Document:

exv10w12

 

Exhibit 10.12

June 30, 2006

Sam Cogdill

CassCo Amaizing Energy, LLLP

1201 East 7th St, Suite 200

Atlantic, IA 50022

     Re:     CassCo Amaizing Energy, LLLP Ethanol Project

Dear Sam:

     This letter of intent will confirm our discussions regarding the proposed terms and conditions
under which Fagen, Inc. (“Fagen”) will enter into exclusive negotiations with CassCo
Amaizing Energy, LLLP (“Owner”) to implement the transaction described in Paragraph 1 below
(the “Transaction”). (Fagen and Owner are referred to herein individually as a
“Party” and collectively as the “Parties”). This letter, if executed and returned
by you within thirty (30) days of the date hereof and payment of the Commitment Fee described in
Paragraph 5 below will constitute a letter of intent between us (the “Letter of Intent”).

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

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

	 	(a)	 	Fagen agrees to provide Owner with those services as described in this Letter
of Intent which are necessary for Owner to develop a detailed description of a one
hundred (100) natural gas-fired million gallons per year (“MGY”) dry grind
ethanol production facility located at Atlantic, Iowa (the “Plant”) and to
establish a price for which Fagen would provide design, engineering, procurement of
equipment and construction services for the Plant. The description of the Plant will
be sufficiently detailed to permit an analysis of the Owner’s lump-sum cost to develop
the Plant and to develop an economic pro forma sufficient to determine if the Plant can
be financed.
	 
	 	(b)	 	Fagen will also provide Owner with assistance in evaluating, from both a technical and business
perspective, Owner’s organizational options, the appropriate location of the Plant, and business
plan development. Fagen will assume no risk or liability of representation or advice to Owner by
assisting in evaluating the above and all decisions made regarding feasibility, financing,
and business risks are the Owner’s sole responsibility and liability. Owner

 

 

CassCo Amaizing Energy, LLLP

Letter of Intent

June 30, 2006

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acknowledges that Fagen has no control over cost of labor, materials, equipment, or
services furnished by others, over other contractors’ methods of determining prices,
or other competitive bidding or market conditions. Fagen’s estimates of project
construction cost will be made on the basis of its experience and qualifications and
will represent Fagen’s best judgment as experienced and qualified professionals
familiar with the construction industry. Fagen does not guarantee that proposals,
bids, or actual construction cost will not vary from its estimates of project cost
and Owner acknowledges the same.

	 	(c)	 	Fagen will also provide Owner with conceptual design and technical information
required to support Owner’s application for a construction air permit prior to the
commencement of Plant Construction.
	 
	 	(d)	 	If Owner determines that the Plant is economically feasible and desires to
proceed with the development of the Plant, then Owner agrees to enter into a Lump Sum
Design-Build contract with Fagen for the design, procurement of equipment and
construction of the Plant (the “Design-Build Agreement”).
	 
	 	(e)	 	Owner shall offer Fagen the right to invest in the project. Unless otherwise
specifically agreed between Fagen and Owner, such investment shall be offered on the
same terms and conditions as all other investors.
	 
	 	(f)	 	Owner agrees that the Design-Build Agreement will be Fagen’s chosen form of
Design-Build Agreement and will contain among other things, those terms and conditions
set forth in the General Terms and Conditions section of this Letter of Intent.

	2.	 	Contract Price. Owner shall pay Fagen One Hundred Nineteen Million Six Hundred Ninety-eight
Thousand Three Hundred Sixty-five Dollars ($119,698,365.00) (the “Contract Price”) as
full consideration to Fagen for full and complete performance of the services described in the
Design-Build Agreement and all costs incurred in connection therewith.

