Document:

Exhibit 10.7

 

[LOGO]

 

PACIFIC SOUTHWEST
REALTY SERVICES

 

MORTGAGES SALES &
EQUITY JOINT VENTURES MARKET EVALUATION

 

18201 MCDURMOTT

WEST

SUITE B

IRVINE, CA

92614

 

949-475-1490

949-475-1478 FAX

 

FEE AGREEMENT

 

This agreement is made
this 18th day of August 2006, by and between Pacific Southwest Realty Services,
hereinafter referred to as “PSRS,” and Blackhawk Biofuels, LLC, hereafter referred to as
“APPLICANT.”  APPLICANT has delivered to
PSRS a request for debt financing for a biodiesel facility for a project to be
located in Freeport, Illinois.

 

APPLICANT and PACIFIC
SOUTHWEST agree as follows:

 

1.                                      PSRS
is hereby engaged to assist APPLICANT for a period of 120 days from date of
execution, and is granted a non-exclusive right for said period to obtain a
commitment from lenders introduced by PSRS or subsequently registered by PSRS
with APPLICANT to provide debt financing. In the event APPLICANT has entered
into an Application with a lender secured by PSRS this agreement shall
automatically be extended for a term of 30 days beyond the expiration date
specified in the Application. PSRS agrees to use due diligence in endeavoring
to procure such debt financing during the term hereof. PSRS upon receipt of the
information listed on the Information Request Form shall submit to APPLICANT a
list of lenders, which PSRS intends to contact regarding this financing request.
Upon receipt of the list of lenders APPLICANT shall review the list and, if
acceptable to APPLICANT, approve same by signing the list and return it to PSRS
via facsimile or e-mail thereby granting PSRS the exclusive right to contact
the approved lenders to arrange any construction, bridge, and/or permanent debt
financing associated with the project. It is understood and agreed that this
agreement is exclusive as to the approved lenders, and may be expanded to
include any additional lending sources which PSRS introduces to APPLICANT and
are approved by APPLICANT. It is further understood that at the end of this
agreement PSRS will submit to APPLICANT an inclusive list of lenders introduced
to APPLICANT and that the Exclusive Right to Represent the lenders listed or
registered on this project shall extend for a term of 48 months from date such
list is submitted to APPLICANT.

 

2.                                      In
consideration of the services performed by PSRS in processing this Application,
and in negotiating and obtaining a commitment for debt financing, APPLICANT
agrees to pay PSRS fees on the following basis.

 

	
  Amount

  	
   

  	
  Fee

  	
   

  
	
  The 1st
  $20,000,000

  	
   

  	
  2.00

  	
  %

  
	
  $20,000,001 -
  $50,000,000

  	
   

  	
  1.75

  	
  %

  
	
  $50,000,001 +

  	
   

  	
  1.50

  	
  %

  

 

PSRS
is responsible for all lender’s fees.

 

 

This Placement Fee shall be deemed
earned upon written acceptance by APPLICANT of a commitment from the lender. The
Placement Fee will be payable through loan escrow upon funding of the subject
loan, unless after acceptance of Lender’s Commitment by Applicant, Applicant
elects to not fund the subject loan, in which case half of the fee will be due
and payable to PSRS within 10 business days. In the event that the lender
limits the amount of the Placement Fee due PSRS payable through loan escrow,
Applicant agrees to pay the balance of the PSRS Placement Fee directly to PSRS
within three (3) business days of loan funding. Co-Brokerage Fees to Colorado
Brokerage Capital Group, LLC and Golden Gate Commercial, or their affiliates,
hereinafter referred to as “CO-BROKERS”, an TopherCo, Inc., hereinafter
referred to as “CONSULTANTS, are included within this fee structure.

 

3.                                      In the event any party shall be required to
bring any legal action against the other to enforce any of the terms of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorney fees and costs.

 

4.                                      NON-CIRCUMVENTION.
PSRS has undertaken at significant time, effort and expense to develop
knowledge of and rapport with energy related financing sources, including but
not limited to, institutional and private lenders PSRS will be due a fee under
the fee structure described in Section 2 for any future financing and capital
deals which APPLICANT or it’s affiliates undertakes with lenders introduced by
PSRS as described in Paragraph 1 above.

