Document:

exv4w4

 

Exhibit 4.4

AMENDED AND RESTATED ESCROW AGREEMENT

     THIS AMENDED AND RESTATED ESCROW AGREEMENT (this “Agreement”) is made this  1st
 day of November, 2007, by and between MinnErgy, LLC a Minnesota limited liability company
(“MinnErgy”) and Winona National Bank as escrow agent (the “Escrow Agent”).

W I T N E S S E T H:

     WHEREAS, the parties previously entered into an Escrow Agreement dated May 9, 2007 (the
“Escrow Agreement”) in connection with Minnergy’s offering made pursuant to a federal registration
under the provision of the Securities Act of 1933 as amended (the “Offering”);

     WHEREAS, Minnergy has amended its federal registration statement related to the Offering and
the parties desire to amend and restate the Escrow Agreement;

     WHEREAS, MinnErgy proposes to offer a minimum of 58,000,000 and a maximum of 78,000,000 of its
Membership Units (the “Units”) at a price of $1.00 per Unit, in minimum blocks of twenty thousand
(20,000) Units in an offering registered with the Securities and Exchange Commission and in the
states of Iowa, Minnesota, Wisconsin and possibly offered in other states pursuant to state
securities registration exemptions and under the provisions of the Securities Act of 1933, as
amended (the “Offering”);

     WHEREAS, MinnErgy has filed a registration statement to register the Units with the Securities
and Exchange Commission, the states of Iowa, Minnesota, Wisconsin, and possibly other states;

     WHEREAS, MinnErgy will allow investors in the Offering to deliver the purchase price of the
subscribed Units in installments; and

     WHEREAS, MinnErgy desires to comply with the requirements of federal and state securities laws
and regulations, and desires to protect the investors in the Offering by providing, under the terms
and conditions herein set forth, for the return to subscribers of the money which they may pay on
account of purchases of Units in the Offering if the Minimum Escrow Deposit (hereinafter defined)
is not deposited with the Escrow Agent.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good
and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties agree
as follows:

     1. Acceptance of Appointment. Winona National Bank hereby agrees to act as Escrow
Agent under this Agreement. The Escrow Agent shall have no duty to enforce any provision hereof
requiring performance by any other party hereunder.

     2. Establishment of Escrow Account. An escrow account (the “Escrow Account”) is
hereby established with the Escrow Agent for the benefit of the investors in the Offering. Except
as specifically provided in this Agreement, the Escrow Account shall be created and maintained
subject to the customary rules and regulations of the Escrow Agent pertaining to such accounts.

     3. Ownership of Escrow Account. Until such time as the funds deposited in the Escrow
Account (the “Deposited Funds”) shall equal the Minimum Escrow Deposit (as hereinafter defined),
all funds deposited in the Escrow Account by MinnErgy shall not become the property of MinnErgy or
be subject to the debts of MinnErgy or any other person but shall be held by the Escrow Agent
solely for the benefit of the investors who have purchased Units in the Offering until the
Deposited Funds are released by the Commissioner of the Minnesota Department of Commerce.

     4. Deposit of Proceeds. All proceeds from sales of Units in the Offering shall be
delivered by MinnErgy to the Escrow Agent, within forty-eight hours of the receipt thereof from
investors, endorsed (if appropriate) to the order of the Escrow Agent, together with an appropriate
written statement setting forth name, address and social security number of each person purchasing
Units, the number of Units purchased, and the amount paid by each such purchaser. Any such
proceeds

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deposited with the Escrow Agent in the form of uncollected checks shall be promptly presented by
the Escrow Agent for collection through customary banking and clearing house facilities. As the
proceeds of each sale are deposited with the Escrow Agent, MinnErgy shall reserve the number of
Units confirmed to the purchaser thereof in connection with such sale. All such deposited proceeds
are referred to herein as the “Escrow Funds”.

     5. Investment of Escrow Account. The Escrow Funds shall be credited by the Escrow
Agent and recorded in the Escrow Account. The Escrow Agent shall be permitted, and is hereby
authorized to deposit, transfer, hold and invest all funds received under this Agreement, including
principal and interest, in those investments directed, in writing by MinnErgy. The Escrow Agent is
hereby authorized to invest Escrow Funds in the Federated Treasury Cash Series (CUSIP 147551-402)
for temporary investment without written direction. Any interest received by the Escrow Agent with
respect to the Escrow Funds shall be paid to MinnErgy, or the investors, as indicated elsewhere in
this Agreement.

     6. Termination of Escrow. This Agreement and the Escrow created hereunder shall be
terminated as provided in paragraph 7 hereof or as of the date in calendar year 2008 (the
“Termination Date”), which is one year and one day following the date in calendar year 2007 upon
which the Securities and Exchange Commission authorizes the Offering (the “Offering’s Effective
Date”). MinnErgy shall notify Escrow Agent of the Offering’s Effective Date within thirty (30)
days of the receipt of notice of the Offering’s Effective Date from the Securities and Exchange
Commission. Notwithstanding the foregoing, if at anytime prior to termination as described above,
the Escrow Agent is advised by the securities commissioners of Minnesota, Iowa or Wisconsin that
the registration to sell securities in the respective state has been revoked, terminated or
suspended, the Escrow Agent shall return all funds received by the subscribers in the respective
state which has revoked or suspended registration.

     7. Disposition of Escrow Funds. The Escrow Agent shall have the following duties and
obligations under this Agreement:

     A. The Escrow Agent shall send a written notice acknowledging the receipt of the
Deposited Funds every seven days to MinnErgy.

     B. The Escrow Agent shall give MinnErgy prompt written notice when the Deposited Funds
equal $5,800,000 (exclusive of interest). Following receipt of such notice, MinnErgy will
advise the purchasers of Units to remit to the Escrow Agent the balance of the purchase
price within twenty (20) days. Thereafter, Escrow Agent shall give MinnErgy written notice
acknowledging the receipt of the Deposited Funds every seven days. The Escrow Agent shall
give MinnErgy prompt written notice when the Deposited Funds total $58,000,000 (exclusive of
interest).