	 	(a)	 	The Contract Price shall not include any costs related to union labor or
prevailing wage requirements. If any action by Owner, a change in Applicable Law, or a
Governmental Authority (as those terms are defined in the Design-Build Agreement)
acting pursuant to a change in Applicable Law, shall require Fagen to employ union
labor or compensate labor at prevailing wages, the Contract Price shall be adjusted
upwards to include any increased costs associated with such labor or wages. Such
adjustment shall include, but not be limited to, increased labor, subcontractor, and
material and equipment costs resulting from any union or prevailing wage requirement;
provided, however, that if an option is made available to either employ union labor, or to compensate labor at prevailing wages,
such option shall be at Fagen’s sole discretion and that if such option is

 

 

CassCo Amaizing Energy, LLLP

Letter of Intent

June 30, 2006

Page 3 of 14

executed
by Owner without Fagen’s agreement, Fagen shall have the right to terminate this
Letter of Intent or the Design-Build Agreement, as applicable, and receive
compensation pursuant to Paragraph 4(c) hereof or the terms of the Design-Build
Agreement, whichever is applicable.

	 	(b)	 	If the Construction Cost Index published by Engineering News-Record Magazine
(“CCI”) for the month in which a Notice to Proceed is given to Fagen is greater
than 7699.59 (June 2006), the Contract Price shall be adjusted to reflect such
increase.

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

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

	 	i.	 	Obtaining land and legal authority to use the site
for its intended purpose;
	 
	 	ii.	 	site grading including soil stabilization and the
costs connected therewith;
	 
	 	iii.	 	final grading, seeding, and mulching;

	 
	 	iv.	 	
 site security, including any site fencing;

	 
	 	v.	 	
 procuring boundary and topographic surveys;

	 
	 	vi.	 	
 procuring soil borings and geotechnical reports;
	 
	 	vii.	 	obtaining all operating permits, including any
fees, bonding, and required testing;
	 
	 	viii.	 	obtaining storm water runoff permit;
	 
	 	ix.	 	obtaining any necessary pollutant elimination
discharge permit;
	 
	 	x.	 	obtaining a natural gas supply and service
agreement and providing all gas piping to the use points, providing
burner tip pressures as specified by Fagen, and supplying a digital
flowmeter;
	 
	 	xi.	 	securing temporary and permanent electrical
service, including all infrastructure design and installation for any
line/service extensions, substation, primary feed and metering system,
and on-site electrical distribution system up to and including the
service transformers;
	 
	 	xii.	 	supplying a water source, storage, and water supply
lines of appropriate quality and quantity;
	 
	 	xiii.	 	paying for a water pre-treatment system should the
project require such a system (procurement and installation by Fagen);
	 
	 	xiv.	 	providing wastewater discharge piping, septic tank
and drainfield or connect to a municipal system as required for the
sanitary sewer requirements of the Plant;
	 
	 	xv.	 	providing and maintain required ditches and
permanent roads;
	 
	 	xvi.	 	constructing, furnishing, and equipping the
administration building;
	 
	 	xvii.	 	providing maintenance and power equipment and
spare parts;
	 
	 	xviii.	 	providing all rail design, engineering, and construction, including any

 

 

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Letter of Intent

June 30, 2006

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railroad permits or approvals;

	 	xix.	 	supplying drawings of rail system and
administration building to Fagen; and
	 
	 	xx.	 	paying for the required fire protection system for
the Plant (procurement and installation by Fagen).

	 	(b)	 	Owner will enter into a Phase I and Phase II Engineering Services Agreement
with Fagen Engineering, LLC. The Phase I and Phase II Engineering Services Agreement
will provide for commencement of work on the Phase I and Phase II engineering for the
project as set forth therein. The Phase I engineering shall consist of engineering and
design of the Plant site and shall include: property layout; grading, drainage and
erosion control plan drawings; roadway alignment drawings; culvert cross sections and
details; and seeding and landscaping, if required. The Phase II engineering shall
consist of engineering and design of site work and utilities for the Plant, all within
the property line of the Plant, including: property layout; site grading and drainage
drawings; roadway alignment; all utility layout including fire loop, potable water,
well water if applicable, sanitary sewer, utility water blowdown, and natural gas;
geometric layout; site utility piping tables; tank farm layout; tank farm details;
sections and details drawing, if required, and miscellaneous details drawing, if
required. Owner will pay Fagen Engineering, LLC Ninety-two Thousand Five Hundred
Dollars ($92,500.00) for such engineering services pursuant to the terms of that
agreement, the full amount of which shall be included in and credited to the Contract
Price. Notwithstanding the foregoing sentence, if a Notice to Proceed is not issued
pursuant to the terms of the Design-Build Agreement, or Financial Closing is not
obtained, then Fagen Engineering, LLC shall keep the full amount paid under the Phase
I and Phase II Engineering Services Agreement as compensation for the services provided
thereunder.
	 
