EXHIBIT 10.7
------------
Project Development Agreement/LOI
Rev 06 30 06
PROJECT DEVELOPMENT AGREEMENT
BETWEEN
NORTHERN ETHANOL (SARNIA) Inc.
AND
DELTA-T CORPORATION
This Agreement is entered into this 7th day of September, 2006 by and
between DELTA-T Corporation, a Virginia corporation located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ (hereinafter "DELTA-T"), and Northern
Ethanol (Sarnia), Inc, a corporation registered in Ontario (hereinafter
"Client"), which parties may be referred to individually as a "Party" or jointly
as the "Parties."
WITNESSETH
WHEREAS, DELTA-T is in the business of developing, designing, and supplying
commercial technologies, equipment and manufacturing facilities to perform a
wide range of process industry applications, including, without limitation,
grain processing, ethanol production, evaporation, distillation, dehydration,
adsorption, solvent recovery and waste treatment; and
WHEREAS, Client intends to develop an ethanol plant having the capacity to
produce 100 million gallons per year at a site to be located in Sarnia
(hereinafter "Plant"); and
WHEREAS, Client wishes to retain DELTA-T to provide professional advice,
business and technical information, design and engineering, and related services
in order to assist Client in assembling all of the information, permits,
agreements and resources necessary for construction of Plant (hereinafter
"Project"), and DELTA-T is willing to provide such services for a fixed fee,
provided that Client enters into an exclusive relationship with DELTA-T to
provide the Plant and/or technology transfer, engineering and procurement
services for the Plant, and otherwise on the terms and conditions set forth
herein; and
WHEREAS, Client and DELTA-T intend to enter an Engineering, Procurement and
Construction (EPC) agreement within 6 months from the execution of this
document,
WHEREAS, Client recognizes that DELTA-T is foregoing other significant
business opportunities in order to perform such services, and that the
provisions of this Agreement concerning exclusivity are essential to this
Agreement and that DELTA-T would not be willing to enter into this Agreement
without those provisions;
NOW THEREFORE, IN CONSIDERATION of the mutual terms and conditions of this
Agreement, Client and DELTA-T agree as follows:
ARTICLE 1
SCOPE OF PROJECT DEVELOPMENT AND
PRELIMINARY ENGINEERING SERVICES
Client hereby retains DELTA-T, and DELTA-T hereby agrees, to provide per the
terms of this Agreement, the services described in this Section 1.1 to help
Client develop the Project.
--------------------------------------------------------------------------------
DELTA-T CORPORATION Page 1 of 9
Confidential Information
Project Development Agreement/LOI
Rev 06 30 06
1.1 Basic Project Development Services: DELTA-T shall:
1.1.1 Help Client develop and analyze feasible Project alternatives,
including potential facility sites, and assist in the selection of the
most appropriate technical and site options in conjunction with the
needs of the Project;
1.1.2 Provide projected plant operating cost factors and assist Client
with profitability and sensitivity analyses for selected Project
alternative(s);
1.1.3 Work with Client to define Plant specifications, and assist in
developing Project roles and responsibilities for all participating
parties;
1.1.4 Develop a preliminary general arrangement drawing for the Plant
based on the selected alternatives and site physical and geo-technical
data provided by the Client;
1.1.5 Provide process emissions data for environmental permitting
activities in support of the environmental permitting firm to be
retained by Client;
1.1.6 Utilize DELTA-T's experience in ethanol plant operation,
products marketing, and industry economics to help Client develop a
business plan;
1.1.7 Provide technical and economic data and strategic guidance to
assist Client in making presentations to potential equity investors
and financial institutions;
DELTA-T shall continue to develop and make modifications to each of the services
referenced under Section 1.1 as necessary in accordance with changing or
evolving Project plans. DELTA-T shall perform such services at such times, and
according to such schedule, as reasonably necessary to support effective
development of the Project. Mutually agreed project development tasks not
addressed in Section 1.1 above, will be engaged by separate agreements such as a
compensated scope of work which may be appended to this Agreement.
1.2 Client's Responsibilities: The entity that will own the Project, whether it
is the Client or another entity, shall hereinafter be referred to as "Owner."