     C. At the time (and in the event) that: (i) the Deposited Funds shall, during the term
of this Agreement, equal $58,000,000 in subscription proceeds (exclusive of interest) (the
“Minimum Escrow Deposit”); (ii) the Escrow Agent shall have received written confirmation
from MinnErgy that MinnErgy has obtained a written debt financing commitment for debt
financing ranging from a minimum of $52,800,000 to a maximum of $72,800,000 depending on the
amount necessary to fully capitalize the project; (iii) MinnErgy has affirmatively elected
in writing to terminate this Agreement; (iv) MinnErgy has signed a definitive design build
agreement with Fagen, Inc.; (v) MinnErgy has been issued the environmental permits necessary
to construct the ethanol plant (vi) the Escrow Agent shall have provided to each state
securities department in which MinnErgy has registered its securities for sale, as
communicated to the Escrow Agent by MinnErgy, an affidavit stating that the foregoing
requirements (i), (ii), (iii), (iv) and (v) of this subsection 7C have been satisfied and
shall have provided to the Commissioner of the Minnesota Department of Commerce
documentation that the foregoing conditions have been met; and (vii) in each state in which
consent is required, the state securities commissioners have consented to release of the
funds on deposit. However, none of the Deposited Funds, regardless of the state of
residence of the investor contributing such funds, shall be released until the Commissioner
of the Minnesota Department of Commerce has provided written express authorized the release
of the Deposited Funds, then this Agreement shall terminate, and the Escrow Agent shall
promptly disburse the funds on deposit, including interest, to MinnErgy to be used in
accordance with the provisions set out in MinnErgy’s registration statement. MinnErgy

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will deliver a copy of its registration statement to the Escrow Agent upon execution of
this Agreement. The Escrow Agent will have no responsibility to examine the registration
statement with regard to the Escrow Account or otherwise and the registration statement
shall contain a provision to such effect. Upon the making of such disbursement, the Escrow
Agent shall be completely discharged and released of any and all further responsibilities
hereunder.

     If the Minnesota Department of Commerce (the “Department) finds that any conditions of
this Agreement have not been satisfied, or that any provisions of the Minnesota securities
laws or regulations have not been complied with, the Department may withhold such
authorization for release of the Deposited Funds and may direct the Escrow Agent to return
the funds to the subscribers. In making the determination for release of the audited funds
the Department may require MinnErgy to provide a statement of all expenses and all amounts
paid into escrow, certified by an independent certified public accountant or an officer of
MinnErgy and any further financial or other information as the Department deems appropriate
or helpful in making the determination. The Department, may, at any time, inspect the
records of the Escrow Agent, insofar as they relate to this Agreement, for the purpose of
determining compliance with and conformance to the provisions of the Agreement.

     D. In the event the Deposited Funds do not equal or exceed the Minimum Escrow Deposit
on or before the Termination Date or if MinnErgy has not received a written debt financing
commitment as described herein on or before the Termination Date, the Escrow Agent shall
return to each of the purchasers of the Units in the Offering, as promptly as possible after
such Termination Date and on the basis of its records pertaining to the Escrow Account: (i)
the sum which each purchaser initially paid in on account of purchases of the Units in the
Offering and (ii) each purchaser’s portion of the total interest earned on the Escrow
Account as of the Termination Date. Computation of any purchaser’s share of the net
interest earned will be a weighted average based on the proportion of such purchaser’s
deposit in the Escrow Account from the Offering to all such purchasers’ deposits held by the
Escrow Agent and upon the length of time in days such deposit was held in the Escrow Account
as compared to all such deposits. All computations with respect to each purchaser’s
allocable share of net interest shall be made by the Escrow Agent, which determinations
shall be final and conclusive. Any amount paid or payable to a purchaser pursuant to this
paragraph shall be deemed to be the property of such purchaser, free and clear of any and
all claims of MinnErgy or its agents or creditors; and the respective purchases of the Units
made and entered into in the Offering shall thereupon be deemed, ipso facto, to be cancelled
without any further liability of the purchasers or any of them to pay for the Units
purchased. At such time as the Escrow Agent shall have made all the payments called for in
this paragraph, the Escrow Agent shall be completely discharged and released of any and all
further responsibilities hereunder, and the Units reserved (as provided in paragraph 4)
shall be released from such reservation, except that Escrow Agent shall be required to
prepare and issue a single IRS Form 1099 to each investor in the event that funds are
returned to investors.

     8. Agreement with Escrow Agent. To induce Escrow Agent to act hereunder, it is agreed
by MinnErgy that:

     A. The sole duty of the Escrow Agent, other than as herein specified, shall be to
receive the Escrow Funds and hold them subject to release, in accordance herewith, and the
Escrow Agent shall be under no duty to determine whether MinnErgy is complying with the
requirements of this Agreement in tendering to the Escrow Agent said proceeds of the sale of
said Units. The Escrow Agent may conclusively rely upon and shall be protected in acting
upon any statement, certificate, notice, request, consent, order or other document believed
by it to be genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall have no duty or liability to verify any such statement, certificate,
notice, request, consent, order or other document, and its sole responsibility shall be to
act only as expressly set forth in this Agreement. The Escrow Agent shall be under no
obligation to institute or defend any action, suit or proceeding in connection with this
Agreement unless first indemnified to its satisfaction. The Escrow Agent may consult
counsel in respect of any question arising under this Agreement and the Escrow Agent shall
not be liable for any action taken or omitted in good faith upon advice of such counsel.

     B. MinnErgy hereby indemnifies and holds harmless the Escrow Agent from and against any
and all loss, liability, cost, damage and expense, including, without limitation, reasonable
counsel fees, which the

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Escrow Agent may suffer or incur by reason of any action, claim or proceeding brought
against the Escrow Agent arising out of or relating in any way to this Agreement or any
transaction to which this Agreement relates unless such action, claim or proceeding is the
result of the gross negligence or willful misconduct of the Escrow Agent.

