exv10w1



 









Exhibit 10.1




	 	 	 	 	 
	[FAGEN, INC. LOGO]

	 	 	 	501 West Hwy. 212, P.O. Box 159
	 

	 	www.fageninc.com
	 	Granite Falls, MN 56241
	 

	 	 	 	320-564-3324
	 

	 	 	 	320-564-3278 fax





* Portions omitted pursuant to a request for confidential treatment and filed separately with
the Securities and Exchange Commission.




April 14, 2006




Steve Eastman

Homeland Energy Solutions LLC

PO Box 291

Riceville, IA 50466




     Re:     Homeland Energy Solutions LLC Ethanol Project



Dear Steve:




     This letter of intent will confirm our discussions regarding the proposed terms and conditions
under which Fagen, Inc. (“Fagen”) will enter into exclusive negotiations with Homeland
Energy Solutions LLC (“Owner”) to implement the transaction described in Paragraph 1 below
(the “Transaction”). (Fagen and Owner are referred to herein individually as a
“Party” and collectively as the “Parties”). This letter, if executed and returned
by you within thirty (30) days of the date hereof, will constitute a letter of intent between us
(the “Letter of Intent”).



     Fagen and Owner (then known as Hometown Energy, LLC) entered into a letter of intent dated
December 29, 2005, for the Transaction (the “Initial Letter of Intent”) and letter of
intent dated March 22, 2006 (“Second Letter of Intent”). Fagen and Owner have agreed to
replace the Initial Letter of Intent and Second Letter of Intent with this Letter of Intent. This
Letter of Intent supersedes and replaces the Initial Letter of Intent and Second Letter of Intent
in their entirety.



     The Parties agree to effect the Transaction subject only to the execution and delivery (in
each case in a form satisfactory to Fagen) of a definitive Design-Build Agreement and other
ancillary instruments and agreements (the “Transaction Documents”). The Transaction
Documents will be executed and delivered by the parties thereto no later than December 31, 2008
(the “Closing Date”); provided that the Transaction Documents may, if agreed to by the
Parties, provide for extensions necessary to secure any consents and approvals of persons (other
than affiliates of the Parties) on terms reasonable to the Parties.




	1.	 	The Transaction. The Parties agree that the Transaction will consist of the following:






	 	(a)	 	Fagen agrees to provide Owner with those services as described in this Letter
of Intent which are necessary for Owner to develop a detailed description of a one
hundred (100) million gallons per year (“MGY”) natural gas-fired dry grind
ethanol production facility located at New Hampton, Iowa (the “Plant”) and to
establish a price for which Fagen would provide design, engineering, procurement




 









 











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Letter of Intent

April 14, 2006

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	 	 	 	of equipment and construction services for the Plant. The description of the Plant
will be sufficiently detailed to permit an analysis of the Owner’s lump-sum cost to develop
the Plant and to develop an economic pro forma sufficient to determine if the Plant can be
financed.






	 	(b)	 	Fagen will also provide Owner with assistance in evaluating, from both a
technical and business perspective, Owner’s organizational options, the appropriate
location of the Plant, and business plan development. Fagen will assume no risk or
liability of representation or advice to Owner by assisting in evaluating the above and
all decisions made regarding feasibility, financing, and business risks are the Owner’s
sole responsibility and liability. Owner acknowledges that Fagen has no control over
cost of labor, materials, equipment, or services furnished by others, over other
contractors’ methods of determining prices, or other competitive bidding or market
conditions. Fagen’s estimates of project construction cost will be made on the basis of
its experience and qualifications and will represent Fagen’s best judgment as
experienced and qualified professionals familiar with the construction industry. Fagen
does not guarantee that proposals, bids, or actual construction cost will not vary from
its estimates of project cost and Owner acknowledges the same.
	 
	 	(c)	 	Fagen will also provide Owner with conceptual design and technical information
required to support Owner’s application for a construction air permit prior to the
commencement of Plant Construction.
	 
