Exhibit 10.3
GREENWAY CONSULTING, LLC
CONFIDENTIAL
GREENWAY CONSULTING, LLC
RED TRAIL ENERGY, LLC
RICHARDTON, ND
--CONFIDENTIAL--
GreenWay Consulting, LLC
--CONFIDENTIAL--
DEVELOPMENT SERVICES AGREEMENT
This Agreement is entered into the 17th day of December, 2003, by and between
RED TRAIL ENERGY, LLC, a North Dakota Limited Liability Company of Richardton,
North Dakota, (hereinafter "RTE") and GREENWAY CONSULTING, LLC, a Minnesota
Limited Liability Company of ▇▇▇▇▇▇, Minnesota (hereinafter "GreenWay").
RECITALS
WHEREAS, RTE requires Project Services (the "Services") in connection with the
execution and delivery of project financing, facility design and construction,
and initial plant operation for an ethanol production facility to be constructed
during the term of this Agreement;
WHEREAS, RTE desires to engage GreenWay to render these specific Services; and
WHEREAS, RTE will be responsible for raising and providing seed capital and
financial assistance to fund development costs and to raise certain equity
funding for the project financing.
NOW THEREFORE, in consideration of the mutual covenants and stipulations
hereinafter set forth, the parties agree as follows:
SECTION I. - SCOPE OF SERVICES PROVIDER. The Scope of Services provided by
GreenWay.
A. PHASE I - PROJECT DEVELOPMENT
1. PROJECT COORDINATION AND DEVELOPMENT:
a. Assist and advise RTE in recruiting and hiring a Project
Coordinator;
b. Assist and advise RTE in engaging other firms to provide legal,
accounting, risk management, and marketing expertise;
c. Assist and advise RTE in the site evaluation and selection
process;
d. Assist and advise RTE in the negotiations of various contracts
including insurance, utilities (gas, electrical, water, waste
water), rail, raw material supply, and product off-take;
e. Assist and advise RTE in obtaining various permits; and
f. Assist and advise in the preparation of a Development Business
Plan including a financial model with five years of operation
projections (Exhibit C - Index).
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2. DESIGN AND CONSTRUCTION:
a. Assist and advise RTE in selecting a design and engineering firm
and in negotiating a contract regarding price, schedule, and
performance;
b. Assist and advise RTE in reviewing and approving preliminary and
final process and detailed design;
c. Assist and advise RTE in selecting a construction company and in
negotiating a contract regarding price, schedule, and
performance.
3. FINANCING:
a. Assist and advise in developing and implementing a strategy for
the financing needs for the project and RTE, including seed
capital, equity, and debt;
b. Assist and advise in evaluating financial options, including
associated costs and technical aspects of any USDA guarantee
program, TIF, revenue bonds, subordinated debt, and State and
Federal grants;
c. Assist and advise in sourcing and evaluating negotiations of debt
financing for the project, including construction financing and
long-term debt financing; and
d. Assist and advise in credit analyses, submissions, and
presentations.
B. PHASE II - CONSTRUCTION
1. Assist and advise RTE in recruiting and hiring RTE's owners'
representative/construction supervisor;
2. Attend monthly site progress meetings between RTE, Design Engineer and
Contractor;
3. Assist and advise during plant start-up with providing assistance and
coordinating the activities of the Design Engineer and Contractor
through and including the monitoring of the performance tests to
assist in determining the performance criteria have been met.
C. PHASE III- INITIAL PLANT OPERATIONS THROUGH START-UP
1. Assist and advise RTE in recruiting and hiring all plant employees;
2. Assist and advise in providing initial employee training; and
3. Assist and advise in providing on-site support staff through
successful start-up and commissioning;
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4. Assist and advise in providing technical support on an as-needed basis
for start-up;
5. Assist and advise in providing ongoing employee training through
startup;
6. Continuously advise RTE on ways to increase plant production and
efficiency through start-up.
It is understood that the GreenWay will not limit its assistance to the services
specifically enumerated above, but will extend their services and assistance as
reasonably required to provide for the successful implementation of the project
plan.
It is also understood that all services provided by the GreenWay will be
provided on a best efforts basis with no warranties of performance.
SECTION II. -- COMPENSATION. Compensation for the Services provided under this
Agreement shall be based on the following schedule:
A. SERVICE RETAINER. RTE shall advance a non-refundable retainer of Two
Hundred Thousand Dollars ($200,000) (the "Retainer") to GreenWay
Consulting, LLC payment not to be made until seed capital funding is
completed. RTE will be obligated to pay for expenses incurred by
GreenWay under SECTION III. After the Retainer is received, GreenWay
shall not receive any additional service compensation until Financial
Close and shall then be paid additional service compensation as set
forth in SCHEDULE 1: COMPENSATION FOR SERVICES.