     9. Resignation and Removal of Escrow Agent Successors. The Escrow Agent may resign
upon thirty (30) days advance written notice to MinnErgy. If a successor Escrow Agent is not
appointed within the 30-day period following such notice, Escrow Agent may petition any court of
competent jurisdiction to name a successor Escrow Agent. Any commercial banking institution or
trust company with which Escrow Agent may merge or consolidate, and any commercial banking
institution or trust company to which Escrow Agent transfers all or substantially all of its
corporate trust business shall be the successor Escrow Agent without further act.

     10. Fees and Expenses of Escrow Agent. MinnErgy agrees to pay the Escrow Agent the
fees specified in the Escrow Agent’s fee schedule attached hereto as Exhibit A, in the manner set
forth therein, unless otherwise agreed to by the parties in writing. The parties further agree
that MinnErgy shall be solely responsible for the payment of such fees and the Escrow Agent shall
not seek payment of the fees from investors or apply any principal deposited by investors in the
escrow account or interest on the escrow account against such fees. The fee agreed upon herein is
intended as full consideration for the Escrow Agent’s services as contemplated by this Agreement;
provided, however, that in the event the Escrow Agent renders any material service
not contemplated in this Agreement or there is any assignment of interest in the subject matter of
this Agreement, or any material modification hereof; or if any material controversy arises
hereunder, or the Escrow Agent is made a party to any litigation pertaining to this Agreement, or
the subject matter hereof, then the Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs and expenses, including reasonable attorney’s
fees, occasioned by any delay, controversy, litigation or event, and the same shall be recoverable
from MinnErgy, but not from the escrow account.

     11. Notices. All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of
service if served personally on the party to whom notice is to be given, (b) on the day of
transmission if sent by facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission, (c) on the next day
on which such deliveries are made in Winona, Minnesota, when delivery is to Federal Express or
similar overnight courier or the Express Mail service maintained by the United States Postal
Service, or (d) on the fifth day after mailing, if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, and properly addressed,
return receipt requested, to the party as follows:

If to Escrow Agent:

Winona National Bank

204 Main Street, P.O. Box 499

Winona, MN 55987

Attn: Thomas Kieffer, Senior Vice President

Fax: (507) 454-9201

Phone: (507 ) 454-9218

If to MinnErgy:

MinnErgy, LLC

4455 Theurer Boulevard, P.O. Box 186

Winona, Minnesota 5597

Attn: Ron Scherbring, President/CEO

Fax: (507) 858-0022

with a required copy to:

Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, P.L.C.

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666 Grand Avenue, Suite 2000

Des Moines, IA 50309

Attention: Miranda L. Hughes

Fax: (515) 323-8477

     12. Governing Law. This Agreement shall be construed, performed, and enforced in
accordance with, and governed by, the internal laws of the State of Minnesota, without giving
effect to the principles of conflict of laws thereof.

     13. Successors and Assigns. Except as otherwise provided in this Agreement, no party
hereto shall assign this Agreement or any rights or obligations hereunder without the prior written
consent to the other parties hereto and any such attempted assignment without such prior written
consent shall be void and of no force and effect. This Agreement shall inure to the benefit of and
shall be binding upon the successors and permitted assigns of the parties hereto.

     14. Severability. In the event that any part of this Agreement is declared by any
court or other judicial or administrative body to be null, void, or unenforceable, said provision
shall survive to the extent it is not so declared, and all of the other provisions of this
Agreement shall remain in full force and effect.

     15. Further Assurances. Each of the parties shall execute such documents and other
papers and take such further actions, as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby.

     16. Amendments. This Agreement may be amended or modified, and any of the terms,
covenants, representations, warranties, or conditions hereof may be waived, only by a written
instrument executed by the parties hereto, or in the case of a waiver, by the party waiving
compliance. Any waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation, or warranty contained in the Agreement, in any one or more instances,
shall not be deemed to be nor construed as further or continuing waiver of any such conditions, or
of the breach of any other provision, term, covenant, representation, or warranty of this
Agreement.

     17. Entire Agreement. This Agreement contains the entire understanding among the
parties hereto with respect to the escrow contemplated hereby and supersedes and replaces all prior
and contemporaneous agreements and understandings, oral or written, with regard to such escrow.

     18. Section Headings. The section headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this Agreement.

     19. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one and the same
instrument.

     IN WITNESS WHEREOF, the parties hereto have hereunto affixed their signatures as of the day
and year first written above.

	 	 	 	 	 	 	 	 	 	 	 
	MINNERGY:	 	 	 	ESCROW AGENT	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	MINNERGY, LLC	 	 	 	WINONA NATIONAL BANK	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Daniel H. Arnold
	 	 	 	By:
	 	/s/ Jack J. Puhl	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Daniel H. Arnold	 	 	 	 	 	 	 	 
	Chairman	 	 	 	 	 	 	 	 

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	Authorized by:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Minnesota Department of Commerce	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

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Exhibit A

Winona National Bank

Escrow Agent Fee Schedule

	 	 	 	 	 
	Escrow Agreement Review and Adoption Fee
	 	$	300 	*
	 
	 	 	 	 
	Weekly Escrow Sub-Accounting Fee @ $75/hour     weekly maximum
	 	$	450 	*
	         one year Escrow maximum
	 	$	22,500 	*
	 
	 	 	 	 
	Escrow Asset Custody Fee
	 	waived
	 
	 	 	 	 
	Investment Return Disbursement Fee (per disbursement generated)
	 	$	25	 

 

			
	*	 	These fees will be waived if the balance is over
$10,000,000.00

Revenue Sharing Arrangement between Winona National Bank & PrimeVest:

	 		
	Revenue sharing is pursuant to the PrimeVest addendum attached hereto
	 	No fee

	Note:  		This Revenue Sharing arrangement does not decrease the
stated money market fund return to the client or increase
the internal fees charged against the money market fund.
See Fund Prospectus for complete fee disclosure.

