**Exhibit 10.6**

 

June 10,2010

 

Mr. BruceNordin

WhiteboxAdvisors, LLC

3033Excelsior Blvd., Suite 300

Minneapolis,MN  55416

 

DearBruce:

 

AventineRenewable Energy Holdings, Inc., a Delaware corporation (the “Purchaser”)is pleased to set forth below a preliminary outline of the terms under whichPurchaser would enter into an asset purchase agreement (the “Purchase Agreement”)with New****CIE Energy Opco, LLC d/b/a RiverlandBioFuels****(“Riverland BioFuels” or “Seller”) toacquire all or substantially all of the assets of Seller comprising the ethanolproduction facility situated in Canton, Illinois (the “Canton Facility”).   We understand that Whitebox****Credit Arbitrage Fund, L.P. and Whitebox Credit ArbitrageFund, Ltd.****(collectively, “Whitebox”)indirectly hold, collectively, a controlling interest in Riverland BioFuels andare empowered to cause the consummation of the transactions contemplated herebyand Whitebox is prepared to execute and deliver the Whitebox Guaranty (asdefined below) simultaneously with the signing of the Purchase Agreement ascontemplated hereby.

 

Exceptas otherwise provided in the “Binding Provisions” below, this Term Sheet isnon-binding and summarizes the proposed terms and conditions of the transactionand shall be used for discussion purposes only.

 

Untilthe execution of a definitive Purchase Agreement in a form approved in writingby Seller and Purchaser, either party shall have the right to withdraw from thetransaction contemplated by this Term Sheet in their sole and absolute discretionwithout liability or obligation to any party by virtue of such withdrawal,except as otherwise provided in the “Binding Provisions” below.

 

**Term Sheet**

 

1.               **Purchaser**.   Aventine Renewable Energy Holdings, Inc.,a Delaware corporation.  Purchaser mayassign its rights and obligations under this letter agreement and the PurchaseAgreement to an affiliate, provided that, in the event of such assignment,Purchaser shall guaranty and remain primarily liable for all of the obligationsof Purchaser under this letter agreement and the Purchase Agreement.

 

2.               **Seller**.   New CIE Energy Opco, LLC, a Delaware limitedliability company d/b/a Riverland BioFuels.

 

3.               **TheCanton Facility**.     TheCanton Facility consists of an approximate 30 acre site on which the 37 mgpynameplate ethanol plant and associated CHP power plant is situated, includingall plant, equipment and storage tanks thereon, permits, licenses, approvals,contracts, easements and intellectual property associated with the ownershipand operation of the Canton Facility, and also includes an associated 259 acreparcel owned by Seller**.**

 

4.               **PurchasePrice**.   Thepurchase price shall be $16,500,000 (the “Purchase Price”), plus the assumptionof assumed obligations (as defined below), payable as follows:

 

a.               $11,000,000 shall be payablein cash on the Closing Date (the “Closing Payment”);

 

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b.              the Deposit (as definedbelow), which shall be credited against the amount of the Closing Payment; and

 

c.               $500,000 shall be depositedin an interest bearing escrow account as a holdback (the “Escrow Holdback”)against Seller’s indemnity obligations for representations, warranties and/orcovenant breaches (with such provisions to be negotiated and included in thePurchase Agreement), and it being expressly understood that any such Sellerindemnity obligations shall not include those certain EPA obligations to beassumed by Purchaser under Paragraph 6 (c) below.  Provided that there are no indemnity claimsasserted by Purchaser on or before the one (1) year anniversary of theClosing Date, such Escrow Holdback, including all accrued interest thereon,shall be released to Seller.

 

5.               **PurchaseAgreement**.   As soon aspracticable after mutual execution of this Term Sheet, Purchaser (through itslegal counsel) shall deliver to Seller a draft Asset Purchase Agreement (the “PurchaseAgreement”).  Purchaser and Seller shallthereafter work in good faith to finalize the terms of such Purchase Agreementand execute the same, with the intent of mutually executing such Purchase Agreementon or before June 18, 2010 or as soon thereafter as the parties, in theexercise of good faith, can reach agreement on such Purchase Agreement termsand finalize and execute the same. The parties agree to work in good faith anduse their respective commercially reasonable efforts to structure thetransaction so as to maximize tax efficiency for each of the parties.