 

5.                                      DUAL AGENCY. Borrower acknowledges that PSRS acts as an agent for Lenders and
APPLICANT and that PSRS may be the agent for Lender. APPLICANT consents to and
authorizes PSRS’ dual representation of APPLICANT and Lender and to PSRS’
receipt of compensation from Lender, which may include a “finder’s fee,” loan
servicing fees or other compensation.

 

 

This
Agreement is hereby executed as of the day and year first above written.

 

FULL
AUTHORITY TO EXECUTE THIS AGREEMENT ON BEHALF OF ALL PARTIES IN INTEREST IS
WARRANTED TO BE HELD BY THE UNDERSIGNED.

 

 

APPLICANT:

 

BLACKHAWK
BIOFUELS, LLC

 

	
  By:

  	
  /s/
  Ronald Mapes, Chairman

  	
   

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Date:

  	
  8/18/06

  	
   

  
					

 

 

BROKER:

 

PACIFIC
SOUTHWEST REALTY SERVICES

 

 

	
  By:

  	
  /s/
  Steven E. Bridges

  	
   

  
	
   

  	
  Steven
  E. Bridges

  
	
   

  
	
   

  
	
  Date:

  	
  9/28/06Exhibit 10.8

 

Memorandum of Understanding

 

THIS AGREEMENT is made by
and between Freeport Area Economic
Development Foundation, an Illinois not-for-profit corporation
(“FAEDF”), and Blackhawk Biofuels, LLC (“Blackhawk”),
with its local office located at 22 S. Chicago Avenue, Freeport, Illinois.

 

RECITALS

 

A. FAEDF is the lead agent
for Stephenson County in connection with land assembly and other issues related
to the attraction of, and negotiation of economic and redevelopment agreement
with, prospective developers within the Mill Race Crossing Industrial Park.

 

B. In furtherance of the
development of the Mill Race Crossing Industrial Park, and Blackhawk’s desire
to construct and operate a bio diesel processing plant therein (the “Project”),
the parties have entered into a Real Estate Option Agreement, dated June 20,
2006, for the sale and purchase of approximately 23.14 acres of real estate
(the “Real Estate”) located within the Mill Race Crossing Industrial Park.

 

C. As a condition to the
exercise of the option set forth in said Real Estate Option Agreement by
Blackhawk, the parties hereby agree to certain conditions and actions which
shall be taken by each for the construction and operation of the Project.

 

D. The parties believe it is
in their mutual best interest to document their agreement in this Memorandum of
Understanding.

 

E. The parties acknowledge
and agree that the terms, conditions and obligations set forth in this
Memorandum of Understanding shall be more fully set forth in an economic
development agreement to be entered into by and between Blackhawk and
Stephenson County and that the obligations of FAEDF set forth herein shall be
performed by Stephenson County upon its acceptance and approval of said
economic development agreement and consent from the City of Freeport as
hereafter set forth.

 

F. The parties further
acknowledge and agree that such economic development agreement is subject in
all respects to the final approval of the Stephenson County Board and the
consent of the corporate authorities of the City of Freeport.

 

NOW THEREFORE, the parties
agree as follows:

 

Section
I. The Recitals set
forth in the preambles to this agreement are true and correct and they are
hereby incorporated into this Section I by this reference.

 

Section
II. Unless
specifically provided for otherwise, all completion dates set forth in this
Memorandum of Understanding shall be subject to a reasonable force majeure
clause to be set forth in the economic development agreement. The parties
acknowledge and agree that events beyond their control may impact a party’s
ability to satisfy projected completion dates.

 

 

Section
III. FAEDF agrees to
provide the following, subject to the execution of an economic development
agreement as set forth in the Recitals hereto:

 

1)  Make the Real Estate available for purchase
by Blackhawk and zone the Real Estate so that all reasonable uses anticipated
by Blackhawk in the construction and operation of the Project may be
accomodated.

 

2)  On or before October 1, 2007, complete the
construction of a public water system and provide process and fire protection
waterlines to the property line of the Project. The public water system shall
consist of drilling a well that will be capable of producing 1500 gallons per
minute and an elevated storage tank that will store 200,000 gallons of water. In
a fire situation, the system shall be able to provide 2500-3000 gallons per
minute for two hours without dropping the overall system pressure below 20 psi.
The water usage charges to be paid by Blackhawk will be the same as the City of
Freeport rates for a domestic user in effect from time to time as determined by
the City of Freeport. The requirements set forth in this paragraph shall not be
subject to a force majeure clause.