- SCHEDULE 1 - COMPENSATION FOR SERVICES
SERVICE FEE SOURCE OF FUNDS PAYMENT TERMS
------- --- --------------- -------------
PHASE I $1,250,000.00 PROJECT FINANCING DUE IN FULL @ FINANCIAL CLOSE
PHASE II $1,100,000.00 PROJECT FINANCING 25% DOWN @ FINANCIAL CLOSE - 50% @
MECHANICAL
COMPLETION - 25% @ SUCCESSFUL
COMMISSIONING
PHASE III $ 700,000.00 PROJECT FINANCING AT SUCCESSFUL COMMISSIONING
In no case ▇▇▇▇ ▇▇▇▇▇▇▇▇ share or split the fees delineated above with any other
party currently assisting RTE in other endeavors. However, GreenWay may, at its
sole discretion, choose to engage other companies (other than as identified in
SECTION I) in order to effect the necessary transactions and may choose to share
a portion of its fees for the services under this Agreement provided by those
other companies.
Any lender commitment fees for any of the components of the funding shall be
paid directly by RTE and will not be considered to be a part of the above
scheduled fees for GreenWay.
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The following definitions apply to this section:
a. Financial Close: Closing of senior debt financing for the
project.
b. Mechanical Completion: Completion of construction such that corn
can be ground for ethanol production.
c. Successful Commissioning: Production of ethanol meeting design
specifications on a daily basis of nameplate production, and all
production meets the guarantees provided by engineers and
contractors.
d. Project Financing: Total debt and equity financing of the
project.
e. Total Project Capitalization: The total source of funds
including, but not limited to, grants, subordinated debt, senior
debts, the equity portion of working capital, and revolving line
of credit all as established as of Financial Close, provided,
however, "Total Project Capitalization" does not include seed
capital equity.
f. Working Capital: Operating revenues of the plant.
g. Seed Capital: At risk money for project development exclusive of
total project
h. Capitalization (e) above.
[NOTE: The Services delineated in SECTION I and the corresponding fees
delineated in SECTION II do not contemplate that GreenWay will solicit seed
capital, subordinated debt or equity on behalf of RTE. While GreenWay will
prepare materials and assist in making presentations under this Agreement,
GreenWay or its members may assist RTE in direct solicitation of seed capital,
subordinated debt, or equity, but such solicitation must be done on other
mutually agreed terms and conditions.]
SECTION III. - EXPENSES.
A. OUT-OF-POCKET EXPENSES
RTE will be responsible for all of GreenWay's out-of-pocket expenses,
including travel, lodging, meals, communication, cost of financial
analysis, e.g. CPA prepared and approved GAAP financial information
required by the capital markets, and reports prepared in fulfilling
its duties for the Services outlined in SECTION I. If expenses
(excluding Costs of Issuance as stated below) exceeding $5,000 per
month are required, GreenWay shall seek pre-approval by RTE, which
shall not be unreasonably withheld. GreenWay shall submit monthly
updated expense reports to RTE for reimbursement. If RTE obtains its
equity from producer members and investors there would be no
anticipated "Costs of Issuance". If RTE seeks bond financing, issues
debentures, or otherwise issues instruments to obtain financing, there
will be fees and expenses commonly known as Costs of Issuance. RTE
will be responsible for the payment of all Costs of Issuance, fees and
expenses, including but not limited to: publication expenses, legal
counsel, bond counsel, ratings, credit enhancement, all travel,
printing of bonds, printing and
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distribution of required disclosure documents, trustee fees, agent
fees, CUSIP registration, and the like, provided however, RTE shall
review and approve the Costs of Issuance prior to being incurred. In
the event such a financing is attempted and ultimately does not occur,
RTE will be responsible for paying all of the aforementioned
pre-approved expenses.
B. GENERAL MANAGER & PLANT MANAGER SALARIES.
Approximately six (6) months prior to anticipated plant commissioning,
Greenway will hire a General Manager and a Plant Manager for the
Plant. All salary and benefits paid by Greenway shall be reimbursed to
Greenway within ten (10) days of invoice to RTE.
