Document:

Exhibit 10.3

 

THIS OPTION AND THE UNITS
ISSUABLE UPON EXERCISE OF THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND STATE LAWS,
UNLESS PRIOR TO SUCH SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
THE ISSUER RECEIVES AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE
SATISFACTORY TO IT, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND STATE
LAWS.

 

UNIT PURCHASE
OPTION

 

To Purchase Capital Units of

 

ETHANOL GRAIN PROCESSORS, LLC

 

August 23, 2005

 

THIS CERTIFIES
THAT, for good and valuable consideration, the receipt of which is hereby
acknowledged,                                                     
(name of grantee)(the “Holder”) is entitled to subscribe for and purchase from
Ethanol Grain Processors, LLC, a Tennessee limited liability company (the “Company”),
on the terms and conditions set forth below, one hundred twenty-five
thousand (125,000) of the Company’s capital units at an exercise price of One
Dollar ($1.00) per unit, subject to anti-dilution adjustments as provided
below.

 

This Option is subject to the following
provisions, terms and conditions:

 

1.             Vesting,
Duration and Forfeiture.  This Option
is vested upon issuance and is immediately exercisable from the date of
issuance until the fifth anniversary of the date the Company reaches financial
closing.  The date the Company reaches
financial closing shall mean the date that the Board of Governors of the
Company determines that the Company has closed on a sufficient amount of debt
financing which, when added to the amount of the subscription payments being
held in escrow in connection with the Company’s initial public offering of
units, together with the amount of all other equity proceeds and commitments
the Company has received and all grant proceeds the Company has received or
been awarded, will allow the Company to construct the proposed ethanol plant
and provide reasonable working capital at plant start-up (the date when
financial closing is reached referred to herein as the “Financial Closing Date”).  This Option shall expire five (5) years
from the Financial Closing Date, with any remaining rights terminating if not
exercised prior to the close of business on the fifth (5th) anniversary of the
Financial Closing Date (the “Expiration Date”). 
This Option is not subject to forfeiture prior to the Expiration Date.

 

2.             Exercise. The
rights represented by this Option may be exercised by the holder hereof, in
whole or in part (but not as to a fractional unit), at any time or from time to
time prior to the Expiration Date as to those units which are then purchasable,
by written notice of exercise (the

 

 

“Exercise Notice”) delivered to the Company and by the surrender of
this Option (properly endorsed if required) at the principal office of the
Company together with payment to it by certified or cashier’s check of the
applicable purchase price.

 

3.             Issuance of Units.  Unless a later date is specified in the
Exercise Notice, any units purchased hereby shall be deemed to be issued to the
record holder hereof as of the close of business on the tenth (10th) day
following the date on which the rights represented by this Option shall have
been exercised as aforesaid.  As soon as
practicable after such issuance date, if the Company’s units are certificated,
certificates for the units so purchased (bearing any applicable restrictive
legends) shall be delivered to the holder hereof, and, unless this Option has
expired, a new Option representing the number of units, if any, with respect to
which this Option shall not then have been exercised shall also be delivered to
the holder hereof.

 

4.             Covenants of
Company.  The Company agrees that all
units which may be issued upon the exercise of the rights represented by this
Option shall, upon issuance, be duly authorized and issued, fully paid and
nonassessable.  The Company further
agrees that during the period within which the rights represented by this
Option may be exercised, in the event this Option is exercised, the Company
shall have authorized, and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Option, a sufficient
number of its units to provide for the exercise of the rights represented by
this Option.

 

5.             Anti-dilution
Adjustments.  The above provisions
are, however, subject to the following:

 

(a)           In case the Company
shall at any time hereafter subdivide or combine its outstanding units or
declare a dividend payable in its units, the exercise price of this Option in
effect immediately prior to the subdivision, combination or record date for
such dividend shall forthwith be proportionately increased, in the case of
combination, or decreased, in the case of subdivision or dividend, and each
unit purchasable upon exercise of this Option shall be changed to the number
determined by dividing the exercise price of this Option in effect immediately
prior to the subdivision, combination or record date for such dividend by the
exercise price as so adjusted.

 

(b)           No fractional units are
to be issued upon the exercise of this Option, but the Company shall pay a cash
adjustment in respect of any fraction of a unit which would otherwise be
issuable.  Such payment shall be made
based on the fair market value of the Company’s units at the time of exercise,
as determined in good faith by the Company.

