UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
| x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended September 30, 2004
OR
| o | Transition report under Section 13 or 15(d) of the Exchange Act. |
For the transition period from to .
Commission file number 333-99065
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Minnesota
(State or other jurisdiction of
incorporation or organization)
41-1997390
(I.R.S. Employer
Identification No.)
15045 Highway 23 S.E.
Granite Falls, Minnesota 56241
(Address of principal executive offices)
(320) 564-3100
(Issuer’s telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No
State the number of shares outstanding for each of the issuer’s classes of common equity as of the latest practicable date: As of November 9, 2004, there were 31,197 units of ownership outstanding.
Transitional Small Business Disclosure Format (Check one): o Yes þ No
CONTENTS
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Item 1. Financial Statements
C O N T E N T S
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GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Condensed Balance Sheet
Notes to Financial Statements are an integral part of this Statement.
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GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Condensed Statements of Operations
Notes to Financial Statements are an integral part of this Statement.
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GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Condensed Statements of Operations
Notes to Financial Statements are an integral part of this Statement.
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GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Condensed Statements of Cash Flows
- Continued -
Notes to Financial Statements are an integral part of this Statement.
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GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Condensed Statements of Cash Flows
Notes to Financial Statements are an integral part of this Statement.
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GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
Notes to Unaudited Financial Statements
September 30, 2004
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted as permitted by
such rules and regulations. These financial statements and related notes
should be read in conjunction with the financial statements and notes thereto
included in the Company’s audited financial statements for the year ended
December 31, 2003, contained in the Company’s annual report on Form 10-KSB for
2003.
In the opinion of management, the interim condensed financial statements
reflect all adjustments considered necessary for fair presentation. The
adjustments made to these statements consist only of normal recurring
adjustments.
Nature of Business
The Company, which started
construction on its plant location near Granite Falls,
Minnesota, was originally organized to fund and construct a 40 million gallon ethanol
plant with distribution to upper Midwest states. Subsequent to September 30, 2004, the board of governors of the Company voted
to build a plant capable of producing up to 50 million gallons of ethanol a
year. The Company’s operations permit presently allows for the production of up
to 47 million gallons of ethanol a year and will have to be amended in the
event the Company’s desires to produce up to its capacity. In addition, the Company
intends to produce and sell distillers dried grains as a co-product of ethanol
production. Construction began in the third quarter of 2004. As of September
30, 2004, the Company is in the development stage with its efforts being
principally devoted to organizational, equity raising, permitting, and
construction activities.
Accounting Estimates
Management uses estimates and assumptions in preparing these financial
statements in accordance with accounting principles generally accepted in the
United States of America. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could
differ from those estimates.
Cash and Equivalents
The Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. The Company maintains its
accounts primarily at one financial institution. At times throughout
the year, the Company’s cash and cash equivalents balances may
exceed amounts insured by the Federal Deposit Insurance Corporation.
The Company’s financial instruments consist primarily of cash
and cash equivalents, whose fair value equals their carrying amount.
Deferred Offering Costs
The Company defers the costs incurred to raise equity financing until that
financing occurs. As of September 30, 2004 the minimum equity has been raised
and these costs have been netted against the proceeds received.
Fair Value of Financial Instruments
The fair value of the Company’s cash and notes payable to Granite Falls Bank
approximates its carrying value. It is not currently practicable to estimate
the fair value of the notes payable to the City of Granite Falls since these
agreements contain unique terms, conditions, and restrictions, which were
negotiated at
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arm’s length with the City of Granite Falls, as discussed in Note 3, there is
no readily determinable similar instrument on which to base an estimate of fair
value.
Grants
The Company will recognize grant income as other income for reimbursement of
expenses incurred upon complying with the conditions of the grant. For
reimbursements of capital expenditures, the grants are recognized as a
reduction of the basis of the asset upon complying with the conditions of the
grant.
Income Taxes
Granite Falls Community Ethanol Plant, LLC is treated as a partnership for
federal and state income tax purposes and generally does not incur income
taxes. Instead, its earnings or losses are included in the income tax returns
of its members. Therefore, no provision or liability for federal or state
income taxes has been included in these financial statements.
Financial Statement Pronouncements
The Financial Accounting Standards Board (FASB) has issued Statement No. 149
“Amendment of Statement 133 on Derivative Instruments and Hedging Activities.”
The Statement amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under Statement 133.
The Financial Accounting Standards Board (FASB) has issued Statement No. 150
“Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity.” The Statement establishes standards for how an issuer
classifies and measures certain financial instruments.
Management does not expect the implementation of these pronouncements to have a
significant effect on the Company’s financial statements.
2. DEVELOPMENT STAGE ENTERPRISE
The Company was formed on December 29, 2000 to have an indefinite life. The
Company was initially capitalized by proceeds from notes payable to the City of
Granite Falls, Minnesota and later by contributions from its founding members
and additional seed capital investors. The seven founders contributed an
aggregate of $55,000 for 700 units and subsequently the Board of Governors
approved a 1:2 reverse membership unit split for the founding members. In
addition, six of the seven founding members agreed to return to the Company
one-half of each of their remaining units, thereby reducing the number of units
held by each such founding member to twenty-five. Sixty-five members,
including six of the founders or their affiliates, contributed an additional
aggregate of $583,500 for 1,167 units that were issued between March and July
2002 pursuant to a private placement memorandum. On July 31, 2002, the Company
discontinued selling units under the private placement memorandum. In August
2002, the Company converted a $25,000 note payable plus accrued interest to the
City of Granite Falls to 50 membership units. Net Loss Per Unit retroactively
reflects the two 1:2 reverse membership unit splits as well as the return of
units to the Company by the founders.
Income or losses are allocated to all members based upon their respective
percentage units held. See Note 4 for further discussion of members’ equity.
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3. NOTES PAYABLE
At September 30, 2004, the Company has $47,800 of notes payable with the City
of Granite Falls, Minnesota originally due on January 1, 2004, including
interest at 7%. All notes are secured by terms and conditions of the
Development Agreement dated February 2, 2001, and subsequently amended, between
the City and the Company. The repayment of up to the entire amount may be
forgiven subject to the covenants set forth in the Development Agreement. The
Company is currently negotiating extensions of the notes with the City.
Under the terms of the Development Agreement, the notes payable can be forgiven
at a rate of $5,000 for each job created, up to ten jobs, within six months of
the start-up of operations of the facility, provided each job pays a gross
annual wage or salary of not less than $24,500. In addition, upon the
completion of financing and organizational startup, $25,000 of the notes
payable may be converted to equity with a market value of $25,000 or more. In
August 2002, the City Council of Granite Falls approved the conversion of a
$25,000 note due from the Company plus accrued interest into fifty membership
units. The notes payable are completely forgiven, in their entirety, if the
project is abandoned.
As of June 30, 2004, the Company had a line of credit with Granite Falls Bank
that was to expire on December 1, 2004 at a maximum of $200,000 with an
interest rate of 5.75% and secured by a separate security agreement and
guaranteed by two members of the Company. The outstanding balance was repaid
on September 24, 2004 and the line of credit was cancelled.
In February 2004, the Company obtained an additional $100,000 note payable from
Granite Falls Bank with interest at 5.75%, secured by a separate security
agreement and guaranteed by a member of the Company and was due in October
2004. The balance was repaid on September 24, 2004.
In April 2004, the Company obtained an additional $50,000 note payable from
Granite Falls Bank with interest at 5.75%, secured by a separate security
agreement and guaranteed by a member of the Company and was due in October
2004. The balance was repaid on September 24, 2004.
In July 2004, the Company obtained a loan to borrow up to $500,000 with
interest at 5.9% from Granite Falls Bank to purchase land and for operations.
This note was due in December 2004, was secured by a separate security
agreement and was guaranteed by a member of the Company. The land was
purchased in August 2004. The outstanding balance of $350,000 was repaid on
September 24, 2004.
4. MEMBERS’ EQUITY
As specified in the Company’s operating agreement, the Company initially will
have one class of membership units. No member shall transfer all or any
portion of an interest without the prior written consent of the Board of
Governors. The Company prepared an SB-2 Registration Statement for a minimum
of 18,000 units which expired on December 27, 2003 because the Company did not
raise the required minimum.
The Board voted to prepare a new offering and filed a Registration Statement
with the Securities and Exchange Commission. This Registration Statement
offered up to a minimum of $18,000,000 and a maximum of $30,000,000 of units
for sale at $1,000 per unit. The minimum purchase was five units. The
Registration Statement was declared effective in February 2004. The Company
filed post-effective amendments to its Registration Statement in July and
August 2004.
As of August 31, 2004, the Company’s escrow agent had received subscriptions
proceeds of over $19 million from the sale of units in the offering. These
proceeds included $6,500,000 and $2,500,000 received from Glacial Lakes Energy,
LLC (“GLE”) and Fagen, Inc. (“Fagen”), respectively, the Company’s two
significant investors. GLE and Fagen had originally provided “qualifying
bridge loans” which the Company was able to count towards the $18,000,000 minimum and
which were subsequently converted into 6,500 and 2,500 of Units, respectively.
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The Company has raised the minimum of $18,000,000 through the Offering and has
entered into a non-binding debt financing commitment with First National Bank of Omaha for
a total credit facility of approximately $37 million. The Company closed the
Offering effective October 15, 2004 after receiving proceeds of
$29,655,000. On September 24, 2004, the Company released funds from escrow
having obtained subscription proceeds in excess of $25,000,000 which
when combined with the $34,000,000 commitment would yield sufficient
funds to construct the then estimated cost of the proposed plant.
5. COMMITMENTS AND CONTINGENCIES
In fiscal 2001, the Company made a nominal payment to obtain an option to
purchase approximately 31 acres of land for a price of $168,000. In August
2004, the Company exercised this option.
In March 2003, the Company made a nominal payment to obtain an option agreement
to purchase approximately 25 acres of land, adjacent to the above 31 acres, for
approximately $168,000. In August 2004 the Company exercised this option.
In February 2003, the Company entered into an agreement with an unrelated party
to act as the Company’s project consultant. The agreement pays $1,250 per
week, with a one-time bonus of $40,000 ($20,000 minimum in membership units).
This bonus is payable after the Company has raised the minimum amount of equity
required to close on its public offering and has secured a loan commitment by a
prospective lender sufficient to finance the Company’s project. As of September
30, 2004, $39,078 of these costs are included in accounts payable. The
unrelated party has the option of receiving the balance of related services
payable in a cash payment or in exchange for membership units, provided the
offering is successful.
In October 2003, subsequently renegotiated in May 2004, the Company entered
into a corn storage and grain handling agreement with a member. The parties
agree that their obligations shall be subject to and conditioned upon final
approval by the lenders and final financial close of the public offering. In
addition, the member does agree that it shall execute a subscription agreement
in connection with the above referenced public offering and that the minimum
subscribed amount and contribution with respect to the project represented
thereby shall be no less than $500,000.
In August 2004, the Company entered into an agreement with an electrical
service provider to provide electrical service to the ethanol plant. Under the
agreement, in addition to paying the stated electric rates, the Company is
required to install, or have installed, transmission lines and a substation.
The cost of the transmission lines and substation are included in the Company’s
anticipated total project costs of the ethanol plant as discussed above.
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In August 2004, the Company
entered into a contract with a design-builder, which was amended in
October 2004, to
design and build the ethanol plant for $48,020,000. If
the contract is terminated by the Company without cause or the design-builder
for cause, the Company will be required to pay the design-builder a fee of
$1,000,000 as compensation for the limited right to use the work product.
Substantial completion of the entire work shall be achieved no later than 425
calendar days after the Date of Commencement. If the plant is substantially
complete within the 425 days, the Company will pay the design-builder an early
performance bonus of $8,000 per day for each day that substantial completion is
achieved prior to the 425 days after the date of commencement.
In August 2004, the Company entered into an exclusive two year renewable
Ethanol Marketing Agreement with Aventine Renewable Energy, Inc. whereby they
will purchase from the Company for re-marketing all of the Company’s ethanol
production. The agreement begins
with the Company’s first shipment of ethanol.
In August 2004, the Company entered into a consulting agreement and an
operating and management agreement with a member. Under the consulting
agreement, the member will provide assistance in planning and will direct and
monitor the construction of the Company’s ethanol plant. The Company will pay
the member $10,000 plus pre-approved expenses per month. The agreement will
terminate upon the effective date of the operating and management agreement
under which the same member will operate and manage the Company’s plant. The
Company will be the member $35,000 per month plus 3% of the plant’s operating
profits under the agreement.
In September 2004, the
Company entered into an agreement with a consultant to provide
consulting
services for supplies of
natural gas and electricity for the plant. The fees during the construction
period shall be $15,000 plus pre-approved travel expenses and upon plant
completion the fees shall be $2,400 per month plus pre-approved travel
expenses. This agreement shall commence on October 1, 2004 and continue until
six months after the plants completion date. The agreement shall be
month-to-month after the initial term and may be terminated by either party
effective after the initial term upon sixty days prior written notice.