SECTION IV. - TERM OF AGREEMENT: TERMINATION. The term of this Agreement shall
begin on the date of execution set forth above and shall have an expiration date
upon reaching Successful Commissioning of the plant. RTE and GreenWay as the
non-defaulting party each shall retain the right to terminate this Agreement if
either party fails to perform ("defaults") under the terms of this contract and
attachments, including but not limited to meeting major milestones in
development by their completion dates in Schedule 2 below. All expenses under
SECTION III shall be paid through Termination. Termination of this Agreement by
RTE prior to Financial Close but after meeting the Business Plan and
Capitalization Plan milestones in Schedule 2, followed by a Financial Close will
result in RTE paying GreenWay a termination fee equal to the Phase I fee shown
in Schedule 1 above. To terminate this Agreement, the non-defaulting party must
notify the defaulting party in writing describing the cause of default and pay
any uncontested amounts that are due through the date of the notice.
- SCHEDULE 2 - MILESTONES AND COMPLETION DATES
MILESTONE COMPLETION DATE FAILURE
--------- --------------- -------
1. RTE raising at least ______________ GreenWay may terminate
$1,000,000 in Seed Capital
2. First draft Business Plan ______________ RTE may terminate
3. First draft of Capitalization Plan ______________ RTE may terminate
4. Selection of Design Firm and Engineer ______________ RTE or GreenWay may
terminate
5. Preliminary Resolution of Construction Issues ______________ RTE or GreenWay may
pre-PPM terminate
6. Completion of raising at least ______________ RTE or GreenWay may
$40,000,000 in Equity terminate
7. Financial Close ______________ RTE or GreenWay may
terminate
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SECTION V. - INDEPENDENT CONTRACTOR. GreenWay is an independent contractor and
nothing in this Agreement shall constitute or designate GreenWay or any of its
employees or agents as employees or agents of RTE.
SECTION VI- CONFIDENTIALITY. RTE agrees all services being provided in this
Agreement are the work product of GreenWay and proprietary property of GreenWay.
GreenWay agrees to license the use of the proprietary property to RTE
exclusively for RTE's use for its development, construction and operation of its
Richardton, North Dakota area ethanol production facility only. RTE agrees it
shall not disclose any proprietary property (information or work product) to
third parties, including the media, without the third party executing a
nondisclosure agreement attached as Exhibit D and first obtaining written
permission from GreenWay. GreenWay agrees that financial and other information
about the ethanol production project will be developed by RTE and disclosed to
GreenWay. GreenWay agrees that proprietary information of RTE will only be used
for purposes of RTE's project and will not be disclosed to others without first
obtaining written permission from RTE. In the event RTE or GreenWay violates the
terms and spirit of this license and disclosure provision, RTE and GreenWay
agree they will be subject to an injunction and such other relief as allowed by
law, including any damages caused to the other party and reimbursement to the
other party for any attorney fees and costs incurred by the other party in
enforcing this provision.
SECTION VII. - ENTIRE AGREEMENT/AMENDMENTS. This Agreement constitutes the
entire Agreement between the parties hereto and sets forth the rights, duties,
and obligations of each to the other as of this date. Any prior agreements,
promises, negotiations, or representations not expressly set forth in this
Agreement are of no force and effect. This Agreement may not be modified except
in writing executed by both GreenWay and RTE.
SECTION VIII. - LEGAL ADVICE. Each Party agrees that it has relied on its own
legal counsel or has had legal counsel available to them. The Parties agree they
have not relied on any legal representations from the other party.
SECTION IX. - BINDING EFFECT. This Agreement will be binding upon and inure to
the benefit of the Parties hereunder, and their respective representatives,
distributees, successors and assigns.
SECTION X. NOTICES. Any written notice or communications required or permitted
by this Agreement, or by law, to be served on, given to, or delivered to either
party hereto by the other party, shall be in writing, and shall be deemed duly
served, given, or delivered when personally delivered to the party to whom it is
addressed, or in lieu of such personal services, when deposited in the United
States' mail, first-class postage prepaid, addressed to:
Red Trail Energy, LLC
▇.▇. ▇▇▇ ▇▇/▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
or to:
GreenWay Consulting, LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
SECTION XI. - CONTROLLING LAW. This Agreement and the rights of the Parties
hereunder, will be governed by, interpreted and enforced in accordance with the
laws of the State of North Dakota.
SECTION XII. - DISPUTE/ARBITRATION. If any dispute arises out of or in
connection with this Agreement, the obligations arising under it or the
interpretation of its terms, the matter shall be referred to arbitration
pursuant to the Commercial Rules of the American Arbitration Association and
according to the following terms:
A. Either RTE or GreenWay may initiate arbitration by giving written
notice requesting arbitration to the other.