 

(c)           If any capital
reorganization or reclassification of the capital units of the Company, or
consolidation or merger of the Company with another company (other than a
merger or consolidation in which the Company is the survivor), or the sale of
all or substantially all of its assets to another company shall be effected in
such a way that holders of its outstanding units shall be entitled to receive
units, other securities or assets with respect to or in exchange for its units
then, as a condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive, upon the basis
and upon the terms and conditions specified in this Option and in lieu of the
units otherwise purchasable and receivable upon the exercise of the rights
represented

 

2

 

hereby, such units, securities or assets to which a holder of the
number of the Company’s units then deliverable upon the exercise hereof would
have been entitled upon such reorganization, reclassification, consolidation,
merger or sale, for the same aggregate price immediately theretofore
applicable, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the holder of this Option to the end
that the provisions hereof (including without limitation provisions for
adjustments of the option exercise price and of the number of units purchasable
upon the exercise of this Option) shall thereafter be applicable, as nearly as
may be, in relation to any units, securities or assets thereafter deliverable
upon the exercise hereof.  The Company
shall not effect any such consolidation, merger or sale unless prior to the consummation
thereof the successor company (if other than the Company) resulting from such
consolidation or merger, or the company purchasing such assets, shall assume by
written instrument executed and mailed to the registered holder hereof at the
last address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such units, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase.

 

(d)           Upon any adjustment of
the option exercise price or the number of units issuable hereunder, then and
in each such case, the Company shall give written notice thereof, by first
class mail, postage prepaid, addressed to the registered holder of this Option
at the address of such holder as shown on the books of the Company, which
notice shall state the option exercise price resulting from such adjustment and
the increase or decrease, if any, in the number of units purchasable at such
price upon the exercise of this Option, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.

 

6.             No Voting Rights.  This Option shall not entitle the holder
hereof to any voting rights or other rights as a holder of the Company’s units.

 

7.             Transfer Requires
Consent.  This Option shall not be
transferable, in whole or in part, without the prior written consent of the
Company

 

IN WITNESS WHEREOF, Ethanol Grain Processors, LLC has caused this
Option to be signed by its duly authorized officer.

 

	
   

  	
  ETHANOL GRAIN PROCESSORS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  / Baxter Sanders /

  
	
   

  	
   Name:

  	
   

  	
  Baxter Sanders

  
	
   

  	
   Its:

  	
   

  	
   President

  
					

 

3

 

Option Exercise Notice

 

Ethanol Grain Processors, LLC

1918 McDonald Road

Rives, TN  38253

 

Ladies and Gentlemen:

 

The undersigned,                                ,
hereby irrevocably elects to exercise the right to purchase                               capital
units (the “Units”) of Ethanol Grain Processors, LLC (the “Company”), under and
pursuant to the Unit Purchase Option granted by the Company to the undersigned
dated                               (the
“Option”).  The total purchase price for
the Units is $                    .  Enclosed herewith is payment for the Units as
required under the Option.

 

In connection with the issuance of the Units to the undersigned, the
undersigned hereby certifies and represents to the Company that the undersigned
is acquiring such Units for investment purposes and not with a view toward
distribution.  The undersigned
understands that the Units have not been registered under the Securities Act of
1933, as amended, or applicable state law and rules and that the Units may
not be sold, transferred, pledged, hypothecated or otherwise disposed of in the
absence of an effective registration statement under such act and state laws,
unless prior to such sale, transfer, pledge, hypothecation or other disposition
the Company receives an opinion of counsel, in form and substance satisfactory
to it, that registration is not required under such act and state laws.  The undersigned understands that a legend
reciting these restrictions shall be placed on any certificate that may be
issued to the undersigned with respect to the Units.

 

The undersigned further understands that the undersigned may suffer
adverse tax consequences as a result of the purchase or future disposition of
the Units.  The undersigned represents
that the undersigned has consulted with any tax consultants the undersigned
deems advisable in connection with the exercise of the Option and that the
undersigned is not relying on the Company for any tax advice.

 

 

	
   

  	
   

  	
  Dated:

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Taxpayer I.D. Number

  	
   

  	
   

  

 

4Exhibit 10.4

 

ETHANOL
GRAIN PROCESSORS, LLC

 

SUBSCRIPTION
AND INVESTMENT REPRESENTATION AGREEMENT

 

THIS SUBSCRIPTION AGREEMENT is entered into and made effective as of
December 2, 2005, by and between Ethanol Grain Processors, LLC, with its
principal executive office located at 1918 McDonald Road, Rives, Tennessee
38253, with mailing address of P.O. Box 95, Obion, Tennessee 38240 (the “Company”),
and Fagen Energy, Inc., with principal executive office located at 501 W.
Highway 212, P.O. Box 159, Granite Falls, Minnesota 56241 (the “Subscriber”).

 

W I
T N E S S E T H

 

In consideration of the mutual promises
contained herein, and other good and valuable consideration, the Subscriber
hereby agrees, represents and warrants as follows:

 

1.             Agreement of Subscription.

 

a.             Subscriber hereby subscribes for the purchase of
membership interests of the Company quantified by the number of units (the “Units”)
indicated below, at a purchase price of $1.20 per Unit, upon the terms and
conditions set forth in this Subscription Agreement:

 

	
  600,000

  	
   

  	
  Number of Units

  
	
   

  	
   

  	
   

  
	
  $

  	
  720,000

  	
   

  	
  Total Purchase Price (number of Units multiplied by $1.20
  per Unit)

  
				