Client shall perform, or cause Owner to perform, the following tasks to assure
development of the Project, and such other tasks as may be required to achieve
funding for the Project:
1.2.1 Promptly provide to DELTA-T, upon its request, such design decisions
and information related to site selection, plant size, interface of the
Plant to other sections of the Project, and other key project design
parameters as DELTA-T may reasonably request from time to time;
1.2.2 Create a Project development strategy and timeline, in cooperation
with DELTA-T, (the "Plan"), for the purposes of fully defining the Project
its specifications and of obtaining one or more letter(s) of commitment for
financing in an amount and on terms and conditions sufficient to enable
Client or Owner to execute the Project, and on terms otherwise acceptable
to Client ("Financing");
--------------------------------------------------------------------------------
DELTA-T CORPORATION Page 2 of 9
Confidential Information
Project Development Agreement/LOI
Rev 06 30 06
1.2.3 Execute the Plan in a diligent manner;
1.2.4 Cooperate with DELTA-T to define Project specifications, and define
Project development roles for all participating parties;
1.2.5 Develop a business plan, in cooperation with DELTA-T, based on the
information provided by DELTA-T under Section 1.1 above; and
1.2.6 Otherwise cooperate with DELTA-T in the development of the Project as
mutually agreed between the Parties.
Client, or Owner, shall perform such tasks within sufficient time to allow
DELTA-T to fulfill its obligations under Section 1.1 above in a timely manner.
Client will designate ▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual, to serve as DELTA-T's
primary contact for the work performed under this Agreement. DELTA-T shall be
entitled to rely on, and shall proceed according to the directions of, that
individual, or such other individual as Client may from time to time appoint in
writing with respect to this Agreement.
1.3 Project Control Responsibilities: Client shall notify DELTA-T promptly of
any plan or intent on the part of any actual or potential investors in the
Project to form an Owner, or alter the equity or voting structure of an Owner,
in such a way that Client would not have sufficient control over such Owner to
require it to perform the obligations of Owner described in this Agreement, and
to assist DELTA-T in causing such Owner to become a party to this Agreement, or
another similar agreement acceptable to DELTA-T. Client agrees that it shall not
assist Owner in any way, directly or indirectly, in working with anyone other
than DELTA-T in connection with the Project, except as expressly permitted under
this Agreement. Client acknowledges that if it were to provide any Confidential
Information (as described in Article 2 below) of DELTA-T to any Owner over which
it did not have control, that such Owner would benefit significantly from such
information, and Client acknowledges that it understands and will comply
strictly with the prohibition on such disclosures set forth in Article 2 below.
In the event that Owner, for any reason other than termination of this Agreement
for breach by DELTA-T, fails to honor the exclusivity provisions of Article 5
below, Client shall, in addition to any other damages that DELTA-T may have, pay
DELTA-T the entire amount due to DELTA-T and remaining unpaid under Sections 3.1
and 3.2 below.
ARTICLE 2
CONFIDENTIAL INFORMATION
"Confidential Information" shall mean (i) all inventions, whether patentable or
not, all processes, designs, know-how, copyrights and any and all other
intellectual property of any kind ("Intellectual Property") and financial and
other business information provided by DELTA-T to Client under this Agreement,
which shall be deemed Confidential Information of DELTA-T and (ii) all business
plans, and other sensitive information about the Project disclosed by Client to
DELTA-T during the term of this Agreement, which shall be deemed Confidential
Information of Client (except to the extent that it consists of Confidential
Information of DELTA-T).
Neither Party shall (i) use any Confidential Information of the other except for
development of the Project as provided under this Agreement, or (ii) disclose
any part of the Confidential Information of the other to any person or entity
other than its employees who need to have access to such data and who are bound
to comply with the confidentiality terms of this Agreement, and
--------------------------------------------------------------------------------
DELTA-T CORPORATION Page 3 of 9
Confidential Information
Project Development Agreement/LOI
Rev 06 30 06
as otherwise authorized by the Party providing the Confidential Information.
Notwithstanding the foregoing Client may disclose information of the type
provided by DELTA-T under Section 1.1 above to third parties to whom it needs to
disclose such information to develop the Project, provided that it first obtains
a written confidentiality agreement from such party to protect such information
to at least the same degree as provided under the agreement attached hereto as
Exhibit B. Client may disclose information of the type provided by DELTA-T under
Section 1 above to any third party to whom it needs to disclose such information
to develop the Project only after such party executes a confidentiality directly
with DELTA-T in the form attached hereto as Exhibit B, or such other form as
DELTA-T may agree. Client shall provide a copy of each such agreement to Delta-T
promptly upon execution of the same. Furthermore, Client may disclose
Confidential Information, if any, that it needs to disclose in order to comply
with any applicable law, rule or regulation provided that it takes whatever
steps are necessary to protect the confidentiality of such information to the
full extent allowed by such law, rule or regulation.
In particular, but without limitation, under no circumstances may Client use any
of the Confidential Information to assist it in negotiating or entering into an
agreement with any third party to provide any services or technology related to
the Project in violation of this Agreement.