	 	(d)	 	If Owner determines that the Plant is economically feasible and desires to
proceed with the development of the Plant, then Owner agrees to enter into a Lump Sum
Design-Build contract with Fagen for the design, procurement of equipment and
construction of the Plant (the “Design-Build Agreement”).
	 
	 	(e)	 	Owner shall offer Fagen the right to invest in the project. Unless otherwise
specifically agreed between Fagen and Owner, such investment shall be offered on the
same terms and conditions as all other investors.
	 
	 	(f)	 	Owner agrees that the Design-Build Agreement will be Fagen’s chosen form of
Design-Build Agreement and will contain among other things, those terms and conditions
set forth in the General Terms and Conditions section of this Letter of Intent.






	2.	 	Contract Price. Owner shall pay Fagen One Hundred Nine Million Seven Hundred Six Thousand
Seven Hundred Eighty-eight Dollars ($109,706,788.00) (the “Contract Price”) as full
consideration to Fagen for full and complete performance of the services described in the
Design-Build Agreement and all costs incurred in connection therewith.




 









 











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	 	(a)	 	The Contract Price shall not include any costs related to union labor or prevailing
wage requirements. If any action by Owner, a change in Applicable Law, or a
Governmental Authority (as those terms are defined in the Design-Build Agreement)
acting pursuant to a change in Applicable Law, shall require Fagen to employ union
labor or compensate labor at prevailing wages, the Contract Price shall be adjusted
upwards to include any increased costs associated with such labor or wages. Such
adjustment shall include, but not be limited to, increased labor, subcontractor, and
material and equipment costs resulting from any union or prevailing wage requirement;
provided, however, that if an option is made available to either employ union labor, or
to compensate labor at prevailing wages, such option shall be at Fagen’s sole
discretion and that if such option is executed by Owner without Fagen’s agreement,
Fagen shall have the right to terminate this Letter of Intent or the Design-Build
Agreement, as applicable, and receive compensation pursuant to Paragraph 4(c) hereof or
the terms of the Design-Build Agreement, whichever is applicable.
	 
	 	(b)	 	If the Construction Cost Index published by Engineering News-Record Magazine
(“CCI”) for the month in which a Notice to Proceed is given to Fagen is greater
than 7540.38 (September 2005), the Contract Price shall be adjusted to reflect such
increase.






	3.	 	General Terms and Conditions. The consummation of the Transaction will be subject to the
Design-Build Agreement containing the following conditions:






	 	(a)	 	Fagen will have no responsibility for and will not perform any site preparation
work. Owner’s site responsibilities will include, but will not be limited to:






	 	i.	 	Obtaining land and legal authority to use the site
for its intended purpose;
	 
	 	ii.	 	site grading including soil stabilization and the
costs connected therewith;
	 
	 	iii.	 	final grading, seeding, and mulching;
	 
	 	iv.	 	site security, including any site fencing;
	 
	 	v.	 	procuring boundary and topographic surveys;
	 
	 	vi.	 	procuring soil borings and geotechnical reports;
	 
	 	vii.	 	obtaining all operating permits, including any
fees, bonding, and required testing;
	 
	 	viii.	 	obtaining storm water runoff permit;
	 
	 	ix.	 	obtaining any necessary pollutant elimination
discharge permit;
	 
	 	x.	 	obtaining a natural gas supply and service
agreement and providing all gas piping to the use points, providing
burner tip pressures as specified by Fagen, and supplying a digital
flowmeter;
	 
	 	xi.	 	securing temporary and permanent electrical
service, including all infrastructure design and installation for any
line/service extensions, substation, primary feed and metering system,
and on-site electrical distribution system up to and including the
service transformers;










 









 











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	 	xii.	 	supplying a water source, storage, and water supply lines of
appropriate quality and quantity;
	 
	 	xiii.	 	paying for a water pre-treatment system should the
project require such a system (procurement and installation by Fagen);
	 
	 	xiv.	 	providing wastewater discharge piping, septic tank
and drainfield or connect to a municipal system as required for the
sanitary sewer requirements of the Plant;
	 
	 	xv.	 	providing and maintain required ditches and
permanent roads;
	 
	 	xvi.	 	constructing, furnishing, and equipping the
administration building;
	 
	 	xvii.	 	providing maintenance and power equipment and
spare parts;
	 
	 	xviii.	 	providing all rail design, engineering, and construction, including any
railroad permits or approvals;
	 
	 	xix.	 	supplying drawings of rail system and
administration building to Fagen; and
	 
	 	xx.	 	paying for the required fire protection system for
the Plant (procurement and installation by Fagen).