6. SUBSEQUENT EVENTS
On October 31, 2004, the Company executed a rail construction agreement with
MGA Railroad Construction, Inc., for the construction of railroad tracks and
switches at its plant site. The Company will pay MGA a total of approximately
$1,114,000 for its construction activities. Payment is to be made on a monthly
basis for work completed subject to a 10% retainage to be paid upon final
completion.
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This report contains forward-looking statements that involve future
events, our future performance and our expected future operations and actions.
In some cases you can identify forward-looking statements by the use of words
such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,”
“intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or
the negative of these terms or other similar expressions. These forward-looking
statements are only our predictions and involve numerous assumptions, risks and
uncertainties. Our actual results or actions may differ materially from these
forward-looking statements for many reasons, including the risks described in
our Form 10-KSB filed March 30, 2004 and appearing elsewhere in this report. We
are not under any duty to update the forward-looking statements contained in
this report. We cannot guarantee future results, levels of activity,
performance or achievements. We caution you not to put undue reliance on any
forward-looking statements, which speak only as of the date of this report.
You should read this report and the documents that we reference in this report
and have filed as exhibits, completely and with the understanding that our
actual future results may be materially different from what we currently
expect. We qualify all of our forward-looking statements by these cautionary
statements.
Overview
Granite Falls Community Ethanol Plant, LLC, a Minnesota limited liability
company, now known as Granite Falls Energy, LLC for business purposes through
our assumed name filing July 29, 2004, was organized on December 29, 2000 to
construct and operate an ethanol plant. We plan to formally change our name to
Granite Falls Energy, LLC, at our next annual meeting of members in 2005. Our
principal business office recently moved to a temporary facility located on our
site with an address of 15045 Highway 23 S.E., Granite Falls, Minnesota 56241.
As of October 13, 2004, we are managed by a seven member board of governors.
We were organized to construct and operate an ethanol plant near Granite
Falls, Minnesota, that would originally have an annual capacity to process
approximately 15 million bushels of corn into approximately 40 million gallons
of ethanol per year (mgy) and approximately 130,000 tons annually of livestock
and poultry feed known as distillers grains, which may be sold as distillers
dried grains with solubles, and under certain conditions distillers modified
wet grains and distillers wet grains. These are the principal co-products of
the ethanol production process.
After further review and consideration, in October 2004, our board of
governors determined that increasing our production capacity to 50 million
gallons of ethanol per year and
approximately 145,000 tons of distiller’s grains will likely result in more
efficient operations for our ethanol plant. Our operations permit
presently allows for the production of up to 47 million
gallons of ethanol a year and will have to be amended in the event we desire to
produce up to our plant’s capacity. This change is not expected to
delay our anticipated date of operation.
Based on the increased capacity of our ethanol plant, new estimates for
our utilities, and an expected early completion bonus to our design-builder,
and other items, we now expect that the project will cost approximately
$61,296,000 instead of the $57,850,000 previously planned. We are still in the
development phase, and until the proposed ethanol plant is operational, will
generate no revenue. We anticipate that accumulated losses will continue to
increase until the ethanol plant is operating. Based on an estimates provided
by our design-builder, and assuming no adverse weather conditions given the
plant is located in Minnesota, we expect that it will take approximately 12 to
14 months from the date construction is commenced by our design-builder to
construct the ethanol plant and commence start-up operations. Our anticipated
date of substantial completion is currently late fall 2005. By April 2005,
we anticipate we will be in a better position to estimate
our start-up commencement date.
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The plant will be located near Granite Falls, Minnesota on a 56 acre site
for which we had options to purchase and which we did purchase in August 2004.
Closing of Our Initial Public Offering and Update on our Debt Financing
.
We raised equity in a public offering registered with the Securities and
Exchange Commission on Form SB-2 (SEC Registration No. 333-112567) which was
declared effective on February 17, 2004, as amended by our post-effective
registration statements filed in July and August 2004 (collectively, the
“Registration Statement”). Our initial public offering (the “Offering “) was
for the sale of our membership units (“Unit(s)”) at $1,000 per Unit of an
aggregate minimum of $18,000,000 (18,000 Units) and an aggregate maximum of
$30,000,000 (30,000 Units). Our Offering required that we raise the
$18,000,000 minimum in proceeds by August 31, 2004 and secure significant debt
financing by September 30, 2004, both of which we timely accomplished.
As of August 31, 2004, our escrow agent had received subscriptions
proceeds of over $19 million from the sale of Units in our Offering. These
proceeds included $6,500,000 and $2,500,000 received from Glacial Lakes Energy,
LLC (“GLE”) and Fagen, Inc. (“Fagen”), respectively, our two significant
investors. GLE and Fagen had originally provided “qualifying bridge loans”
which we were able to count towards our $18,000,000 minimum and which were
subsequently converted into 6,500 and 2,500 of our Units,
respectively. GLE is providing consulting services to us in connection with the construction
of our plant and eventually will manage and operate our plant. Fagen is the
design-builder of our ethanol plant.
We anticipate closing on our debt financing commitment from First National
Bank of Omaha on or about November 30, 2004 for a term loan of up to
$34,000,000 (not to exceed 58% of the project cost) for the construction of our
plant and a $3,500,000 revolving line of credit for hedging purposes
and operations. We received
this commitment in August 2004. A commitment for debt financing is not a
binding loan agreement. A written commitment only obligates the lender to
lend us the debt financing if we satisfy all of the conditions of the
commitment. If we do not satisfy all of the conditions, we may not successfully
construct and commence operations of our proposed plant and may terminate
operations.
On September 24, 2004, we released funds from escrow having obtained
subscription proceeds in excess of $25,000,000 which when combined with our
debt commitment would yield at least $57,850,000, our then estimated cost of
constructing the proposed ethanol plant.
On October 15, 2004, we closed our Offering having sold 29,655 Units
and raising equity proceeds of $29,655,000, which when combined with our debt
commitment would yield over $61,296,000, our revised and current estimated cost
of constructing the proposed ethanol plant.
Satisfaction of all of GLE’s and Fagen’s Conditions to Investment
We satisfied all of the conditions to GLE’s and Fagen’s investment by
entering into a consulting agreement with GLE, an operating and management
agreement with GLE, a new grain procurement agreement with the Farmers
Cooperative Elevator Company, and by obtaining from our members amendments to
our operating and member control agreement, all on substantially the same terms
and conditions as detailed in our prospectus supplement dated August 25, 2004.
Design-Build Contract; Submission of Change Order
On August 31, 2004, we entered into our design-build contract with Fagen,
one of our significant investors, for the construction of our ethanol plant.
The terms of this agreement materially comply with the terms and conditions
described in our prospectus dated February 17, 2004 and our prospectus
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supplement dated August 25, 2004. However, our agreement with Fagen is subject
to our debt financing lender’s approval which we anticipate receiving.
In connection with our determination to increase the capacity of our
proposed plant, we submitted to Fagen a change order changing the scope of the
original project to also include the equipment and services necessary to expand
the capacity of the plant to produce up to 50 million gallons of ethanol
annually. The expansion would include adding one fermenter and one centrifuge
for a total of four fermenters and five centrifuges, as well as other
additional equipment. On October 28, 2004, the Company and Fagen accepted the
change order. Our operations
permit presently allows for the production of up to 47 million
gallons of ethanol a year and will have to be amended in the event we desire to
produce up to our plant’s capacity.
We will pay
Fagen (on progress basis) approximately $48,020,000, which is subject to further adjustments
made in accordance with the terms of the design-build contract.
If this contract is terminated by us without cause or by Fagen for cause,
we will be required to pay Fagen a fee of $1,000,000 as compensation for the
limited right to use the work product created by Fagen. If the plant is substantially complete
within the 425 days from the date Fagen begins construction, we will pay Fagen
an early performance bonus of $8,000 per day for each day that substantial
completion is achieved prior to the 425 days after the date of commencement.
Plan of Operations for the Next 12 Months
We expect to spend the next 12 months in design development and
construction of the ethanol plant and obtaining our final permitting
requirements and other contracts.
Design and Construction Activity
In August 2004, we began site grading and dirt work at the plant site as
part of our site preparation obligations under the design-build contract.
These obligations include obtaining surveys, soil reports, and land disturbance
and erosion control permits which we have accomplished, as well as, preparing
the land such as site grading, preparing and stabilizing the soil in required
areas, creating a replacement fill and storm water drainage and detention, as
well as other similar items. We anticipate completing the site preparation
work by the middle of November 2004.
Actual construction of the proposed plant by Fagen began on October 26,
2004. We will be seeking from Fagen its agreement to this start date, or
another mutually acceptable start date, for purposes of determining
the performance bonus under the design-build
contract.
Based
on an estimates provided by Fagen, and assuming no
adverse weather conditions given the plant is located in Minnesota, we expect
to complete construction of the proposed plant and commence operations
approximately 12 to 14 months from the date Fagen began construction, or
approximately late fall 2005. By April 2005, we anticipate we will be in a better position to estimate
our start-up commencement date.
Fagen, our design-builder and general contractor, through its affiliated
entity, Fagen Engineering, LLC, and a subcontractor, is now working on
preliminary civil engineering and site development designs for our ethanol
plant. Once these designs are completed, Fagen will construct the plant
according to the designs.
Permitting Activity
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We continue to work towards obtaining all required permits for the
construction of our ethanol plane. We have obtained a majority of the required
air, water and other permits. Over the past several months we have obtained
the following important permits and other rights:
In July 2004, we received an Above Ground Storage Tank Permit (effective
September 1, 2004) from the Minnesota Pollution Control Agent (“MPCA”);
In August 2004, we received a Construction Storm Water Permit from the
MPCA; and
In October 2004, we obtained our building permit from the City of Granite
Falls;
In addition, we are also working on an alternative to proposed water
appropriation and intake permit with the Army Corp. of Engineers. We are
currently investigating whether we can obtain the necessary water to operate
the plant from local wells, rather than from the Minnesota River. This
requires determining the impact on the aquifer that supplies water to other
local users. Obtaining waters from local wells is our preferred course of action. If this
is not feasible, we will obtain our water from the Minnesota River and resume
our discussion with the Army Corps. of Engineers.
Contracting Activity
In August 2004, we executed our agreement with Minnesota Valley Rural
Electric Cooperative, our electrical service provider. Under this agreement,
we will pay them a base fee of $8,000 per month plus regular rates for our
electricity. We estimate we will pay Minnesota Valley approximately
$1,000,000 for our first full year of operations.
On August 31, 2004, we executed a two year renewable Ethanol Marketing
Agreement with Aventine Renewable Energy, Inc. This contract is no longer
contingent because we closed on our Offering. Under this agreement, Aventine
will purchase from us for re-marketing all of our ethanol production. We will
receive the average net selling price (net of freight, transportation costs and
commissions paid to Aventine) in a given month of ethanol sales by Aventine on
behalf of us and eleven other ethanol plants. Our agreement begins with our
first shipment of ethanol to Aventine.
On October 31, 2004, we executed a rail construction agreement with MGA
Railroad Construction, Inc., for the construction of railroad tracks and
switches at our plant site. We will pay MGA a total of approximately
$1,114,000 for its construction activities. Payment is to be made on a monthly
basis for work completed subject to a 10% retainage to be paid upon final
completion.
We have had verbal conversations with both the TC&W railroad and the
Burlington Northern Santa Fe railroad for rail service and freight rates at our
plant.
We
are also working towards finalizing agreements with natural gas
providers.
Updates to Our Sources and Uses of Cash
Revised Sources and Uses of Cash
. We originally estimated that we would
require approximately $58,750,000 of total cash to pay for all of our
construction and start-up costs. However, based on our decision to expand the
plant, new estimates for our utilities, an expected early completion bonus to
our design-builder, and other items, we estimate that our construction and
start-up costs will be $61,296,000.
The
following tables describe our revised estimated use of our offering
and debt financing proceeds and assumes we will close on our debt
financing commitment. The figures are estimates only, and the actual uses
of proceeds may vary significantly from the descriptions given below.
17
Revised Estimated Use of Offering and Debt Proceeds:
Based upon offering proceeds of $29,655,000, and a term loan in the
approximate amount of $34,000,000, we expect that we will have approximately
$63,655,000 of debt and equity available, which means we expect to have
sufficient cash on hand to cover construction and related start-up costs
necessary to make the plant operational.
18
Liquidity and Capital Resources
Quarterly Financial Results.
As of September 30, 2004, we had cash and
cash equivalents of $25,631,210 and total assets of $26,589,101. To date, we
have sold 29,655 Units in our Offering raising proceeds of $29,655,000. We
released proceeds of our Offering from escrow on September 24, 2004, and issued
a total of 29,655 membership units sold in our Offering to investors as well as an
additional 125 Units to various third parties for non-cash consideration related to their
efforts in the Offering.