 

b.             Subscriber agrees to pay the total purchase
price of the Units pursuant to the payment terms of the fully-executed
promissory note dated of even date herewith in principal amount of $720,000 and
delivered to the Company herewith (the “Promissory Note”).  Subscriber
acknowledges and agrees that 100% of Subscriber’s purchase price of the Units
and all payments made thereon constitute “at-risk” capital, and will not be
placed into any type of escrow. 
Subscriber understands that this Subscription agreement is subject to
acceptance by the Company.  Upon
acceptance by the Company, Subscriber further agrees that this Subscription
Agreement and the Promissory Note delivered herewith each is irrevocable and
binding upon Subscriber, and the payment obligations pursuant to the payment
terms of the Promissory Note are unconditional. 
Notwithstanding the foregoing, this Subscription Agreement and the
payment obligations under the Promissory Note are contingent upon the consent
and approval of a majority in interest of the Company’s members to the purchase
of the Units hereunder, which consent is required by and shall be sought
pursuant to the Company’s operating agreement dated October 28, 2004, as
amended (the “Operating Agreement”). 
Such consent and approval was obtained at a duly held meeting of the
Company’s members held on November 22, 2005.

 

c.             Subscriber acknowledges that the Company has not
established a minimum number of units that must be sold in conjunction with the
Company’s second round seed capital offering and that the

 

 

	
  ETHANOL
  GRAIN PROCESSORS, LLC

  	
  SECOND ROUND SEED CAPITAL

  
	
   

  	
  SUBSCRIPTION AGREEMENT

  

 

Company may accept subscriptions for, and
complete sales of, any number of units in its second round seed capital
offering.

 

d.             Subscriber acknowledges and agrees that 100% of
Subscriber’s purchase price of the Units constitutes “at-risk” capital, and
will not be placed into any type of escrow. 
Immediately following tender of the payment(s) for the Units, the
Company will use such funds to pay for a portion of organizational, start-up,
and development costs associated with the Company’s ethanol project in
Northwest Tennessee, as further described in the Feasibility Report and
Memorandum (as defined below).

 

e.             Subscriber and the Company agree that, upon
acceptance of this Subscription Agreement, Subscriber will become a “Member” of
the Company, which membership shall be subject to the Company’s Articles of
Organization and the Operating Agreement. 
No certificates will be issued for the Units unless and until the
Company accepts this Subscription Agreement and Subscriber pays the entire
Principal Balance of the Promissory Note and all other amounts due and owing
under the Promissory Note to the Company, at the times and as provided for
therein.

 

2.             Representations and Warranties of
Subscriber.

 

In consideration of the Company’s offer
to sell the Units, Subscriber hereby represents and warrants to the Company and
its agents as follows:

 

a.             Information About the Ethanol
Project.  Subscriber, or its representative(s), has
received, read and understands the Company’s ethanol feasibility study dated
September, 2004 prepared by PRX Geographic and Holbrook Consulting Services
regarding the feasibility of a large-scale dry-mill ethanol production facility
to be located near Obion, Tennessee and all Exhibits and Appendices thereto
(the “Feasibility Report”).  Subscriber,
or its representative, has had an opportunity to obtain, and has received, any
additional information regarding the Company or its ethanol project under
development, and has had an opportunity to ask such questions of, and receive
answers from, the Company or an agent or representative of the Company, to the
extent deemed necessary by the Subscriber in order to form a decision
concerning an investment in the Company and the ethanol project the Company is
seeking to develop.  As a result, Subscriber
believes it has sufficient knowledge about the business, management and
financial affairs of the Company, the ethanol project and the proposed ethanol
plant, and the terms and conditions of the purchase of Units contemplated
hereby.

 

Without limiting the generality of the
foregoing, Subscriber understands that the Company was recently organized, is a
development stage company with no financial or operating history, and will
require approximately $60 million of additional equity (pursuant to subsequent
offerings of membership interests quantified by units) and approximately $90
million of debt financing in order to reach financial closing on the ethanol
project or begin construction of the proposed ethanol plant.  Therefore, the Company’s financing plan faces
substantial uncertainty and contemplates significant leverage, and Subscriber
will incur and suffer a substantial amount of dilution.  Moreover, the Company recently decided to
pursue a gas-fired 100 million gallon per year (MGY) ethanol project rather the
previously proposed 50 MGY coal-fired ethanol plant.  Therefore, the development of the ethanol
project remains in flux and uncertain. 
Subscriber understands and agrees that, despite these and other
substantial uncertainties facing the Company and its development and financing
of the ethanol project and the planned ethanol plant, Subscriber’s subscription
hereunder and the payment obligations under the Promissory Note each is
irrevocable, absolute and unconditional, and may not be withdrawn for any
reason.

 

Subscriber understands that all capitalized
terms used in this Subscription Agreement and not otherwise defined herein
shall have the meaning ascribed to such terms first in the Memorandum (defined
below) or, if not defined therein, then in the Feasibility Report.