	 	(b)	 	Owner will enter into a Phase I and Phase II Engineering Services Agreement
with Fagen Engineering, LLC. The Phase I and Phase II Engineering Services Agreement
will provide for commencement of work on the Phase I and Phase II engineering for the
project as set forth therein. The Phase I engineering shall consist of engineering and
design of the Plant site and shall include: property layout; grading, drainage and
erosion control plan drawings; roadway alignment drawings; culvert cross sections and
details; and seeding and landscaping, if required. The Phase II engineering shall
consist of engineering and design of site work and utilities for the Plant, all within
the property line of the Plant, including: property layout; site grading and drainage
drawings; roadway alignment; all utility layout including fire loop, potable water,
well water if applicable, sanitary sewer, utility water blowdown, and natural gas;
geometric layout; site utility piping tables; tank farm layout; tank farm details;
sections and details drawing, if required, and miscellaneous details drawing, if
required. Owner will pay Fagen Engineering, LLC [*] for such engineering services
pursuant to the terms of that agreement, the full amount of which shall be included in
and credited to the Contract Price. Notwithstanding the foregoing sentence, if a
Notice to Proceed is not issued pursuant to the terms of the Design-Build Agreement, or
Financial Closing is not obtained, then Fagen Engineering, LLC shall keep the full
amount paid under the Phase I and Phase II Engineering Services Agreement as
compensation for the services provided thereunder.




* Portion omitted pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.




 









 








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Letter of Intent

April 14, 2006

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	 	(c)	 	Fagen will provide reasonable assistance to Owner in obtaining Owner’s permits,
approvals and licenses.
	 
	 	(d)	 	Owner will provide: surveys describing the property’s boundaries; geotechnical
studies describing subsurface conditions; temporary and permanent easements, zoning and
other requirements and encumbrances to enable Fagen to perform the work; a legal
description of the site; as-built and record drawings of any existing structures;
environmental studies, reports, and statements describing the environmental conditions,
including hazardous conditions at the site.
	 
	 	(e)	 	Owner will be responsible for securing and executing all necessary real estate
agreements to secure the site and is responsible for all costs incurred in obtaining
those agreements.
	 
	 	(f)	 	Fagen may subcontract portions of the work.
	 
	 	(g)	 	Fagen will provide two (2) weeks of training for all of Owner’s employees and,
if applicable, Owner’s Operator’s employees required for the operation and maintenance
of the Plant.
	 
	 	(h)	 	Owner must obtain Financial Closing prior to the issuance of a Notice to
Proceed.
	 
	 	(i)	 	Owner will pay all reasonable costs incurred by Fagen for frost removal so that
winter construction can proceed. Such costs will be in addition to, and not included
in, the lump sum price.
	 
	 	(j)	 	All drawings, specifications, calculations, data, notes and other materials and
documents, including electronic data furnished by Fagen to Owner under the Design-Build
Agreement (“Work Product”) will be instruments of service and Fagen will retain
the ownership and property interests therein, including copyrights thereto.
	 
	 	(k)	 	Fagen will utilize certain proprietary property and information of ICM, Inc., a
Kansas corporation (“ICM”), in the design and construction of the project, and
may incorporate proprietary property and information of ICM into the project. Owner’s
use of the proprietary property and information of ICM shall be governed by the terms
and provisions of a license agreement between Owner and ICM which shall be attached as
an exhibit to the Design-Build Agreement. Owner will be responsible for negotiating
any requested changes to the ICM license directly with ICM, not Fagen.
	 