We placed approximately $4,655,000 of the proceeds in our money market
account with Granite Falls Bank to cover our short-term development needs. The
remaining proceeds were transferred to First National Bank of Omaha and placed
in short-term, no risk to principal type investments such as commercial paper
and quasi-governmental agency discounted notes. We may draw on these funds at
any time, but do not intend to do so prior to the commencement of substantial
construction of the ethanol plant.
As of September 30, 2004, we had current liabilities of $556,772, which
consists primarily of accounts and construction payables in the aggregate
amount of approximately $496,000 and a Note to the City of Granite Falls in the
amount of $47,800 due January 1, 2004, which has not been paid, and which we
have been working with the City to extend and which may be forgiven under the
terms of our Development Agreement with the City.
Total
members equity as of September 30, 2004 was $26,032,329.
Since inception, we have generated no revenue from operations. For the quarter
ended September 30, 2004, we have a net loss of $18,904 due to start-up costs.
Repayment of Outstanding Bank Debt.
As of September 24, 2004, we repaid
all of our outstanding loans with Granite Falls Bank for operating expenses and
land purchases in the aggregate amount of approximately $700,000.
In August 2004, we received a written debt financing commitment from First
National Bank of Omaha consisting of a term loan of $34,000,000 for the
construction of our plant and a $3,500,000 revolving line of credit for
hedging purposes and operations. We anticipate closing on our loan facility on or around November
30, 2004. A commitment for debt financing is not a binding loan agreement. A written commitment only obligates the lender to lend us the debt financing if
we satisfy all of the conditions of the commitment. If we do not satisfy all of
the condition, we may not successfully construct and commence operations of our
proposed plant and may terminate operations.
19
Estimated Sources of Funds.
The following schedule sets forth our sources
of funds from our Offering proceeds and our debt financing proceeds assuming the closing
of our debt financing commitment.
If we need additional cash after obtaining our planned debt, we may borrow
additional funds or sell additional Units. We will have access to our proposed
$3,500,000 revolving credit line for hedging purposes and operations, assuming the
closing of our debt financing commitment. We cannot assure success in obtaining
additional financing if needed on acceptable terms, or at all.
We do not have any off-balance sheet arrangements.
Item 3: Controls and Procedures.
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and the principal financial officer, of the Company’s
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934 (the “Exchange Act”). Based on
this evaluation, the principal executive officer and the principal financial
officer concluded that the Company’s disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There was no change in the Company’s
internal control over financial reporting during the Company’s most recently
competed fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.
20
FINANCIAL INFORMATION
Page
4
5
7
9
Table of Contents
DBA GRANITE FALLS ENERGY, LLC
(A Development Stage Company)
September 30,
ASSETS
2004
(Unaudited)
$
25,631,210
7,025
46,453
25,684,688
6,317
556,072
344,338
906,727
(2,314
)
904,413
$
26,589,101
$
250,601
12,148
246,223
47,800
556,772
27,186,375
(1,154,046
)
26,032,329
$
26,589,101
Table of Contents
DBA GRANITE FALLS ENERGY, LLC
(A Development Stage Company)
From Inception
Quarter Ended
Quarter Ended
(December 29, 2000)
September 30,
September 30,
to September 30,
2004
2003
2004
(Unaudited)
(Unaudited)
(Unaudited)
$
—
$
—
$
—
10,133
12,513
184,455
275
10,020
157,729
44,857
40,063
360,633
(18,742
)
35,835
127,778
36,523
98,431
830,595
(36,523
)
(98,431
)
(830,595
)
25,835
32
29,804
—
—
2,000
(8,216
)
(1,155
)
(30,501
)
—
—
(324,754
)
17,619
(1,123
)
(323,451
)
$
(18,904
)
$
(99,554
)
$
(1,154,046
)
$
(11.09
)
$
(70.26
)
$
(1,246.27
)
Table of Contents
DBA GRANITE FALLS ENERGY, LLC
(A Development Stage Company)
Nine Months Ended
Nine Months Ended
September 30,
September 30,
2004
2003
(Unaudited)
(Unaudited)
$
—
$
—
35,096
42,473
37,219
22,855
151,721
148,845
10,601
112,912
234,637
327,085
(234,637
)
(327,085
)
25,836
748
1,000
—
(17,880
)
(3,054
)
8,956
(2,306
)
$
(225,681
)
$
(329,391
)
$
(149.16
)
$
(232.46
)
Table of Contents
DBA GRANITE FALLS ENERGY, LLC
(A Development Stage Company)
From Inception
Nine Months
Nine Months
(December 29,
Ended
Ended
2000)
September 30,
September 30,
to September 30,
2004
2003
2004
(Unaudited)
(Unaudited)
(Unaudited)
$
(225,681
)
$
(329,391
)
$
(1,154,046
)
945
947
2,314
—
—
324,754
(44,453
)
(5,030
)
(46,453
)
(7,025
)
—
(7,025
)
56,430
29,282
143,367
630
3,053
13,251
(219,154
)
(301,139
)
(723,838
)
—
—
(6,317
)
(344,338
)
—
(344,338
)
(309,849
)
—
(309,849
)
(654,187
)
—
(660,504
)
(11,417
)
—
—
(149,000
)
99,000
72,800
26,712,400
—
27,350,900
—
—
(35,962
)
(47,432
)
(47,247
)
(372,186
)
26,504,551
51,753
27,015,552
25,631,210
(249,386
)
25,631,210
—
251,987
—
$
25,631,210
$
2,601
$
25,631,210
Table of Contents
DBA GRANITE FALLS ENERGY, LLC
(A Development Stage Company)
Nine Months
Nine Months
From Inception
(December 29,
Ended
Ended
2000)
September 30,
September 30,
to September 30,
2004
2003
2004
(Unaudited)
(Unaudited)
(Unaudited)
$
9,695
$
—
$
18,354
$
107,234
$
—
$
107,234
$
—
$
—
$
26,103
$
246,223
$
—
$
246,223
Table of Contents
(A Development Stage Company)
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Plan of Operation.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
$
48,020,000
78.3
%
2,037,000
3.3
1,340,000
2.2
700,000
1.1
200,000
0.3
340,000
0.6
1,424,000
2.3
300,000
0.5
900,000
1.5
654,000
1.1
271,000
0.4
4,630,000
7.6
480,000
0.8
$
61,296,000
100.0
%
(1)
In July 2004, we borrowed $500,000 from Granite Falls Bank
to enable us to purchase the land for our plant site (which
we did in August 2004 for $334,000) and begin site
preparation.
Between February and June 2004, we borrowed an aggregate of
$350,000 from Granite Falls Bank which we have used to fund
legal, accounting and other costs associated with our
organization and operation as an entity. We repaid these
loans in September 2004 from proceeds of our Offering.
(2)
Includes amounts paid to our project coordinator,
GLE our construction manager and other professional services fees paid
during our post-Offering and pre-construction period.
(3)
Includes $750,000 of pre-production period expenses,
$1,800,000 of initial inventories of corn and other
ingredients and chemicals, $950,000 of ethanol and dry
distillers grain inventories, $380,000 of spare parts and
other equipment and $750,000 of working capital.
Table of Contents
Table of Contents
Percent of
Source of Funds
Total
$
29,655,000
46.6
%
$
34,000,000
53.4
%
$
63,655,000
100.00
%
Table of Contents
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Securities and Use of Proceeds.
The Securities and Exchange Commission declared our Registration Statement
on Form SB-2 (SEC Registration No. 333-112567) effective on February 17, 2004.
We commenced our initial public offering of our units shortly thereafter. Our
initial public offering (the “Offering “) was for the sale of our membership
units (“Unit(s)”) at $1,000 per Unit of an aggregate minimum of $18,000,000
(18,000 Units) and an aggregate maximum of $30,000,000 (30,000 Units). Our
Offering required that we raise the $18,000,000 minimum in proceeds by August 31, 2004
and secure significant debt financing by September 30, 2004, both of which we
timely accomplished. The following is a breakdown of the Units registered and
the Units sold in the offering:
(1) We
issued 29,655 Units for cash at $1,000 per Unit and 125 Units for consideration other
than cash at
$1,000 per Unit.
On September 24, 2004, we released funds from escrow and issued 29,655
Units for cash to investor/members and 125 Units for consideration other than
cash to various individuals and third parties for their efforts related to the
Offering, who are also now members. Our Offering terminated on October 31,
2004. However, on October 15, 2004, we closed the Offering and stopped selling
units registered under our Registration Statement because we had sold 29,655
Units and received aggregate offering proceeds of $29,655,000 which was
satisfactory. We sold the Units without the assistance of an underwriter or
selling agent.
Of
the 29,655 Units issued for cash, 6,500 were issued to GLE, our
construction consultant and eventually, our manager and operator of
our plant, 2,500 were issued to
Fagen, our design-builder, and approximately 20,000 were issued to individuals
and companies
located primarily in the Granite
Falls area (comprising western Minnesota and eastern South Dakota) and
other areas of the upper Midwest region.
Of the 125 Units
issued for non-cash consideration, we issued 71 Units for services rendered by
consultants, 39 Units to two individuals (one of whom was our project
coordinator) for water easements rights, and 15 Units to Granite Falls Bank,
our escrow agent in lieu of cash.
Our
expenses for our Offering totaled $250,000. When we
released funds from escrow, we netted our offering expenses against the
aggregate subscription proceeds. No offering expenses were paid to related
parties. Our net offering proceeds were $29,405,000.
The following table describes our use of our net offering proceeds for the
three month period ended September 30, 2004:
21
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are included herein:
(2) Incorporated by
reference as Appendix A to our Post
Effective Amendment No. 1 filed July 21, 2004 to our Registration Statement on
Form SB-2, No. 333-112567, originally filed on February 6, 2004.
(3) Incorporated by reference to the exhibit of the same number in
Pre-Effective amendment No. 1 filed on February 12, 2004 to our Registration
Statement on Form SB-2, No. 333-112567, originally filed on February 6, 2004.
(4) Incorporated by reference to the exhibit of the same number in Post
Effective Amendment No. 2 filed July 29, 2004 to our Registration Statement on
Form SB-2, No. 333-112567, originally filed on February 6, 2004.
(5) Incorporated by reference to the exhibit on the same number in
Post-Effective Amendment No. 3 filed on August 23, 2004 to our Registration
Statement on Form SB-2, No. 333-112567, originally filed on February 6, 2004.
(6) Incorporated by reference to the exhibit of the same number in our 10-KSB
for the period ended December 31, 2003.
(*) Filed herewith.
(**) To be filed by amendment.
22
(b) Reports on Form 8-K:
1. We filed a report on Form 8-K on the following dates:
23
Aggregate price of
Aggregate price of the
the
Amount Registered
amount registered
Amount Sold
amount sold to date
$
30,000,000
29,780,000
(1)
$
29,780,000
(1)
$
10,000
$
292,450
$
337,450
$
362,952
$
97,550
$
1,100,000
Table of Contents
Exhibit
Description
Method of Filing
Articles of Organization
1
Form of Fifth Amended and Restated Operating and Member
Control Agreement
2
Form of membership unit certificate
1
Form of Escrow Agreement
3
Grain Procurement Agreement with Farmers Cooperative
Elevator Company
*
Operating and Management Agreement with
Glacial Lakes Energy, LLC
*
Consulting Agreement with Glacial Lakes Energy, LLC
*
Revised Form of letter to prior investors
4
Debt Financing Commitment from First National Bank of Omaha
5
Fagen, Inc. Qualifying Bridge Loan Documents
5
Glacial Lakes Energy, LLC Qualifying Bridge Loan Documents
5
Design Build Agreement dated August 31, 2004 with Fagen, Inc.
**
Ethanol Marketing Agreement dated August 31, 2004 with Aventine
Renewable Energy, Inc.
**
Rail Construction Agreement with
MGA Railroad Construction, Inc. dated October 30, 2004
*
Electric Service Agreement dated
August, 2004 with Minnesota Valley Cooperative Light and Power
**
Code of Ethics
6
Certificates pursuant to 17 CFR 240 15d-14(a)
*
Certificates pursuant to 18 U.S.C. Section 135
*
Table of Contents
•
July 6, 2004, announcing our qualifying bridge
loans with GLE and Fagen.
•
September 7, 2004, announcing our receipt of the
minimum requisite funds for our initial public offering.
•
September 13, 2004, announcing we entered into
our design-build contract with Fagen, Inc. and our Renewable Energy
Marketing Agreement with Aventine Renewable Energy.
•
October 19, 2004, announcing that we implemented
the amendments to our Operating and Control Agreement by
approving designated governors and appointing at-large
governors and certain officers.