 

6.               **AssumedObligations**.   Inaddition to the Purchase Price, Purchaser shall only assume the followingobligations associated with the Canton Facility or, as the case may be, taketitle subject to such obligations (collectively, the “Assumed Obligations”):

 

a.               A mortgage in favor of theUSDA in the approximate amount of $500,000 and affecting the 259 acre parcel.

 

b.              Certain equipment leaseswhich Seller identifies as the “capital leases” and which consist of (a) theNebraska Package (boiler equipment); (b) the IFC Credit Corp. lease (steamturbine generator); and (c) the U.S. Waters lease (water treatmentequipment).

 

c.               The funding of the cost ofcertain environmental obligations, as reflected in a consent agreement or otherinstrument between Seller and the Illinois Environmental Protection Agency,related to waste water and storm water discharge issues affecting the CantonFacility and the 259 acre parcel.

 

d.              The funding of the cost ofthe disposal or other processing of certain process waste water (estimated tobe approximately 2.4 million gallons) associated with the Canton Facilityoperations.

 

7.               **Depositto Seller**.    Theparties acknowledge that Seller has significant accounts payable and/or vendorobligations (the “Payables”) which Seller needs to address pending the closingof the transaction contemplated hereby. Purchaser is prepared to and shall deposit with Seller the sum of $5,000,000as non-refundable deposit (the “Deposit”) which Seller shall use pursuant toParagraph 7(c) on the following terms:

 

a.               As promptly as reasonablypracticable following the mutual execution and delivery of this letter by theparties, and upon delivery to Purchaser of the fully executed Whitebox 

 

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Guarantee (as defined below), the sum of $5,000,000 shall be wired orotherwise delivered to Seller by Purchaser as U.S. dollar certified orcollected funds.

 

b.              In addition to all remedieswhich Purchaser may have as to Seller under the Purchase Agreement orotherwise, Whitebox (as the controlling equity holder of Seller) agrees that,in exchange for and simultaneous with payment by Purchaser of the Deposit,Whitebox shall execute and deliver to Purchaser an agreement in form andsubstance reasonably satisfactory to Purchaser (the “Whitebox Guaranty”) underwhich Whitebox covenants that it will act as guarantor of Seller’s obligationsunder this letter to return or refund to Purchaser the full amount of theDeposit in the event of a Bankruptcy Filing (as defined below) or a SellerBreach (as defined below) and Purchaser’s election to demand a return of theDeposit in accordance with this Paragraph 7(b). The parties acknowledge and understand that the Whitebox Guarantyhereunder is expressly limited in scope and applies only the return or refundof the Deposit under the conditions herein described and nothing herein isintended to create any other guaranty obligation by Whitebox as to any otherobligation of Seller under the Purchase Agreement.

 

c.               The Deposit may only be usedby Seller to extinguish existing third party liabilities of Seller or forworking capital expenditures to meet Seller’s payroll and overhead obligationsassociated with the Canton Facility, in each case that are due andpayable.  Seller has provided toPurchaser a list of current accounts payable, a copy of which is attached as Exhibit Ahereto. Seller may use the Deposit to pay any account payable set forth on suchlist and for current accounts payable incurred in the ordinary course ofbusiness consistent with past practice. Any other use of any material portion of the Deposit shall be subject toPurchaser’s prior written approval, which approval shall not be unreasonablydelayed or withheld.

 

d.              The Purchase Agreement shallcontain a clause providing that the Deposit shall be a credit against thePurchase Price at closing, and the Deposit shall  be non-refundable to Purchaser except upon (i) afiling by which Seller and/or the assets of the Seller are placed under thejurisdiction of the U.S. Bankruptcy Court, whether under a Chapter 7 or Chapter11 proceeding and whether voluntarily filed by Seller or as an involuntaryproceeding instituted by any creditor of Seller, and such proceeding is notdismissed within 30 days of filing (collectively, a “Bankruptcy Filing”), (ii) use by Seller or itsaffiliates of any material portion of the Deposit in the manner other than asset forth in Paragraph 7(c), (iii) the incurrence by Seller of anyadditional material indebtedness or suffering of any additional material lienon any of its assets other than in the ordinary course of business, consistentwith past practice, (iv) any material diminution in value of the assets tobe acquired in the Canton Facility as a result of a casualty loss with respectto the fixed assets located at the Canton Facility, or (v) a refusal by orthe inability of Seller to close this transaction in accordance with the PurchaseAgreement, or to satisfy a material condition of closing contained in thePurchase Agreement that is the obligation of Seller, or upon a breach of any ofSeller’s material obligations contained in the Purchase Agreement(collectively, the items in clauses (ii) — (v)  a “Seller Breach”).   Upon either a Bankruptcy Filing or uponPurchaser’s delivery to Seller of written notice of a Seller Breach (“Notice ofBreach”) and Seller’s subsequent failure to cure such Seller Breach within 7days after receipt of such Notice of Breach and, provided that Purchaser is notin breach of any of Purchaser’s material obligations contained in the PurchaseAgreement and/or has not refused to close this transaction in breach of thePurchase Agreement, Purchaser shall thereafter have the right, in Purchaser’sdiscretion, (a) to demand a return of the Deposit and Seller shall returnsuch Deposit within two (2) 

