EXHIBIT
10.7


	
  

  	
  

  



 


Agreement for Project Development Services 


This Agreement for Project Development Services (the “Agreement”)
is made and entered into on this 7th day of October, 2005, between
Tennessee Valley Agri-Energy, hereafter known as “Client,” and BBI
International, hereafter known as “Contractor.”


Client is identified as:


Tennessee Valley
Agri-Energy


540 Little Dry Creek Road


Pulaski, TN 38478


(931) 424-0653 office


(931) 424-6168 fax


Contractor is identified as:


BBI International


602 Park Point Drive


Suite 250


Golden, CO 80401


(303) 526-5655 office


(303) 526-7776 fax


Whereas, Client desires assistance in carrying out
project development and project financing activities required to build an
ethanol plant in or near Decatur, Alabama, and Contractor is willing to
complete said tasks.


Now, therefore, it is mutually agreed that,


Client retains the services of Contractor to conduct
the tasks outlined in “Attachment A,” under the following conditions and
tenets:


1.          CONTRACT TASKS Contractor
shall complete the tasks specified in “Attachment A.” Changes to the Agreement
tasks cannot be made, after contract signing, without the express written
consent of both Client and Contractor.


2.          BEST INTERESTS
Contractor shall represent the best interest of Client at all times.













3.          PROJECT DEVELOPMENT
RETAINER, EXPENSES, SUCCESS FEE Contractor shall carry out the project
development activities specified in Attachment A. Client shall pay Contractor a
monthly retainer of $10,000 per month plus travel expenses and other approved
expenses. In no event shall client be obligated to pay Contractor a monthly
retainer hereunder in excess of $120,000 without written modification of this
Agreement. All travel will be completed as economically as possible.


Contractor will invoice Client at the beginning of
each month for the current month’s retainer and for travel expenses from the
prior month. The first monthly payment shall be due upon execution by all
parties of this Agreement. Subsequent invoices shall be paid net 20-days after
receipt and approval of invoices by Client. Contractor shall itemize each
invoice to detail the work performed and all travel or other expenses,
including design, printing, advertising and rentals related to project
financing tasks. Any expense in excess of $500.00 must be pre-approved by
Client.


In addition, Contractor will collect a success fee for
project development and project financing activities upon Successful Financial
Closing for the project. Successful Financial Closing is defined as actual
closing (execution and delivery of all documents) by the Client with its
project lender(s) providing for all financing, including senior and
subordinated debt, and any other project financing characterized by debt
obligations as required by the project’s Senior Debt lender.


The success fee for reaching Financial Closing for the
project shall be one and one-half percent (1.5%) of the total capitalized cost
of the project. The total capitalized cost shall include all equity, mezzanine
or subordinated debt and senior debt which when combined allow for the
Successful Financial Closing of the project. All success fees are payable to
Contractor upon Successful Financial Closing and are not payable if the project
does not close.


4.          CONFIDENTIALITY
Contractor agrees to maintain as confidential all information obtained in the
process of completing the project. This obligation of confidentiality shall
survive the termination of this Agreement and remain if effect until such time
Client releases Contractor from the confidentiality obligation.


5.          DURATION The
duration of this Agreement shall be the time necessary to achieve Successful
Financial Closing. Client’s and Contractor’s goal is to achieve Successful
Financial Closing in twelve (12) months or less from the date this Agreement is
signed by all parties. Client agrees that this goal is non-binding and is aware
that it may take longer to reach Successful Financial Closing.


6.          TERMINATION
Client may initiate the termination of this Agreement should Contractor fail to
fulfill its obligations under this Agreement. However, Client will allow for
consultation and provide Contractor the opportunity to cure the cause for
termination. Client may also terminate this Agreement if, in the sole
discretion of Client, the completion of the ethanol project becomes infeasible
for any reason. Termination of the contract must be in writing.



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7.          DISPUTE RESOLUTION
If a dispute arises out of or relating to this Agreement or the breach of this
Agreement, and if the dispute cannot be settled through direct discussions, the
parties agree to first endeavor to settle the dispute in an amicable manner by
mediation. Mediation shall consist of an informal, nonbinding conference or
conferences between the parties and the mediator jointly, and at the discretion
of the mediator, then in separate caucuses in which the mediator will seek to
guide the parties to a resolution of the case. The parties shall attempt to
select a mutually acceptable mediator. If the parties cannot agree upon a
mediator, the parties shall seek assistance in the appointment of a mediator
from the District Judge in the County of Davidson, State of Tennessee.


8.          CHOICE OF LAW,
JURISDICTION AND VENUE This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Illinois. Any and all
actions, suits, or judicial proceedings upon any claim arising from or relating
to this Agreement, subject to Paragraph 7 herein, shall be instituted and
maintained in the County of Davidson, State of Tennessee. Each party waives the
right to change of venue, or to file any action, suit or judicial proceeding in
federal court. Notwithstanding this provision, if it is judicially determined
that either party may file an action, suit or judicial proceeding in federal
court, such action, suit or judicial proceeding shall be in the Federal
District Court for the District of Middle Tennessee.