Table of Contents
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
GRANITE FALL COMMUNITY ETHANOL PLANT, LLC | |
|
|
||
|
Date:
November 15, 2004
|
/s/ Thomas Branhan
|
|
|
|
Thomas Branhan | |
|
|
Chief Executive Officer and General Manager | |
|
|
( Principal Executive Officer) | |
|
|
||
|
Date:
November 15, 2004
|
/s/ Michael Nealon
|
|
|
|
Michael Nealon | |
|
|
Chief Financial Officer and Controller | |
|
|
(Principal Financial and Accounting Officer) |
24
EXHIBIT 10.2
GRAIN PROCUREMENT AGREEMENT
OF
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
AND
FARMERS COOPERATIVE ELEVATOR CO.
Dated May 14, 2004
GRAIN PROCUREMENT AGREEMENT
TABLE OF CONTENTS
TITLE I: PRIOR AGREEMENTS.............................................. 1
1.1.01: PRIOR AGREEMENTS SUPERSEDED.............................. 1
TITLE II: FACILITY..................................................... 1
ARTICLE I - PREMISES................................................. 1
2.1.01: LAND..................................................... 1
TITLE III: CORN PROCUREMENT............................................ 2
ARTICLE I - PROVISION OF CORN........................................ 2
3.1.01: FCE'S PROVISION OF CORN.................................. 2
3.1.02: CORN QUALITY............................................. 2
3.1.03: LICENSING................................................ 5
3.1.04 PAYMENTS TO CORN SUPPLIERS................................ 5
ARTICLE II - TERM OF CORN PROCUREMENT................................ 5
3.2.01: COMMENCEMENT............................................. 5
3.2.02: TERM OF AGREEMENT........................................ 6
ARTICLE III - CORN PROCUREMENT FEE................................... 6
3.3.01: PROCUREMENT FEE.......................................... 6
3.3.02: CORN FOR GFCEP........................................... 6
3.3.03: HEDGING ASSISTANCE....................................... 6
ARTICLE IV - INVOICING AND PAYMENT................................... 7
ARTICLE V - LOCATION OF FCE'S DELIVERY............................... 7
ARTICLE VI - DEFAULT, WAIVER AND REMEDIES............................ 8
3.6.01: DEFAULT, NOTICE, AND CURE................................ 8
3.6.02: WAIVER................................................... 8
3.6.03: REMEDIES................................................. 8
TITLE IV: GENERAL PROVISIONS........................................... 9
ARTICLE 1 - WARRANTIES............................................... 9
4.1.01: OWNERSHIP AND QUALITY OF CORN............................ 9
4.1.02: NO EXPRESS OR IMPLIED WARRANTIES......................... 9
ARTICLE II - DISPUTE RESOLUTION...................................... 10
4.2.01: ALTERNATIVE DISPUTE RESOLUTION........................... 10
4.2.02: ATTORNEY'S FEES AND COSTS................................ 10
ARTICLE III - FORCE MAJEURE.......................................... 10
4.3.01: RELIEF FROM TRANSFERRING CORN............................ 10
4.3.02: DEFINITION............................................... 11
ARTICLE IV - DELIVERY OF PAYMENTS AND NOTICES........................ 11
4.4.01: METHOD AND TIME.......................................... 11
4.4.02: NOTICE TO FCE............................................ 11
4.4.03: NOTICE TO GFCEP.......................................... 12
4.4.04: CHANGE OF ADDRESS........................................ 12
|
ARTICLE V - INDEMNITY................................................ 12 4.5.01: DUTY TO INDEMNIFY (FCE)................................. 12 4.5.02: DUTY TO INDEMNIFY (GFCEP)................................ 12 ARTICLE VI - OTHER GENERAL PROVISION................................. 13 4.6.01: COMPUTATION OF TIME...................................... 13 4.6.02: SUCCESSORS IN INTEREST................................... 13 4.6.03: ENTIRE AGREEMENT......................................... 13 4.6.04: PARTIAL INVALIDITY....................................... 13 4.6.05: RELATIONSHIP OF PARTIES.................................. 13 4.6.06: INTEREST................................................. 14 4.6.07: MODIFICATION............................................. 14 4.6.08: CHOICE OF LAW............................................ 14 4.6.09: HEADINGS AND CAPTIONS.................................... 14 4.6.10: COUNTERPARTS............................................. 14 |
GRAIN PROCUREMENT AGREEMENT
THIS GRAIN PROCUREMENT AGREEMENT, (the "Agreement") is made and entered into this 14 day of May, 2004, by and between GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC ("GFCEP") and FARMERS COOPERATIVE ELEVATOR CO. ("FCE").
WHEREAS, GFCEP intends to construct, own, and operate a dry mill ethanol and byproduct manufacturing plant and related facilities (the "Facilities") on the Premises (defined below);
WHEREAS, the acquisition of a steady and reliable supply of corn is integral to the use and operation of the Facilities;
WHEREAS, in order to guaranty the use and operation of the Facilities, the parties are entering into this Agreement whereby FCE will provide a steady and reliable supply of corn to GFCEP for use in the operation of the Facilities under the terms and conditions hereinafter described.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, it is hereby agreed as follows:
TITLE I: PRIOR AGREEMENTS
1.1.01: PRIOR AGREEMENTS SUPERSEDED
The parties hereby agree and acknowledge that they previously entered into one or more agreements relating to the operation of GFCEP, including, but not limited to a Declaration of Restrictions and Covenants made by the Granite Falls Community Ethanol Plant, LLC; a Corn Storage and Delivery Agreement, and a Pre-Closing Memorandum. All such agreements are superseded by the terms of this Grain Procurement Agreement and such prior agreements are hereby revoked; provided, however, that all subscription agreements to purchase units in GFCEP shall remain in full force and effect.
TITLE II: FACILITY
ARTICLE I
PREMISES
2.1.01: LAND
The Facilities (also described herein as "plant") will be constructed on the premises (real estate) legally described as being east of the City of Granite Falls, County of Chippewa, State of Minnesota, legally described as:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF
TITLE III: CORN PROCUREMENT
ARTICLE I
PROVISION OF CORN
3.1.01: FCE'S PROVISION OF CORN
(a) FCE shall have the exclusive right and responsibility to provide GFCEP its full daily requirements of No. 2 yellow corn, 15% moisture content, meeting the specifications of this Agreement (the "Corn") during the term hereof and under the conditions herein set forth. This right and responsibility shall include the plant as originally constructed and any and all alterations, modifications or expansions thereof.
(b) Purchases. The parties acknowledge and agree that GFCEP shall purchase all of its corn requirements from FCE and shall place all actual orders for purchase of corn to be delivered to the facility with FCE. At all times, FCE, either through its own management or through lawful contracts entered into with third parties, shall maintain
or cause to be maintained such licenses and/or authorities as may be required to lawfully engage in the purchase and sale of corn.
(c) Risk Management. Notwithstanding the foregoing, GFCEP acknowledges that it shall separately retain appropriate risk management services for evaluating corn pricing and purchases and/or for making trades for price protection and future delivery such as options, future contracts and the like.
(d) Delivery Estimates. GFCEP agrees to provide to FCE an estimate on or before the first day of each calendar quarter with respect to its required deliveries of corn for the following calendar quarter. The parties expressly understand that GFCEP's notice shall be a good faith estimate and that the parties anticipate reasonable variations between delivery forecast and actual delivery requirements. For purposes of this Agreement the phrase "reasonable variations" shall mean a variation of no more than 10% between the delivery forecast and actual delivery requirements. To that end, GFCEP shall also report to FCE on or before the first business day of each month its estimated delivery requirement of corn for the following month.
(e) FCE shall maintain a minimum of four days supply of corn in storage at GFCEP at all times.
3.1.02: CORN QUALITY
(a) Corn Quality. Corn delivered under this Agreement shall: (i) be No. 2 shelled yellow corn, having no more than a 15% moisture content; (ii) be graded in accordance with State and Federal laws and in accordance with any reasonable standards set by GFCEP; (iii) be merchantable and not be adulterated; (iv) meet such additional specifications and standards as the parties may establish from time to time by mutual agreement, including without limitation standards and specifications related to test weight (determined with reference to moisture content), foreign material and mycotoxin and other toxin levels.
It is understood and agreed that corn over 15% moisture content will be delivered and/or corn with certain of the discount elements described in paragraph 3.1.02(b) may be delivered and such is acceptable to GFCEP, subject to the pricing discount(s) and other terms described in said paragraph 3.1.02(b).
It is understood and agreed that the parties intend that the corn quality provisions of this Agreement that pertain to daily averages shall be construed so that FCE is able to compete with other corn merchants in the surrounding area and correspondingly so that GFCEP is treated fairly. The daily average on quality factors shall not be abused by reasons such as bringing specific quality loads at certain times of the day to maximize the ranges allowed in the average window allowance(s). This will be monitored on a daily basis and if there is any material violation, GFCEP will not be required to and shall not allow any loads for that day to be applied to the daily averages as described in this Agreement.
(b) Corn Not Meeting Quality Requirements. GFCEP may, at its option: (i) reject any corn delivered by FCE that does not meet these specifications described herein or (ii) accept corn delivered by FCE that does not meet these specifications on the following discounted pricing terms:
DISCOUNT SCHEDULE
Corn Discounts that will be charged to FCE from GFCEP:
Moisture
15.0% and under-no discount
15.1-15.5% 2 cents per bu.
15.6 - 16.0% - 4 cents per bu.
16.1 - 16.5% - 6 cents per bu.
16.6 to 17.0% - 8 cents per bu.
Corn over 17.0% - subject to rejection
Test Weight
54.0 lbs and over - no discount
53.0 - 53.9 lbs. - 2 cents per bu.
52.0 - 52.9 lbs. - 4 cents per bu.
Below 52.0 lbs. - additional 2 cents per lb. per bu.
Regular Damage
5.0% and under - no discount
5.1% and up - 2 cents per bu. Per each 1%
Over 10.0% - subject to rejection
Foreign Material
4.0% and under - no discount
4.1% and up - 3 cents per bu. Per each 1%
MUSTY/SOUR - 5 cents per bu. If not rejected.
The parties agree that the quality requirements (and corresponding right to reject corn) and discount schedule shall be applied as follows:
1. Moisture: There will be no discount on a load of corn until it is above 15.0%, and then a discount and right to reject as described in the discount schedule. The discount schedule and right to reject regarding moisture shall be determined on a load by load basis.
2. Test Weight: All loads with a test weight of 50 lbs. and above shall be averaged on a daily average basis, with the discount schedule applied on that daily average. All loads of test weights below 50 lbs. shall be handled on a load by load basis, subject to the right of rejection and with the discount schedule (if such corn is accepted) being applied on a load by load basis.
3. Damage (Regular and/or Heat): All loads between 0% and 10% damage shall be averaged on a daily average basis, with the discount schedule applied on that daily average. Any loads of corn with more than 10% damage shall be handled on a load by load basis, with right to reject and in applying the discount schedule.
4. Foreign Material: Loads with 0% to 6% foreign material shall be averaged on a daily average basis, with the discount schedule applied on that daily average. Loads with more than 6% foreign material shall be handled on a load by load basis, with right to reject and in applying the discount schedule. Toxins. Any load of corn that tests positive for microtoxins or other toxins will be rejected. However, it is agreed that FCE is responsible only to use "black light" testing to determine the existence of such toxins. If GFCEP desires additional testing, it shall give written notice to FCE and
GFCEP shall pay all costs of such additional testing.
This discount schedule is subject to change as market conditions dictate providing both FCE and GFCEP mutually agree to any change in writing.
(c) Limitation on Quality Requirements. Notwithstanding the foregoing provisions of this Section 3.1.02, FCE shall not be required to provide Corn under this Agreement with qualities and characteristics exceeding the average qualities of Corn produced during the preceding corn production year ending on August 31 of such year in the specific area surrounding the Plant defined as within a twenty (20) mile radius of the plant. If such average qualities of corn produced within a 20 mile radius of the plant are unacceptable to GFCEP, as reasonably determined by GFCEP, then FCE shall have the right to procure corn from other geographic areas until such time as the average qualities of corn within the 20 mile radius of the plant are reasonably acceptable to GFCEP. If corn is procured
from other geographic areas pursuant to the terms of this paragraph, the Market Price shall be the purchase price, plus shipping costs. In addition, GFCEP shall pay FCE the per bushel procurement fee.
(d) Determination of a Bushel of Corn. For purposes of FCE's delivery obligations hereunder, a "bushel of Corn" or "bushel" is to be equivalent to a bushel of No. 2 shelled yellow corn at 15% moisture and a weight of 56 pounds per bushel. The moisture content and test weights of the Corn delivered to GFCEP under this Agreement shall be determined and discounts on price, if any, applied, as described in Paragraph 3.1.02 (b).
3.1.03: LICENSING
FCE shall obtain Corn to be provided to GFCEP under this Agreement under FCE's own grain dealer's license. GFCEP shall obtain and maintain a grain dealer's license. FCE shall also obtain any and all licenses or permits necessary for FCE to meet its obligations under this Agreement.
3.1.04: PAYMENTS TO CORN SUPPLIERS
FCE will account for the Corn provided by, and settle with, all third parties providing Corn to the Plant.