 

2

 

b.             Information About the Company,
the Offering, and the Revised Ethanol Project. 
Subscriber, or its representative(s), has received, read and understands
the Company’s private placement memorandum dated November 18, 2005 including
all Appendices and any supplements thereto (the “Memorandum”).  Subscriber acknowledges and agrees that
Subscriber has received, read and understands the Articles and Operating
Agreement.  Subscriber, or its
representative, has had an opportunity to obtain, and has received, any
additional information and has had an opportunity to ask such questions of, and
receive answers from, the Company or an agent or representative of the Company,
to the extent deemed necessary by the Subscriber in order to form a decision
concerning an investment in the Company and its ethanol project under
development, and the Company’s capital structure and financing plans.  As a result, Subscriber believes it has
sufficient knowledge about the business, management and financial affairs of
the Company, the ethanol project, and the terms and conditions of the purchase
of Units contemplated hereby.  Without
limiting the generality of the foregoing, Subscriber
understands that Subscriber’s investment in the Units is 100% at-risk capital,
that no payments will be held in escrow and there is no minimum
offering amount, and that the Company cannot complete its ethanol project
without substantial amounts of additional equity or debt financing, neither of
which is assured.  Subscriber understands that the inability or failure
of the Company to raise the substantial amount of additional equity or to
obtain the debt financing it will need to complete the ethanol project and to
construct its proposed ethanol plant will likely result in a complete loss of
Subscriber’s investment. 
Many of the impediments to raising such equity or obtaining such debt
financing are completely outside of the control of the Company.

 

c.             High Degree of Risk. 
Subscriber realizes that an investment in the Units involves a high
degree of risk, including, but not limited to, the risks of receiving no return
on the investment and of losing Subscriber’s entire investment in the Company.

 

d.             Ability to Bear the Risk. 
Subscriber is able to bear the economic risk of investment in the Units,
including the total loss of such investment.

 

e.             No Market for Units; Restrictions on Transfer. 
Subscriber realizes that (i) there are substantial restrictions on
the transfer of the Units, both under the Securities Act and State Laws, as
well as under the Articles and the Operating Agreement; (ii) there is not
currently, and it is unlikely that in the future there will exist, a public
market for the Units; and (iii) accordingly, for the above and other
reasons, Subscriber may not be able to liquidate an investment in the Units for
an indefinite period.  Subscriber
realizes that the Units have not been registered for sale under the Securities
Act of 1933, as amended (the “Securities Act”) or applicable state securities
laws (the “State Laws”).  Subscriber
acknowledges and agrees that the Units may be sold only pursuant to
registration under the Securities Act and State Laws, or an opinion of counsel
acceptable to the Company that such registration is not required, and in
accordance with the Articles and the Operating Agreement.

 

f.              Suitability. 
Subscriber believes that the investment in the Units is suitable for the
undersigned based upon Subscriber’s investment objectives and financial needs,
and Subscriber has adequate means for providing for his, her or its current
financial needs and personal contingencies and has no need for liquidity of
investment with respect to the Units. 
Subscriber has such knowledge and experience in financial and business
matters that he, she or it is capable of evaluating the merits and risks of an
investment in the Units or Subscriber has obtained, to the extent Subscriber
deems necessary, his, her or its own professional advice with respect to the
risks inherent in the investment in the Units, and the suitability of the
investment in the Units in light of Subscriber’s financial condition and
investment needs.

 

g.             Investment Intent. 
Subscriber has been advised that the Units are not being registered
under the Securities Act or the relevant State Laws but are being offered and
sold pursuant to exemptions

 

3

 

from such laws and that the Company’s reliance
upon such exemptions is predicated in part on Subscriber’s representations to
it as contained herein.  Subscriber represents and warrants that the Units are
being purchased for Subscriber’s own account and for Subscriber’s investment
and without the intention of reselling or redistributing the same, that
Subscriber has made no agreement with others regarding any of the Units
and that Subscriber’s financial condition is such that it is not likely that it
will be necessary to dispose of any of the Units in the foreseeable
future.  Subscriber is aware that, in the
view of the Securities and Exchange Commission, a purchase of the Units with an
intent to resell by reason of any foreseeable specific contingency or
anticipated change in market values, or any change in the condition of the
Company, or in connection with a contemplated liquidation or settlement of any
loan obtained for the acquisition of the Units and for which the Units were
pledged as security, would represent an intent inconsistent with the
representations set forth above. 
Subscriber further represents and agrees that if, contrary to the
foregoing stated intentions, Subscriber should later desire to dispose of or
transfer any of the Units in any manner, he, she or it shall not do so without
first obtaining the consent of the Company as required by the Company’s
Articles and the Operating Agreement and (i) the opinion of counsel
satisfactory to the Company that such proposed disposition or transfer lawfully
may be made without the registration of the Units pursuant to the Securities
Act and applicable State Laws, or (ii) such registration (it being
expressly understood that the Company shall not have any obligation to register
such Units for such purpose).  Moreover,
Subscriber understands that the Board of Governors of the Company has adopted
or will adopt shortly a unit transfer policy that will restrict the transfer of
any units (except for transfers without consideration upon death or to related
parties) until thirty (30) days following the successful start-up of the
proposed ethanol plant.