 

3)  On or about October 1, 2007, complete the
construction of a public waste water conveyance system adequate to transport
all final waste water effluent from the Project to the City of Freeport’s Waste
Water Treatment Plant. Stephenson County shall extend the system lines to the
property line of the Project. The waste water usage charges to be paid by
Blackhawk will be the same as the City of Freeport rates for a domestic user in
effect from time to time as determined by the City of Freeport.

 

With respect to the
pretreatment of waste water to comply with City of Freeport ordinances,
Stephenson County may in its discretion construct a centralized pretreatment
facility, the purpose of which would be to pretreat any waste water effluent
produced by the Project and other developments within the Mill Race Crossing
Industrial Park for acceptance into the City of Freeport’s Waste Water
Treatment Plant. Except as set forth below, the parties agree to work together
to determine a mutually agreeable method for allocating the costs of constructing
and maintaining the pretreatment facility and acknowledge that any such method
will most likely bear a proportionate relationship to the number of users and
the amount and type of effluent discharged by each.

 

Blackhawk shall evaluate the
development of its own waste water treatment system and provide FAEDF with
written evidence of its compliance with the City of Freeport’s Waste Water
Treatment Plant by March 1, 2007. Blackhawk at its sole discretion will have
the option to connect to the Mill Race Crossing Industrial Park centralized
pretreatment facility or use its own system.

 

4)  On or before October 1, 2007, provide
railroad access to the Canadian National Railroad consisting of a parallel lead
track that will provide access to the Project. In connection therewith, the
earthen sub-ballast on all track and spurs into and on the Project site shall
be completed by December 31, 2006. Blackhawk shall be responsible for one of
the connecting switches from the main line to the parallel lead track and all
other items associated with the rail’s spur lines on the Project site. FAEDF
shall endeavor to provide evidence to Blackhawk on or about December 31, 2006,
that Blackhawk’s rail requirements are capable of being satisfied. The October
1, 2007, deadline set forth in this paragraph shall not be subject to a force
majeure clause.

 

5)  On or about January 1, 2007, complete a
regional storm water detention facility as determined necessary by Stephenon
County.

 

 

6)  On or about January 1, 2007, any fill
material required to elevate the building areas prior to installing the
foundation and building pad will be furnished and installed; provided, that the
foregoing does not include removal of material for building pads or foundations
that are to be placed on undisturbed soil. If necessary, any fill material
required to balance the site will be provided; however, Blackhawk shall be
responsible for the placement and installation of such fill material. Furthermore,
FAEDF will not strip the entire site of topsoil or vegetable material; FAEDF
will only strip those areas where it may be installing fill material as set
forth above.

 

7)  Complete the aggregate base course for the
public roadway necessary to provide Blackhawk with an all-weather road access
to their site on or before December 31, 2006.

 

8)   Make available to Blackhawk State of
Illinois Enterprise Zone benefits which may include waiver of sales tax for all
building materials, state investment tax credit for depreciable assets, state
jobs tax credit, and waiver of state income tax paid on corporate dividends. However,
Enterprise Zone benefits shall not include any real estate tax abatement. In
connection with the receipt of Enterprise Zone benefits, Blackhawk shall be
responsible for all applications, satisfying any qualifying factors and payment
of the Enterprise Zone filing fee of 1/4 of 1% of the value of the Project.

 

 9)  
Apply to the Illinois EPA, IDOT and other appropriate state agencies for
all permits required for the well, water tower and waste water conveyance
system for Mill Race Crossing Industrial Park on or about November 15, 2006. FAEDF
shall keep Blackhawk informed as to the progress of such permit applications.

 

10)  Provide reasonable assistance to Blackhawk,
such as letters of support, in connection with Blackhawk’s applications, if
any, for grants and other public financing sources.

 

Section
IV. Blackhawk agrees
to do the following in connection with the construction and operation of the
Project:

 

1)  Purchase the Real Estate for a per acre price
of $15,000. Such purchase shall be completed on or before to December 31, 2006,
unless Blackhawk’s option pursuant to the Real Estate Option Agreement is
extended by agreement of the parties thereto. The requirement set forth in this
paragraph shall not be subject to a force majeure clause.

 

2)  Construct and operate the Project capable of
producing 30 million gallons of finished product per year. The approximate cost
of the Project is $48 million. Approximately 26 full-time jobs will be created
to operate the Project.