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PrimeVest PrimeSweep Addendum

Federated Money Market Funds

Financial Institution shall earn the following basis points:

	 	 	 	 	 
	Total Aggregate	 	 
	Customer Balances	 	 
	in Retail Federated Funds	 	Basis Points
	$0 -                    $999,999.99
	 	 	.20	 
	$1,000,000.00 - $4,999,999.99
	 	 	.25	 
	$5,000,000.00 - $19,999,999.99
	 	 	.30	 
	$20,000,000.00 - Over
	 	 	.35	 

	 	 	 	 	 
	Total Aggregated Average Daily Customer	 	 
	Balances in the following:	 	Basis Points
	•     Auto Cash Management Trust
	 	 	.10	 
	•     Tax Free Instruments Trust
	 	 	.10	 
	•     Auto Government Money Trust
	 	 	.10	 
	•     Government Obligations
	 	 	.10	 
	•     PrimeCash Obligations
	 	 	.10	 
	•     Treasury Obligations
	 	 	.10	 

PrimeVest shall calculate and pay applicable basis points to Financial Institution on a quarterly
basis (in arrears), based on the average daily balances in Federated funds during the prior
calendar quarter.

8exv10w27

 

Exhibit 10.27

UNITED STATES DEPARTMENT OF AGRICULTURE RURAL BUSINESS-COOPERATIVE SERVICE

VALUE-ADDED PRODUCER GRANT AGREEMENT

This Grant Agreement (Agreement) dated September 27, 2007, between MinnErgy, LLC
(Grantee), and the United States of America, acting through the Rural Business-Cooperative Service
of the Department of Agriculture (Grantor), for $ 300,000 in grant funds under the VAPG
program, delineates the agreement of the parties.

NOW, THEREFORE, in consideration of the grant;

The parties agree that all the terms and provisions of the VAPG Notice of Solicitation of
Applications (NOSA) and application submitted by the Grantee for this VAPG grant, including any
attachments or amendments, are incorporated and included as part of this Agreement. Any changes to
these documents or this Agreement must be approved in writing by the Grantor.

The Grantor agrees to make available to the Grantee for the purpose of this Agreement funds in an
amount not to exceed the Grant funds, subject to the terms and conditions of this Agreement.

As a condition of the Agreement, the Grantee certifies that at least 51 percent of the outstanding
interest in the project has membership or is owned by those who are either citizens of the United
States or reside in the United States after being legally admitted for permanent residence.

As a condition of the Agreement, the Grantee certifies that it is in compliance with and will
comply in the course of the Agreement with all applicable laws, regulations, Executive Orders, and
other generally applicable requirements, including those contained in 7 CFR parts 3015, 3019, 4284,
and the VAPG NOSA, which are incorporated into this agreement by reference, and such other
statutory provisions as are specifically contained herein. The Grantee will comply with title VI of
the Civil Rights Act of 1964, section 504 of the Rehabilitation Act of 1973, the Age Discrimination
Act of 1975, the Americans with Disabilities Act, Executive Order 12898, and Executive Order 12250.

As a condition of the Agreement, the Grantee certifies that its management has read and understands
the requirements of 7 CFR parts 3015, 3017, 3018, 3019, and 4284.

NOW, THEREFORE, the parties do hereby agree as follows:

1. Grant

A. The total amount of grant funds payable to the Grantee by the Grantor shall not exceed
$300,000 (Grant). Any unexpended Grant funds remaining at the time of project
completion or termination of the Agreement shall be returned to the Grantor within 30 calendar days
from the date of project completion or termination of the Agreement.

B. Grantee will match Grant funding with an amount equal to or greater than
$300,000. The matching funds will be spent at a rate equal to or in advance of grant funds, with

 

 

the expenditure of matching funds not to occur until the date the Grant begins.

C. The funding period of this grant will begin on October 1, 2007 and will conclude
within 365 days of the starting date, but no later than December 31, 2008. The Grantee may charge
to the Grant only allowable costs resulting from obligations incurred during the funding period.

D. The Grantee shall use Grant funds and matching funds only for the purposes and activities
specified in detail in EXHIBIT A, entitled “GRANT WORK PLAN AND BUDGET” which is attached hereto
and incorporated herein. Any uses not provided for in EXHIBIT A must be approved in writing by the
Grantor in advance of expenditure by the Grantee.

2. Financial Management

A. The Grantee shall relate financial data to performance data and develop unit cost information
whenever practical.

B. The Grantee shall maintain a financial management system in accordance with 7 CFR 3019.21.

C. Payment shall be made in accordance with 7 CFR 3019.22. If the Grantee cannot maintain a
financial management system in accordance with 7 CFR 3019.21 or if Grantee fails to satisfactorily
meet any other conditions set forth in this Agreement, the Grantee may be paid on a reimbursement
basis, at the discretion of the Grantor.

i. If payment is to be made by advance, the Grantee shall request advance payment, but not more
frequently than once every 30 days, of grant funds by using Standard Form 270, “Request for Advance
or Reimbursement.” Receipts, hourly wage rate, personnel payroll records, or other documentation
must be provided upon request from the Agency.

ii. If payment is to be made by reimbursement, the Grantee shall request reimbursement of grant
funds, but not more frequently than once every 30 days, by using Standard Form 270, “Request for
Advance or Reimbursement.” Receipts, hourly wage rate, personnel payroll records, or other
documentation, as determined by the Agency, must be provided with the request to justify the
amount.

D. If program income is earned during the time period of the grant, it may be used to replace other
sources of matching funds if prior approval is received from the Agency. Program income that is not
used as matching funds for the grant project must first be added to the total project costs and
used to further eligible project or program objectives. Program income earned in excess of funds
that can be used for matching funds or eligible expenses must be deducted from the total project or
program allowable cost and will result in a reduction of the Federal share. Costs incident to the
generation of program income may be deducted from gross income to determine program income,
provided these costs have not been charged to the award.