 

h.             Brokers or Finders. 
Subscriber has not taken any action that will cause the Company to
incur, directly or indirectly, any liability for brokerage or finders’ fees or
agents’ commissions or any similar charges in connection with this Subscription
Agreement.

 

i.              Tax Liability. 
Subscriber has reviewed with Subscriber’s own tax advisors the tax
consequences of this investment and the transactions contemplated by this
Subscription Agreement, and has and will rely solely on such advisors and not
on any statements or representations of the Company or any of its agents.  Subscriber understands that Subscriber (and
not the Company) shall be responsible for Subscriber’s own tax liability that
may arise as a result of this investment or the transactions contemplated by
this Subscription Agreement.

 

j.              Residency. 
Subscriber is a resident of or, if an entity, has its principal place of
business in, the following State:

 

                      
Minnesota                                             
(please write in your state of residency).

 

k.            Dilution. 
Subscriber understands and realizes that the offering price per Unit
exceeds amounts paid by prior purchasers of the Company’s capital units and the
price at which the Company has granted options to purchase the Company’s
capital units, and that Subscriber will experience substantial dilution in the
per unit net tangible book value of the Units purchased hereunder.

 

3.             Accredited Status.

 

SECTION 3 IS REQUIRED IN CONNECTION
WITH THE EXEMPTIONS FROM THE SECURITIES ACT AND STATE LAWS BEING RELIED ON BY
THE COMPANY WITH RESPECT TO THE OFFER AND SALE OF THE UNITS.  ALL FINANCIAL INFORMATION IN SECTION 3
WILL BE KEPT CONFIDENTIAL, AND WILL BE REVIEWED ONLY BY THE COMPANY AND

 

4

 

ITS COUNSEL. 
The undersigned agrees to furnish any additional information that the
Company or its counsel deems reasonably necessary in order to verify the
responses set forth below.

 

Subscriber represents and warrants as follows
(EACH SUBSCRIBER MUST COMPLETE. PLEASE CHECK ALL THAT APPLY – YOU MUST BE AN
ACCREDITED INVESTOR TO PURCHASE THE UNITS):

 

	
  INDIVIDUALS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (a)

  	
   

  	
  Subscriber (hereinafter in this Section 3,
  “the undersigned”) is an individual with a net worth, or a joint net worth
  together with his or her spouse, in excess of $1,000,000. (In calculating net
  worth, you may include equity in personal property and real estate, including
  your principal residence, cash, short-term investments, stock and securities.
  Equity in personal property and real estate should be based on the fair
  market value of such property minus debt secured by such property.)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (b)

  	
   

  	
  The undersigned is an individual that had an
  individual income in excess of $200,000 in each of the prior two years and
  reasonably expects an income in excess of $200,000 in the current year.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (c)

  	
   

  	
  The undersigned is an individual that had with
  his/her spouse joint income in excess of $300,000 in each of the prior two
  years and reasonably expects joint income in excess of $300,000 in the
  current year.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (d)

  	
   

  	
  The undersigned is a director or executive
  officer or general partner (or its equivalent) of the Company.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ENTITIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ý

  	
   

  	
  (e)

  	
   

  	
  The undersigned, if other than an individual,
  is an entity all of whose equity owners meet one of the tests set forth in (a) through
  (d) above. (If relying on this category alone, each equity owner must
  complete a separate copy of this Subscription Agreement.)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ý

  	
   

  	
  (f)

  	
   

  	
  The undersigned is an entity, and is an “Accredited
  Investor” as defined in Rule 501(a) of Regulation D under the
  Securities Act. This representation is based on the following (check one or
  more, as applicable):

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  (i)

  	
   

  	
  The undersigned (or, in the case of a trust,
  the undersigned trustee) is a bank or savings and loan association as defined
  in Sections 3(a)(2) and 3(a)(5)(A), respectively, of the Securities Act
  acting either in its individual or fiduciary capacity.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  (ii)

  	
   

  	
  The undersigned is an insurance company as
  defined in Section 2(13) of the Securities Act.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  (iii)

  	
   

  	
  The undersigned is an investment company
  registered under the Investment Company Act of 1940 or a business development
  Company as defined in Section 2(a)(48) of that Act.

  

 

5

 

	
   

  	
   

  	
  o

  	
   

  	
  (iv)

  	
   

  	
  The undersigned is a Small Business Investment
  Company licensed by the U.S. Small Business Administration under Section 301(c) or
  (d) of the Small Business Investment Act of 1958.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  (v)

  	
   

  	
  The undersigned is an employee benefit plan
  within the meaning of Title I of the Employee Retirement Income Security Act
  of 1974 and either (check one or more, as applicable):

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (aa)

  	
   

  	
  the investment decision is made by a plan
  fiduciary, as defined in Section 3(21) of such Act, which is either a
  bank, savings and loan association, insurance Company, or registered
  investment adviser; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (bb)

  	
   

  	
  the employee benefit plan has total assets in
  excess of $5,000,000; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (cc)