	 	(c)	 	Fagen will provide reasonable assistance to Owner in obtaining Owner’s permits,
approvals and licenses.
	 
	 	(d)	 	Owner will provide: surveys describing the property’s boundaries; geotechnical
studies describing subsurface conditions; temporary and permanent easements, zoning and
other requirements and encumbrances to enable Fagen to perform the work; a legal
description of the site; as-built and record drawings of any existing structures;
environmental studies, reports, and statements describing the environmental conditions,
including hazardous conditions at the site.
	 
	 	(e)	 	Owner will be responsible for securing and executing all necessary real estate
agreements to secure the site and is responsible for all costs incurred in obtaining
those agreements.

 

 

CassCo Amaizing Energy, LLLP

Letter of Intent

June 30, 2006

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	 	(f)	 	Fagen may subcontract portions of the work.
	 
	 	(g)	 	Fagen will provide two (2) weeks of training for all of Owner’s employees and,
if applicable, Owner’s Operator’s employees required for the operation and maintenance
of the Plant.
	 
	 	(h)	 	Owner must obtain Financial Closing prior to the issuance of a Notice to
Proceed.
	 
	 	(i)	 	Owner will pay all reasonable costs incurred by Fagen for frost removal so that
winter construction can proceed. Such costs will be in addition to, and not included
in, the lump sum price.
	 
	 	(j)	 	All drawings, specifications, calculations, data, notes and other materials and
documents, including electronic data furnished by Fagen to Owner under the Design-Build
Agreement (“Work Product”) will be instruments of service and Fagen will retain
the ownership and property interests therein, including copyrights thereto.
	 
	 	(k)	 	Upon payment in full under the Design-Build Agreement, Fagen will grant Owner a
limited license to the Work Product for use in connection with the operation,
maintenance, and repair of the Plant including the interconnection of, but not design
of, any future expansions to the Plant. The limited license will not permit Owner to
modify the Plant in any way that would increase the distillation, dehydration or
evaporation capacity of the Plant.
	 
	 	(l)	 	Work will commence following receipt of Owner’s written valid notice to proceed
(“Notice to Proceed”). The Notice to Proceed cannot be given until (1) the
Owner has title to the real estate on which the project will be constructed; (2) the
site work required of Owner is completed; (3) the air permit(s) and/or other applicable
local, state or federal permits necessary for construction to begin have been obtained;
(4) Owner has obtained Financial Closing; (5) if applicable, Owner executes a sales tax
exemption certificate and provides to Fagen; (6) Owner provides the name of its
property/all-risk insurance carrier and the specific requirements for fire protection;
(7) Owner has provided an insurance certificate or copy of insurance policy
demonstrating that Owner has obtained builder’s risk insurance; and (8) Fagen has
provided Owner written notification of its acceptance of the Notice to Proceed. If
Notice to Proceed is not issued within one hundred and eighty (180) days of the
effective date of the Design-Build Agreement, that agreement shall terminate, thus
releasing Fagen of all obligations.
	 
	 	(m)	 	“Substantial Completion” will be the date on which the Plant
construction has been completed to a point that the Plant is ready to grind the first batch of corn for

 

 

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Letter of Intent

June 30, 2006

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producing ethanol and begin operation for its intended use as a one hundred
(100) MGY dry grind ethanol production facility. No production capacity is
guaranteed on the Substantial Completion date, but the Plant is largely completed as
of that date.