IN WITNESS WHEREOF, CLIENT AND CONTRACTOR, by and
through its proper officers duly authorized to execute this Agreement, have
hereunto set their hands.


TENNESSEE VALLEY AGRI-ENERGY


	
  By:

  	
  /s/ Bartt
  McCormack

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Printed Name:

  	
  Bartt McCormack

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chairman

  	
   

  	
   

  
					



 


BBI INTERNATIONAL


	
  By:

  	
  /s/ Mark Yanceyk

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Printed Name:

  	
  Mark Yancey

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  
					



 



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ATTACHMENT A 


Ethanol
Project Development and Project Financing

Scope of Work


September 29, 2005


Contractor shall provide the project development and
project financing services required to develop the Tennessee Valley Agri-Energy
ethanol project from Feasibility Study to Successful Financial Closing and
groundbreaking. Contractor and Client will work closely together to complete
the following project development and project financing activities.


Contractor will assign specific individuals, with the
required skills, to complete the required tasks for the project. Contractor
will assign a Project Manager to the project who will be responsible for all
aspects of managing Contractor’s work and coordinating communications with
Client. When necessary, Contractor will assist in the selection of and
negotiations with appropriate subcontractors.


The scope of work described below is divided into two
phases: 1) Feasibility Study and 2) Project Development and Project Financing.
The Phase I Feasibility Study will be a detailed study designed to assess all
aspects of ethanol production in the study area including:


·             Detailed assessment of local and imported
grain supply and pricing


·             Review of potential plant sites and site
recommendation


·             Ethanol and co-product market analyses


·             Preliminary capital and operating cost
estimates for three ethanol plant sizes


·             Detailed financial analysis including a
10-year proforma statement of cash flows, income statement and a balance sheet


·             Sensitivity
studies for corn, ethanol, distillers grain, alternative energy sources if
available, energy pricing and plant capacity


Phase I. 
Feasibility Study


Task 1.                               Hold
a project kickoff meeting with Client. BBI will present an overview of the
project and review key issues with the Client. BBI will also conduct site
inspections during this trip.


Task 2.                               Review
and assess potential sites for the ethanol facility. The site assessment shall
include an evaluation of rail and road transportation infrastructure, gas and
electric utilities, water, land cost, wastewater disposal options, proximity to
communities, corn supply and access to ethanol, distiller grain and carbon
dioxide markets.


Task 3.                               Review
state and federal permits required for a dry mill ethanol plant.



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Task 4.                               Appraise
the availability and cost of local grain, imported grain and other suitable
feedstocks for ethanol production. BBI will define the local grain procurement
area and assess the adequacy of local grain production versus the proposed
ethanol plant capacity. Major competitors for grain within the local feedstock
area will be identified and their impact on grain available and price will be
assessed. Historical grain pricing will be documented and the potential basis
impact of the proposed ethanol plant will be estimated. For projects that may
require imported grain (from the U.S. Corn Belt), BBI will determine the grain
source, historical pricing and transportation costs.


Task 5.                               Analyze
the local and regional ethanol and distillers grain markets and the local
carbon dioxide (CO2) market. Each market analysis shall include the following:


Market Definition – The potential markets for ethanol,
distillers grain and CO2 that can be competitively served by the project will
be defined. Local ethanol markets are typically within 150 miles of the project
with the regional market up to 450 miles away. Specific ethanol markets and
fuel ethanol blending terminals within these markets will be identified. The
markets for the project’s distillers grain and CO2 will be defined in a similar
manner.


Market Trends – The market analysis will document the
current and historical use of ethanol, distillers grain and CO2 and identify
trends in local and regional markets. Trends in product and coproduct
production, use and pricing will be analyzed. Historical pricing for ethanol,
distillers grain and CO2 will also be documented. Up to 10 years of historical
data will be documented if available.


Ethanol Market Potential – Estimates of the local,
regional and national market potential for the project’s ethanol will be
determined. The division of the project’s ethanol between local, regional and
national markets will be estimated and the resulting blended pricing and
shipping costs to these markets will be determined.


Distillers Grain Market Potential – Estimates of the
local and regional market potential for the project’s wet and dry distillers
grain will be made based on a detailed analysis of the number and size of
cattle operations, dairies and other potential users in the region.


Carbon Dioxide Market Potential – Estimates of the
local and regional market potential for the project’s carbon dioxide will be
made based on an analysis of CO2 supply and demand in the region.


Task 6.                               Determine
the preliminary capital and operating costs (using inputs from leading ethanol
design/build companies) for ethanol production for three sizes of dry mill
ethanol plants (to be discussed and decided at the kickoff meeting). The
capital cost estimate will have an accuracy of +/-20%. BBI will determine the
preferred size ethanol plant based on the availability of feedstock, ethanol
and coproduct markets and equity considerations.