	 	(l)	 	Upon payment in full under the Design-Build Agreement, Fagen will grant Owner a
limited license to the Work Product for use in connection with the operation,
maintenance, and repair of the Plant including the interconnection of, but not





 









 





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	 	 	 	design of, any future expansions to the Plant. The limited license will not permit
Owner to modify the Plant in any way that would increase the distillation, dehydration or
evaporation capacity of the Plant.






	 	(m)	 	Work will commence following receipt of Owner’s written valid notice to proceed
(“Notice to Proceed”). The Notice to Proceed cannot be given until [*]. If
Notice to Proceed is not issued within one hundred and eighty (180) days of the
effective date of the Design-Build Agreement, that agreement shall terminate, thus
releasing Fagen of all obligations.
	 
	 	(n)	 	“Substantial Completion” will be the date on which the Plant
construction has been completed to a point that the Plant is ready to grind the first
batch of corn for producing ethanol and begin operation for its intended use as a one
hundred (100) MGY dry grind ethanol production facility. No production capacity is
guaranteed on the Substantial Completion date, but the Plant is largely completed as of
that date.
	 
	 	(o)	 	Substantial Completion will occur within Five Hundred and Fifteen (515) days
after the date of the Notice to Proceed.
	 
	 	(p)	 	“Final Completion” will be achieved once Owner reasonably determines
that: Substantial Completion has been achieved; any outstanding amounts owed by Fagen
to Owner have been paid; remaining items of work have been completed; clean-up of the
site has been completed; all permits required to have been obtained by Fagen have been
obtained; certain information including an affidavit stating that there are no
outstanding liens, a release from further compensation, consent to final payment, and a
hard copy of the as-built plans (which will remain Work Product) has been provided to
Owner; releases and waivers of all claims and liens from Fagen and subcontractors have
been provided; and the Performance Tests have been successfully completed. Final
Completion will occur no more than ninety (90) days after the actual Substantial
Completion date. The 90-day period between Substantial Completion and Final Completion
will be
	 
	 	 	 	tied directly to actual Substantial Completion. By way of example, if Substantial
Completion is achieved 10 days early, then the 90-day period to Final Completion
would begin on that earlier date.
	 
	 	(q)	 	Fagen will demonstrate certain performance guarantee criteria through
performance testing performed following Substantial Completion but prior to Final
Completion (“Performance Tests”). Air permit testing shall be done by a third
party contractor retained by Owner.




* Portion omitted pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.




 









 





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	 	(r)	 	Owner will take control of the Plant after completion and acceptance of the
Performance Tests. The Performance Tests will be completed by Owner’s personnel under
Fagen’s direction.
	 
	 	(s)	 	Fagen will pay liquidated damages for each day past 90 days after Substantial
Completion that Final Completion is not attained. Fagen’s liability for liquidated
damages shall be capped at and shall not exceed [*].
	 
	 	(t)	 	The aggregate liability of Fagen to Owner (or any successor thereto or assignee
thereof) for any and all claims and/or liabilities arising out of or relating in any
manner to the work or to Fagen’s performance of its obligations under the Design-Build
Agreement, whether based on contract, tort (including negligence), strict liability, or
otherwise, shall not exceed the Greater of [*].
	 
	 	(u)	 	The warranty period for work completed pursuant to the Design-Build Agreement
will extend for one year past Substantial Completion. The Warranty will not apply to
defects caused by abuse, alterations, or failure to maintain the work by persons other
than Fagen or anyone for whose acts Fagen may be liable. The warranty period will be
extended one day for each day that such part of the work repaired under such warranty
is malfunctioning or not in conformance with project requirements provided that Owner
must report such non-conformance or malfunction within seven (7) days of the appearance
of such non-conformance or malfunction.
	 
	 	(v)	 	Owner will pay Fagen a mobilization fee in the amount of [*] as soon as
possible following the execution of the Design-Build Agreement, and at the latest, at
the earlier to occur of financial closing or the issuance of a Notice to Proceed.