Neither Party shall disclose any Confidential Information of the other pursuant
to court order or other legal process unless: (i) it is advised by its legal
counsel that it is legally required to do so, (ii) it has promptly given the
other notice of such order or process so that the other can obtain a secrecy
order or other applicable remedy and (iii) it has used all other reasonable
means to ensure the confidential treatment of such information, other than
seeking a judicial order or other judicial relief.
Notwithstanding anything set forth above, however, neither Party shall have any
obligation under this Article 2 with respect to Confidential Information of the
other which the receiving Party can show through documentary evidence falls
under one or more of the following exclusions: (a) that such information was in
its possession prior to receipt from the other; (b) such information was in the
public domain at the time of disclosure or thereafter enters into the public
domain through no breach of this Agreement by Recipient or is in general use in
the trade without violation by Recipient of this Agreement, or violation by any
other party of an obligation not to disclose it; or (c) the information is
disclosed to the receiving Party by a third party who is under no obligation not
to disclose it.
The provisions of this Section shall survive termination of this Agreement until
such time, if ever, that it falls under one of the exclusions described in the
preceding paragraph.
ARTICLE 3
COMPENSATION
3.1 Project Development Services: For the services described in Section 1.1
above, Client shall pay DELTA-T a fee equal to $100,000 USD Client shall pay to
DELTA-T Client shall pay to DELTA-T 70% of such fee within ten (10) days of
signing this Agreement and the remaining balance within ten (10) days of air
permit submittal by Client to the Province of Ontario.
3.2 Travel and Related Expenses: Client shall bear the cost of all travel, room
and board and related expenses incurred in connection with providing on site
services to the extent provided under Article 1 above, with reimbursement based
on actual costs. Client shall pay DELTA-T's reasonable costs incurred in
connection with all other such
--------------------------------------------------------------------------------
DELTA-T CORPORATION Page 4 of 9
Confidential Information
Project Development Agreement/LOI
Rev 06 30 06
expenses incurred with Client's prior consent, except that DELTA-T will be
responsible for one site visit by two people without charge to Client.
3.3 Late Payment Penalty: Client shall pay DELTA-T a late charge at the lesser
of 1% per month or the highest amount permitted by applicable law on all
payments past due.
ARTICLE 4
LIMITED LICENSE OF DELTA-T CONFIDENTIAL INFORMATION
DELTA-T is and shall remain the sole owner of the Confidential Information
provided by DELTA-T hereunder, and of the copyrights in all the drawings and
other documents provided by DELTA-T under this Agreement. DELTA-T hereby grants
Client a limited, non-exclusive, non-transferable license, without right to
sublicense, to use the Confidential Information of DELTA-T solely for Client's
use in connection with development and financing of the Project during the term
of this Agreement. DELTA-T reserves to itself all rights not expressly granted
under this Article 4. In particular, but without limitation, this license does
not include the right to use any of the Confidential Information to procure bids
for development or construction of a plant, or to design or operate a plant or
facility based on any of such Confidential Information.
ARTICLE 5
EXCLUSIVE RELATIONSHIP
5.1 The Plant: If Client, or Owner as the case may be, elects to build the
Plant, then it shall employ best efforts to enter into a contract with DELTA-T
whereby DELTA-T will provide, as a minimum, all services defined in Article 6
below. Additional services, up to and including DELTA-T providing the Plant on a
turn-key fixed-price basis, may be included at the mutual consent of the
Parties. During the term of this Agreement Client shall not, and shall not
permit Owner or any other party associated with the Project, to enter into,
negotiate toward, or take any other action in furtherance of entering into any
agreement for provision of the technology, services or equipment to be provided
by DELTA-T under the Technology Agreement to be entered into under Article 6
below, or in furtherance of entering into any turnkey engineering, procurement
and construction agreement for the entire Plant ("EPC Agreement") except as
permitted under Sections 6 and 7 below.
5.2 Other Plants: If for any reason the Parties do not enter into an EPC
Agreement or Technology Agreement with respect to the Plant, then neither Client
nor Owner shall, for a the shorter of (a) five (5) years from the date of this
Agreement, or (b) such time as Client or Owner and DELTA-T enter into an EPC
Agreement or Technology Agreement for an ethanol plant, enter into an agreement
with any other party to use technology, engineering and procurement services
other than DELTA-T's for any ethanol plant project without first providing
DELTA-T at least sixty (60) days to enter into an agreement for development and
design of such plant on the same terms as set forth in this Agreement.