	 	(n)	 	Substantial Completion will occur within Five Hundred and Forty-Five (545) days
after the date of the Notice to Proceed.
	 
	 	(o)	 	Fagen will be entitled to an early completion bonus for each day that
Substantial Completion occurs in advance of Five Hundred and Forty-Five (545) days
(“Early Completion Bonus”). The Early Completion Bonus is earned for achieving
Substantial Completion early, but is not due until the final payment.
	 
	 	(p)	 	“Final Completion” will be achieved once Owner reasonably determines
that: Substantial Completion has been achieved; any outstanding amounts owed by Fagen
to Owner have been paid; remaining items of work have been completed; clean-up of the
site has been completed; all permits required to have been obtained by Fagen have been
obtained; certain information including an affidavit stating that there are no
outstanding liens, a release from further compensation, consent to final payment, and a
hard copy of the as-built plans (which will remain Work Product) has been provided to
Owner; releases and waivers of all claims and liens from Fagen and subcontractors have
been provided; and the Performance Tests have been successfully completed. Final
Completion will occur no more than ninety (90) days after the actual Substantial
Completion date. The 90-day period between Substantial Completion and Final Completion
will be tied directly to actual Substantial Completion. By way of example, if
Substantial Completion is achieved 10 days early, then the 90-day period to Final
Completion would begin on that earlier date.
	 
	 	(q)	 	Fagen will demonstrate certain performance guarantee criteria through
performance testing performed following Substantial Completion but prior to Final
Completion (“Performance Tests”). Air permit testing shall be done by a third
party contractor retained by Owner.
	 
	 	(r)	 	Owner will take control of the Plant after completion and acceptance of the
Performance Tests. The Performance Tests will be completed by Owner’s personnel under
Fagen’s direction.
	 
	 	(s)	 	Fagen will pay liquidated damages at a daily amount equal to the daily Early
Completion Bonus amount for each day past 90 days after Substantial Completion that
Final Completion is not attained. Fagen’s liability for liquidated damages shall be
capped at and shall not exceed Two Hundred and Fifty Thousand Dollars ($250,000).

 

 

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	 	(t)	 	The aggregate liability of Fagen, its Subcontractors, vendors, suppliers,
agents and employees, to Owner (or any successor thereto or assignee thereof) for any
and all claims and/or liabilities arising out of or relating in any manner to the work
or to Fagen’s performance or non-performance of its obligations under the Design-Build
Agreement, whether based on contract, tort (including negligence), strict liability, or
otherwise, shall not exceed in the aggregate, the Contract Price and shall be reduced,
upon the issuance of each Application for Payment, by the total value of such
Application for Payment; provided, however, that upon the earlier of Substantial
Completion or such point in time that requests for payment pursuant to the Design-Build
Agreement have been made for ninety percent (90%) of the Contract Price, Fagen’s
aggregate liability shall be limited to the greater of (1) Ten Percent (10%) of the
Contract Price or (2) the amount of insurance coverage available to respond to the
claim or liability under any policy of insurance provided by Fagen under the
Design-Build Agreement
	 
	 	(u)	 	The warranty period for work completed pursuant to the Design-Build Agreement
will extend for one year past Substantial Completion. The Warranty will not apply to
defects caused by abuse, alterations, or failure to maintain the work by persons other
than Fagen or anyone for whose acts Fagen may be liable. The warranty period will be
extended one day for each day that such part of the work repaired under such warranty
is malfunctioning or not in conformance with project requirements provided that Owner
must report such non-conformance or malfunction within seven (7) days of the appearance
of such non-conformance or malfunction.
	 
	 	(v)	 	Owner will pay Fagen a mobilization fee in the amount of Eight Million Dollars
($8,000,000.00) as soon as possible following the execution of the Design-Build
Agreement, and at the latest, at the earlier to occur of financial closing or the
issuance of a Notice to Proceed.
	 
