the job site shall not relieve
the General Contractor of its obligation, duties, and responsibilities including but not limited to
construction means, methods, sequence, superintending and coordinating the Work in accordance with
the contract documents and any health and safety precautions required by any regulatory agencies.
The Client agrees that the General Contractor shall be solely responsible for jobsite safety and
warrants that this intent shall be carried out in the Client’s contract with the General
Contractor.

Ownership of Instruments of Service

All reports, drawings, specifications, computer files, field data, notes and other documents and
instruments prepared by KL Process Design Group as instruments of service shall remain the property
of KL Process Design Group. KL Process Design Group shall retain all common law, statutory and
other reserved rights, including the copyright thereto. The client shall not reuse or make any
modifications to the construction documents without written authorization. KL Process Design Group
will provide written authorization in the form of a technology agreement with Agassiz Energy, LLC
in order for the plant to operate. With regards to future expansions of the proposed plant, Agassiz
Energy will maintain the rights to decide future expansions of the plant. Agassiz Energy agrees to
indemnify and hold harmless KL Process Design Group against any damages, liabilities, costs, and
legal fees arising from or allegedly arising from or in anyway connected to the unauthorized or
reuse of the construction documents by the Client or any person or entity that acquires or obtains
the construction documents from or through the Client without written authorization from KL Process
Design Group.

KL Process Design Group, LLC

2693C Commerce Road, Rapid City, SD 57702 (605) 718-0372 Fax (605) 718-1372

www.klprocess.com

1461991.1

+Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.

 

 

			
	Donald Sargeant 

Agassiz Energy, LLC
	 	Apr 12, 2007

Page 6 of 8

Assignment 

Neither party to this Agreement shall transfer, sublet or assign any rights under or interest in
this Agreement (including but not limited to monies that are due or monies that may be due) without
prior written consent of the other party. Subcontracting to subconsultants normally contemplated
by KL Process Design Group such as civil/structural engineers, electrical engineers, environmental
engineers and detailed mechanical engineers shall not be considered as assignment for purposes of
this Agreement.

Standard of Care

In providing services under this Agreement, KL Process Design Group will endeavor to perform in a
manner consistent with
that degree of care and skill ordinarily exercised by members of the same profession currently
practicing under similar circumstances.

Opinions of Probable Construction Costs

In providing opinions of probable construction costs, the client understands that KL Process Design
Group has no control over the cost or availability of labor, equipment or materials, or over market
conditions or the Contractor’s method of pricing, and that KL Process Design Group’s opinion of
probable construction costs are made on the basis of the KL Process Design Group’s professional
judgment and experience. KL Process Design Group makes no warranty, expressed or implied that the
bids or the negotiated cost of Work will not vary from the Consultant’s opinion of probable
construction costs. KL shall promptly notify Agassiz of any potential or actual material increase
in the probably construction costs for any reason.

Other

KL Process Design Group’s sole contractual relationship shall be with the Client and nothing herein
shall be construed to create any obligation or contractual relationship between KL Process Design
Group and any third party. KL Process Design Group relies solely and exclusively on the Client to
provide complete, accurate and timely information of the Owner’s design criteria.

KL Process Design Group, LLC

2693C Commerce Road, Rapid City, SD 57702 (605) 718-0372 Fax (605) 718-1372

www.klprocess.com

1461991.1

+Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.

 

 

			
	Donald Sargeant 

Agassiz Energy, LLC
	 	Apr 12, 2007

Page 7 of 8

APPENDIX A

Agassiz Energy Cost Screening Estimate

	 	 	 	 	 	 	 	 	 
	General Assumptions
	 	 	 	 	 	 	 	 
	Million Undenatured Gallons
	 	 	55,000,000	 	 	 	 	 
	Gallons of Ethanol per Bushel
	 	 	2.7	 	 	 	 	 
	Bushels of Corn
	 	 	20,370,370	 	 	 	 	 
	Construction & Engineering Costs:
	 	 	 	 	 	 	 	 
