May 17, 2007 Southern Iowa BioEnergy
May
17,
2007
Southern
Iowa BioEnergy
▇▇▇
▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇
Lamoni,
IA 50140
Attn:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Third
Inning Solutions
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
Des
Moines, IA 50321
Attn:
▇▇▇▇ ▇▇▇▇▇▇
Subject:
Interim Agreement - SIBE Bio Diesel Plant in Osceola or Lamoni, Iowa
Dear
▇▇.
▇▇▇▇▇▇ & ▇▇. ▇▇▇▇▇▇:
It
was a
pleasure meeting with you and
your
team on
Monday
March 5, 2007.
Ball
Industrial Services is excited to join the SIBE Team as your
Engineering,
Procurement,
Construction (EPC)
Contractor. As such we will be providing services to construct a 30 MGPY
Biodiesel facility; coordinating all design, construction and commissioning
services.
The
intent of this Interim Agreement is to establish a base line from which we
will
execute a definitive agreement unless sooner terminated. The Interim
Agreement
shall
remain in place until the later of (a) the date the definitive agreement is
executed, or (b) August 1, 2007.
Team
Approach
As
the
EPC Contractor for your project, Ball Industrial Services will act as the prime
contractor to SIBE and will directly manage other key prime contractors. Ball
Industrial Services will utilize existing SIBE relationships with key subs
for
the project.
Ball
Industrial Services
The
services to be provided by Ball in connection with the Facility shall include,
but are not limited to, the following:
| a) |
Preparation
of a proposed Guaranteed Maximum Price Agreement (GMAX Agreement)
for the
design, construction and start-up of the Facility, including a preliminary
schedule.
|
| b) |
Design,
construct and startup the Facility in accordance with the GMAX
Agreement.
|
| c) |
All
other items agreed to in the GMAX
Agreement.
|
Ball
will
not limit its assistance to the service specifically enumerated above, but
will
extend its services and assistance as reasonably required and requested by
the
Company to provide for the successful implementation of the plan of financing
and the design, construction and startup of the Facility. (Please refer to
Appendices A, B, C, D for more details.)
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇ - ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ph:
▇▇▇.▇▇▇.▇▇▇▇ Fax: ▇▇▇.▇▇▇.▇▇▇▇
We
will
provide project coordination for building design, civil engineering, trade
procurement for site, concrete, erection, carpentry and design as required
for
the project.
In
addition, ▇▇▇▇ will be responsible for all coordination of technology providers,
contracts, cash management, and schedule performance. As the controlling
contractor, we are responsible for OSHA activities, documentation and
implementation to ensure a safe worksite.
In
order
to ensure communication with the SIBE, LLC Board regarding critical issues
on
budget and schedule, Ball Industrial Services shall supply monthly a progress
report for use by the board and financing partners.
All
subcontracts and licenses to be entered into by Ball Industrial Services and
Bratney Companies shall be subject to prior review and approval by
SIBE.
Ball
Industrial and Bratney Companies shall use commercially reasonable efforts
to
obtain and provide to SIBE as soon as reasonably practicable the proposed
forms of any licenses, sublicenses or similar agreements relating to technology
to be provided by third parties (including, without limitation, Westfalia and
CIMBRIA SKET), and shall reasonably cooperate with SIBE in negotiating such
agreements to provide SIBE with such rights and protections as SIBE deems
necessary or appropriate in connection with such underlying
technology.
Bratney
Companies
Bratney
will be the technology provider for this project. They will provide the design
process, process license, and detailed engineering services for
the
plant &
process.
Bratney
will be a subcontractor to Ball Industrial Services. Bratney will provide
proprietary process equipment and services. Both Ball and SIBE will contract
directly with Bratney for the license,
design
services
and
process equipment supply.
Bratney
will be responsible
for the
engineering,
design,
procurement and construction
for all
components of the main process plant. They will also be responsible for vessel
fabrication & erection and system commissioning.