 

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business days after such demand for return of the Deposit is deliveredto Seller in writing  (including but notlimited to enforcing its rights under the Whitebox Guaranty) or (b) toenforce its remedy of specific performance as shall be provided in the PurchaseAgreement.

 

8.               **DueDiligence Period**.   Prior tothe execution of the Purchase Agreement, Purchaser shall perform all duediligence inspections, evaluations and feasibility assessments of the Propertywhich Purchaser elects to complete in its sole and absolute discretion.  Seller will use its commercially reasonableefforts to cooperate with Purchaser and its representatives in conducting suchdiligence.

 

9.               **ClosingDate**.  ThePurchase Agreement shall contain a clause providing that, subject to theextension provisions of Paragraph 12, Closing shall be targeted to occur on orbefore June 30, 2010, and in any event not later than July 30, 2010(provided the Closing has be extended in accordance with Paragraph 12), in eachcase provided that all Conditions to Closing have been satisfied (the “ClosingDate”).

 

10.         **Conditions to Closing**.   The Purchase Agreement shall contain aclause providing that Purchaser’s obligation to purchase the Canton Facilityshall be subject to the following conditions, which conditions are for thebenefit of Purchaser and may be waived by Purchaser at any time in writing andsatisfaction of which shall be in Purchaser’s sole and absolute discretion:

 

a.               The assignment or transferto Purchaser of all necessary licenses, permits and approvals for the operationof the Canton Facility, the execution and delivery of all deeds, bills of sale,assignments of leases, assignment of contracts and other closing documentationnecessary to effect the transfer of the Canton Facility to Purchaser ascontemplated herein, unless any of the foregoing are not assignable accordingto their terms.

 

b.              The material compliance ofthe Canton Facility with all applicable laws and regulations.

 

c.               Such other conditions asshall be set forth in the Purchase Agreement and which are typical and standardfor asset acquisitions similar to the transaction contemplated hereby.

 

11.         **Site Access**.   The Seller shall provide Purchaser withreasonable access to the Property and to Seller’s personnel during the periodprior to the Closing Date to perform any non-invasive physical inspections andinvestigations and otherwise determine that all Conditions to Closing have beensatisfied.   If not sooner or otherwiseprovided,  Seller shall also providePurchaser upon request and/or make available for inspection copies of allfinancial records, contracts, leases, agreements, surveys, reports,environmental audits, appraisals, permits, licenses,  engineering reports, soils reports and suchother information which is in Seller’s possession to allow Purchaser toevaluate the Canton Facility and the related 259 acre parcel.

 

12.         **Extension**.   The Purchase Agreement shall contain aclause providing that upon notice provided by Purchaser to Seller in writing,Purchaser shall be entitled to an extension of the Closing Date of up to 30days (until July 30, 2010), in which case the Purchaser shall pay toSeller $300,000 as a nonrefundable extension fee; provided that (a) Sellershall grant Purchaser’s request for the extension contemplated hereby withoutany associated fee in the event that the parties are not able to consummate thetransaction on or before the Closing Date as a result of the material acts ormaterial failures to act of Seller or its affiliates, (b) such fee, ifpaid, shall be refunded (on the same terms as the Deposit) in the event thatthe Deposit is required to be refunded in accordance with Paragraph 7 and (c) ifthe parties consummate the transaction on or before the 15th day of the 

 

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extension period, Seller will credit $100,000 of the extension fee paidby Purchaser, dollar for dollar, toward the Purchase Price.