ARTICLE II
TERM OF CORN PROCUREMENT
3.2.01: COMMENCEMENT
The terms of this Agreement shall become effective on the first date that the facility needs corn for testing, startup or operations. GFCEP shall notify FCE ten (10) days in advance of when corn is first needed.
3.2.02: TERM OF AGREEMENT
The term of this Agreement shall begin on the first day corn is requested
by GFCEP as stated in paragraph 3.2.01 and shall continue for a term of twelve
(12) years thereafter. Suspensions of operations for any reason, such as
repairs, modifications, expansions or damage to the facility shall not terminate
this Agreement - provided the plant thereafter resumes operations.
ARTICLE III
CORN PROCUREMENT FEE
3.3.01: PROCUREMENT FEE
For the first four (4) years of the Corn Procurement Term, GFCEP will pay FCE a Corn procurement and delivery fee of $0.05 per bushel of Corn delivered pursuant to Title 3 of this Agreement (the "Procurement Fee"). Beginning on the fourth (4th) year anniversary of the Corn Procurement Term, the Procurement Fee shall be increased to 5.5 cents per bushel of Corn delivered. Beginning on the eighth (8th) year anniversary of the Corn Procurement Term, the Procurement Fee shall be increased to 6 cents per bushel of Corn delivered.
3.3.02: CORN FOR GFCEP
For any Corn required by GFCEP and provided by FCE pursuant to this Agreement, GFCEP shall pay FCE the Market Price as determined in Title III, Article IV (or, if applicable, Title III, Article I, paragraph 3.1.02(c)), plus the Procurement Fee and storage fees provided for under this Agreement.
3.3.03: HEDGING ASSISTANCE
FCE shall assist GFCEP, or GFCEP's designated agent, in GFCEP's forward purchases of Corn to "lock in" the costs thereof whenever GFCEP determines such risk positions are prudent. The determination of GFCEP need not be separately evidenced in writing so long as GFCEP communicates to FCE its decision to make forward
purchases. GFCEP shall pay the purchase price for such forward purchases plus the Procurement fee and, if applicable, storage fees.
GFCEP shall pay the purchase price when the corn is purchased or when invoiced, whichever occurs first. The Procurement fee shall be due when the corn is delivered to the plant and the Procurement fee invoiced as provided by Title III, Article IV, paragraph 3.4.01. Any storage fees shall be paid as agreed on a case by case basis by the parties, or if no such agreement occurs, as is customary and standard or as otherwise provided by this Agreement.
ARTICLE IV
INVOICING AND PAYMENT
3.4.01 GFCEP shall pay FCE for the corn as delivered to the GFCEP facilities and the corresponding Procurement Fee for said corn every Wednesday at 10:00 a.m. central time for deliveries accrued through the close of business on Monday. If any Wednesday falls on a national holiday, payment shall occur 10:00 a.m. the next day.
3.4.02 The Market Price per bushel is the daily posted board price at the Minnesota Falls branch of the FCE as of 10:00 a.m. the next trading day after the corn is delivered to the GFCEP facility. The discounts, if any, shall be determined pursuant to paragraph 3.1.02(b).
ARTICLE V
LOCATION OF FCE'S DELIVERY
3.5.01 FCE shall deliver all Corn to GFCEP, and risk of loss shall pass to GFCEP, at the Facilities.
3.5.02 All responsibility for and all unloading will be performed by GFCEP at the sole and exclusive cost of GFCEP.
3.5.03 The GFCEP shall provide space rent free at its facility for no more than two (2) employees of the FCE, so that said employees may coordinate the purchase and delivery of corn to the GFCEP facilities. Said employee shall not be responsible for and shall not be involved in the unloading or handling of said corn when it arrives at the facility site. It is intended that said FCE employees shall remain in "office" because of GFCEP's liability concerns.
Said FCE employees at GFCEP shall be responsible to weigh and grade corn as delivered to the GFCEP facility. FCE employees will take and provide the required corn samples so that said weighing and grading can properly occur. GFCEP employees shall, from time to time, spot check the weighing and grading conducted by FCE employees.
3.5.04 Any disputes over grade discrepancies will be settled by the Minnesota Grain Inspection Department.
3.5.05 The grain purchased or owned by GFCEP which is held pursuant to warehouse receipt or priced later shall be physically stored in FCE's facilities.
3.5.06 The facility as constructed by GFCEP shall have a minimum of 470,000 bushels of corn storage and if the plant is expanded, then storage on the plant site shall proportionately increase so the on site storage at the plant has at least enough capacity to hold ten (10) days of corn for operation of the plant.
3.5.07 The design of the GFCEP grain receiving, handling and storage facilities shall be subject to the review of FCE before such are constructed. Any expansion or material modification of such grain receiving, handling and storage facilities of GFCEP shall likewise be subject to review by FCE before any such expansion or material modification occurs. GFCEP shall give due consideration to comments or recommendations made by FCE following its review. However, GFCEP shall not be bound to accept such comments or recommendations.
ARTICLE VI
DEFAULT, WAIVER, AND REMEDIES
3.6.01: DEFAULT, NOTICE, AND CURE
(a) Except as provided in Section 3.6.01(b), if either party shall fail to perform any of the covenants or obligations imposed upon it by this Agreement (except such failure as shall be excused under Title IV, Article III), the other party shall notify the party in default in writing of the alleged default and if the party in default shall not cure said default within fifteen (15) days from and after receiving such notice (the "Cure Period"), then notwithstanding any other provision of this Agreement, the complaining party shall have the remedies set forth in Section 3.6.03.
(b) If GFCEP fails to make payment for Corn delivered by FCE and accepted by GFCEP under the terms of this Agreement, the provisions of Section 3.6.01(a) shall apply; however, the Cure Period shall be three (3) days from and after GFCEP's receipt of notice of GFCEP's default from FCE.
3.6.02: WAIVER
Waiver by either party of any breach of the terms and conditions herein contained shall not be construed as a waiver of any subsequent breach of the same or any other provision of this Agreement.
3.6.03: REMEDIES
(a) GFCEP's Remedies. If FCE fails to deliver Corn as required by this Agreement, or if GFCEP reasonably in good faith believes that FCE will fail to deliver corn as required by this agreement, GFCEP may: (i) in good faith and without unreasonable delay, make any reasonable purchase of Corn in substitution of the quantity due from FCE, (ii) recover from FCE as damages the difference between the cost of cover under (i) and the Market Price (or the average Board price at the comparable location(s) established by the Amendment to this Agreement, if Market Price cannot be determined), plus the Procurement Fee, together with any incidental or consequential damages, but less expenses saved in consequence of FCE's breach, (iii) seek and receive injunctive relief or a decree of specific performance, (iv) credit the amount of damages FCE has become obligated to pay GFCEP, as determined by arbitration or if arbitration fails to occur as required hereby, a court of competent jurisdiction, to GFCEP and set off such amount against any amounts owed by GFCEP to FCE.
(b) FCE's Remedies. If GFCEP fails to make any payment for Corn delivered by FCE and accepted by GFCEP under the terms of this Agreement, FCE may recover the payments from GFCEP. FCE may withhold future scheduled deliveries only if GFCEP fails to pay FCE the payments owed FCE as provided by this Agreement within three (3) business days after GFCEP's receipt of FCE's written demand for payment. FCE shall also have the right to specifically enforce the terms of this Agreement, including, but not limited to, the obligation of GFCEP to purchase all of the corn needed to operate the plant from FCE.
(c) No right, power or remedy conferred by this Agreement shall be exclusive of any other right, power or remedy now or hereafter available at law, in equity, by statute or otherwise. In case of material reoccurring defaults, the non-defaulting party shall be entitled to an immediate remedy available at law, in equity, by statute or otherwise, not withstanding the notice and cure provisions of this Article 6.
TITLE IV: GENERAL PROVISIONS
ARTICLE I
WARRANTIES
4.1.01: OWNERSHIP AND QUALITY OF CORN
FCE warrants to GFCEP that FCE owns all of the Corn delivered to GFCEP under this Agreement and that such Corn shall be free and clear of any security interest, lien, penalty, charge, or encumbrance, governmental or
otherwise. If FCE has granted a security interest in any of the Corn delivered, FCE shall inform GFCEP in writing, at or before delivery of the Corn, of any such secured party's name and address. GFCEP shall have the right, but not the obligation, to name the secured party as co-payee with FCE on any payment for the Corn and to deliver such payment to the secured party.
4.1.02: NO EXPRESS OR IMPLIED WARRANTIES
Neither party shall be liable for any representation or warranty of any kind, express or implied, not expressly set forth in this Agreement.
ARTICLE II
DISPUTE RESOLUTION
4.2.01: ALTERNATIVE DISPUTE RESOLUTION
If a dispute, controversy, or claim arises out of or relates to this Agreement, or the alleged breach thereof, including any claim or allegation of fraud or misrepresentation, and if said dispute cannot be settled through direct discussions, the parties agree to first endeavor to settle the dispute in an amicable manner by mediation with an independent mediator selected by mutual agreement of the parties. If the parties are unable to agree on a mediator, mediation shall be administered by the American Arbitration Association under its Commercial Mediation Rules. If the matter has not been resolved pursuant to mediation within thirty (30) days of the commencement of such mediation (which period may be extended by mutual agreement in writing), then any unresolved dispute, controversy, or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules (the "Commercial Arbitration Rules"), and judgment upon the award rendered by the arbitrators may be entered in the Minnesota District Court in Yellow Medicine or Chippewa County, Minnesota, or the highest state court having jurisdiction. The arbitration shall be conducted in Yellow Medicine County, Minnesota by a panel of three neutral arbitrators appointed pursuant to the Commercial Arbitration Rules.. The arbitrators shall permit each party to conduct limited relevant discovery. The arbitrators shall award damages measured by the prevailing party's actual damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of this Agreement. The provisions of this Agreement shall be a complete bar and defense to any suit, action or proceeding instituted in any court or administrative tribunal with respect to any controversy or dispute under this Agreement which is arbitrable.
4.2.02: ATTORNEY'S FEES AND COSTS
The parties agree that the arbitration panel shall award to the prevailing party in any dispute resolution proceedings related to this Agreement, from the other party, the amount of the prevailing party's costs, expenses, and attorneys' fees as the arbitrators deem fair and equitable.
ARTICLE III
FORCE MAJEURE
4.3.01: RELIEF FROM TRANSFERING CORN
In the event of either party being rendered reasonably unable by Force Majeure to perform any of its obligations in receiving or delivering Corn hereunder, the obligations of such party shall be suspended, to the extent it is unable, in whole or in part, to receive or deliver Corn by reason of Force Majeure, during the continuance of any inability so caused and the cause of such inability shall, so far as possible, be remedied with reasonable diligence. Inability may include a storm event that does not allow management of GFCEP to execute documents and otherwise perform wire transfers or payment as required by this Agreement or which does not permit FCE to perform as required by this Agreement. However, the party not subject to the force majeure event may, during such period, accept performance from the other party or a third party as it may reasonably determine under the circumstances.
4.3.02: DEFINITION
The term "Force Majeure" as used in this Agreement shall mean natural catastrophe, strikes, lockouts, or other industrial disturbances, acts of the public enemy, wars, declared or undeclared, blockades, insurrections, riots, fires, civil disturbances, explosions, curtailment of power or natural gas, compliance with laws, governmental regulations, orders and requests, whether valid or not, curtailment or other inability to obtain equipment, supplies, materials, including corn, or transportation facilities, breakdown of facilities, machinery or equipment and any other cause whether of the kinds herein enumerated or otherwise, not within the reasonable control of the party claiming suspension, all of which by the exercise of due diligence such party could not have reasonably foreseen and provided against; provided, however, that the settlement of strikes or lockouts shall be entirely within the discretion of the party having the difficulty.
ARTICLE IV
DELIVERY OF PAYMENTS AND NOTICES
4.4.01: METHOD AND TIME
All payments for corn and related fees shall be made by wire transfer. All payments of other sums, notices, demands, or requests from one party to another may be personally delivered or sent by mail, certified or registered, postage prepaid, to the addresses stated in this section, and shall be deemed to have been given at the time of personal delivery or forty-eight (48) hours after the time of mailing.
4.4.02: NOTICE TO FCE
All notices, demands or requests from GFCEP to FCE shall be given to FCE at:
Farmers Cooperative Elevator Co.
C/o General Manager
P. O. Box 59
Hanley Falls, Minnesota 56245
Fax number: (507) 768-3675.
4.4.03: NOTICE TO GFCEP
All notices, demands or requests from FCE to GFCEP shall be given to GFCEP at:
Granite Falls Community Ethanol Plant C/o General Manager
with a required copy to:
To be determined.
4.4.04: CHANGE OF ADDRESS
Each party shall have the right, from time to time, to designate a different address by notice given in conformity with this section.