* Portion omitted pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.




 









 








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	(w)	 	Fagen will request payment and Owner will pay Fagen in accordance with the
following procedures:






	 	i.	 	Fagen will submit to Owner a request for payment
(an “Application for Payment”) on or before the twenty-fifth
(25th) day of each month beginning with the first month following the
acceptance of Notice to Proceed. Along with each Application for
Payment, Fagen will submit to Owner signed lien waivers for the work
included in the Application for Payment submitted for the immediately
preceding pay period and for which payment has been received.
	 
	 	ii.	 	The Application for Payment will constitute Fagen’s
representation that the work has been performed consistent with the
Transaction Documents and has progressed to the point indicated in the
Application for Payment. No additional documentation will be provided to
Owner in support of the Application for Payment. The work completed at
the site and the comparison of the Application for Payment against the
Schedule of Values shall provide sufficient substantiation to Owner of
the accuracy of the Application for Payment. The Schedule of Values
subdivides the work into its respective parts, includes values for all
items comprising the work, and serves as the basis for the monthly
progress payments.
	 
	 	iii.	 	The Application for Payment may request payment for
equipment and materials not yet incorporated into the project only if
Owner is satisfied that the materials and equipment are suitably stored
at the site or elsewhere and are protected by suitable insurance. Upon
payment, Owner will receive title to such equipment and materials.
	 
	 	iv.	 	Owner shall make payment within ten (10) days of
receipt of the Application for Payment. Failure to make such payment
will result in the accrual of interest at a rate of eighteen percent
(18%) per annum commencing five (5) days after the payment is due.
Failure to make such payment, except if due to appropriate withholding of
payment due to a good faith dispute, entitles Fagen to stop work.
	 
	 	v.	 	If Owner wishes to dispute any portion of the
Application for Payment, Owner must notify Fagen in writing at least five
(5) days prior to the date payment is due. Such notice must state the
specific amounts Owner intends to withhold, the reasons and contractual
basis for withholding, and the specific measures Fagen must take to
rectify Owner’s concerns. Regardless of a dispute as to a portion of the
Application for Payment, Owner must pay all undisputed amounts by the
payment due date.
	 
	 	vi.	 	Retainage on progress payments made pursuant to the
Design-Build Agreement will be capped at five percent (5%) of the total
price. Owner will retain ten percent (10%) of each payment up to a
maximum of five percent (5%) of the total Contract Price. Once five
percent (5%) of the total price has been retained, Owner will not retain
any additional amounts










 









 











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	 	 	 	from subsequent payments. Owner will release retainage, less the amount
equal to the value of subcontractor lien waivers not yet obtained, upon
completion of the Performance Tests.






	 	vii.	 	Upon Final Completion, Fagen will deliver to Owner
a request for final payment. Owner will make the final payment within
thirty (30) days after the receipt of such request. Owner’s failure to
make Final Payment will void any and all warranties, whether express or
implied, provided by Fagen pursuant to the Agreement.






	 	(x)	 	Fagen will not be responsible for any hazardous condition encountered at the
site and may stop work in an affected area until such hazardous condition is removed by
Owner.
	 
	 	(y)	 	Fagen will not be responsible for differing site conditions including concealed
or latent physical conditions or subsurface conditions and will be entitled to a price
adjustment to the Contract Price to the extent that its cost and/or time of performance
is adversely impacted by the differing site conditions.
	 
	 	(z)	 	“Force Majeure Events” shall mean any cause or event beyond the
reasonable control of, and without the fault or negligence of a Party claiming Force
Majeure, including, without limitation, an emergency, floods, earthquakes, hurricanes,
tornadoes, adverse weather conditions not reasonably anticipated or acts of God;
sabotage; vandalism beyond that which could reasonably be prevented by a Party claiming
Force Majeure; terrorism; war; riots; fire; explosion; blockades; insurrection; strike;
slow down or labor disruptions (even if such difficulties could be resolved by
conceding to the demands of a labor group); economic hardship or delay in the delivery
of materials or equipment that is beyond the control of a Party claiming Force Majeure,
and action or failure to take action by any governmental authority after the effective
date of the Design-Build Agreement (including the adoption or change in any rule or
regulation or environmental constraints lawfully imposed by such governmental
authority), but only if such requirements, actions, or failures to act prevent or delay
performance; and inability, despite due diligence, to obtain any licenses, permits, or
approvals required by any governmental authority.
	 