  	
   

  	
  the plan is a self-directed plan with
  investment decisions made solely by persons who are “Accredited Investors” as
  defined under the Securities Act.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  (vi)

  	
   

  	
  The undersigned is a private business
  development company as defined in Section 202(a)(22) of the Investment
  Advisers Act of 1940.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ý

  	
   

  	
  (vii)

  	
   

  	
  The undersigned has total assets in excess of
  $5,000,000, was not formed for the specific purpose of acquiring securities
  of the Company and is one or more of the following (check one or more,
  as appropriate):

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (aa)

  	
   

  	
  an organization described in Section 501(c)(3) of
  the Internal Revenue Code; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  ý

  	
   

  	
  (bb)

  	
   

  	
  a corporation; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (cc)

  	
   

  	
  a Massachusetts or similar business trust; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (dd)

  	
   

  	
  a partnership.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  (viii)

  	
   

  	
  The undersigned is a trust with total assets
  exceeding $5,000,000, which was not formed for the specific purpose of
  acquiring securities of the Company and whose purchase is directed by a
  person who has such knowledge and experience in financial and business
  matters that he is capable of evaluating the merits and risks of the
  investment in the Units.

  

 

4.             Entities.

 

If Subscriber is an entity, the
individual signing on behalf of such entity and the entity jointly and
severally agree and certify that:

 

a.             if entity is accredited solely by reason of the
category described in Section 3(f)(vii) or (viii) above, then
the undersigned entity was not organized for the specific purpose of acquiring
the Units; and

 

b.             this Subscription Agreement has been duly
authorized by all necessary action on the part of the undersigned entity, has
been duly executed by an authorized officer or

 

6

 

representative of the undersigned entity,
and each is a legal, valid, and binding obligation of the undersigned entity
enforceable in accordance with its terms.

 

5.             Relationship to Brokerage Firms.

 

(Please answer the following questions by
checking the appropriate response.)

 

a.             o  YES   ý  NO:  Are you a director, officer, partner, branch
manager, registered representative, employee, shareholder of, or similarly
related to or employed by a brokerage firm?

 

b.             o  YES   ý  NO:  Is your spouse, father, mother, father-in-law,
mother-in-law, or any of your brothers, sisters, brothers-in-law, sisters-in-law
or children, or any relative which you support, a director, officer, partner,
branch manager, registered representative, employee, shareholder of, or
similarly related to or engaged by, a brokerage firm?

 

c.             o  YES   ý  NO:  Does the Subscriber own voting securities of
any brokerage firm?

 

d.             o  YES   ý  NO:  If the undersigned is an entity, is any
director, officer, partner or 5% owner of the undersigned also a director,
officer, partner, branch manager, registered representative, employee,
shareholder of, or similarly related to or employed by, a brokerage firm?

 

e.             If the answer to any of the above items is “YES”,
please supply details below:

 

6.             Securities Law Exemptions.

 

Subscriber acknowledges that the offer and sale of the Units has
not been registered under the Securities Act, or any state securities laws
and that the Company will offer and sell the Units and the Units
will be issued to Subscriber in reliance on exemptions from the registration
requirements of the Securities Act and exemptions under applicable state securities
laws and in reliance on the representations, warranties and agreements made by
Subscriber herein.

 

7.             Restrictive Legend.

 

In addition to the restrictions to
transfer on the Units contained in the Articles and Operating Agreement, and
any corresponding restrictive legends required thereunder, Subscriber also
agrees that the Company shall place a restrictive legend on any statement of
interest prepared by the Company with respect to the Units containing
substantially the following language:

 

The securities represented by this
statement have not been registered under the Securities Act of 1933, as amended
(the “Act”) or under applicable state securities laws and are also subject to a
Subscription and Investment Representation Agreement.  The securities may not be sold, transferred
or pledged in the absence of such registration, unless pursuant to an exemption
from the registration requirements of the Act and applicable state securities
laws.  The Company reserves the right to
require an opinion of counsel satisfactory to it before effecting any transfer
of the securities.

 

7

 

8.             Miscellaneous.

 

a.             Survival of Representations and Warranties;
Indemnification.  Subscriber understands the meaning and legal
consequences of the agreements, representations and warranties contained
herein, agrees that such agreements, representations and warranties shall
survive and remain in full force and effect after the execution hereof and
payment for the Units, and further agrees to indemnify and hold harmless the
Company and each current and future employee, agent and member of the Company
from and against any and all loss, damage or liability due to, or arising out
of, a breach of any agreement, representation or warranty of the undersigned contained
herein.

 

b.             No Assignment or Revocation; Binding Effect. 
Neither this Subscription Agreement, nor any interest herein, shall be
assignable by Subscriber without prior written consent of the Company.  Subscriber hereby acknowledges and agrees
that Subscriber is not entitled to cancel, terminate or revoke this
Subscription Agreement and that it shall survive the death, incapacity,
dissolution or bankruptcy of Subscriber. 
The provisions of this Subscription Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective heirs, legal
representatives, successors and assigns.

 

c.             Choice of Law.  This
Subscription Agreement shall be construed and interpreted in accordance with
Tennessee law, without regard to its choice of law or conflicts of law
provisions.