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Task 7.                               BBI
will use its proprietary financial model to evaluate the proposed ethanol
project. Return on Investment (ROI), Internal Rate of Return (IRR) and/or Net
Present Value (NPV) will be used to assess the project viability at the
preferred site for each plant size. The financial analysis will include a
10-year balance sheet, income statement and cash flow statement. The financial
assumptions will be clearly stated and will be based on the conclusions of the
feasibility study and on BBI’s assumptions as to the performance of certain
commodity markets affecting feedstock and product prices in the future. A
sensitivity study will be performed for ethanol, corn, distillers grain and
energy pricing and for wet versus dry distillers grain sales.


Task 8.                               BBI
will provide an Executive Summary that will include key findings of the study,
BBI’s recommendation whether to proceed, and identification of significant
issues and key risks.


BBI will submit the draft Phase I Feasibility Study
within 45 days of receipt of a signed contract and initial retainer payment.


Phase II - Project Development


Should the results of the feasibility study be
positive and Client concurs with the results, BBI will then immediately begin
the following scope of work as a continuation of its project development
services. Phase II is subdivided into two major activities: Project Management
and Project Financing.


Project Management 


Task 9.                               A
strategic planning meeting will be held to reach full agreement on the path
forward and to introduce the entire BBI Project Development Team to the Client.
At this meeting we will review the scope of work and project development
strategy, and finalize responsibilities and assignments. BBI will develop along
with Client, a realistic timeline for the project’s development.


Task 10.                        BBI
will work with Client in selecting appropriate legal counsel (if desired) for
business formation and determination of the tax and liability implications for
the project directors, owners and investors. Legal counsel will also be
required for the development of offering documents. BBI recommends that Client
have local representation for issues such as purchasing the site, as well as
representation that is experienced in ethanol project development issues.


Task 11.                        BBI
will complete a Business Plan for the project and update it regularly as the
project is developed and specific issues are resolved.


Task
12.                        BBI
will assist and make recommendations in the initial screening of qualified
ethanol process design/build and engineering firms. BBI will develop a Request
for Proposal to be sent to the selected finalists for the design and
construction of the ethanol plant. BBI’s team of experts will prepare a
detailed technical and financial 



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analysis of the proposals. Client will interview and make the final
selection of the process design/build company and general contractor for the
project.


Task 13.                        BBI
will assess and advise Client of capital and equity requirements, and will
develop a projection of the timing of expenditures throughout the project
development phase.


Task 14.                        Client
and BBI will jointly develop and implement a strategy for raising up to $1
million in seed capital to advance the project through the Project Development
and Financing phases of the project.


Task 15.                        Client
and BBI will jointly develop a political strategy that will help move the
project forward. BBI will also develop a media strategy and media package for
the project.


Task 16.                        Client
and BBI will meet with local government officials to advise them of the project
and garner their support for the project.


Task 17.                        BBI
will work with Client to organize a tour of several ethanol facilities for
Client, government officials, lenders and possible investors in the project.


Task 18.                        BBI
will work with Client to select and provide oversight of subcontractor(s) to
secure all necessary permits. BBI will participate with subcontractors in all
necessary meetings with permitting agencies and local government agencies as
necessary to secure all required permits


Task 19.                        BBI
will interview and recommend to Client a risk management company. The risk
management company will work with Client to manage variances in corn, natural
gas, electricity and commodity prices.


Task 20.                        BBI
will assist Client in the negotiation of rail, water, sewer and other utility
contracts as requested.


Task 21.                        BBI
will identify and recommend appropriate marketing firms to Client and assist in
negotiating marketing and off-take agreements for ethanol, distillers grains
and possibly CO2.


Task 22.                        Through
the BBI Biofuels Recruiting Services®, BBI will work with Client to select and
hire a General Manager, owner’s construction manager and other key personnel as
needed for the project. Under an exclusive contract between BBI and Client, BBI
will recruit and screen candidates based on Client’s specifications. BBI will
deliver resumes of individuals that have been screened to meet Client’s
qualifications and are seriously interested in the position and the location of
the project. The fee for successful placement of a candidate is 20% of the
person’s first year salary and no payment is made to BBI until the position is
filled.


Project Financing 


Task
23.                        BBI
will work with Client to raise equity via a private placement or other equity
partnering arrangements. BBI will educate potential investors regarding the
project 



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that Client identifies. In addition to BBI’s experience in facilitating
and organizing equity raising efforts, BBI’s contacts within the ethanol
industry provide access to a significant number of potential investors and
partners in the industry. BBI will introduce Client to potential investors and
partners for the project and will direct efforts to raise the equity for the
project.


It should be noted that all work performed within the
equity raising portion of the scope of work will be under the guidance and
limitations of both state and federal securities regulations.


Task 24.                        BBI
will develop a list of recommended lender(s) for the project and arrange
meetings with these prospective lenders for project debt financing. BBI will
attend and assist in the preparation for all lender meetings.  We will assist in the preparation and review
of presentation materials, review term sheets, and assist in negotiating
construction and permanent financing for the project.  Printing and graphic design charges, if any,
will be the responsibility of Client.


Task 25.                        BBI
will make available its proprietary Financial Model to banks and prospective
lenders (with an appropriate non-disclosure agreement in place) and assist
lenders in using the BBI Financial Model as needed.



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