 

 

E. The Grantee shall provide satisfactory evidence to the Grantor that the Grantee has complied
with the bonding or insurance requirements specified by EXHIBIT B, “BONDING COVERAGE,” which is
attached hereto and incorporated herein.

The Grantee is subject to the audit requirements specified in EXHIBIT C, “AUDIT REQUIREMENTS,”
which is attached hereto and incorporated herein.

3. Property Standards

The Grantee must adhere to the property standards outlined in 7 CFR 3019.31 through 3019.37.

4. Procurement Standards

The Grantee must adhere to the procurement standards outlined in 7 CFR 3019.41 through 3019.48.

5. Reports 

The Grantee shall submit financial and project performance reports satisfactory to the Grantor in
accordance with EXHIBIT D, entitled “REPORTING REQUIREMENTS,” which is attached hereto and
incorporated herein.

6. Site Visits

The Grantee will allow the Grantor to conduct site visits as needed for monitoring the Grantee’s
progress and auditing the Grantee’s financial records related to the performance under the
Agreement. Failure to allow the Grantor to conduct site visits shall be grounds for terminating the
grant.

7. Records

The Grantee shall retain and provide access to records as required by 7 CFR 3019.53.

8. Termination

The award that is the subject of this Agreement shall only be terminated in accordance with 7 CFR
3019.61.

9. Enforcement 

The terms and conditions of this award will be enforced using the provisions of 7 CFR 3019.62.

10. Extensions

If the grant will not be completed by the end of the funding period, as defined in paragraph 1.C.,

 

 

the Grantee may request an extension. The extension must be requested at least 30 days prior to the
end of the funding period or it will not be considered. The request must be in writing and
addressed to the State Director. It must include the following information: (1) the time period of
the extension requested; (2) a revised budget and work plan demonstrating that funds will be
completely expended by the end of the extension; (3) the reason(s) why the extension is being
requested; and (4) what steps will be taken by the Grantee to ensure that the project is completed
by the end of the extension. Submission of a request for an extension does not guarantee that the
Agency will approve the extension. The Agency may grant one no-cost extension of up to one year at
its discretion. However, extensions will only be approved in cases where significant circumstances
beyond the Grantee’s control prohibited timely performance of grant activities. Extensions will not
be approved for changes in scope.

11. Other Conditions

If the Grantee is a farmer or rancher cooperative, the Grantee’s Board of Directors must take
director training on cooperative governance and the responsibilities of cooperative directors
during the time period of the Grant. Members on the Board of Directors that have taken this
training previously can certify, in writing, to the Grantor the specifics of the training and when
it was completed. Any new members or members who have not completed the training previously must
complete the training as approved by the Grantor.

IN WITNESS WHEREOF, Grantee has this day authorized and caused this Agreement to be signed it its
name and its corporate seal to be hereunto affixed and attested by its duly authorized officers
thereunto, and the Grantor has caused this Agreement to be duly executed on its behalf by:

Grantor:

UNITED STATES OF AMERICA

RURAL BUSINESS-COOPERATIVE SERVICE

	 	 	 	 	 	 	 
	           /s/ David Gaffaney

	 	 	 	9/28/2007	 	 
	 

Signature

	 	 	 	 

Date
	 	 
	 
	 	 	 	 	 	 
	DAVID GAFFANEY
	 	 	 	 	 	 
	 

Name

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	          Business & Cooperatives Programs Director
	 	 	 	 	 	 
	 

Title

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Grantee:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	MinnErgy, LLC
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Daniel H. Arnold

	 	 	 	10-5-07	 	 
	 

	 	 	 	 

	 	 

 

 

	 	 	 	 	 	 	 
	Signature

	 	 	 	Date	 	 
	 
	 	 	 	 	 	 
	Daniel H. Arnold
	 	 	 	 	 	 
	 

Name

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Chairman
	 	 	 	 	 	 
	 

Title

	 	 	 	 	 	 

 

 

EXHIBITI A

GRANT WORK AND BUDGET

 

 

     The plant work force will include approximately five team leaders/supervisors to oversee day
to day operations and production employees. The company also intends to hire production positions,
which will staff a four crew operation, and material handlers for an estimated total of fifteen
employees. The material handlers will include rail attendants, truck attendants, a grain sampler
and entry level floater.

     The company intends on hiring a utilities and safety manager and a maintenance manager. The
company also plans on hiring five maintenance positions including a boiler operator, welder,
electrician, electronic technician and general worker.

     The lab staff will consist of a manager and two lab technicians

     The company intends to hire an office staff to help with administrative items. The company may
chose to hire one or more secretary/general clerk depending on the qualifications of the other
office personnel.

Work plan/Budget

     MinnErgy, LLC formally organized on March 31, 2006 and began developing the work plan to
construct and operate a 50 million gallon dry mill corn-processing ethanol plant utilizing natural
gas-fired boilers. The budget for the project in it’s’ entirety is $133,000,000.

     The initial phase of the project was to identify local investors with an interest in creating
an organization that would agree with the development objective. This accomplished, a Board of
Governors was established and PRX Geographic was engaged to prepare a feasibility study concerning
the viability of the project. Concurrently the legal firm of Streater & Murphy was retained, as was
the accounting firm of Christianson and Associates. An Operating Committee was developed to
identify and initiate project tasks. This committee identified prospective building sites. Site
evaluation criteria consisted of: fatal flaw assessment, infrastructure and other assets necessary
for an ethanol plant including grain availability, road and rail access and transportation
infrastructure at the site, utilities including electricity stores, natural gas, water and waste
water disposal, ethanol and co-product market proximity, labor availability, community services
such as welding, electrical shop, plumbing, schools, fire protection, hospital, airport, and
location relative to communities and homes. Contracts were developed with the environmental firm of
Natural Resource Group and the civil engineering firm of Yaggy Colby Associates. Meetings were
held with the DM&E Railroad to discuss the requirements necessary for access and service, and also
with a variety of companies that were capable of supplying the engineering, procurement, and
construction requirements of the project.