Ball
Industrial
will be
responsible
for the
engineering,
design,
procurement and construction
for the
components of the project which are not part of the main process plant. This
includes the design of the process buildings, equipment supports, design of
feedstock
handling systems and equipment,
storage
and load out equipment, biodiesel
& glycerin
storage
and load out;
water
& waste
water
treatment, steam generation, cooling water system, chemical storage and
handling.
Scope
& Budget
Ball
Industrial Services will be acting as the EPC contractor for this project
and
as
such will be responsible
for all
direct
engineering
and subcontractors
including
the management
of Bratney. We will work with Bratney, and our subcontractor base to establish
a
base line scope and price to produce a 30 MG PY facility. It is imperative
that
we accurately
forecast
all
factors affecting the
cost
and
timing of project completion. We are in a very dynamic marketplace and the
currently strong demands on market
resources
can produce unforeseen
costs and
delays.
Schedule
Ball
Industrial Services estimates a sixteen to eighteen month construction cycle.
The schedule will commence when long lead time equipment has been placed on
order. Although the SIBE estimate for ground breaking for the Osceola or Lamoni
site is set for August 1, 2007, Ball Industrial Services will commence
construction activities earlier if given direction from the Owner, once
financing is in place.
2
Key
Elements to Proposed Schedule:
SIBE
has
the responsibility to obtain all required permits. Ball Industrial Services
will
work with SIBE to obtain all appropriate permits. The time for this activity
may
be a critical path item for the schedule and may require schedule adjustments
based upon the critical timeline to procure.
Ball
Industrial Services is forecasting availability of equipment and manpower from
key subcontractors on the project. Material shortages, labor agreements and
SIBE
down payments will affect and drive the overall schedule for the project. It
is
imperative that we establish accurate lead times for critical path items. Ball
Industrial Services will provide monthly schedule and budget updates to
SIBE.
Contract:
Ball
Industrial Services proposes a cost plus fee Guaranteed Maximum Price contract
as a prime contract for the SIBE
project.
Except
as otherwise directed by ▇▇▇▇, all subcontracts shall be competitively bid
as
part of the Ball Industrial Services package. All contracts shall be reviewed
prior to execution with ▇▇▇▇. All costs shall be made available for review
by
the SIBE team at anytime.
Ball
Industrial Services and ▇▇▇▇ have executed this interim agreement to cover
project management, engineering and equipment procurement costs associated
with
the project. The Target Price for the Project will be prepared within 8 weeks
of
execution and funding of this Interim Agreement.
EPC
Agreement:
It
is the
intention of Ball Industrial Services and SIBE to execute a prime contract
for
EPC services with a Guaranteed Maximum Price ("GMAX").
The
rights and obligations of the parties with respect to the Facility will be
set
forth in the GMAX agreement to be executed by the parties (the "GMAX
Agreement").
The
completion of the GMAX Agreement is subject to and contingent upon the parties
reaching agreement on the terms and conditions thereof. After this interim
agreement is executed by the Company and returned to Ball industrial
Services
together with the down payment, the parties will enter into good faith
negotiations for the preparation of the GMAX Agreement. Either party may
terminate such negotiations at any time and for any reason. If this interim
agreement is terminated by SIBE, Ball Industrial Services will refund the down
payment paid less expenses incurred and fee earned by Ball Industrial Services
as a result of this interim agreement. If this interim agreement is terminated
by Ball Industrial Services, Ball Industrial Services will refund the down
payment paid by SIBE.
Ball
Industrial GMAX pricing shall include GMAX pricing for Ball Industrial Services
and all subs and primes plus an agreed to project contingency. GMAX pricing
will
be established by the time the Project Design and Development documents are
80%
complete.
3
Fees
Project
Fee: Ball Industrial Services proposes a 10% cost of work fee on all
subcontracts under Ball Industrial Services EPC agreement. Ball Industrial
Services proposes a 10% cost of work fee for prime contracts managed by Ball
Industrial Services.