ARTICLE 6
TECHNOLOGY TRANSFER, ENGINEERING AND
PROCUREMENT SERVICES AGREEMENT
Upon Client's obtaining the Financing for the Project or at such earlier time as
Client and DELTA-T may agree, Client and DELTA-T shall enter into either a
turnkey EPC agreement to
--------------------------------------------------------------------------------
DELTA-T CORPORATION Page 5 of 9
Confidential Information
Project Development Agreement/LOI
Rev 06 30 06
provide the entire Plant under mutually agreeable terms ("EPC Agreement"), or a
technology transfer, engineering and procurement services agreement ("EPT
Agreement") whereby DELTA-T shall, as a minimum, (a) provide engineering
services in addition to that provided under Section 1.1 above that may be
required to complete the basic process engineering design suitable for capital
investment determination and all detail design; (b) review all detailed
engineering performed by others in order to assure that it conforms to such
suitable process engineering design; (c) provide the procurement services for
plant equipment as determined by DELTA-T; (d) provide construction observation
assistance, operations and maintenance manuals, training and start up assistance
services to be specified in the EPC or Technology Agreement; (e) provide a
license of the Plant process technology embodied in the basic process
engineering design provided by DELTA-T for the purpose of operating the Plant.
Such Technology Agreement shall include the following provisions, and such other
provisions as the parties deem reasonably appropriate:
a. DELTA-T shall be paid a detailed engineering, startup and training
services fee, plus a one-time technology license fee. Such fees will
be quoted by DELTA-T upon substantial completion of Basic Project
Development Services listed in Section 1.1 herein.
b. In addition, DELTA-T shall be paid a fee based on the purchase price
of all equipment for which DELTA-T is to provide procurement services.
c. DELTA-T shall provide Plant process performance warranties that are
typical for the industry based on the final plant configuration and
selected energy-saving options.
d. DELTA-T shall offer a liquidated damages provision the event of breach
of the Plant process performance warranties on a pro rata basis,
depending upon the extent to which such warranty is breached as
determined by a performance test protocol to be included in the
Technology Agreement;
e. The maximum amount of DELTA-T's total liabilities in the Technology
Agreement shall be limited to a percentage of the fees earned
performing the scope of services described in the Technology
Agreement.
ARTICLE 7
FIRST RIGHT OF REFUSAL
If the Parties do not reach agreement for DELTA-T to provide the plant on a
turnkey, EPC basis and instead enter into a Technology Agreement, Owner shall
not enter into a construction agreement with any other party without providing
DELTA-T at least sixty (60) days to enter into an agreement for construction on
the same terms as another party is willing to contractually agree to for the
construction.
ARTICLE 8
INDEPENDENT CONTRACTOR
DELTA-T and Client are independent contractors, and nothing in this Agreement
shall be deemed to make either Party an agent or partner of the other, or to
give either Party the right to bind the other in any way.
ARTICLE 9
TERM AND TERMINATION
--------------------------------------------------------------------------------
DELTA-T CORPORATION Page 6 of 9
Confidential Information
Project Development Agreement/LOI
Rev 06 30 06
This Agreement shall commence on the date first above written and shall continue
for a period of five (5) years unless earlier terminated as provided in this
Article 9. This Agreement may be terminated upon written notice:
(i) By either Party in case of material breach by the other if such breach
is not cured within thirty (30) days after receipt of the breaching
party of notice of such breach;
(ii) By DELTA-T if a) payment is not received by DELTA-T as provided in
Article 3 of this Agreement and such breach is not cured with thirty
(30) days after receipt of DELTA-T's notice of such breach, or b)
Project Financing is not obtained within eighteen (18) months of the
date first above written.
Upon termination of this Agreement for any reason, the license granted under
Article 4 above shall immediately cease, and each Party shall (i) immediately
cease use of all Confidential Information of the other, (ii) immediately deliver
to the disclosing Party all Confidential Information provided to it by the
other, including all copies of the same, and destroy all materials developed by
it or any third parties to whom it disclosed such information which was based
upon such information, and (iii) certify to the disclosing Party that it has
done so. In particular, but without limitation, Client shall promptly advise all
actual and potential investors and lenders for the Project and all regulatory
authorities to which Confidential Information of DELTA-T has been provided of
the termination hereof, and shall withdraw any applications for financing or
permits that were based on the use of DELTA-T's Confidential Information.