     Land option agreements were developed and committed to upon selection of prospective site
locations. A Letter Of Intent was signed in March 2007 with the design-build firm of Fagen, Inc.
Engineering services are currently planned to proceed during October 2007 with plant construction
to begin April 2008. A production well and observation well has been drilled by Thein Well Company
and a seven day ground water pumping test was completed April 21, 2007.

 

 

     The firms of American Engineering Testing, Inc. and Brookfield Resources, Inc. have performed
subsurface exploration and geotechnical review services for the plant site.

     The environmental permitting process is underway currently. The environmental permitting firm
the Natural Resource Group has been contracted to direct this process. It is expected that the
applications will be submitted to the appropriate governmental agencies in June of 2007. We expect
to receive permit approval prior to 2007 year end.

     In March of 2007 the Board of Governors began working on the task of developing the various
committees and committee chairpersons and has completed all of the committees and chairpersons
except one. The various committees will be: Communications, PR, Fund Raising-Tony Wasinger,
Chairman; Finance Committee — Dan Florness, Chairman; Grain, Energy Procurement-End Product
Marketing- Chairperson, TBD; Site Construction & Permitting Committee — Ron Scherbring, Chairman;
Legal Committee — Dan Arnold, Chairman.

     A relationship is being developed with an entity to purchase corn for the process. We expect
to begin developing forward contracts for corn delivery as much as one year prior to substantial
completion. Relationships will also be developed during the construction phase with marketing
companies for the sale of the ethanol and the DDGS.

     Six months prior to substantial completion we expect to begin hiring and training the staff
that will manage and operate the business.

     Included in the budget table that follows are the estimated costs for the working capital uses
of the grant request. The grant budget time frame will start December 1, 2007 and extend to
November 30, 2008. The time frame of this budget is 365 days. The identified costs are: computer
network, computers, accounting software and implementation — $225,000; office equipment, i.e.,
phone system, copying machine, supplies — $75.000; office rent, utilities, and salaries for project
manager and administrative assistant — $160,000; inventory for plant and office supplies -
$140,000. Matching funds will be spent at a rate equal to or greater than grant funds.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Start	 	End	 	Budget	 	 	 	 	 	 
	Task	 	Date	 	Date	 	Federal	 	Cash	 	In-Kind	 	Total
	Task 1 — Computers,
Software, Network,
Implementation
Responsible Staff:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dan Arnold, Dan Florness
	 	 	01/1/08	 	 	 	5/30/08	 	 	 	112,500	 	 	 	112,500	 	 	 	 	 	 	 	225,000	 
	Task 2 — Office
Equipment Responsible
Staff: Tony
Wasinger
	 	 	04/1/08	 	 	 	09/30/08	 	 	 	37,500	 	 	 	37,500	 	 	 	 	 	 	 	75,000	 

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Start	 	End	 	Budget	 	 	 	 	 	 
	Task	 	Date	 	Date	 	Federal	 	Cash	 	In-Kind	 	Total
	Task 3 — Office rent,
Utilities, Salaries
Responsible Staff: Ron
	 	 	12/1/07	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Scherbring
	 	 	10/1/07	 	 	 	11/30/08	 	 	 	80,000	 	 	 	80,000	 	 	 	 	 	 	 	160,000	 
	Task 4 — Inventory,
Supplies Responsible
Staff: Ron
Scherbring
	 	 	06/1/08	 	 	 	11/30/08	 	 	 	70,000	 	 	 	70,000	 	 	 	 	 	 	 	140,000	 
	Total Cost of Project
	 	 	 	 	 	 	 	 	 	 	300,000	 	 	 	300,000	 	 	 	 	 	 	 	600,000	 

Task I — Purchase and implementation of the computer system and accounting software necessary to
support the business activities. Cost = $225,000

Dan Arnold will chair the committee responsible for this decision. Dan has had extensive experience
working within the contract electronics manufacturing industry and has broad knowledge of
accounting and business systems. He is currently President of DCM  — Tech. Serving on this
committee will also be Dan Florness, currently the Chief Financial Officer of the Fastenal Company.
Dan has considerable experience and expertise with accounting software systems. We will lean
heavily on Christianson and Associates for advice concerning the accounting system. Christianson
has developed software specifically for the grain and ethanol industries. It is expected that
implementation of the system will be contracted with the company supplying the system.

Timing: January 2008 — October 2008.

Subtask A - Identify computer hardware requirements. MinnErgy will deploy a business class computer
system consisting of a multiple servers and approximately 15 client work stations throughout the
facility. The servers will be fully redundant with raid array storage and multiple power supplies.
An offsite backup system will also be implemented. A computer infrastructure flow sheet will be
designed. Competing proposals will be developed for committee review and decision making. We
consider this to be a critical component of the business and will address it early in the
construction phase of the project. The grant administrator will be able to evaluate the progress of
this task through the review of proposals, submittal of invoices and review of flow sheet
development.

Timing: January 2008 — June 2008. Cost = $108,000

Subtask B - Identify and procure accounting software. MinnErgy will review business application
accounting software options typically used within the industry. We will discuss the use of the
different options with users of such software and with our consulting accounting firm Christianson
and Associates, and McGladrey & Pullen our consulting audit firm. Request of competing proposals
for committee review. This subtask may be evaluated by reviewing the business proposals and the
submission of invoices.

Timing: April 2008 — June 2008 Cost $55,000

Subtask C - Identify, procure and install grain accounting software. MinnErgy will review

 

 

business application software options typically used with the industry. We will discuss the use of
different options with users of such software including our member All American Co-op, our
consulting accounting firm Christianson and Associates, and other firms in the grain risk
management arena. Request competing proposals for committee review and decision making. This
subtask may be evaluated by reviewing the business proposals and the submission of invoices.

Timing: June 2008 — October 2008 Cost = $62,000

Task 2 - Purchase of office equipment. $75,000

Tony Wasinger will chair the committee that will oversee this activity. Tony is currently the Plant
Manager of the Bay State Milling Company flour mill in Winona, MN. Also serving on this committee
will be Chris Arnold. Chris is currently President of E-Tool, Inc. in Winona, MN.