	Mobilization and General Conditions
	 	 	 	 	 	 	(_________	)+
	Engineering and Project Management Costs
	 	 	 	 	 	 	(_________	)+
	Site Work
	 	 	 	 	 	 	(_________	)+
	Cook, Fermentation, Distillation and Distiller’s Grains Buildings
	 	 	 	 	 	 	(_________	)+
	Doors, Windows and Finishers
	 	 	 	 	 	 	(_________	)+
	Concrete Work
	 	 	 	 	 	 	(_________	)+
	Structural Steel
	 	 	 	 	 	 	(_________	)+
	Field Erected Tanks
	 	 	 	 	 	 	(_________	)+
	Process Equipment and Tanks (to include distillation column)
	 	 	 	 	 	 	(_________	)+
	Desiccant Beads
	 	 	 	 	 	 	(_________	)+
	Process Pumps
	 	 	 	 	 	 	(_________	)+
	Heat Exchangers (to include evaporator effects)
	 	 	 	 	 	 	(_________	)+
	Dryer—Includes VOC emissions control equipment (RTO)
	 	 	 	 	 	 	(_________	)+
	Steam Generation System—Coal Fired with storage and unloading
	 	 	 	 	 	 	(_________	)+
	Chiller
	 	 	 	 	 	 	(_________	)+
	Water Treatment Facility
	 	 	 	 	 	 	(_________	)+
	Cooling Towers
	 	 	 	 	 	 	(_________	)+
	Centrifuge Packages with Controls
	 	 	 	 	 	 	(_________	)+
	Air Compressors
	 	 	 	 	 	 	(_________	)+
	Grain Handling (includes 3 million bushels of corn storage)
	 	 	 	 	 	 	(_________	)+
	Painting
	 	 	 	 	 	 	(_________	)+
	Administrative Office
	 	 	 	 	 	 	(_________	)+
	Lab and Control Room (Located in Process Building)
	 	 	 	 	 	 	(_________	)+
	Process Piping and Valves
	 	 	 	 	 	 	(_________	)+
	Insulation
	 	 	 	 	 	 	(_________	)+
	Plumbing and HVAC
	 	 	 	 	 	 	(_________	)+
	Pollution Control Equipment
	 	 	 	 	 	 	(_________	)+
	Electrical including Instrumentation and Controls
	 	 	 	 	 	 	(_________	)+
	Truck/Rail Scales and Probe
	 	 	 	 	 	 	(_________	)+
	Fire Protection/Suppression
	 	 	 	 	 	 	(_________	)+
	Additional Waste Water Management
	 	 	 	 	 	 	(_________	)+

KL Process Design Group, LLC

2693C Commerce Road, Rapid City, SD 57702 (605) 718-0372 Fax (605) 718-1372

www.klprocess.com

1461991.1

+Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.

 

 

			
	Donald Sargeant 

Agassiz Energy, LLC
	 	Apr 12, 2007

Page 8 of 8

	 	 	 	 	 	 	 	 	 
	General Contingency including engineering, construction and equipment
	 	 	 	 	 	 	(_________	)+
	 
	 	 	 	 	 	 	 
	Total Construction & Engineering Costs Excluding Soft Costs
	 	 	 	 	 	$	100,707,500	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Utilities (Wells, Electrical Transformer and Natural Gas Border
Connections)
	 	 	 	 	 	 	(_________	)+
	Rail Siding Improvements and Switching (2 Switches)
	 	 	 	 	 	 	(_________	)+
	Inventory — Corn (15 Days @ $2.50 per bushel)
	 	 	 	 	 	 	(_________	)+
	Inventory — Chemicals, Yeast, and Denaturant
	 	 	 	 	 	 	(_________	)+
	Inventory — Ethanol (3 Days @ $2.00 per gallon)
	 	 	 	 	 	 	(_________	)+
	Inventory — Mash in Process
	 	 	 	 	 	 	(_________	)+
	Spare Parts
	 	 	 	 	 	 	(_________	)+
	Start-up Costs (Additional Labor, Education and Training)
	 	 	 	 	 	 	(_________	)+
	Captilized Interest
	 	 	 	 	 	 	(_________	)+
	Financing Cost Estimate to Include Fund Raising
	 	 	 	 	 	 	(_________	)+
	Working Capital
	 	 	 	 	 	 	(_________	)+
	Organizational Costs—legal and office equipment
	 	 	 	 	 	 	(_________	)+
	Land for ethanol plant
	 	 	 	 	 	 	(_________	)+
	Independent Engineer (Hired by Lender)
	 	 	 	 	 	 	(_________	)+
	 
	 	 	 	 	 	 	 
	Total Ethanol Project Start-up and Other Costs
	 	 	 	 	 	 	(_________	)+
	 
	 	 	 	 	 	 	 
	Total Uses of Funds
	 	 	 	 	 	$	115,307,897	 
	 
	 	 	 	 	 	 	 

Confidential treatment has been requested with respect to certain Portions of this exhibit. Omitted Portions have been filed
separately with the Securities and Exchange Commission.

KL Process Design Group, LLC

2693C Commerce Road, Rapid City, SD 57702 (605) 718-0372 Fax (605) 718-1372

www.klprocess.com

1461991.1

+Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}]]