 

d.             Issue Date of Units.  Upon
acceptance of this Subscription Agreement by the Company and upon the consent
of a majority in interest of the Company’s members, the issuance of the Units
subscribed for hereunder may be made effective as of a uniform date for all
Units issued in the second round of the seed capital offering for
administrative convenience reasons, as determined by the Board of Governors,
and provided such date shall be within a reasonable period (but in all cases
within sixty days) of the date this Subscription Agreement is accepted and the
consent of a majority in interest of members is given.

 

9.             Representations and Warranties of
the Company.

 

In consideration of Subscriber’s
agreement to purchase the Units, the Company represents and warrants to
Subscriber as follows:

 

a.             Existence. 
The Company is a duly organized and validly existing limited liability
company under the laws of the State of Tennessee.

 

b.             Good Standing. 
The Company is in good standing under the laws of the State of Tennessee
and there are no proceedings or actions pending to limit or impair any of its
powers, rights, privileges, or to dissolve it.

 

c.             Due Authorization and Approval. 
The execution and delivery of this Subscription Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by proper corporate action of the Company. 
This Subscription Agreement has been consented to and approved by a
majority in interest of the Company’s members at a duly held member meeting in
accordance with and as required by the Company’s Operating Agreement.

 

d.             Units. 
Upon receipt of full payment for the Units and all other amounts due and
owing on the Promissory Note, the Units shall be duly authorized, fully-paid,
validly issued and non-assessable units of the Company.

 

8

 

SIGNATURE

 

	
  /
  Ron Fagen /

  	
   

  	
   

  	
   

  
	
  Subscriber (Signature)

  	
   

  	
  Subscriber (Signature, if more than one
  investor)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fagen
  Energy, Inc.

  	
   

  	
   

  	
   

  
	
  Print Name of Subscriber

  	
   

  	
  Print Name of Subscriber (If more than one

  investor)

  

 

	
  Ron
  Fagen, Secretary/Treasurer

  	
   

  
	
  Name and Title of Signatory (for entities)

  	
   

  

 

 

Address:

 

501 W Hwy 212

 

PO Box 159

 

Granite Falls, Minnesota 56241

 

NOTE:   All Subscriptions must be accompanied
by (i) completed Subscriber Information Page attached hereto, (ii) a
fully-executed promissory note for payment of 100% of the total purchase price
of the Units, and (iii) an executed additional member signature page to
the Operating Agreement.  Also, if
Subscriber is an entity, the attached Certificate of Signatory must be
executed.

 

ACCEPTANCE
OF SUBSCRIPTION

 

The Company hereby accepts the
subscription evidenced by this Subscription and Investment Representation
Agreement as of the 5th day of December, 2005.

 

	
   

  	
  ETHANOL GRAIN PROCESSORS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  / James K. Patterson /

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:
  Chief Executive Officer

  

 

9

 

SUBSCRIBER
INFORMATION

 

	
  Fagen Energy, Inc.

  	
   

  
	
  (Please print name(s) in which the Units are
  to be issued)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  41-1277828

  	
   

  	
   

  
	
  Taxpayer I.D. No.

  	
  Taxpayer I.D. No.

  
	
  (If more than one investor)

  	
   

  
	
   

  	
   

  
	
  PO Box 159, 501 W. Hwy 212

  
	
  Address

  

 

	
  City:

  	
  Granite Falls

  	
  State:

  	
  Minnesota

  	
  Zip Code:

  	
  56241

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone Number: (320) 564-3324

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name of Authorized Representative (if other
  than individual): Ron Fagen and Diane Fagen

  

 

	
  Form of Ownership: (check one)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o            Individual Ownership

  	
   

  	
  o            Tenants in Common

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o            Joint Tenants (JTWROS)

  	
   

  	
  ý            Corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o            Limited Liability Company

  	
   

  	
  o            Trust (Signature and title pages of Trust
  Agreement and all amendments must be enclosed)

  	
   

  	
   

  
	
   

  	
   

  	
  Trustee Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Trust Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o            Other: Provide information below.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

10

 

CERTIFICATE
OF SIGNATORY

 

(To be
completed if Units are being subscribed for by an Entity)

 

I, Ron Fagen, am the Sec./Treas.  of Fagen Energy, Inc. (the “Entity”).

 

I certify that I am empowered and duly
authorized by the Entity to execute and carry out the terms of the Subscription
and Investment Agreement and to purchase and hold the Units pursuant to the
Company’s Articles and the Operating Agreement, and to act on behalf of the
Entity with respect to any actions or consents of the Entity required thereunder
or this Agreement.  I further certify
that the Subscription and Investment Agreement and such actions or consents
been duly and validly executed on behalf of the Entity and each constitutes a
legal and binding obligation of the Entity.

 

IN WITNESS WHEREOF, I have set my hand
hereto this 2nd day of December, 2005.

 

 

	
   

  	
  /
  Ron Fagen /

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Sec./Treas.