 

3)  Construct the Project in compliance with the
building codes of both the City of Freeport and Stephenson County, as well as
the other codes, rules and regulations set forth in paragraph 8 of the
Intergovernmental Agreement (the “Intergovernmental Agreement”) by and between
Stephenson County and the City of Freeport with respect to the Mill Race
Crossing Project Area. In any situation where such codes, rules and regulations
conflict, the most stringent shall be utilized. The statutory building permit
fee of Stephenson County shall not be assessed but Blackhawk shall be
responsible for payment of all direct costs of building plan review and
building inspections, including the charges of third party consultants utilized
by Stephenson County for such purposes.

 

4)  Arrange for and extend utility services at
its cost to the Project as deemed necessary by

 

 

Blackhawk
and in compliance with paragraph 3 of this Section IV. Utility services shall
include but not be limited to cable, natural gas, electric and telephone. The
responsibility for the extension of these utilities will be negotiated and
finalized in the economic development agreement.

 

5)  Purchase potable water from Stephenson County
as provided in paragraph 2 of Section III hereof. The amount of water to be
purchased is estimated, but not required, to be 30,000 - 40,000 gallons per
day.

 

6)  Comply with any pretreatment requirements of
the City of Freeport for the waste water effluent from the Project and pay all
charges provided in paragraph 3 of Section III hereof. Notwithstanding the
foregoing, in the event Stephenson County decides to construct a centralized
pretreatment facility, Blackhawk shall either participate in such pretreatment
facility as provided in paragraph 3 of Section III or permit, construct and
operate in accordance with applicable law its own waste water treament facility
as set forth in in such paragraph.

 

7)  Complete all obligations of Blackhawk
required for railroad access as provided in paragraph 4 of Section III hereof.

 

8)  Provide all earthwork required in connection
with the Project except that set forth in paragraph 6 of Section III hereof,
including but not limited to rough grading, balancing the site and providing
adequate on-site drainage.

 

9)  Complete the construction of the Project and
commence the operation thereof on or about October 1, 2007.

 

10)  As may be required pursuant to the
Intergovernmental Agreement, annex the project site into the City of Freeport
should the boundaries of the City of Freeport and the project become
contiguous.

 

11) Comply with any other
ordinances, rules, regulations, statutues and laws applicable to the
construction and operation of the Project, including but not limited any
requirements imposed on develpers within the Mill Race Crossing Project Area
pursuant to the Intergovernmental Agreement.

 

Section
V.              The parties agree to begin work on
an economic development agreement to address the issues in this Memorandum of
Understanding and all other issues which the parties deem may be required for
formal approval of the Project and the economic development agreement by the
Stephenson County Board and the consent of the corporate authorities of the
City of Freeport. The parties shall endeavor to complete a draft of such an
economic development agreement on or before October 1, 2006, and to work
together to present such economic development agreement as soon as thereafter
practical for consideration by the Stephenson County Board and the corporate
authorities of the City of Freeport and any necessary committees thereof.

 

Section
VI.            All completion dates set forth in
this Memorandum of Understanding presume the execution of this instrument on or
before September 1, 2006. Execution of this Memorandum of Understanding after
such date shall automatically extend the completion dates set forth herein by
the number of days equal to the number of days this instrument is executed
after September 1, 2006.

 

 

IT WITNESS WHEREOF, the
parties have executed this agreement on this 1st day of September , 2006.

 

	
   

  	
  Freeport Area Economic
  Development Foundation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert J. Skurla

  	
   

  
	
   

  	
   

  	
  Bob Skurla, Executive Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Blackhawk Biofuels, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald Mapes

  	
   

  
	
   

  	
   

  	
  Ron Mapes, Chairman of Board of Managers

  
					

 

 

Acknowledgment

 

The undersigned, as Chairman
of the Stephenson County Board, acknowledges his review of the terms set forth
in this Memorandum of Understanding. Notwithstanding the foreoing, however, the
performance of Stephenson County’s obligations shall be subject in all respects
to the final approval of the Stephenson County Board and the execution of an
economic development agreement as set forth herein following all required
approvals and consents.

 

	
   

  	
  Stephenson County,
  Illinois

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John J. Blum

  	
   

  
	
   

  	
   

  	
  John Blum, Stephenson County Board Chairman

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