Shared
Savings: Ball Industrial Services proposes a 60/40 split on all savings
generalized by the prime contractors below the GMAX price. 60% for SIBE and
40%
Ball Industrial Services which will be shared pro rate with the prime
subs.
Schedule
Bonus: Prior to the GMAX Agreement being finalized, Ball Industrial Services
proposes developing a schedule incentive plan with SIBE. If the performance
guarantee is achieved on or before the expiration of the eighteenth month,
this
incentive shall be shared pro rata with each key subcontractor to ensure
performance. In the event the parties agree to such a schedule incentive plan,
Ball Industrial Services will also agree to pay liquidated damages in an
identical amount for each day after eighteen months that the project is not
complete.
General
Liability
General
Liability fee of .60% of the cost of work shall be applied to the Ball
Industrial Services EPC contract.
Payment
Terms:
Initial
Down Payment:
Upon
execution of this interim agreement SIBE will provide a series of initial down
payments to start project design. Ball Industrial Services shall make deposits
to Bratney, and design engineers, to begin engineering. Ball Industrial Services
will require a payment of $750,000 for preconstruction engineering, design,
deposits and other initial project expenses. Ball Industrial Services will
provide SIBE with a weekly accounting of any such payments and
deposits.
Subcontractor
Retention:
Ball
Industrial Services reserves the right to contract or change subcontractors
to
deliver the project as required to meet the project timelines, subject to SIBE’s
prior written consent, which shall not be unreasonably withheld.
Ball
Industrial Services
The
remaining contractors shall invoice bimonthly for work completed. SIBE shall
pay
all invoices in Net 15 days after receipt of invoices. Ball Industrial Services
shall prepare an estimated draw schedule which will be reviewed and agreed
to by
Ball Industrial Services and SIBE.
Equipment
Down Payments
There
will be several long lead items involved with the SIBE project. They shall,
from
time to time, require deposits or non-refundable deposits to secure production
slots. If such deposits are approved by SIBE, SIBE shall direct wire such
payments directly to the contractor vendors. Ball Industrial Services shall
track and report monthly all such deposits so SIBE can maintain accurate records
of non-refundable deposits.
Warranties
4
Mechanical
& Process:
The
Bratney
Companies
and their technology provider will provide mechanical and process performance
warranties. These will be developed prior to execution of the GMAX
Agreement.
Workmanship:
Ball
Industrial Services will provide a one year warranty agreement for workmanship
and materials.
SIBE
Responsibilities
| · |
Payment
of all prime contracts as well as associated licensing and performance
requirements.
|
| · |
All
site costs associated with ground acquisition and due
diligence
|
| · |
All
costs associated with debt
financing
|
| · |
Obtaining
state, city, or county incentives for the
project
|
| · |
Application,
securing and payment of all applicable licensing and permits related
to
the project.
|
This
is
an approved understanding and agreement between Ball Industrial Services and
Southern Iowa Bio Energy, LLC,
| Ball Industrial Services, LLC | Southern Iowa Bio Energy, LLC | ||
| /s/▇▇▇▇ ▇▇▇▇
▇▇▇▇
▇▇▇▇
|
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
||
| President | President | ||
| Date: 5-17-07 | Date: 5-17-07 |
Attachments:
Appendix
A: Engineer/Contractor
Responsibilities
Appendix
B: Owner’s
Responsibilities
Appendix
C: Ownership
of Documents
Appendix
D: Feedstock
Risk Assessment
5
Appendix
A:
Engineer/Contractor Responsibilities
Engineering
services shall be performed under the direct supervision of Ball Industrial.