	 	(w)	 	Fagen will request payment and Owner will pay Fagen in accordance with the
following procedures:

	 	i.	 	Fagen will submit to Owner a request for payment
(an “Application for Payment”) on or before the twenty-fifth
(25th) day of each month beginning with the first month following the
acceptance of Notice to Proceed. Along with each Application for
Payment, Fagen will submit to Owner signed lien waivers for the work
included in the Application for Payment submitted for the immediately
preceding pay period and for which payment has been received.
	 
	 	ii.	 	The Application for Payment will constitute Fagen’s representation that the work has been performed consistent with the
Transaction Documents

 

 

CassCo Amaizing Energy, LLLP

Letter of Intent

June 30, 2006

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and has progressed to the point indicated in the
Application for
Payment. No additional documentation will be provided to Owner in support
of the Application for Payment. The work completed at the site and the
comparison of the Application for Payment against the Schedule of Values
shall provide sufficient substantiation to Owner of the accuracy of the
Application for Payment. The Schedule of Values subdivides the work into
its respective parts, includes values for all items comprising the work, and
serves as the basis for the monthly progress payments.

	 	iii.	 	The Application for Payment may request payment for
equipment and materials not yet incorporated into the project only if
Owner is satisfied that the materials and equipment are suitably stored
at the site or elsewhere and are protected by suitable insurance. Upon
payment, Owner will receive title to such equipment and materials.
	 
	 	iv.	 	Owner shall make payment within ten (10) days of
receipt of the Application for Payment. Failure to make such payment
will result in the accrual of interest at a rate of eighteen percent
(18%) per annum commencing five (5) days after the payment is due.
Failure to make such payment, except if due to appropriate withholding of
payment due to a good faith dispute, entitles Fagen to stop work.
	 
	 	v.	 	If Owner wishes to dispute any portion of the
Application for Payment, Owner must notify Fagen in writing at least five
(5) days prior to the date payment is due. Such notice must state the
specific amounts Owner intends to withhold, the reasons and contractual
basis for withholding, and the specific measures Fagen must take to
rectify Owner’s concerns. Regardless of a dispute as to a portion of the
Application for Payment, Owner must pay all undisputed amounts by the
payment due date.
	 
	 	vi.	 	Retainage on progress payments made pursuant to the
Design-Build Agreement will be capped at five percent (5%) of the total
price. Owner will retain ten percent (10%) of each payment up to a
maximum of five percent (5%) of the total Contract Price. Once five
percent (5%) of the total price has been retained, Owner will not retain
any additional amounts from subsequent payments. Owner will release
retainage, less the amount equal to the value of subcontractor lien
waivers not yet obtained, upon completion of the Performance Tests.
	 
	 	vii.	 	Upon Final Completion, Fagen will deliver to Owner
a request for final payment. Owner will make the final payment within
thirty (30) days after the receipt of such request. Owner’s failure to
make Final Payment will void any and all warranties, whether express or
implied, provided by Fagen pursuant to the Agreement.

	 	(x)	 	Fagen will not be responsible for any hazardous condition encountered at the
site and may stop work in an affected area until such hazardous condition is removed by
Owner.

 

 

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Letter of Intent

June 30, 2006

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

	4.	 	Exclusivity, No Solicitation or Negotiations.

 

 

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Letter of Intent

June 30, 2006

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

	5.	 	Commitment Fee. Immediately upon the execution of this Letter of Intent, Owner shall pay
Fagen One Million Dollars ($1,000,000.00) as a non-refundable commitment fee (“Commitment
Fee”). The Commitment Fee will be credited against the Contract Price upon the occurrence
of: (i) the execution of the Transaction documents; and (ii) timely acceptance of Notice to
Proceed pursuant to the Design-Build Agreement. If Owner chooses not to proceed with the
project or the Transaction Documents are not executed and delivered by the Closing Date or
Owner fails to provide timely Notice to Proceed pursuant to the Design-Build Agreement, Fagen
shall retain the full amount of the Commitment Fee and Owner shall not be entitled to any
refund or credit. Should Owner fail to pay the Commitment Fee within ten (10) days of the
execution of this Letter of Intent, this Letter of Intent shall terminate and Fagen shall have
the right to receive compensation pursuant to Paragraph 4(c) hereof. 