	 	(aa)	 	If Fagen is delayed at any time in the commencement or progress of the work due
to a delay in the delivery of, or unavailability of, essential materials or labor to
the project as a result of a significant industry-wide economic fluctuation or
disruption beyond the control of and without the fault of Fagen or its subcontractors
which is experienced or expected to be experienced by certain markets providing
essential materials, equipment or labor to the project during the performance of the
work and such economic fluctuation or disruption adversely impacts the price,
availability, and delivery timeframes of essential materials and equipment (such event
an “Industry-Wide Disruption”), Fagen shall be entitled to





 









 





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	 	 	 	an equitable extension of the Contract Time on a day-for-day basis equal to such
delay. The Owner and Fagen shall undertake reasonable steps to mitigate the effect of such
delays. Notwithstanding any other provision to the contrary, Fagen shall not be liable to
the Owner for any expenses, losses or damages arising from a delay, or unavailability of,
essential materials or labor to the project as a result of an Industry-Wide Disruption.
	 
	 	(bb)	 	The Transaction will be governed by the laws of the State of Minnesota.






	4.	 	Exclusivity, No Solicitation or Negotiations.






	 	(a)	 	Neither Owner, nor its affiliates, shareholders, members or other equity
owners, or their officers, representatives, agents or employees will solicit or
negotiate, directly or indirectly, with any third party to obtain the services
contemplated by this Letter of Intent.
	 
	 	(b)	 	During the term of this Letter of Intent the Owner agrees that Fagen will have
the exclusive right to provide to Owner the services contemplated by the Letter of
Intent. Developer and Owner will not disclose any information related to this Letter of
Intent to a competitor or prospective competitor of Fagen.
	 
	 	(c)	 	Should Owner choose not to develop the project or to develop or pursue a
relationship with a company other than Fagen to provide the preliminary engineering or
design-build services for the project, then Owner will reimburse Fagen for all expenses
Fagen has incurred in connection with the project based upon Fagen’s standard rate
schedule plus all third party costs incurred from the date of the Initial Letter of
Intent. 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 costs, and postage.
	 
	 	(d)	 	In the event Fagen’s services are terminated by Owner, title to the technical
data, which may include preliminary engineering drawings and layouts and proprietary
process related information will remain with Fagen and any copies thereof, will be
returned to Fagen.
	 
	 	(e)	 	Owner acknowledges that the technical data provided by Fagen under this Letter
of Intent is preliminary and may not be suitable for construction. Owner agrees that
any use of such technical data following termination of Fagen’s services will be at
Owner’s sole risk.






	5.	 	Confidentiality. Owner will hold in confidence and will use only for the purposes of
completing the Transaction any and all confidential information disclosed to it except that




 









 











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Letter of Intent

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	 	 	Owner may disclose confidential information to its lenders, lenders’ agents, prospective
investors, advisors and/or consultants as may be reasonably necessary to enable them to advise
Owner on the Transaction, provided that any party to whom confidential information is disclosed is
informed of the existence of this confidentiality obligation and agree to be obligated to keep such
information confidential. The term “confidential information” will mean (i) any and all
information concerning the Transaction, including that Fagen and Owner are negotiating the
consummation of the Transaction, and (ii) all information which Owner, directly or indirectly, may
acquire from Fagen, but confidential information will not include information falling into any of
the following categories:






	 	(a)	 	information that, at the time of disclosure hereunder, is in the public domain;
	 
	 	(b)	 	information that, after disclosure hereunder, enters the public domain other
than by breach of this Agreement or the obligation of confidentiality;
	 
	 	(c)	 	information that, prior to disclosure hereunder, was already in the Owner’s
possession, either without limitation on disclosure to others or subsequently becoming
free of such limitation;
	 
	 	(d)	 	information obtained by the Owner from a third party having an independent
right to disclose this information; and
	 
	 	(e)	 	information that is available through discovery by independent research without
use of or access to the confidential information acquired from Fagen.