B. The parties shall select a single arbitrator by mutual agreement, but
if they fail to select an arbitrator within ten (10) calendar days of
the receipt of notice of arbitration, then each party shall within
seven (7) business days thereafter, appoint their respective
arbitrator and the two (2) arbitrators thus chosen shall together,
within seven (7) business days of their appointment, select a third
arbitrator and that three member panel shall arbitrate the dispute. In
the event that the two arbitrators shall fail within seven (7)
business days of their appointment to select a third arbitrator, then
upon written request of either party, the third arbitrator shall be
appointed by the American Arbitration Association. If a party shall
fail to appoint an arbitrator as required the arbitrator appointed by
the other party shall be the sole arbitrator. The arbitration shall be
conducted in Fargo, North Dakota.
C. Within fifteen (15) business days of the appointment of the arbitrator
or panel, as the case may be, each party shall state in writing its
position concerning the dispute, supported by the reasons therefore,
and deliver its position to the arbitrator(s) and the other party. If
either party fails to submit its position in a timely manner, the
position submitted by the other party shall be deemed correct, and the
arbitration shall be deemed concluded. The parties shall then have ten
(10) calendar days to respond to the position of the other party and
deliver that response to the arbitrator(s). The arbitrator(s) shall,
within thirty (30) calendar days thereafter, meet to consider the
documents presented in order to make a determination by majority on
the issues in dispute. Within fifteen (15) business days of the end of
their meeting the arbitrator(s) shall present their award. The
arbitrator(s) may
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award a party the right to terminate this Agreement if termination is
a remedy specified herein for the claim which is the subject of the
arbitration.
D. Each party in such arbitration shall bear one-half each of the
expenses of the arbitrators), including their fees and costs, but each
party shall bear their own expenses, including attorney's fees.
SECTION XIII. - LIMITATION OF LIABILITY; INDEMNIFICATION.
▇. ▇▇▇▇▇▇▇▇ shall not be liable to RTE, its affiliates and each of their
respective partners, directors, officers, agents, consultants,
employees and controlling persons (all such persons for purposes of
this SECTION XIII, a "RTE Party" or the "RTE Parties") for any losses,
damages, expenses or liabilities (collectively, "Losses") suffered by
a RTE- Party as a result of or relating to any act or omission of
GreenWay, its affiliates or any of their respective partners,
directors, officers, agents, consultants, employees and controlling
persons (all such persons for purposes of this SECTION XIII, a
"GreenWay Party or the GreenWay Parties") in performing the services
under this Agreement, except to the extent and only to the extent of
any direct (as opposed to consequential or incidental) damages or
Losses suffered by a RTE Party which are caused proximately by (1) any
acts of negligence or misrepresentations by a GreenWay Party; (2)
GreenWay's breach of any provision of this Agreement; (3) any
warranty, express or implied, or representation made by a GreenWay
Party to any third party in connection with the project under
development which is not authorized by RTE; (4) GreenWay's failure to
meet its obligations to or perform any acts required under its
agreements with its subcontractors, representatives or agents or any
other third party; or (5) the relationship between GreenWay and any
GreenWay Party. In addition to the foregoing limitation of liability,
GreenWay's aggregate liability to the RTE Parties under this Agreement
shall be limited to and shall not exceed the amount of compensation
earned by GreenWay hereunder plus any expenses paid to GreenWay
hereunder, except in the event any policy of insurance shall apply and
in such case, Greenway's total liability shall be limited to any
applicable insurance coverage. The foregoing limitations of liability
shall not apply to GreenWay's indemnification of RTE Parties against
third party claims as provided under SECTION XIII C hereof.
B. RTE shall not be liable to any GreenWay Party for any Losses suffered
by any GreenWay Party as a result of or relating to any act or
omission of a RTE Party in connection with this Agreement or the
project under development, except to the extent and only to the extent
of any direct (as opposed to consequential or incidental) damages or
Losses suffered by any GreenWay Party which are caused proximately by
(1) any acts of negligence or misrepresentations by a RTE Party; (2)
RTE's breach of any provision of
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this Agreement; (3) any warranty, express or implied, or
representation made by a RTE Party to any third party in connection
with the project under development which is not authorized by
GreenWay; (4) RTE's failure to meet its obligations to or perform any
acts required under its agreements with its subcontractors,
representatives or agents or any other third party; or (5) the
relationship between RTE and any RTE Party. In addition to the
foregoing limitation of liability, RTE's aggregate liability in the
GreenWay Parties under this Agreement shall be limited to and shall
not exceed the amount of compensation earned by GreenWay hereunder
plus any expenses paid to Green Way hereunder, This limitation of
liability shall not apply to RTE's indemnification of GreenWay Parties
against third party claims as provided under SECTION XIIID hereof.