Timing: April 2008 — September 2008.

Subtask A - Identify requirements of administration, laboratory, and manufacturing departments as
it relates to desks, chairs, and file storage. Review operational requirements of staff and prepare
office layout drawings of various departments. Identify preferred vendor options and request
competing proposals for committee review and decision making. Subtask may be evaluated by review of
proposals and submission of invoices.

Timing: May 2008 — June 2008 Cost —— $20,000

Subtask B - Identify office requirements of copiers, scanners, and fax machines. Review of
operational requirements of office, laboratory, and manufacturing departments. Identify preferred
vendor options and request competing proposals for committee review and decision making. Subtask
may be evaluated by review of proposals and submission of invoices.

Timing: June 2008 —July 2008 Cost $30,000

Subtask C - Identify telephone system requirements for facility. Request competing system proposals
from various vendors including system diagrams for committee decision making. Subtask may be
evaluated by review of proposals and submission of invoices.

Timing: July 2008 — September 2008 Cost $25,000

Task 3 — Office rent, salaries, utilities.

Ron Scherbring will be responsible for these activities. Ron serves as the President/CEO of
MinnErgy, LLC. Ron owns and operates Scherbring Heifer Hotel a custom dairy operation.

Timing: December 2007 — November 2008.

 

 

Subtask A - Identify office space options in area of project and initiate rental agreement. Prepare
proposal for committee review. Subtask may be evaluated by review of proposals and submission of
invoices. Timing — December 1, 2007 — December 31, 2007

Cost — Rent = $7,200. ($1,800/quarter)

Subtask B — Develop project manager and office administrator job descriptions. Initiate search for
prospects and create list of qualified candidates. Interview candidates and submit proposed
decisions to committee for review and decision making. Subtask may be evaluated by submission of
copies of payroll payments.

Timing —           December 2007 — January 2008: Identify and Hire Candidates

December 2007 — November 2008: Payment of payroll.

Cost = $148,600 ($37,150/quarter)

Subtask C - Submission of utility costs. Evaluate subtask by submission of copies of invoices.

Timing- December 2007 — November 2008, Cost = $4,200 ($1,050/quarter)

     Task 4 — Inventory, Supplies. Cost = $140,000

Ron Scherbring will own the responsibility for these tasks.

Timing: June 2008 — November 2008.

Subtask A - Determine inventory requirements for process chemicals/enzymes. Discuss usage
requirements with vendors and develop support quantities. Request proposal and submit to committee
for review and decision making. Subtask may be evaluated by review of vendor support list and
submission of invoices.

Timing: June 1 — June 30, 2008 Cost = $70,000

Subtask B - Determine maintenance supply inventory requirements. Discuss system maintenance
requirements with equipment suppliers. Request proposals from suppliers of suggested maintenance
support inventory. Present proposals to committee for review and decision making. Evaluate subtask
by review of proposals and submission of invoices.

Timing: September I — November 30, 2008                 Cost = $65,000

Subtask C - Determine office inventory supply requirements of paper, envelopes, pens and pencils.

Review supplier options and request proposals. Present proposals to committee for review and

 

 

decision making. Evaluate subtask by review of proposal documentation and submission of invoices.

Timing: July 1 — July 31, 2008            Cost = $5,000

Following is a budget breakdown for the entire project.

	 	 	 	 	 	 	 	 	 
	Use of Proceeds	 	Amount	 	 	 	 
	Plant Construction
	 	$	83,400,000	 	 	 	 	 
	Material Escalation Clause
	 	$	1,668,000	 	 	 	 	 
	CCI Contingency
	 	$	4,170,000	 	 	 	 	 
	Land Cost
	 	$	3,675,000	 	 	 	 	 
	Site Development Costs
	 	$	12,182,000	 	 	 	 	 
	Construction Contingency
	 	$	1,305,000	 	 	 	 	 
	Construction Performance Bond
	 	$	500,000	 	 	 	 	 
	Construction Insurance Costs
	 	$	300,000	 	 	 	 	 
	Administrative Building
	 	$	400,000	 	 	 	 	 
	Office Equipment
	 	$	75,000	 	 	 	 	 
	Computers, Software, Network
	 	$	225,000	 	 	 	 	 
	Railroad
	 	$	6,000,000	 	 	 	 	 
	Rolling Stock
	 	$	400,000	 	 	 	 	 
	Fire Protection and Water Supply
	 	$	5,300,000	 	 	 	 	 
	Capitalized Interest
	 	$	3,000,000	 	 	 	 	 
	Financing Costs
	 	$	700,000	 	 	 	 	 
	Organilation Costs
	 	$	1,200,000	 	 	 	 	 
	Pre-Production Costs-Salaries, Utilities, etc.
	 	$	750,000	 	 	 	 	 
	Working Capital
	 	$	3,750,000	 	 	 	 	 
	Inventory-Corn, Chemicals, Ethanol, DDGS
	 	$	3,500,000	 	 	 	 	 
	Spare Parts 7 process equipment
	 	$	500,000	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	TOTAL
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	$	133,000,000	 
	 
	 	 	 	 	 	 	 	 

Amount requested

MinnErgy, LLC is requesting a grant in the amount of $300,000 to help fund the start-up working
capital costs of the project.

 

 

EXHIBIT B

BOND COVERAGE

The Grantee shall provide satisfactory evidence to the Grantor that the Grantee holds fidelity bond
coverage in the amount of $ N/A*     that covers all officers and employees of the

Grantee’s organization authorized to receive or disburse Federal funds. The bond coverage shall be
obtained from a company or companies holding certificates of authority as acceptable sureties, as
prescribed in 31 CFR part 223, “Surety Companies Doing Business With the United States.”

 

			
	*	 	This grant is being administered as a reimbursement grant so fidelity bond coverage is not
required (3015.17).