 

13.         **Closing Costs**.   Seller shall pay all customary transfertaxes, documentary stamp taxes and recording fees.   All real property taxes shall be prorated ina customary manner between the parties as of the Closing Date.

 

14.         **Confidentiality**.    This Term Sheet and its contents areconfidential and each party agrees not to disclose this Term Sheet or itscontents to third parties without the prior written approval of the otherparty, other than (a) to its investors and advisors, (b) to theextent required by applicable law, regulation or court order, or (c) inconnection with the enforcement of the “Binding Provisions”.

 

15.         **Brokerage Fees**.    Each party represents and warrants to theother that it has not engaged or dealt with any brokers or finders inconnection with the transaction described in this Term Sheet.  Each party will indemnify, defend and holdthe other party harmless from any claim, liability, loss, or damage resultingfrom the indemnifying party’s breach of the foregoing representation andwarranty.

 

16.         **No Solicitation**.  Upon delivery by Purchaser to Seller of theDeposit within 24 hours of the acceptance of this letter of agreement bySeller, Seller shall not, and shall cause its officers, directors, employees,representatives and affiliates not to, solicit or accept any offers nor engagein any discussions regarding the sale and purchase of any equity interest inSeller, the Canton Facility, or any material portion of the assets comprisingthe Canton Facility, including the related 259 acre parcel, except withPurchaser and its representatives. Seller agrees to terminate, or cause to be terminated, any current discussionsregarding the foregoing with any person or entity other than Purchaser and itsrepresentatives. Provided that the full Deposit of $5,000,000 has beendelivered to Seller in accordance with the provisions of Paragraph 7(a), suchexclusivity shall be extended through the Closing Date (as may be extended inaccordance with the provisions of Paragraph 12) in accordance with theprovisions of the Purchase Agreement. Until the receipt of the Deposit by Seller, Seller shall be under noobligation of exclusivity or non-solicitation with respect to the sale andpurchase of the Canton Facility. To the extent, there is a breach of thisParagraph 16, Purchaser shall be entitled to specific performance with respectto the consummation of the Canton Facility acquisition.

 

17.         **Governing Law**.  This letter shall be governed by andconstrued under the internal laws of the State of Delaware, without givingeffect to conflicts-of-laws provisions of any jurisdiction.

 

17.  **Binding Provisions**.   Notwithstanding the nonbinding nature ofthis Term Sheet, the parties agree that the sections entitled “Deposit toSeller”, “Confidentiality”, “Brokerage Fees”, “Non Solicitation”, “GoverningLaw”, and “Binding Provisions”  shall bebinding on the parties.

 

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Ifthe foregoing terms and conditions are acceptable to you, please execute thisTerm Sheet where indicated below and return the same to the undersigned.  This Term Sheet may be executed incounterparts (including execution by facsimile or .PDF delivered via email),each of which shall be deemed to be an original.  We look forward to working with you on thistransaction and achieving a successful closing.

 

 
| ** ** | **AVENTINE RENEWABLE ENERGY** |
|------------|-------------------------------|
| ** ** | **HOLDINGS, INC.**       |
|       |                          |
|       | By:                           | /s/  Thomas Manuel |
|       | Name:  Thomas Manuel          |
|       | Title:  CEO                   |

 

 

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| Approved and accepted this 10th day of June, 2010: |          |
|----------------------------------------------------|---------------|
|                                               |          |
| **New CIE Energy Opco, LLC**                       |          |
| ** **                                         |          |
| By:                                                | Jaime  Lynch  | CFO |   |
|                                               | Name          | Title |   |
|                                               |          |   |   |
|                                               |          |   |   |
| **Whitebox Credit Arbitrage Fund,  L.P.**          |          |
| ** **                                         |          |
| ** **                                         |          |
| By:                                                | Bruce  Nordin | COO/CFO |   |
|                                               | Name          | Title |   |
|                                               |          |   |   |
|                                               |          |   |   |
| **Whitebox Credit Arbitrage  Fund, Ltd.**     |          |
| ** **                                         |          |
| ** **                                         |          |
| By:                                                | Bruce  Nordin | Director |   |
|                                               | Name          | Title |   |

 

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EXHIBIT A

 

Certain Accounts Payable

 

[Attached]

 

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