	 	 	Owner’s obligation to maintain confidential information in confidence will be deemed performed
if Owner observes with respect thereto the same safeguards and precautions which Owner observes
with respect to its own confidential information of the same or similar kind. It will not be
deemed to be a breach of the obligation to maintain confidential information in confidence if
confidential information is disclosed upon the order of a court or other authorized governmental
entity, or pursuant to other legal requirements. However, if Owner is required to file the
Transaction Documents or a portion thereof with a governmental entity, it agrees that it will
not do so without first informing Fagen of the requirement and seeking confidential treatment of
the Transaction Documents prior to filing the documents or a portion thereof. Owner’s
confidentiality obligations under this section shall survive the expiration or termination of
this Letter of Intent and shall be a legally binding obligation of Owner for five (5) years
following the later to occur of termination of this Letter of Intent or completion of the Plant
contemplated by the Transaction Documents.
	 
	6.	 	Publicity. Neither Owner nor any of its affiliates, shareholders, subcontractors, or vendors
or their officers, representatives, agents and employees will issue any press or publicity
release or otherwise release, distribute, announce, or disseminate any information for
publication concerning the Transaction, the existence of the negotiations among Fagen and
Owner, the





 









 





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	 	 	participation of Fagen in the Transaction, or any other matter affecting Fagen hereunder,
without the prior written consent of Fagen, which consent may be withheld for any reason, except
where such press or publicity release is required by order of a court or necessary or appropriate
under the rules or regulations of any governmental agency.
	 
	 	 	The Parties will jointly agree on the timing and content of any public disclosure by Owner,
including but not limited to, press releases, relating to Fagen’s involvement in Owner’s
project, and no such disclosure will be made without Fagen’s consent and approval, except as may
be required by applicable law.
	 
	7.	 	Disclaimer of Consequential Damages. In no event will either Fagen or Owner be liable to the
other pursuant to this Letter of Intent, or for activities conducted under this Letter of
Intent, under any theory of recovery for any indirect, special, incidental or consequential
damages (including, without limitation, loss of revenues or profits, loss of use, cost of
replacement, cost of capital and claims of customers, interest charges, or increased costs of
nature whatsoever) .
	 
	8.	 	Legal Effect. Although this Letter of Intent does not contain all matters upon which
agreement must be reached in order for the Transaction to be consummated, Fagen and Owner wish
to set forth, prior to the execution of the Transaction Documents, their mutual agreement as
to the material terms and conditions of the Transaction. Each Party agrees to negotiate in
good faith towards entering into the written, definitive and legally binding Transaction
Documents containing, among other terms and conditions, those terms and conditions set forth
in this Letter of Intent including, without limitation, those terms set forth in Paragraphs 2
and 3 hereof. Notwithstanding the foregoing, the provisions of this Paragraph and of
Paragraphs 1, 4, 5, 6, 7, 10, 11, 13, 16 and 17 hereof are agreed to be legally binding
obligations of the Parties upon the execution and acceptance of this Letter of Intent.
	 
	9.	 	Negotiation of Definitive Agreements. The Transaction Documents will contain reasonable terms
and conditions regarding releases, payment obligations, cooperation as to tax planning and
structuring, other financial matters, legal opinions, confidentiality, limitations of
liability, assignment, breach, dispute resolution, events of default, remedies,
representations, warranties, indemnifications and other provisions customary for similar
transactions. Time is of the essence in the performance of this Letter of Intent in all
respects.
	 