 

 

EXHIBIT C

AUDIT REQUIREMENTS

If a the Grantee is a non-profit corporation and the Grantee expends $500,000 or more in federal
funds in one year, the Grantee shall be audited by a Certified Public Accountant. The audit, for
the years the Grantee receives this financial assistance, will be conducted in accordance with
Generally Accepted Government Auditing Standards (GAGAS) and OMB Circular A-133. These audits are
due within 9 months after the end of the Grantee’s fiscal year. The Grantor is to receive a copy of
this audit.

If the Grantee is a nonprofit corporation and the Grantee expends less than $500,000 in federal
funds or the Grantee is a for profit corporation and the Grant amount is greater than $100,000, the
project shall be audited by a Certified Public Accountant in accordance with Generally Accepted
Government Auditing Standards (GAGAS). This audit will he a limited-scope audit focused only on the
expenditure of grant and matching funds to assess compliance with applicable laws and regulations.
It must be completed within 90 days after the funding period with a copy submitted to the Grantor.

If the Grantee is a nonprofit corporation and the Grantee expends less than $500,000 in federal
funds or the Grantee is a for profit corporation and the Grant amount is $100,000 or less, the
Grantee is subject to an audit by the Grantor of all records whose retention is required by the
Agreement. This audit will focus only on the expenditure of grant and matching funds to assess
compliance with applicable laws and regulations and must be completed within 90 days after the
funding period.

 

 

EXHIBIT D

REPORTING REQUIREMENTS

You must provide Rural Development with a paper copy original or an electronic copy that includes
all required signatures of the following reports. The reports should be submitted to the Agency
contact listed for your assigned state in Section VII of the VAPG NOSA. Failure to submit
satisfactory reports on time may result in suspension or termination of your grant. Both
performance reports and financial reports must be in compliance with 7 CFR 3019.51 and 3019.52.

A. Form SF-269 or SF-269A. A “Financial Status Report,” listing expenditures according to agreed
upon budget categories, on a semi-annual basis. Reporting periods end each March 31 and September
30. Reports are due 30 days after the reporting period ends. A final “Financial Status Report” is
due within 90 calendar days of the completion of the project. Reports will be on a cash basis.

B. Semi-annual performance reports. Reports are due as provided in paragraph (A) of this section.
These reports shall include the following:

i. A comparison of actual accomplishments to the objectives for that period. Objectives should be
reported by specific task breakdown as described in the approved work plan and budget.

ii. Reasons why established objectives were not met, if applicable.

iii. Reasons for any problems, delays, or adverse conditions which will affect attainment of
overall program objectives, prevent meeting time schedules or objectives, or preclude the
attainment of particular objectives during established time periods. This disclosure shall be
accomplished by a statement of the action taken or planned to resolve the situation.

iv. Objectives and timetables established for the next reporting period.

v. A summary at the end of the report with the following elements to assist in documenting the
annual performance goals of the VAPG program for Congress.

If funds were awarded for working capital, the Grantee must discuss the following

	 	•	 	Number of jobs created as a result of the project;
	 
	 	•	 	Any increase in producer revenues as a result of the project;
	 
	 	•	 	Any increase in customer base as a result of the project; and
	 
	 	•	 	Projects with significant energy components must report expected or actual capacity
(e.g. gallons of ethanol produced annually, megawatt hours produced annually) and any
emissions reductions incurred during the project.

vi. Compliance with any special condition on the use of award funds should be discussed.

 

 

C. Final project performance reports. Reports are due as provided in paragraph (A) of this section.
These reports shall include the following:

i. A comparison of actual accomplishments to the objectives for that period. Objectives should be
reported by specific task breakdown as described in the approved work plan and budget.

ii. Reasons why established objectives were not met, if applicable.

iii. Reasons for any problems, delays, or adverse conditions which will affect attainment of
overall program objectives, prevent meeting time schedules or objectives, or preclude the
attainment of particular objectives during established time periods. This disclosure shall be
accomplished by a statement of the action taken or planned to resolve the situation.

iv. Objectives and timetables established for the next reporting period.

v. Compliance with any special condition on the use of award funds should be discussed.

vi. Responses to the following:

	 	a.	 	What have been the most challenging or unexpected aspects of this program?
	 
	 	b.	 	What advice you would give to other organizations planning a similar program. These should
include strengths and limitations of the program. If you had the opportunity, what
would you have done differently?
	 
	 	c.	 	If an innovative approach was used successfully, the Grantee should describe
their program in detail so that other organizations might consider replication in their
areas.

vii. A summary at the end of the report with the following elements to assist in documenting the
annual performance goals of the VAPG program for Congress.

If funds were awarded for planning activities, the Grantee must discuss the following:

	 	•	 	Number of expected jobs created as a result of continuing project;
	 
	 	•	 	Any expected increase in producer revenues as a result of continuing the project;
	 
	 	•	 	Any expected increase in customer base as a result of continuing the project; and
	 
	 	•	 	Projects with significant energy components must report expected capacity (e.g. gallons
of ethanol produced annually, megawatt hours produced annually) and any emissions
reductions expected as a result of continuing the project.

If funds were awarded for working capital, the Grantee must discuss the following

	 	•	 	Number of jobs created as a result of the project;
	 
	 	•	 	Any increase in producer revenues as a result of the project;
	 
	 	•	 	Any increase in customer base as a result of the project; and
	 
	 	•	 	Projects with significant energy components must report expected or actual capacity
(e.g.

 

 

	 	 	 	gallons of ethanol produced annually, megawatt hours produced annually) and any emissions
reductions incurred during the project.

viii. The Grantee must submit supporting documentation for completed tasks, which includes, but are
not limited to, feasibility studies, marketing plans, business plans, and an accounting of how
working capital funds were spent.

D. SF-272. If the Grantee receives advance payments, the Grantee shall submit a “Report of Federal
Cash Transactions,” listing expenditures according to agreed upon budget categories, on a quarterly
basis. Reporting periods end each March 31, June 30, September 30, and December 31. Reports are due
15 calendar days after the reporting period ends.

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