ARTICLE 10
DISPUTE RESOLUTION
In the event of any dispute arising under or in connection with this Agreement
or with the existence, validity, interpretation, breach or enforcement thereof,
either before or after the termination or expiration of this Agreement, the
Parties shall, upon the written request of either of them, enter into mediation
of such dispute pursuant to the applicable rules of the American Arbitration
Association, or such other rules or procedures as they may agree. Neither party
shall file suit unless it has first complied with this provision and attempted
to resolve such dispute for a period of at least thirty (30) days. Nothing
herein contained, however, shall be deemed to prevent either Party from seeking
injunctive relief from any court of competent jurisdiction, without necessity of
posting bond, in case of a breach of Articles 2, 4, 5, 6 or 7 above. Should
litigation arise after complying with the provisions of this paragraph, the
losing party will pay legal expenses of the prevailing party in such litigation.
ARTICLE 11
LIMITATION OF DAMAGES AND REMEDY
Client's sole remedy with respect to uncured breach by DELTA-T of any provision
of this Agreement (other than breach of Article 2), or with respect to services
performed by DELTA-T under this Agreement shall be termination of this Agreement
and refund of the portion of the fee, if any, allocable to services not properly
performed. In no case shall DELTA-T be liable for any other damages of any kind,
direct, indirect, incidental, consequential, reliance, exemplary or otherwise,
with respect to any services performed by it, or to its failure to perform
services, under this Agreement.
ARTICLE 12
GENERAL TERMS
--------------------------------------------------------------------------------
DELTA-T CORPORATION Page 7 of 9
Confidential Information
Project Development Agreement/LOI
Rev 06 30 06
12.1 Waiver: The failure of either Party to insist on strict performance of any
of the provisions of this Agreement or to exercise any right it grants will not
be construed as a relinquishment of any right or a waiver of any provision of
this Agreement. No waiver of any provision or right shall be valid unless it is
in writing and signed by a duly authorized representative of the Party granting
the waiver.
12.2 No Assignment: Neither Party may assign or convey this Agreement or its
obligations hereunder without the other's prior written consent, except that
either Party may assign this Agreement to a purchaser of a controlling interest
in its capital stock or of substantially all of its assets as long as the
purchaser agrees to comply with all the selling Party's obligations set forth
herein.
12.3 Governing Law: This Agreement shall be governed and construed in accordance
with the laws of the Province of Ontario, without regard to its choice of law
rules.
12.4 Notices: Notices and other communications required or allowed by this
Agreement shall be in writing and sent by U.S. mail, express carrier, by hand,
or by facsimile transmission as follows:
If to DTC, to: DELTA-T Corporation,
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President
If to CLIENT, to Northern Ethanol (Sarnia) Inc.
▇▇▇-▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇
FAX ▇▇▇ ▇▇▇ ▇▇▇▇
Attn: ▇▇▇▇▇▇ Reader
or such other addresses as a Party may specify by proper notice.
Each notice so given shall be deemed delivered, if by mail upon the third
business day after mailing, if by courier, upon delivery by the courier, and
otherwise upon receipt by the Party to whom notice is sent.
12.5 Survival: The provisions of Articles 2, 10 and 11 above shall survive
termination or expiration of this Agreement, and Articles 5.2 and 7 shall
survive except in case of termination by Client for material breach by DELTA-T.
12.6 Severability: If a court of competent jurisdiction determines that any
portion of this agreement is illegal, unenforceable or invalid, then that
portion shall be considered to be removed from this agreement, the remainder
shall remain in full force and effect, and the Parties shall cooperate to modify
the Agreement to cause it to conform to the original language of the Agreement
to the extent consistent with the finding of the court.
12.6 Entire Agreement: This Agreement constitutes the entire agreement between
the Parties relating to its subject matter, and supersedes all prior
representations,
--------------------------------------------------------------------------------
DELTA-T CORPORATION Page 8 of 9
Confidential Information
Project Development Agreement/LOI
Rev 06 30 06
understandings and agreements, written or oral, express or implied. The
Agreement can be modified only by written agreement executed by authorized
representatives of each Party.
IN WITNESS whereof the Parties have executed this Agreement on the dates set
forth below.
DELTA-T CORPORATION NORTHERN ETHANOL (SARNIA) INC
By: s/▇▇▇▇ ▇▇▇▇▇▇▇ By: s/▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------------ -------------------------
Printed ▇▇▇▇ ▇▇▇▇▇▇▇ Printed ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: ------------------------------------ Name: -------------------------
Vice President Project Development CEO
Title: ------------------------------------ Title: -------------------------
September 7, 2006 September 7, 2006
Date: ------------------------------------ Date: -------------------------
--------------------------------------------------------------------------------
DELTA-T CORPORATION Page 9 of 9
Confidential Information
