LETTER OF INTENT



	
 



	
 



	
Date:               January 13, 2003



	
 



	
Parties:           Fagen, Inc. of Granite Falls, MN (Fagen) and Golden Grain Energy, LLC of New Hampton, IA (Owner)



	
 



	
 



	
Owner is an Iowa limited liability company organized by farmers and business people to facilitate the development and building of a locally-owned 40 MGY ethanol plant in Iowa (the Facility).



	
 



	
Fagen is an engineering and construction firm capable of providing development assistance, as well as designing and constructing the Facility being considered by Owner.



	
 



	
Owner and Fagen agree to use best efforts in jointly developing this project under the following terms:



	
 



	
 
	
            1.         Owner agrees that Fagen will Design/Build the Facility if determined by Owner to be feasible and if adequate financing is obtained. Should Owner chose to develop or pursue a relationship with a company other than Fagen, Inc. to provide the preliminary engineering or design-build services for the project, then Owner shall reimburse Fagen, Inc. for all expenses Fagen, Inc. has incurred in connection with the Project based upon Fagen, Inc.’s standard rate schedule plus all third party costs incurred from June 21, 2002.  Such expenses include, but are not limited to, labor rates and reimbursable expenses such as legal charges for document review and preparation, travel expenses, reproduction costs, long distance phone cost, and postage.  In the event Fagen, Inc.’s services are terminated by Owner, title to the technical data, which may include preliminary engineering drawings and layouts and proprietary process related information shall remain with Fagen, Inc.; however, Owner shall have the right to use the above described technical data, excluding proprietary process related information, for construction, operation, repair and maintenance of the Project.



	
 



	
 
	
            Should Fagen, Inc. intentionally or negligently fail or refuse to comply with it’s commitments contained in this Letter of Intent, Fagen, Inc. shall absorb all of its own expenses, and Owner shall have the right to terminate the Letter of Intent immediately upon written notice to Fagen, Inc. and Owner shall be released from its obligations to pay or reimburse Fagen, Inc. as described above.



	
 



	
 
	
            2.         Fagen will provide Owner with assistance in evaluating, from both a technical and business perspective:



	
 



	
 
	
 
	
	Owner organizational options;




	
 
	
 
	
	The appropriate location of the proposed Facility; and




	
 
	
 
	
	Business plan development.




	 


	 	 1	 


	 


	





	
 
	
            3.         Fagen agrees to Design/Built the Facility at a capital cost as shown on the attached Exhibit 1.  Exhibit 1 assumes ICM technology is used in the plant process.



	
 



	
 
	
            4.         Fagen shall assist Owner in locating appropriate management for the Facility.



	
 



	
 
	
            5.         Fagen will assist Owner in presenting information to potential investors, potential lenders, and various entities or agencies that may provide project development assistance.



	
 



	
 
	
            6.         During the term of this Letter of Intent the Owner agrees that Fagen will be the exclusive Developer for the Owner in connection with matters covered by this Letter of Intent.  During the term of this Letter of Intent, Fagen agrees that it will not develop or construct another ethanol project or facility within 75 miles of New Hampton, Iowa.



	
 



	
 
	
            7.         This Letter of Intent shall terminate on December 31, 2003 unless the basic size and design of the Facility have been determined and mutually agreed upon, and a specific site or sites have been determined and mutually agreed upon, and at least 10% of the necessary equity has been raised.  Furthermore, this Letter of Intent shall terminate on December 31, 2004 unless financing for the Facility has been secured.  Either of the aforementioned dates may be extended upon mutual agreement of the parties.



	
 



	
 



	
Golden Grain Energy, LLC



	
 



	
By:       /s/ Walter Wendland     



	
 



	
Its:        President



	
 



	
Date:    1-15-2003



	
 



	
 



	
Fagen, Inc.



	
 



	
By:       /s/ O. Wayne Mitchell



	
 



	
Its:        Vice-President



	
 



	
Date:    1/15/03



	
 



	 


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Exhibit 1



	
Golden Grain Energy, LLC



	
 



	
40 MGY Dry Grind Ethanol Plant



	
 



	
Fagen, Inc.



	
January 13, 2003

Estimated Sources and Uses of Funds Statement*




	
Sources of Funds
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
Equity
	
 
	
 
	
 
	
 
	
 
	
40
	
%

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
Cash & Equity Equivalents
	
 
	
 
	
 
	
 
	
$
	
22,007,000
	
 

	
 
	
 
	
 
	
Long-Term Debt
	
 
	
 
	
 
	
 
	
 
	
33,006,000
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	





 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Total Sources of Funds
	
 
	
 
	
 
	
 
	
$
	
55,010,000
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Uses of Funds
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Design Construction & Startup
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
Plant Construction (GMP, includes thermal oxidizer**)
	
 
	
 
	
 
	
 
	
$
	
45,300,000
	
 

	
 
	
Land & Site - Developmental Cost (Est.)
	
 
	
 
	
 
	
 
	
 
	
2,000,000
	
 

	
 
	
Administration Building & Furnishing
	
 
	
 
	
 
	
 
	
 
	
200,000
	
 

	
 
	
Rail
	
 
	
 
	
 
	
 
	
 
	
750,000
	
 

	
 
	
Startup Costs:
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
Corn (10 days @ $2.25)
	
 
	
$
	
910,000
	
 
	
 
	
 
	
 

	
 
	
 
	
Enzymes, Chemicals and other
	
 
	
 
	
250,000
	
 
	
 
	
 
	
 

	
 
	
 
	
Spare Parts
	
 
	
 
	
500,000
	
 
	
 
	
 
	
 

	
 
	
 
	
Other Startup Costs
	
 
	
 
	
750,000
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	





 
	
 
	
 
	
 

	
 
	
Subtotal
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
2,410,000
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Organizational & Financing
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
Financing Costs
	
 
	
$
	
2,500,000
	
 
	
 
	
 
	
 

	
 
	
Organizational Costs
	
 
	
 
	
350,000
	
 
	
 
	
 
	
 

	
 
	
Miscellaneous Costs
	
 
	
 
	
500,000
	
 
	
 
	
 
	
 

	
 
	
Owners Contingency
	
 
	
 
	
1,000,000
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	





 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
4,350,000
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	





 
	
 

	
Total Uses of Funds
	
 
	
 
	
 
	
 
	
$
	
55,010,000
	
 



	
 



	* General Assumptions:  Land & site development, startup, and organizational & financing costs are estimated.  Owner provides all plant and access roads, rails systems, substation if required, electrical distribution/transformers, gas line(s), process and fire water supply/pretreatment to & waste water systems (septic) from the designated areas within the plant site.  Assumes non-winter conditions for earthwork, concrete & building erection.  Other conditions may apply in the definitive construction agreement.


	 


	** Thermal Oxidizer will be required to meet PCA emission standards.  The Thermal Oxidizer installation also results in lower plant air emissions, much reduced dryer odor, and allows the plant to expand beyond the 20MGY production rate without triggering the EPA PSD permitting process.


	 


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