	6.	 	Confidentiality. Owner will hold in confidence and will use only for the purposes of

 

 

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Letter of Intent

June 30, 2006

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

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

Owner’s obligation to maintain confidential information in confidence will be deemed performed
if Owner observes with respect thereto the same safeguards and precautions which Owner observes
with respect to its own confidential information of the same or similar kind. It will not be
deemed to be a breach of the obligation to maintain confidential information in confidence if
confidential information is disclosed upon the order of a court or other authorized governmental
entity, or pursuant to other legal requirements. However, if Owner is required to file the
Transaction Documents or a portion thereof with a governmental entity, it agrees that it will
not do so without first informing Fagen of the requirement and seeking confidential treatment of
the Transaction Documents prior to filing the documents or a portion thereof. Owner’s
confidentiality obligations under this section shall survive the expiration or termination of
this Letter of Intent and shall be a legally binding obligation of Owner for five (5) years
following the later to occur of termination of this Letter of Intent or completion of the Plant
contemplated by the Transaction Documents.

	7.	 	Publicity. Neither Owner nor any of its affiliates, shareholders, subcontractors, or vendors
or their officers, representatives, agents and employees will issue any press or publicity
release or otherwise release, distribute, announce, or disseminate any information for

 

 

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Letter of Intent

June 30, 2006

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publication concerning the Transaction, the existence of the negotiations among Fagen and
Owner, the
participation of Fagen in the Transaction, or any other matter affecting Fagen hereunder,
without the prior written consent of Fagen, which consent may be withheld for any reason, except
where such press or publicity release is required by order of a court or necessary or
appropriate under the rules or regulations of any governmental agency.

The Parties will jointly agree on the timing and content of any public disclosure by Owner,
including but not limited to, press releases, relating to Fagen’s involvement in Owner’s
project, and no such disclosure will be made without Fagen’s consent and approval, except as may
be required by applicable law.

	8.	 	Disclaimer of Consequential Damages. In no event will either Fagen or Owner be liable to the
other pursuant to this Letter of Intent, or for activities conducted under this Letter of
Intent, under any theory of recovery for any indirect, special, incidental or consequential
damages (including, without limitation, loss of revenues or profits, loss of use, cost of
replacement, cost of capital and claims of customers, interest charges, or increased costs of
nature whatsoever) .
	 
	9.	 	Legal Effect. Although this Letter of Intent does not contain all matters upon which
agreement must be reached in order for the Transaction to be consummated, Fagen and Owner wish
to set forth, prior to the execution of the Transaction Documents, their mutual agreement as
to the material terms and conditions of the Transaction. Each Party agrees to negotiate in
good faith towards entering into the written, definitive and legally binding Transaction
Documents containing, among other terms and conditions, those terms and conditions set forth
in this Letter of Intent including, without limitation, those terms set forth in Paragraphs 2
and 3 hereof; provided, however, that except as specifically identified and set forth herein,
nothing in this Agreement shall be read to promise, guarantee, or otherwise secure on Owner’s
behalf any specific construction start date with respect to the Plant including but not
limited to any pour concrete date, scheduling slots or dates for the delivery of design
packages or to entitle Owner to any rights, privileges, or claims with respect thereto or any
right, privilege, or claim to any place on Fagen’s construction schedule. Notwithstanding the
foregoing, the provisions of this Paragraph and of Paragraphs 1, 4, 5, 6, 7, 8, 11, 12, 14, 17
and 18 hereof are agreed to be legally binding obligations of the Parties upon the execution
and acceptance of this Letter of Intent.
	 
	10.	 	Negotiation of Definitive Agreements. The Transaction Documents will contain reasonable terms
and conditions regarding releases, payment obligations, cooperation as to tax planning and
structuring, other financial matters, legal opinions, confidentiality, limitations of
liability, assignment, breach, dispute resolution, events of default, remedies,
representations, warranties, indemnifications and other provisions customary for similar
transactions. Time is of the essence in the performance of this Letter of Intent in all
respects.