  	
   

  
	
   

  	
  (Title)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Ron
  Fagen

  	
   

  
	
   

  	
  (Please Print
  Name)

  

 

11

 

Ethanol
Grain Processors, LLC

 

PROMISSORY NOTE

 

 

	
  Number of Units
  subscribed:

  	
   

  	
  600,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Purchase price
  per unit:

  	
  x

  	
  $

  	
  1.20

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  subscription price:

  	
   

  	
  $

  	
  720,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Installment
  payment amount:

  	
  x

  	
  1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Principal
  balance:

  	
   

  	
  $

  	
  720,000.00

  	
   

  

 

For
value received, the undersigned, pursuant to the undersigned’s subscription
agreement (the “Subscription Agreement”) to purchase the above units of Ethanol
Grain Processors, LLC, a Tennessee limited liability company (the “Company”),
hereby promises to pay to the Company, in lawful money of the United States of
America, the principal sum of Seven Hundred Twenty Thousand and No/100 Dollars
($720,000.00) (“Principal Balance”) upon the terms set forth herein.

 

1.             Payments.

 

(a)           The
Principal Balance shall be due and payable in eleven installments, with the
first installment of $120,000 due and payable on December 1, 2005, and
thereafter ten equal installments of $60,000 per month, commencing on December 15,
2005 and continuing on the 15th of each month thereafter for a
period of ten months, with the final payment of the entire remaining unpaid
Principal Balance due and payable at maturity on September 15, 2006 (the “Maturity
Date”). All payments shall be made payable to the order of “Ethanol Grain
Processors, LLC”.

 

(b)           In
the event the undersigned fails to make any payment of the Principal Balance
when due, interest shall accrue on such payment amount at the rate of twelve
percent (12%) per annum from the due date, and such interest is due and payable
as of the last day of the calendar month in which accrued.  Otherwise, if the undersigned makes all
payments when due hereunder, no interest shall accrue on the Principal Balance.

 

2.             Default.    In
the event the undersigned fails to make any payment of principal or interest
under this Promissory Note when due, and such default remains uncured for a
period of fifteen (15) days, the undersigned acknowledges and agrees that:

 

(a)           The
Company may demand immediate payment of all amounts owing under this Promissory
Note;

 

(b)           The Company may
commence legal proceedings to collect the amounts due, and shall be entitled to
collect from the undersigned all of its costs and expenses of collection or
enforcement including, but not limited to, reasonable attorneys’ fees and
expenses; and

 

(c)           The Company may,
if such default remains uncured for a period of thirty (30) days following
written notice to the undersigned, retain all prior payments remitted pursuant
to the Subscription Agreement or this Promissory Note as liquidated damages,
and cancel any units then already issued with respect to the Subscription
Agreement, in exchange for canceling this Promissory Note.

 

3.             Notices.    All
notices, requests, consents and demands shall be made in writing and shall be
delivered by facsimile or by hand, sent via a reputable nationwide overnight
courier service or mailed by first class certified or registered mail, return
receipt requested, postage prepaid, if to the undersigned at the fax number or
address of such undersigned as shown on the books of the Company, or if to the
Company at the following fax number or address, or to such other fax number or
address as may be furnished in writing to the undersigned: Ethanol Grain
Processors, LLC, P.O. Box 95, Obion, Tennessee 38240, fax number: (731) 536-1287.
Notices, requests, consents and demands shall be deemed delivered upon
confirmation of facsimile transmission, upon personal delivery, one business
day after being sent via reputable nationwide overnight courier service, or
three business days after deposit in the mail.

 

1

 

4.             Modification and Waiver.    No
purported amendment, modification or waiver of any provision hereof shall be
binding unless set forth in a written document signed by the undersigned and
the Company (in the case of amendments or modifications) or by the party to be
charged thereby (in the case of waivers). Any waiver shall be limited to the
provision hereof in the circumstances or events specifically made subject
thereto, and shall not be deemed a waiver of any other term hereof or of the
same circumstance or event upon any reoccurrence thereof.

 

5.             Successors and Assigns.    All
the terms and provisions of this Promissory Note shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the undersigned and the Company, whether or not so expressed.

 

6.             Waiver of Demand, Presentment and Notice of Dishonor.    The
undersigned hereby waives demand, presentment, protest, notice of protest and
notice of dishonor, and any and all other notices or demands in connection with
the delivery, acceptance, performance or default hereof.

 

7.             Applicable Law.    The
laws of the State of Tennessee, without regard to its conflicts of law
principles, shall govern the validity, the construction and the interpretation
of the rights and duties of the parties.

 

IN
WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the
date set forth below.

 

 

	
  Individuals:

  	
  Entities:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fagen Energy, Inc.

  	
   

  
	
  Signature of
  Investor

  	
  Name of Entity

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  / Ron Fagen /

  	
   

  
	
  Signature of
  Joint Investor

  	
  Authorized
  Signature

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ron Fagen

  	
   

  
	
  Date

  	
  Print Name

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Sec./Treas.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  December 2, 2005

  	
   

  

 

2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}]]