EXHIBIT
10.1
JOINT VENTURE
AGREEMENT
THIS JOINT VENTURE AGREEMENT (the “JV
Agreement“) is made and entered into effective as of
September 17, 2006 (the “Effective Date”), by and
between Star Ethanol, LLC , an Illinois limited
liability company (“Star”), and Ethanex Energy,
Inc. , a Nevada corporation (“Ethanex”).
Ethanex and Star shall be referred to individually as a
“Party” and collectively as the
“Parties.”
RECITALS
A. The Parties signed a non-binding letter
of intent dated August 15, 2006, as subsequently amended (the
“LOI”) regarding the establishment of a joint venture
company to construct and operate a 132 million gallon ethanol
production facility in Franklin County, Illinois utilizing
fractionation technology in the production of ethanol and
ethanol-related products.
B. The Parties now desire to formally
organize a limited liability company under the laws of the State of
Illinois (the “Company”) through which they will
construct an ethanol facility and develop, manufacture, distribute,
and sell ethanol and ethanol-based products.
C. Each Party shall collaborate and
lend its expertise to the successful achievement of the
Company’s commercial objectives.
D. The Parties enter into this JV
Agreement to set out the terms governing the management and
operations of the Company and the Parties’ investment and
relationship as Members in the Company.
NOW, THEREFORE, in consideration of the above
Recitals, which are incorporated herein by this reference, and the
mutual promises, agreements and covenants set forth in this JV
Agreement, Star and Ethanex agree as follows:
ARTICLE 1
DEFINITIONS AND
INTERPRETATION
In this JV
Agreement, unless otherwise clearly indicated by the context, the
following terms, whether used in singular or plural forms, shall
have the following meanings:
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“Articles
of Organization” means the Articles of Organization to be
filed with the Illinois Secretary of State’s office for
purposes of legally organizing the Company, in the form attached
hereto as Exhibit 1 .
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“Assignment Agreement” means the
Assignment Agreement between Ethanex and the Company, in the form
attached hereto as Exhibit 4 , to be executed on the
Effective Date pursuant to Section 8.1 of this JV
Agreement.
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“Construction Start Date” means
shall have the meaning ascribed to such term in the definitive
agreement among the Company and the Company’s designated EPC
contractor.
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“Contribution Agreement” means the
Contribution Agreement between Star and the Company, in the form
attached hereto as Exhibit 3 , to be executed on the
Effective Date pursuant to Section 8.2 of this JV
Agreement.
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“Deposit” means the sum of
$2,000,000 to be paid by Ethanex to the Company upon the execution
of this JV Agreement, as more fully described in Article 3
below.
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“Effective Date” has the meaning set
forth in the preamble.
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“Equity
Determination Date” means the earlier of the Mechanical
Completion Date and September 31, 2008.
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“Mechanical Completion Date” shall
have the meaning ascribed to such term in the definitive agreement
among the Company and the Company’s designated EPC
contractor.
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“Operating Agreement” means the
Operating Agreement of the Company by and among Ethanex, Star and
the Company, in the form attached hereto as Exhibit 2 , to
be executed on the Effective Date.
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“Plant” means a 132 million gallon
per year nameplate ethanol production plant to be constructed and
operated by the Company on the Plant Site.
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“Plant
Site” means certain real property located in Franklin County,
Illinois.
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“Related
Agreements” means the following agreements each to be dated
and deemed effective as of the Effective Date: (i) Operating
Agreement, (ii) Contribution Agreement, and (iii) Assignment
Agreement.
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“Star
Assets” means the assets of Star to be contributed as initial
capital of the Company including all of the assets owned,
controlled by, or licensed to Star or its subsidiaries including,
but not limited to all cash, equipment, buildings and improvements,
start-up costs, land leases, intellectual property, licenses and
sublicenses, purchase agreements, construction and engineering
contracts, and business plans. The assets to be contributed shall
include all of the assets owned, controlled by, or licensed to Star
or its affiliates with the right to sublicense, including all of
the assets owned or controlled by Star or its affiliates located at
the Facility including, without limitation, all leases, licenses,
permits, governmental authorizations, intellectual and other
intangible property, real property, personal property, equipment,
materials, supplies, prepaid deposits, accounts receivable, claims
and causes of action.
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“Third
Party” means any person or legal entity other than Ethanex,
Star, or the Company.
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“Member,” “Membership
Interest,” “Board” and “Manager”
shall have the meanings set forth in the Operating
Agreement.
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In this JV
Agreement, except to the extent that the context otherwise requires
(i) whenever the words “include,”
“includes” or “including” are used they are
deemed to be followed by the words “without
limitation,” and (ii) the definitions contained in this JV
Agreement are applicable to the singular as well as the plural of
such terms.
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ARTICLE 2
ORGANIZATIONAL MATTERS OF
COMPANY
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2.1
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On or before
the Effective Date, the Parties shall organize the Company as a
limited liability company under the laws of the State of Illinois
by filing the Articles of Organization, in the form attached hereto
as Exhibit 1 , with the Illinois Secretary of State’s
office.
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2.2
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The name of the
Company shall be Ethanex Southern Illinois, LLC.