ARTICLE V
INDEMNITY
4.5.01: DUTY TO INDEMNIFY. FCE agrees to indemnify and hold GFCEP harmless against any and all claims, losses, damages or expenses by or on behalf of any person or entity arising out of the performance of any covenant or agreement to be performed by FCE, or arising from any act or negligence or willful misconduct on the part of FCE, any person or entity claiming by, through or under FCE or its agents, contractors, employees or invitees, including reasonable attorney fees, expenses, and liabilities, incurred in connection with any such claim or action or proceeding brought against GFCEP.
4.5.02: DUTY TO INDEMNIFY. GFCEP agrees to indemnify and hold FCE harmless against any and all claims, losses, damages or expenses by or on behalf of any person or entity arising out of the performance of any covenant or agreement to be performed by GFCEP, or arising from any act or negligence or willful misconduct on the part of GFCEP, any person or entity claiming by, through or under GFCEP or its agents, contractors, employees or invitees, including reasonable attorney fees, expenses, and liabilities, incurred in connection with any such claim or action or proceeding brought against FCE.
ARTICLE VI
OTHER GENERAL PROVISIONS
4.6.01: COMPUTATION OF TIME
The time in which any act provided by this Agreement is to be done shall be computed by excluding the first day and including the last, unless the last day is a Saturday, Sunday or holiday, and then it is also excluded, except that storage and interest shall begin to accrue on the first day.
4.6.02: SUCCESSORS IN INTEREST
Each and all of the covenants, conditions and restrictions in this Agreement shall inure to the benefit of and shall be binding upon the successors, assigns, transferees, sublessees, licensees of the parties hereto; provided, however, that if FCE sells to or is acquired by any other cooperative, corporation or entity, and does not retain majority ownership or control, this Agreement shall terminate, at the option of GFCEP.
4.6.03: ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties with respect to the matters covered herein, and no other agreement, statement or promise made by any party, to any employee, officer, or agent of any party, which is not contained in this Agreement shall be binding or valid.
4.6.04: PARTIAL INVALIDITY
If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction or the arbitrators to be invalid, void, or unenforceable, the invalid, void or unenforceable term(s) shall be void, and the parties shall renegotiate said term(s) of this Agreement in good faith and if the parties cannot reach agreement, said term(s) shall be established by the Dispute Resolution provisions of this Agreement.
4.6.05: RELATIONSHIP OF PARTIES
Nothing contained in this Agreement shall be deemed or construed by the parties or by any third person, arbitrator, or court to create the relationship of principal and agent or of partnership or of joint venture or of any association between FCE and GFCEP, and neither the method of computation of rent or fees nor any other provisions contained in this Agreement nor any acts of the parties shall be deemed to create any relationship between FCE and GFCEP, other than the relationship of seller and buyer.
4.6.06: INTEREST
Any sum accruing to FCE or GFCEP under the provisions of this Agreement which shall not be paid when due shall bear interest at the rate of ten percent (10%) per annum from the date of written notice specifying such nonpayment is served on the defaulting party, until paid.
4.6.07: MODIFICATION
This Agreement may not be modified or amended except by written instrument signed by both of the parties, provided that the Board of Directors of both parties approve the modification, and shall not be modified or
altered by any subsequent course of performance by either of the parties, except as expressly otherwise herein provided.
4.6.08: CHOICE OF LAW
This Agreement shall be deemed to have been made and executed in the State of Minnesota and the validity, construction, interpretation, effect and enforcement thereof shall be governed by the laws of the State of Minnesota.
4.6.09: HEADINGS AND CAPTIONS
The headings and captions of the titles, articles, sections, and subsections of this Agreement are inserted for convenience of reference only, and do not constitute part of the Agreement.
4.6.10: COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts, each of which shall in such event be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, FCE and GFCEP have caused this Agreement to be executed by their duly authorized representatives as of the date first set forth above.
FARMERS COOPERATIVE GRANITE FALLS COMMUNITY ELEVATOR CO. (FCE) ETHANOL PLANT, LLC (GFCEP) By /s/ Wayne Lonwagie By /s/ Tom Branham --------------------------- --------------------------------- Its President Its CEO/General Manager --------------------------- -------------------------------- 8-5-04 August 4, 2004 |
Exhibit "A"
Legal Description of the Premises on which the facilities ("plant") of Granite Falls Community Ethanol Plant, LLC (GFCEP) will be constructed:
County of Chippewa, State of Minnesota:
EXHIBIT 10.4
OPERATING AND MANAGEMENT AGREEMENT
THIS OPERATING AND MANAGEMENT AGREEMENT ("Agreement") is made effective as of the 9 day of July, 2004, by and between GLACIAL LAKES ENERGY, LLC, a South Dakota limited liability company ("Manager"), and GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC, a Minnesota limited liability company ("Owner").
Background Statements
Owner and the Manager (as a Member of Owner) have entered into certain agreements, of even date herewith, which will provide for sufficient capital to construct and thereafter operate a 40 million gallon per year dry mill ethanol plant on property owned by Owner (the "Facility"). Owner desires to contract with Manager for operating and management services for the Facility. Manager desires to provide these services having provided similar services in the construction and operation of such facilities in the past. This Agreement sets forth the responsibilities of the parties with respect to the Facility and its operation and management.
Statement of Agreement
NOW THEREFORE, in consideration of the mutual promises set forth in this Agreement, the parties hereto agree as follows:
ARTICLE 1
Duties of Manager
During the term of this Agreement Owner hereby grants to Manager, subject to the terms and conditions hereof, the sole right and authority to supervise and direct the management and operation of the Facility. Manager hereby accepts such responsibility and agrees, subject to the supervision and direction of Owner's Board of Governors, to perform all services necessary for the construction, equipping, start up and thereafter operation of the Facility in accordance with highest industry standards. Manager's duties shall include, but not be limited to the following:
(a) Maintenance and Operation. Upon completion of construction, to direct the maintenance and operation of the Facility. In connection therewith:
i. Manager shall, at all times, do all things necessary to obtain permits and licenses required for the construction and/or operation of the Facility. Thereafter Manager shall continuous ensure compliance with all regulatory matters to which the Facility or its operations may be subject.
ii. Manager shall, at all times, hire, promote, discharge and supervise the work of all employees necessary to operate the Facility, and arrange for payment of all employee wages, salaries and benefits as established from time to time by Owner. Notwithstanding, the parties understand and agree that all employees shall, except for the CEO/General Manager, the Commodities Manager, and the Environmental, Health and Safety Manager, and the Chief Finance Officer (the "CFO") be employees of Owner.
iii. Manager shall direct all audit and accounting functions with respect to the Facility and its operation and, in connection therewith, shall upon approval of Owners Board secure the services, at competitive rates, of accountants, auditors, lawyers or other professionals as reasonably necessary to carry out such functions.
iv. Subject to the limitations and policies as established, from time to time by Owner's Board of Governors, Manager shall direct contracting for purchase or sale of goods and
services, for the purchase of equipment and fixtures, to arrange for necessary repairs, renewals, additions and/or improvements to the Facility, all in such amounts as may be within Owner's budget and/or as may authorized by the Board of Governors from time to time. It is understood and agreed by the parties that, except as otherwise provided by the Board of Governors, Manager will not enter into any agreement or commitment to utilize the credit of Owner or to borrow money in the name of the Owner unless approved in writing in advance by Owner, except for purchase of goods and services and other items on credit as are in the ordinary course and are customary and consistent with the day to day operation of Owner.
v.
(a) Managers shall collect income and pay expenses of Owner in accordance with the terms set forth herein and as provided, from time to time by Owners Board of Governors.
(b) Manager shall deposit in banking institution or institutions as may be designated from time to time by Owner, as soon as possible after collection, all monies or other income received by Manager in operation of the Facility and disburse and pay from the same, on behalf of and in the name of Owner, such amounts and at such a time as required to be disbursed or paid pursuant to this Agreement. The parties agree that Owner shall approve any proposed appointee of Manager as a person designated as one authorized to withdraw funds from any such account. Such person shall be insured by a Fidelity Bond or insurance policy in a form as approved by Owner.
(c) In connection with all income collected and deposited, Manager shall segregate funds necessary for paying ordinary and necessary expenses into a working capital account which shall not, without Owner's advance consent, have a balance in excess of $100,000. Funds in excess of such amount shall be held on deposit or in investments as determined, from time to time by Owner.
(d) With respect to disbursements, Manager shall cause to be paid all obligations incurred in the ordinary course in the operation and management of the Facility from the working capital account. Payment for expense outside of the ordinary course of business shall require Owner's advance written consent.
vi. Manager shall prepare, for approval by Owner, an annual budget prior to each 12 months operation of the Facility. Said budget shall contain all anticipated expenses, both ordinary and extraordinary for the coming year. Manager shall report on a monthly basis the results of actual operation as compared to the Annual Budget. Payment of any unbudgeted items, or items exceeding the budgeted allowance shall require Owner's advance consent.
vii. Manager shall direct all grain purchasing and risk management with respect to the same, and as may be necessary to operate the Facility in accordance with reasonable business practices and in accordance with any agreements or contracts entered into by Owner with respect to the same.
viii. Manager shall direct the marketing of all product produced at the Facility and use Manager's best efforts to secure the highest rate of return for Owner and its members.
ix. Manager shall recommend to Owner and shall assist Owner in procuring and keeping in force such property, public liability and workman's' compensation insurance and such other insurance for risk and causality as are customarily insured against with respect to
operations similar to that of the Facility and in such an amounts and on such terms as may be customary in the industry.
x. Manager shall maintain books and records in accordance with GAAP, and shall cause to be prepared and delivered to Owner regular financial and operational reports as directed by Owner from time to time and which shall include a monthly profit and loss statement, annual balance sheet and related statement of profit and loss for each fiscal year together with statement showing assets employed in the operation of the Facility and liabilities incurred in connection therewith.
xi. Manager shall direct the preparation of all tax returns, SEC and other filings which may be required of Owner and arrange for payment of all taxes, fees, licenses and assessments related to the Facility and its operations. In addition, Manager shall arrange and give proper notice of annual meetings of Owner.
xii. Manager shall attend all meetings, prepare such reports, and shall otherwise manage, supervise and conduct the day-to-day affairs of the Company, including, without limitation, the daily operations of financial management, government reports, board and member reports, tax reporting and filing, maintenance and service of the plant, (subject to Article I(a)(iii) above) hiring of legal counsel and auditors and accountants, public relations, buying and selling goods and services and all other things necessary and desirable for the operation of the plant, and as may be requested from time to time by Owner. At all times Managers shall follow policies and procedures as may, from time to time, be announced by Owner's Board of Governors.
xiii. To hire and dismiss such employees of the Owner and independent contractors as the Manager shall deem reasonably necessary to the operation of the facility.
xiv. Within the scope of Owner's Board authorization to purchase or otherwise obtain the right to use equipment, supplies, hardware and software technology associated with the facility.
xv. Under the direction of Owner's Board, to institute, prosecute, defend, settle, compromise and dismiss lawsuits or other judicial or administrative proceedings brought on or in behalf of, or against, the Owner, the Members or the Manager in connection with activities arising out of or incidental to this Agreement, and to engage counsel or others in connection therewith.
xvi. To carry on any other activities necessary to, in connection with, or incidental to any of the foregoing or the day-to-day operations of the Owner.
xvii. Manager shall perform start-up and operational monitoring and reporting; review physical performance compared to plan and compared to vendor guarantees; and certification of issues surrounding completion as defined in Credit and other Agreements (close out).
xviii. Owner's Board shall, promptly upon execution hereof and upon this Agreement becoming effective announce, in advance, to Manager its policies and procedures as related to the duties of Manager as described above; and shall thereafter review the same, at least annually with Manager. Manager shall be entitled to rely on the policies and procedures of Owner until such time as Owner's Board advises Manager, in writing, of a change with respect to the same. Further, in establishing its policies and procedures Owner's Board shall give due consideration to the format and effectiveness of Manager's existing operational authority for other ethanol plants managed by it.
(b) Indemnity of Manager. Except for Wrongful Conduct (as defined below) by Manager, Owner will indemnify, defend and hold Manager harmless from and against any and all costs, liabilities, losses, and expenses (and reasonable attorney's fees and other legal costs) resulting from any claim, suit, action, or proceeding brought by any third party against Manager arising out of or related to this Agreement. Further, except for Wrongful Conduct, Owner shall have no cause of action against Manager for Manager's actions and conduct under the terms of the Agreement. The term "Wrongful Conduct" used herein shall be defined as any and all acts or conduct by Manager which: (1) is willful, wanton, intentional, knowing, reckless, or grossly negligent misconduct; (2) constitutes self dealing and/or gives rise to improper profit on the part of Manager in breach of fiduciary duty or duty of loyalty that Manager owes to Owner hereunder; or (3) in nature, violates any state or federal criminal law unless Manager reasonably believes, at the time of such act or conduct, that such act or conduct will not violate the same, or has no reasonable cause to believe the conduct unlawful. In the event of any third party claim against Manager, Manager shall give Owner notice of any third party claims against Manager and Owner may, at its option, take over the defense of such claim at its own expense.