The
following Engineering Services shall be provided:
|
Project
costing developed
|
|
Project
Cash Flow Projection for the project (with definition of payment
terms)
|
|
Utility
Requirements definition to Owner
|
|
Site
Lay-out Plan development (with utilities, rail, roads, and building
orientations) with Owner representatives input. (This does NOT include
Civil Engineering for final design)
|
|
Process
Area Lay-out. (equipment location and orientation by level in the
structure)
|
|
Process
Engineering Package development. (Material and Energy Balance, process
flow sheets, index flow sheets)(utility consumption rates
defined)
|
|
Process
wastewater and air emissions information transferred to Owner’s
Environmental Engineer.
|
|
Design
detail development of Process Structure and foundations.
|
|
Project
Milestone Schedule (detailed) and full Project Scope definition
document.
|
|
Development
of detailed Piping and Instrumentation Diagrams
(P&ID)
|
|
Design/Build
Construction Contract Developed. (GMAX format)
|
|
Identification
of Long Lead Time Equipment and Procurement Plan for Westfalia, Cimbria
and Bratney provided equipment.
|
|
Definition
of electrical requirements and electrical design
details.
|
|
Definition
of ISBL and OSBL tank farm sizing recommendations to
Owner.
|
|
Definition
of fire prevention and detection equipment and installation
requirements.
|
|
Development
of control logic documents (functional descriptions), control code
and
control graphics for process equipment.
|
|
Design
details of instrumentation input and output requirements. (loop drawings)
|
|
Definition
of insulation requirements for piping and equipment.
|
|
Completion
of a HAZOP review of process with owner’s representatives in
attendance
|
|
Specification
of all Bratney provided instruments, piping, valves, pumps and fittings.
|
|
Definition
of painting requirements for piping and
equipment.
|
Project
Schedule The
developed schedule shall show the activities of the Owner and the
Engineer/Contractor necessary to meet the Owner’s completion requirements with
ownership designation on individual tasks.
Target
Pricing Ball
Industrial will work with the Owner to develop the Target Price for the defined
scope of work. This will occur within 8 weeks of execution and funding of this
Interim Agreement.
6
Appendix
B: Owner’s
Responsibilities
The
Owner
shall provide to Ball Industrial all relevant information for the Project,
including the Owner’s Program and intentions, 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 not to proceed with the Project, the Owner shall have no further
obligation to Ball Industrial other than the payment of compensation as set
forth in this Agreement.
The
Owner
shall provide Ball Industrial all known information regarding site and the
site
attributes that are needed to complete the project scope.
7
Appendix
C: Ownership
of Documents
All
documents, work papers, plans, designs, and related work product generated
or
produced pursuant to this Interim Agreement shall remain the property of Ball
Industrial and its subcontractors prior to handing-over of the completed plant
to the Owner, subject, however, to a non-assignable license to the Owner to
complete the proposed plant in or near Osceola or Lamoni, Iowa and to use
such materials in connection with such plant, provided that the Owner has paid
all amounts owing to such parties. This includes notes, photos, memorandums,
drawings generated as part of the scope of this Interim Agreement. The ownership
of technology specific information and/or information regarding the Connemann
Process Patent will remain in ownership by the Bratney Companies and Westfalia
in the event the project is stopped during or after the duration of this work
phase.
8
Appendix
D: Feedstock
Risk Assessment
If,
during the completion of work outlined in this agreement, the feedstock plan
for
the facility dictates other than soy or palm oil to be used, a Feedstock Risk
Assessment activity will be completed as soon as possible under the direction
of
Ball Industrial / Bratney. This assessment will be completed as an expense
to
the Owner. This step is being dictated due to the influx of potential feedstock
for Biodiesel production that may highly variable in quality.
The
Owner
will be asked to provide liquid samples of all feedstock types planned other
than soybean or palm oil. These samples must be considered representative and
“typical” of the supply that will eventually be resourced to supply the
operating Biodiesel facility.
Ball
Industrial / Bratney 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.
Ball
Industrial / Bratney will coordinate a review session of the test results with
the Owner and the Owner’s representative. 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 Owner’s 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, Ball Industrial / Bratney
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.
If
no
concerns exist, the work outlined under this agreement will continue as per
planned content and schedule.
9