▇. ▇▇▇▇▇▇▇▇ shall indemnify and hold harmless any RTE Party from and
against any and all claims, demands, salts, actions or proceedings,
including any Inquiry or investigation. ("Claims") brought by third
parties based primarily on or arising proximately from (1) any acts of
negligence or misrepresentations by a GreenWay Party; (2) GreenWay's
bleach of any provision of this Agreement; (3) any warranty, express
or implied, or representation made by a GreenWay Party to any third
party in connection with the project under development which is not
authorized by RTE; (4) Greenway's failure to meet its obligations to
or perform any acts required under its agreements with its
subcontractors, representatives or agents or any other third party; or
(5) the relationship between GreenWay and any GreenWay Party. This
indemnity and hold harmless shall include indemnity against all
Losses, including reasonable attorneys fees, incurred by the RTE Party
in connection with such Claim and the defense thereof, but shall
exclude any consequential damages suffered by the RTE Party as a
result of any such Claim brought by a third party. Provided, further,
that the indemnity afforded under this SECTION XIII C shall not apply
to any Claim or Losses actually paid pursuant to any insurance policy
covering the RTE Party.
D. RTE shall indemnify and hold harmless any GreenWay Party from and
against any and all claims, demands, suits, actions or proceedings,
including any inquiry or investigation ("Claims") brought by third
parties arising from or in connection with any act, omission,
transaction or event contemplated by the Agreement. This indemnity and
hold harmless shall include indemnity against all Losses, including
reasonable attorneys fees, incurred by the GreenWay Party in
connection with such Claim and the defense thereof, but shall exclude
any consequential damages suffered by the GreenWay Party as a result
of any such Claim brought by a third party. Provided, further, that
the indemnity afforded under this SECTION XIII D shall not apply to
any Claim or Losses based primarily on or arising proximately from (1)
any acts of negligence or misrepresentations by a
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GreenWay Party; (2) GreenWay's breach of any provision of this.
Agreement; (3) any warranty, express implied, or representation made
by a Green Way Party to any third Party in connection with the project
under development which is not authorized by RTE; (4) GreenWay's
failure to meet its obligations to or perform any acts required under
its agreements with its subcontractors, representatives or agents or
any other third party; (5) the relationship between GreenWay and any
GreenWay Party; or (6) actually paid pursuant to any insurance policy
covering the GreenWay Party.
E. The obligations of GreenWay and RTE under this SECTION XIII shall
survive any termination of this Agreement. In the event of any
fundamental change involving the corporate structure of either party,
the obligations of the re-structuring party under this Agreement
shall, if not assumed by operation of law, be assumed by contract by
the acquiring entity or arrangements made to protect the interests of
the non-restructuring party hereto reasonably satisfactory to such
non-restructuring party.
F. In no event shall any GreenWay Party other than GreenWay be liable or
responsible to a RTE Party for the debts, obligations or liabilities
of GreenWay to such party under this Agreement. In no event shall any
RTE Party other than RTE be liable or responsible to a GreenWay Party
for the debts, obligations or liabilities of RTE to such party under
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written. By the signature of its representatives below, each party
affirms that it has taken all necessary action to authorize said
representative(s) to execute this Agreement.
EACH PARTY AGREES IT HAS READ AND UNDERSTANDS ALL THE TERMS OF THIS AGREEMENT.
RED TRAIL ENERGY, LLC GREENWAY CONSULTING, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------- ------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: President Its: Chief Manager
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AMENDMENT
TO THE DECEMBER 17, 2003 DEVELOPMENT SERVICES AGREEMENT
This Amendment to that certain Developmental Services Agreement of December
17, 2003 is entered into this 16th day of December, 2005 by and between
GreenWay, LLC ("GreenWay") and Red Trail Energy, LLC ("Red Trail"):
FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, the parties hereby amend their original Developmental Services
Agreement (See 7/11/02 Developmental Services Agreement attached hereto as
Exhibit A) as follows;
SECTION 2 - COMPENSATION shall be amended to reflect the following payment
dates:
PHASE I Shall be due at Financial Close or January 9,
2006 whatever occurs later
25% OF PHASE II Shall be due at Financial Close or January 9,
2006 whatever occurs later
All remaining terms of this Agreement shall remain in effect as originally
agreed upon.
THIS AMENDMENT IS ENTERED INTO THE DAY AND YEAR FIRST ABOVE WRITTEN.
GREENWAY CONSULTING, LLC
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By Its: Chief Manager
RED TRAIL ENERGY, LLC
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇
By Its: President