(c) Damages. In the event Manager earns or acquires improper profit in breach of fiduciary duty or duty of loyalty that Manager owes to Owner hereunder, Owner is entitled to, in addition to any other remedies that Owner may have under applicable law and equity, the maximum amount of such improper profit plus interest at the maximum rate applicable under applicable law.
ARTICLE 2
Right to Replace Manager
2.1 Material Breach. Upon a material breach of the Agreement by Manager, Owner shall have the right to replace Manager as operator during the Term by terminating this Agreement under Article 6 hereof, after notice of such breach of Manager.
(a) A material breach of this Agreement by Manager shall mean: (i) Managers failure to comply with applicable laws or regulations; (ii) Managers breach of a material term of this Agreement, or (iii) any and all acts or conduct by Manager which is willful, wanton, intentional, knowing, reckless, or grossly negligent misconduct, or which constitutes self dealing and/or gives rise to improper profit on the part of Manager in breach of fiduciary duty or duty of loyalty that Manager owes to Granite Falls hereunder.
(b) Notwithstanding any other terms to the contrary hereof or of any other agreement between the parties, in the event Owner replaces Manager for cause pursuant to the terms and conditions hereof, neither Manager nor any individual member, employee, agent of Manager, notwithstanding as a Governor or Owner, may participate in the vote that may result in the replacement of Manager or termination of this Agreement, or otherwise exercise voting power, right, or privilege granted to Manager or to such individual hereunder or elsewhere in connection with such replacement or termination. Such decision to terminate shall require the affirmative vote of seventy-five percent (75%) of the remaining Governors.
ARTICLE 3
Fees and Expenses
3.1 Fee. (A) Upon commencement of the term of this Agreement, Manager shall receive, for its compensation for the services rendered hereunder, $35,000.00 per month. (B) In addition, Manager shall receive additional compensation in the amount of 3% of net income, payable annually. For purposes of this net income calculation, gifts received by the Owner, grants, government payments or subsidies, tax credits (such as Jobz) and the like shall be excluded.
3.2 Terms of Payment. Each month, Manager shall deliver to Owner an invoice indicating the sum due Manager from Owner for the operating and management services provided to Owner during the previous month, which invoice shall be paid within 10 days. The fee based upon net income shall be paid within 20 days of completion of the Owner's fiscal year and annual audit.
3.3 Inflationary Adjustment. Upon the three year anniversary of the commencement of the term of this Agreement, the monthly fee of $35,000 shall be adjusted to correspond to changes in the Consumer Price Index from the date of this Agreement to the date of the three year anniversary of the contract term.
ARTICLE 4
Relationship of Parties
4.1 Services Provided by Manager. At all times during the Term, Manager and its employees shall be considered independent contractors with respect to Owner. Any person engaged by Manager to perform services at the facility shall do so solely as servant or agent of Manager. Manager shall pay all salaries and fringe benefits, withhold payroll taxes, and make any other payments normally made to, or for the benefit of such persons. Manager shall provide all appropriate payroll administration services with respect to such persons.
4.2 Services Provided by Owner. At all times during the Term, Owner and its employees shall be considered independent contractors with respect to Manager. Any person engaged by Owner to perform services at the facility shall do so solely as servant, agent or employee of Owner. Owner shall pay all salaries and fringe benefits, withhold payroll taxes, and make any other payments normally made to, or for the benefit of such persons. Owner shall provide all payroll administration services with respect to such persons.
4.3 The Independent Contractors to be Provided by Manager. It is intended that Manager will provide the following independent contractors: CEO/General Manager, CFO, Commodities Manager to monitor/handle grain procurement and grain risk and Environment, Health and Safety Manager. These individuals will not be full-time, but shall divide time between Watertown and Granite Falls. Manager shall also provide the part-time services of a CFO to provide oversight on financial records and reports, an employee to provide assistance to the Plant Manager to be hired by Owner, and an employee to provide assistance to the Maintenance Manager hired by Owner. All other persons will be employees of the Owner, except for services that may be provided by independent contractors (other than Manager) on a case by case basis. All other persons will be employees of the Owner, except for services that may be provided by independent contractors (other than Manager) on a case by case basis.
4.4 Insurance. Manager, at its own cost and expense, during the full term of this Agreement, shall carry and maintain Workers' Compensation insurance at statutory limits and Employer's Liability Insurance and General Commercial Liability Insurance with a limit of not less than $500,000 [sic], $1,000,000, respectively, $2,000,000 aggregate [sic]. Evidence of such insurance shall be furnished to Owner upon written request therefore.
ARTICLE 5
Confidentiality
Each party will treat as confidential all information designated by the other party in writing as confidential which is not otherwise lawfully known to it or already in the public domain, shall not disclose such information to any third party (except its attorneys, accountants or other advisors (who shall be similarly bound by this Confidentiality Clause), or unless such disclosure is required by law) without the prior written consent of the other party, shall return such information promptly to the other party upon request, and shall keep such information confidential both during and following the expiration of the Term of this Agreement.
ARTICLE 6
Termination of Agreement
6.1 Termination. Anything in this Agreement to the contrary notwithstanding, this Agreement may be terminated prior to the end of the Term set forth in Article 11 hereof upon any of the following events:
(a) By mutual written consent of Manager and Owner;
(b) Upon written notice from either party to the other if such other party is subject to proceedings under any law relating to bankruptcy, or the relief of debtors, other than an involuntary petition in bankruptcy which is dissolved within sixty (60) days after the commencement thereof.
(c) As provided at Article 2 hereof.
(d) Upon written notice from either party to the other party if the other party has failed to make any payment due hereunder which is not reasonably in dispute within twenty (20) days after delivery of written notice that such amount is past due; or
(e) Upon written notice from either party to the other if such other
party has breached any material term of this Agreement that is not excused by
Force Majeure and such other party does not commence curative action with
reasonable diligence to cure the breach as soon as practicable within twenty
(20) days following the delivery of written notice to such other party
specifying such breach.
(f) Upon the dissolution or liquidation of either party or the inability of either party to carry on its business.
6.2 Effect of Termination. Upon termination of this Agreement for any reason, all obligations of the parties hereunder shall terminate, except confidentiality obligations hereunder, and the obligations which may become due and payable in respect to any services provided pursuant to this Agreement prior to termination. Nothing in this Section 6.2 shall affect the right of either party to bring an action against the other party for a breach occurring prior to the termination or for a wrongful termination, and to recover damages resulting therefrom. No failure or delay on the part of the parties hereto to exercise any right, power or privilege hereunder shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
ARTICLE 7
Force Majeure
Except as otherwise provided herein, the performance of a party shall be excused due to Force Majeure, including any event, action or circumstance which is beyond the reasonable control of the party claiming Force Majeure and adversely and directly renders the performance of the party impossible in whole or in part. In the event a party is responsible for an action, event, or circumstance pursuant to this Agreement, then such action, event, or circumstance shall be deemed beyond the reasonable control of the other party, by such other party, except as otherwise provided herein. Where such impossibility of performance is in part due to Force Majeure, the said party shall not be relieved of the performance of that party which is not so rendered impossible. Any party prevented from performing due to an event of Force Majeure shall be obligated to use all reasonable efforts to remedy such condition as soon as reasonably possible. Either party may terminate this Agreement upon not less than thirty (30) days prior written notice if an event of Force Majeure has occurred that will prevent either party from performing its obligations hereunder for more than ninety (90) days.
ARTICLE 8
Notices
All notices pertaining to this Agreement shall be given in writing to the representatives indicated below (or as may otherwise be designated in writing by either party) delivered personally or sent by express or certified mail, postage prepaid, or faxed with a hard copy mailed at the following addresses:
Owner: P.O. Box 216, Granite Falls, MN 56241
------------------------------------------
Granite Falls Community Ethanol Plant, LLC
-6-
|
Manager: P.O. Box 933, Watertown, SD 57201
---------------------------------
Glacial Lakes Energy, LLC
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ARTICLE 9
Entire Agreement; Amendments
9.1 Entire Agreement. Except as otherwise agreed to in a writing signed by both parties, represent the entire agreement between the parties concerning provisions of operating and maintenance service for the Ethanol Plant and supersedes all prior negotiations and representations whether written or oral.
9.2 Amendment. This Agreement may be amended or modified only by a written instrument signed by the respective authorized representatives of the parties.
ARTICLE 10
Term of Agreement
10.1 Initial Term. The term of this Agreement shall commence six months prior to the estimated start-up date of the facility and shall continue until the fifth anniversary thereof.
10.2 Renewal Term. Thereafter, this Agreement shall be automatically renewed for successive periods of one (1) year each, provided, however, that this Agreement may be terminated by either party upon one-hundred eighty (180) days written notice prior to the beginning of any such renewal period.
ARTICLE 11
Miscellaneous
11.1 Severability. If any provision of this Agreement or any remedy provided herein is found to be invalid, illegal, or unenforceable in part or in whole under any applicable law, such provision or remedy, or portion thereof, shall be inapplicable and deemed omitted from this Agreement, but the remaining provisions shall continue in full force and effect.
11.2 Counterparts. Any number of counterparts to this Agreement may be executed and each shall have the same force and effect as the original.
11.3 Governing Law. This agreement shall be governed by and interpreted under the laws of the State of Minnesota.
11.4 Successors and Assigns. This Agreement shall not be assigned by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and shall inure to the benefit of the parties' successors and assigns.
11.5 Inspection of Records. Upon reasonable prior notice, each party shall allow the other to inspect the records supporting the calculations determined under this Agreement (which relate to the performance of this Agreement) which may be required by law or this Agreement to be maintained by either party. Where and when reasonable to do so, either party may install its own temporary or permanent measuring device at its own expense to verify any measurement made by the other party pursuant to this Agreement.
11.6 Arbitration. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in Yellow Medicine County, Minnesota in accordance with the rules then existing of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. The arbitrator or arbitrators under this provision shall decide who shall pay the expenses of
arbitration. Any decision made by an arbitrator or arbitrators under this provision shall be enforceable as final and binding as if it were a final decision or decree of a court of competent jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first above written.
Owner: Manager:
GRANITE FALLS COMMUNITY ETHANOL GLACIAL LAKES ENERGY, LLC
PLANT, LLC
By: /s/ Jon T. Anderson
--------------------------------
Printed Name: Jon T. Anderson
----------------------
By: /s/ Paul Enstad Title: President
------------------------------- -----------------------------
Printed Name: Paul Enstad
----------------------
Title: Chairman
-----------------------------
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EXHIBIT 10.5
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("AGREEMENT") is made effective as of the 9th day of July, 2004, by and between Glacial Lakes Energy, LLC a South Dakota limited liability company ("CONSULTANT"), and Granite Falls Community Ethanol Plant, LLC, a Minnesota limited liability company ("Granite Falls").
WHEREAS, Granite Falls, (of which Glacial Lakes is a member) intends to construct a 40 Million gallon per year "Dry Mill" ethanol plant ("Project") near Granite Falls, Minnesota; and
WHEREAS, Granite Falls desires to engage the Consultant to assist Granite Falls in monitoring the construction and reviewing project plans and documents as set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. CONSULTING SERVICES. Granite Falls hereby retains the services of Consultant, and Consultant agrees to provide such consulting services pursuant to the terms of this Agreement. The scope of services provided by the Consultant pursuant to this Agreement are set forth on the attached EXHIBIT A, which is incorporated herein by this reference. Consultant agrees to faithfully perform the duties required of it pursuant to this Agreement and to devote the necessary time and attention to performing such services for Granite Falls. Consultant shall hire "PROJECT COORDINATOR" and shall be on site and advise Consultant as to the status of construction at all times. Consultant will employ and direct the activities of the Project Coordinator. The parties acknowledge that in no event shall Consultant be liable to Granite Falls or any other Project lender or third party for the acts or omissions of the Project architects, engineers, construction managers, and contractors, or for any design and construction defects, subcontractors, or suppliers consequential damages.
2. COMPENSATION. Granite Falls agrees to pay Consultant a fee of $10,000.00 per month for its consulting services as set forth herein. The fees shall be paid to Consultant upon receipt of an invoice from Consultant. Granite Falls shall make payments to Consultant within ten days of the date on each invoice. The fees shall not be subject to any withholding or payments of income tax, FICA, FUTA or similar tax and insurance withholding requirements. Consultant is responsible for the payment of all applicable taxes. Consultant is an independent contractor and is not an employee of Granite Falls.
3. REIMBURSABLE EXPENSES. In addition to the Fee set forth above in
Section 2, Granite Falls agrees to reimburse Consultant as follows:
Granite Falls agrees to reimburse Consultant for all pre-approved expenses reasonably incurred by Consultant in connection with the performance of consulting services under this Agreement, to the extent approved in advance by Granite Falls, excluding any travel costs back and forth between Granite Falls, Minnesota and Watertown, South Dakota.