	11.	 	Termination. This Letter of Intent will terminate on December 31, 2007 unless the basic

 

 

CassCo Amaizing Energy, LLLP

Letter of Intent

June 30, 2006

Page 13 of 14

size and design of the Plant have been determined and mutually agreed upon, a specific site
or sites have been determined and mutually agreed upon, and at least 10% of the necessary equity
has been raised. This date may be extended upon mutual written agreement of the Parties.
Furthermore, unless otherwise agreed to by the Parties, this Letter of Intent will terminate:

	 	(a)	 	at the option of either Fagen or Owner if the Design-Build Agreement is not
completed and executed by the Closing Date; or
	 
	 	(b)	 	upon the execution and delivery of the Transaction Documents.

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

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

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

	15.	 	Assignability; Binding Effect; Benefit. This Letter of Intent will inure to the benefit of and be
binding upon the Parties and their respective successors and assigns. Nothing in this Letter
of Intent, either expressed or implied, is intended to confer on any person other than the
Parties and their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Letter of Intent. Neither Fagen nor
Owner shall, without the written consent of the other, assign or transfer this Letter of
Intent. Any sale, transfer, or disposition by Owner of over fifty percent (50%) of its assets
or any sale, transfer, or disposition of more than fifty percent (50%) of Owner to any single
entity by one or more entities holding interest in Owner shall be deemed an assignment subject
to this paragraph. Notwithstanding any consent granted by Fagen to any assignment, Owner
shall remain jointly liable for any failure of any assignee to fulfill its obligations under
this Letter of Intent, including but not limited to any payment and confidentiality
obligations established hereunder.

	16.	 	Further Action. Each Party agrees to execute and deliver all further instruments, legal
opinions and documents, and take all further action not inconsistent with the provisions of
this Letter of Intent that may be reasonably necessary to complete performance of the

 

 

CassCo Amaizing Energy, LLLP

Letter of Intent

June 30, 2006

Page 14 of 14

Parties’ obligations hereunder and to effectuate the purposes and intent of this Letter of Intent.

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

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

	19.	 	No Representation, Warranties or Covenants. Notwithstanding anything contained
herein to the contrary, Fagen is not making any representation, warranty or covenant of any
kind with respect to any design, engineering or construction scheduling, or with respect to
projections, estimates or budgets heretofore delivered to or made available to Owner of future
revenues, expenses or expenditures, future results of operations (or any component thereof) or
the future business and operations of the Owner, nor any other commitments or assurances
except as may be provided in the Transaction Documents.

	20.	 	Counterparts. This Letter of Intent may be executed in one or more counterpart, each of
which when so executed and delivered will be deemed an original, but all of which taken
together constitute one and the same instrument. Signatures which have been affixed and
transmitted by facsimile or other electronic means will be binding to the same extent as an
original signature, although the Parties contemplate that a fully executed counterpart with
original signatures will be delivered to each Party.

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

	 	 	 	 	 
	 	Yours sincerely,

Fagen, Inc.

 	 
	 	/s/ Ron Fagen
 	 
	 	By: Roland “Ron” Fagen 	 
	 	Title:  	President and CEO 	 
	 

Accepted and agreed to this

day of 25th July, 2006.

	 	 	 	 	 
	CassCo Amaizing Energy, LLLP

 	 	 
	/s/ Sam J. Cogdill
 	 	 
	By: Sam Cogdill 	 	 
	Title:  	Presidentexv10w13

 

Exhibit 10.13

	 	 	 	 	 
	 
	 	 	 	“Nationwide Service”
800-999-3050
262-252-3377
Fax 262-252-3393

	VOLKMANN
	 	 	 	 
	            RAILROAD
	 	Engineering — Construction – Maintenance	 	 
	                          BUILDERS
	 	14625 West Kaul Avenue — Menomonee Falls, WI 53051	 	 

 