	10.	 	Termination. This Letter of Intent will terminate on December 31, 2007 unless the basic size
and design of the Plant have been determined and mutually agreed upon, a specific site or
sites have been determined and mutually agreed upon, and at least 10% of the necessary equity
has been raised. This date may be extended upon mutual written agreement of the Parties.
Furthermore, unless otherwise agreed to by the Parties, this Letter of Intent will terminate:






	 	(a)	 	at the option of either Fagen or Owner if the Design-Build Agreement is not





 









 





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Letter of Intent

April 14, 2006

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	 	 	 	completed and executed by the Closing Date; or
	 
	 	(b)	 	upon the execution and delivery of the Transaction Documents.






	11.	 	Governing Law. This Letter of Intent is governed by, and will be construed and interpreted in
accordance with the laws of the State of Minnesota, without regard to any conflicts of law or
choice of law rules.






	12.	 	Expenses. Except as set forth in Paragraph 4(c) above, unless otherwise agreed by Fagen and
Owner, each Party will bear its own expenses in connection with the negotiation and execution
of definitive documentation for the transactions contemplated herein.






	13.	 	Indemnification. Each Party will indemnify, defend and hold harmless the other Party and its
respective agents, servants, officers, directors, employees and affiliates from and against
any loss, cost, liability, claim, damage, expense (including reasonable attorneys’ and
consultants’ fees and disbursements), penalty or fine incurred in connection with any claim or
cause of action arising from or in connection with this Letter of Intent to the extent caused
by the negligence, misrepresentation, fraud, fault or misconduct of the indemnifying Party.






	14.	 	Assignability; Binding Effect; Benefit. This Letter of Intent will inure to the benefit of
and be binding upon the Parties and their respective successors and assigns. Nothing in this
Letter of Intent, either expressed or implied, is intended to confer on any person other than
the Parties and their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Letter of Intent.






	15.	 	Further Action. Each Party agrees to execute and deliver all further instruments, legal
opinions and documents, and take all further action not inconsistent with the provisions of
this Letter of Intent that may be reasonably necessary to complete performance of the Parties’
obligations hereunder and to effectuate the purposes and intent of this Letter of Intent.






	16.	 	Amendments. The Parties agree that this Letter of Intent may be modified only by written
agreement by the Parties.






	17.	 	Integration; Letter of Intent. This Letter of Intent represents the entire understanding
between the Parties in relation to the subject matter hereof, and supersedes any and all
previous agreements, arrangements or discussions between the Parties (whether written or oral)
in respect of the subject matter hereof, and specifically supersedes and replaces the Initial
Letter of Intent and Second Letter of Intent in all respects. No change, amendment or
modification of this Letter of Intent will be valid or binding upon the Parties unless such
change, amendment or modification will be in writing and duly executed by both Parties.






	18.	 	Counterparts. This Letter of Intent may be executed in one or more counterpart, each of
which when so executed and delivered will be deemed an original, but all of which taken





 









 





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Letter of Intent

April 14, 2006

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	 	 	together constitute one and the same instrument. Signatures which have been affixed and
transmitted by facsimile or other electronic means will be binding to the same extent as an
original signature, although the Parties contemplate that a fully executed counterpart with
original signatures will be delivered to each Party.





          If the foregoing terms accurately reflect your understanding of our discussions and are
acceptable to you, please sign and return the enclosed counterpart of this Letter of Intent to the
undersigned.




	 	 	 	 	 
	 	 	Yours sincerely,
	 
	 	 	 	 
	 	 	Fagen, Inc.
	 
	 	 	 	 
	 

	 	 	 	/s/ Ron Fagen
	 	 	 
	 

	 	By:
	 	Ron Fagen
	 

	 	Title:
	 	President and CEO
	 
	 	 	 	 
	Accepted and agreed to this      17th     

day of      April     , 2006.
	 	 	 	 
	 
	 	 	 	 
	Homeland Energy Solutions LLC
	 	 	 	 
	 
	 	 	 	 
	/s/ Stephen K. Eastman
	 	 	 	 
	 	 	 	 	 
	By:

Title: President