The reimbursable expenses referenced in this Section 3 shall be included in the
itemized monthly invoice provided by Consultant as set forth in the above
Section 2.
4. TERM. This Agreement shall commence as of the date of its execution and, unless otherwise agreed in writing, shall terminate upon commencement of the Operating and Management Agreement term, as set forth therein. If the Project is abandoned, Granite Falls may terminate this Agreement. In such event, Consultant shall be entitled to receive payment for services rendered and expenses incurred through the date of termination.
5. NO AUTHORITY TO BIND; RELATIONSHIP OF THE PARTIES; 3RD PARTY BENEFICIARIES. Consultant is merely an advisor to Granite Falls, and, as such, Consultant shall have no authority to bind Granite Falls on any
matter. This Agreement does not create a partnership or any other relationship other than that of an independent contractor relationship between the parties. There are no intended 3rd party beneficiaries of this Agreement.
6. ASSIGNMENT. This Agreement and a party's rights and obligations hereunder may not be assigned without the written consent of the other party. Subject to the foregoing, this Agreement shall be binding on the heirs, successors and assigns of the parties.
7. WAIVER. The waiver by either party of a breach of any provision of this Agreement shall not be deemed a waiver of any other provision or of any other breach of the same provision. Waivers shall apply only if in writing and signed by the party against whom the waiver is claimed. No change, modification or amendment shall be valid unless in writing and signed by both parties.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire statement of agreement between the parties and supersedes all prior discussions and understandings between the parties pertaining to the subject matter of this Agreement. The headings have been inserted for convenience only and are not to be considered when interpreting the provisions of this Agreement.
9. SEVERABILITY: If any term or provision of this Agreement is held invalid and unenforceable to any extent, the remaining terms and provisions of this Agreement shall not be affected thereby, but each term and provision of the Agreement shall be valid and enforced to the fullest extent permitted by law.
10. APPLICABLE LAW. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Minnesota, determined without regard to its principles of conflicts of laws. In the event of a claim arising out of this Agreement the prevailing party shall be entitled to recover attorney's fees and other collection or enforcement costs.
11. NOTICES. All notices or other communications required or permitted to be given pursuant to the provisions of this Agreement shall be in writing and shall be considered as properly given if mailed by first class United States mail, postage prepaid, or by delivering same in person to the intended addressee, or by prepaid telegram. Notice so mailed shall be effective upon its deposit. Notice given in any other manner shall be effective only if and when received by the addressee. For purposes of notice, the addresses of the parties shall be as follows:
If to the Consultant: Glacial Lakes Energy, LLC
PO Box 933
Watertown, SD 57201
To Granite Falls: Granite Falls Community Etnanol Plant
PO Box 216
Granite Falls, MN 56241
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12. COUNTERPARTS. This Agreement may be executed in counterparts and on telecopy counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same agreement.
[Remainder of Page Intentionally Blank]
IN WITNESS WHEREOF, the parties sign this Agreement to be effective as of the date first above written.
GLACIAL LAKES ENERGY, LLC
BY: /s/ Jon T. Anderson ------------------------------------- President |
GRANITE FALLS COMMUNITY ETHANOL
PLANT, LLC
BY: /s/ Paul Enstad
-------------------------------------
NAME: Paul Enstad
-----------------------------------
TITLE: Chairman
----------------------------------
|
EXHIBIT A
TO
CONSULTING AGREEMENT
Scope of Services*
A. Phase I - Written review of project plans and documents affecting viability
- Review of safety plans and their implementation.
- Review Equipment suitability.
- Review Equipment layout.
- Review availability of utilities.
- Review environmental reports relating to their impact on cost, schedule, and constructability.
- Review the sufficiency of permitting and approvals.
- Review of insurance coverage requirements.
- Review of invoice payment, title insurance, and lien waiver procedures.
- Summary comment on feasibility.
B. Phase II - Construction Monitoring
- Review global project budget and timeline
- Manage construction draws as follows:
1. Serve as collection point for payment invoices and lien waivers.
2. Assure that lien waivers are provided as per any Loan Agreement, Construction Disbursing Agreement or other form of Disbursing Agreement, each of which shall be reviewed by Consultant. The form of lien waiver shall be as approved by Granite Falls.
3. Sign-off on payment invoices and provide to Granite Falls for approval. (Sign-off includes certification that the related budget item is completed, or on schedule to complete and is in accordance with specifications and timeline.) The forms of certification shall be as approved by Granite Falls.
4. Report budget item cost overruns to Granite Falls. If outside established tolerance (as determined by Granite Falls) obtain Granite Falls approval prior to disbursement. Report all cost overruns monthly.
5. Provide monthly report which compares construction draws to the item specific project budget.
6. Forward invoices, lien waivers, and payment recommendations to Granite Falls.
- Complete on-site inspections monthly or more often as reasonably requested.
- Provide written recommendation and analysis of change order requests.
- Provide monthly review of project manager's weekly status reports.
- Provide monthly report to Granite Falls, which includes but is not limited to the following:
1. Construction progress.
2. Construction budget to actual disbursements.
3. Environmental & Compliance issues.
4. Safety issues.
5. Material and equipment procurement status.
6. Change order requests, analysis, and recommendation.
7. Problems or deviations from plan, specifications or budget.
- Coordinate and attend monthly meetings with Granite Falls, lenders and others as appropriate.
- Construction. To direct construction of the Owners (Granite Falls) scope of work, pursuant to Owners Board approval, to include bidding process, letting of all contracts, approving schedules of work, paying progress payments, securing lien waivers, enforcing Owner's contractual rights and warranty claims and all other things necessary to bring construction of the Facility to substantial completion.
- Purchasing. To direct the purchase of all equipment and fixtures and installation thereof, whether during the construction process or after its completion as specified in the plans and specifications for the Facility, upon Owners Board approval.
* Granite Falls acknowledges that Consultant is not a licensed architect or engineer and that Consultant's consulting services do not include professional design or engineering services, but rather the services relate to construction monitoring as set forth herein and a review of the plans and specifications to determine their impact on cost, schedule, constructability and feasibility.
EXHIBIT 10.12
CONTRACT
THIS AGREEMENT, made and entered into this 30th day of October, 2004, between Granite Falls Energy, L.L.C., 15045 Highway 23 SE, Granite Falls, Minnesota, hereinafter called the “Owner” and MGA Railroad Construction, Inc., hereinafter called the “Contractor”.
| 1. | WITNESSETH: That the said Contractor, having been awarded the contract for |
Granite Falls Railroad Track Project
Granite Falls, Minnesota
In accordance with the proposal therefore, which is bound herewith and for and in consideration of the premises and of the covenants and agreements and of the payments herein specified to be made and performed by the Owner. The Contractor hereby covenants and agrees with the Owner to undertake and execute all of the said work in good, substantial and workman-like manner, and to furnish all the materials and all tools and labor necessary to properly perform and complete the work ready for use in strict accordance with the plans and specifications, and any revisions thereto in effect at the same time of signing this contract and to accept as full compensation the amount of One Million One Hundred Fourteen Thousand Eight Hundred and Eighty-Four Dollars in same as the attached price quote.
| 2. | The prices named in the Price Quote attached hereto are for the completed work and include the furnishing of all materials, labor, tools and expenses, direct and indirect connected with the proper execution of the work in accordance with plans and/or specifications for the work and maintaining the same until it is accepted by the Owners. | |||
| 3. | It is a condition of this contract, that the Contractor and any subcontractor shall not require any laborer or mechanic employed in performance contract to work in surroundings under working conditions which are unsanitary, hazardous, or dangerous to his health or safety, as determined under construction safety and health standards. | |||
| 4. | This AGREEMENT may be terminated by either party upon fifteen days within notice, in the event of substantial failure to perform in accordance with the terms thereof by one party through no fault of the other party. If this AGREEMENT is so terminated, the Contractor shall be paid in the amount, which he has earned up to such date of termination including any reimbursable or terminal expenses then due under the terms of this AGREEMENT. Upon termination, the Owner shall become the property of the Owner. Unless the AGREEMENT shall have been terminated as herein before provided, it shall terminate on completion of the scope of work as defined in the plans and specifications and on final payment of all fees under this AGREEMENT by the Owner. | |||
| 5. | This contract with all its forms, plans, specifications and provisions, shall be binding upon heirs, executors, administrators or assigns of said Contractor and upon the successors or assigns of said Owner as much so as if each and all of them had been specifically mentioned. | |||
IN WITNESS WHEREOF: The Contract has been executed on behalf of said owned and caused the seal of said Owner to be hereto affixed and the contractor has hereunto set his hand and seal the day and year first written above.
| Granite Falls Energy, L.L.C | ||||||
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(Seal)
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(Owner) | |||||
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| MGA Railroad Construction, Inc. | BY: | /s/ Tom Branhan | ||||
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| (Contractor) | ||||||
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BY
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/s/ Michale G. Arter | TITLE: | CEO/General Manager | |||
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| Mike Arter | ||||||
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TITLE:
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President | |||||
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Final completion date of August 15, 2005 JN/MGA
-2-
| MGA RAILROAD CONSTRUCTION, INC. | September 10, 2004 | |
| 47452 210 Street | ||
| Aurora, SD 57002 | ||
GLACIAL LAKES
PROJECT: Granite Falls, MN
Track Work
|
Item #
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Item
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Unit
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Est. Quantity
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Unit Price
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Total Est. Price
|
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1
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Track | Track Feet | 13,604 | $ | 71.00 | $ | 965,884.00 | |||||||||||||
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2
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No. 9 Turnout | Each | 6 | $ | 24,100.00 | $ | 144,600.00 | |||||||||||||
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3
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Derail | Each | 2 | $ | 700.00 | $ | 1,400.00 | |||||||||||||
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4
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Wheel Stops | Pair | 6 | $ | 500.00 | $ | 3,000.00 | |||||||||||||
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Total | $ | 1,114,884.00 | |||||||||||||||||
MATERIALS UTILIZED
New 7” x 8” Hardwood Grade 4 Ties
112 lb. or Heavier Relay Rail
A minimum of 6” of crushed ballast.
Full Depth timber crossings
Switches With E-Z Operating Stands
Total of All Estimated Prices: One Million, One Hundred Seventy-Seven thousand, Six Hundred Fourteen Dollars and Forty Cents plus applicable taxes.
* Price includes all tract construction except mainline turnouts, on a prepared subgrade. Price includes surveying costs to lay out curves, determining top of rail elevation and location of switches.
NOTE: Instead of a performance bond, “payment to the Contractor will be made by check or cash, based on monthly estimates for work completed, subject to a 10 percent retainage until final work is completed and accepted by Glacial Lakes Energy”.
Exhibit 31
CERTIFICATION PURSUANT TO
I, Thomas Branhan, certify that:
Date: November 15, 2004
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this quarterly report on Form 10-QSB of Granite Falls
Community Ethanol Plant, LLC;
2.
Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
report;
4.
The Registrant’s other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the Registrant
and have:
a)
designed such disclosure controls and procedures, or caused
such disclosure controls and procedures, to ensure that material
information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being
prepared;
b)
evaluated the effectiveness of the Registrant’s
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report, based
on such evaluation; and
c)
disclosed in this report any change in the Registrant’s
internal control over financial reporting that occurred during the
Registrant’s most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Registrant’s
internal control over financial reporting; and
5.
The Registrant’s other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the Registrant’s auditors and the audit committee of the Registrant’s
board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Registrant’s
ability to record, process, summarize and report financial
information; and
b)
any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant’s internal control over financial reporting.
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Nealon, certify that:
| 1. | I have reviewed this quarterly report on Form 10-QSB of Granite Falls Community Ethanol Plant, LLC; | |||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | |||
| 4. | The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the Registrant and have: | |||
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
| b) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and | |||
| c) | disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and | |||
| 5. | The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |||
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. | |||
Date: November 15, 2004
|
/s/ Michael Nealon
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|
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Michael Nealon
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|
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Chief Financial Officer and Controller
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(
Principal Accounting Officer)
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Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Granite Falls Community Ethanol Plant, LLC (the “Company”) on Form 10-QSB for the period ended September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Thomas Branhan, Chief Executive Officer and General Manager certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |||
| (2) | The information contained in the accompanying Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | |||
|
Date:
November 15, 2004
|
/s/ Thomas Branhan | |
|
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Thomas Branhan | |
|
|
Chief Executive Officer and General Manager | |
|
|
(Principal Executive Officer) |
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Granite Falls Community Ethanol Plant, LLC (the “Company”) on Form 10-QSB for the period ended September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Nealon, Chief Financial Officer and Controller of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |||
| (2) | The information contained in the accompanying Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | |||
|
Date: November 15, 2004
|
/s/ Michael Nealon | |
|
|
|
|
|
|
Michael Nealon | |
|
|
Chief Financial Officer and Controller | |
|
|
(Principal Accounting Officer) |