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2.3
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Subject to the
terms and conditions of this JV Agreement, on the Effective Date,
the Parties shall adopt and execute the Operating Agreement in the
form attached hereto as Exhibit 2 . The Operating Agreement
shall more fully set forth the rights and obligations of the
Members in the Company and, to the extent permitted by applicable
law, shall be consistent with the terms of this JV
Agreement.
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2.4
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The duration of
the Company shall be perpetual subject to the provisions of this JV
Agreement and the Operating Agreement.
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2.5
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The purpose of
the Company will be to (i) construct and operate the Plant, (ii)
develop, manufacture, distribute and sell ethanol and ethanol-based
products, and (iii) engage in all activities necessary, customary,
convenient or incident to the activities described
herein.
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ARTICLE 3
DEPOSIT; DISPOSITION OF
DEPOSIT
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3.1
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Upon the
signing of this JV Agreement, Ethanex shall make an initial capital
contribution to the Company in the form of the Deposit.
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3.2
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In the event
that this JV Agreement is terminated before the Effective Date or
the Parties, for any reason, are unable to come to agreement on the
Related Agreements or any other definitive transaction documents,
then the Company shall be obligated to refund the Deposit to
Ethanex.
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3.3
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In the event,
however, the Related Agreements and any other definitive
transaction documents necessary for the JV contemplated hereby are
entered into and the JV is subsequently terminated, the Deposit
shall be treated as a portion of Ethanex’s initial capital
contribution.
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ARTICLE 4
INITIAL CAPITAL
CONTRIBUTIONS
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4.1
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Upon the
Effective Date, and contemporaneously with the execution of the
Related Agreements, Ethanex shall contribute management expertise,
goodwill and tangible and intangible assets of Ethanex. Ethanex
will also undertake to raise the project financing necessary to
complete construction of the Plant in part through the sale of
Ethanex securities.
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4.2
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Subject to
adjustment as set forth in this Section 4.2 , Star shall
make an initial capital contribution of Eleven Million Two Hundred
and Fifty Thousand Dollars ($11,250,000) an amount representing the
anticipated equity contribution necessary for Star to secure a
fifteen percent 15% equity interest in the Plant based upon an
anticipated Two Hundred and Fifty Million Dollar ($250,000,000)
cost of construction with seventy percent (70%) leverage. One half
(1/2) of such contribution or Five Million Six Hundred Twenty-Five
Thousand Dollars ($5,625,000) shall be due within 60 days of the
Effective Date. Star shall contribute the amounts called for in
this Section 4.2 in cash, or in the form of the Star Assets
at a mutually agreed upon valuation. The Parties anticipate that on
or before March 31, 2007, the Company and its and the
Company’s designated EPC contractor will determine the fixed
price to construct the Plant. On or before the earlier of the
Mechanical Completion Date and September 31, 2008, Star shall
contribute an amount in cash equal to the difference of Five
Million Six Hundred Twenty-Five Thousand Dollars ($5,625,000) (or
such other amount actually contributed pursuant to Section
4.2 above), and fifteen percent (15%) of the actual equity cost
to construct the Plant. At such time, Star shall have the right to
contribute an additional amount in cash to bring the total amount
contributed to twenty-five (25%) of the actual equity cost to
construct the Plant. By way of example: (a) within 60 days of the
Effective Date Star contributes cash and Star Assets with an agreed
upon value of Five Million Six Hundred Twenty-Five Thousand Dollars
($5,625,000), (b) the actual (anticipated) cost to construct the
Plant is Two Hundred Million Dollars ($200,000,000) with
seventy-five percent (75%) leverage (i.e. Fifty Million
($50,000,000) of equity required), (c) Star would be required to
contribute an additional One Million Eight Hundred Seventy-Five
Thousand Dollars ($1,875,000) on or before the Mechanical
Completion Date and September 31, 2008 in order to preserve its
fifteen percent (15%) interest in the Company, but shall have the
right to contribute up to an additional Six Million Eight Hundred
Seventy-Five Thousand Dollars ($6,875,000) in order to secure a
25%) interest in the Company. In the event that the actual cost to
complete the Plant exceeds the amount anticipated on the earlier of
the Mechanical Completion Date and September 31, 2008, each of the
Parties shall have the right to make additional capital
contributions necessary to preserve the anticipated seventy-five
percent (75%) - twenty-five percent (25%) ownership ratio between
Ethanex and Star, respectively. Notwithstanding the amount of any
such cost overrun, Star shall be required to contribute an amount
sufficient to preserve a minimum fifteen percent (15%) ownership
interest in the Company.
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4.3
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Ethanex hereby
agrees to advance Star up to Four Million Dollars ($4,000,000) to
be applied to Star’s initial capital contribution.Such
advance will take the form of a senior subordinated debenture
bearing interest at the rate of 11% per year, compounded quarterly.
In the event Ethanex loans funds to Star to enable Star to make its
initial capital contribution as contemplated in the previous
sentence, such loan will be repaid, interest first, out of
distributions made pursuant to the Operating Agreement.
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4.4
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The capital
contribution provided by Ethanex pursuant to Section 4.1
above shall be used by the Company to fund the capitalizable assets
of the Company including, without limitation, the design,
engineering and construction costs of the Plant and th
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