Railroad Track Design-Build Agreement

Owner Cassco Amaizing Energy LLC, 1201 E. 7s’ Street, Atlantic, IA 50022

Design-Build Contractor: Volkmann Railroad Builders, Inc (VRB)          Date: September 29, 2006

Whereas, Owner desires to have VRB design and build a complete and functional
railroad track system to serve Owner’s proposed facility known as Cassco
Energy ethanol plant located in Atlantic, lowa, Owner and VRB agree as
follows:

Phase One “Conceptual Drawings”: Owner will provide site map and topo
phic survey of proposed site at no cost to VRB. Based upon information
provided by Owner as to required railcar capacity, types of railcars, and
service needs, VRB will furnish a Conceptual Plan indicating a possible track
layout This plan is for discussion purposes and does not guarantee railroad
approval and is subject to final field survey, drainage considerations,
utility conflicts, construction drawings, local permits, and railroad
approvals. A track construction cost estimate will be provided. for Owner’s
budgeting purposes.

Phase Two “Construction Drawings”: After preliminaty approval of the
Conceptual Plan, VRB will provide detailed track construction drawings for
final approval. VRB will coordinate with the operating railroad, the facility
designer and builder, and the site civil engineer to establish final layout
and elevations. Final plans will include both plan and profile views of the
complete track facility. Note: Environmental and geotechnical
investigation/evaluation is not part of VRB’s scope of work,

Phase Three “Construction”: Owner and VRB agree that a track
construction agreement will be based upon the final construction drawings to
determine quantities of track, derails, turnouts, road crossings, etc. to be
built, and that the prices will be based upon VRB cost schedule, plus 10% for
overhead and profit (see attached Track Construction Exhibit A for sample cost
calculation). VRB will endeavor to obtain the best possible value when
purchasing materials for the project. Railroad requirements, local market
conditions, and rail material industry conditions can cause costs to vary
significantly in different locations and at different times. VRB will
coordinate with the owner and plant builder’s schedule to assure that tracks
are completed when needed. Owner will pay VRB on a monthly basis for progress
including material purchased for the project. VRB will obtain approval of
track construction from operating railroad to assure the Owner that service
will be provided to the facility. VRB guarantees all material and workmanship
for one year after completion of project and will correct any defects
(excluding damage by others) at no cost to the Owner.

	 	 	 	 	 
	Costs are as follows:
	 	Phase One Conceptual Drawings	 	$1,650 per site (2 sites included)
	 
	 	Phase Two Construction Drawings:	 	$14,600
	 
	 	Phase Three Track Construction:	 	Cost plus 10%
	 
	 	Rail yard grading plan:	 	$6,200

This agreement and attachment(s) Track Construction Exhibit A are agreed to by
Owner and VRB. If Owner decided to terminate the project after Phase One is
comple(ted, it shall not be responsible for any
costs beyond Phase One and likewise for Phase Two. If Phase Two is completed and Phase
Three is
approved by Owner, it is hereby agreed that Track Construction Agreement will
be entered by both parties, its successor, or assigns.

	 	 	 	 	 
	Owner: CassCo Amaizing Energy
	 	Volkmann Railroad Builders, Inc.
	 	 	 	 	 
	By:
	 	/s/ Jack Ryan	 	Rick Volkmann
	Name: Jack Ryan     Title: Project Coordinator
	 	Rick Volkmnn, President

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Track Construction — Exhibit A	 	 	 	 	 	 	 	 	 	 	 	 
	XYZ Ethanol
	 	 	 	 	 	 	 	 	 	 	Date:	 	 	09/26/06	 	 	 	 	 
	Project:
	 	new ethanol plant	 	 	 	 	 	 	 	 	 	 	Track Ft.=	 	 	19125	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Quantity
	 	 	 	Wt	 	Description	 	Cost	 	Total	 	Per Unit
	728.28
	 	tons rail	 	 	112	 	 	39	 	ft lengths	 	$	780.00	 	 	$	568,058.40	 	 	 	 	 
	11769
	 	7’ Industrial Grade	 	 	 	 	 	19.5	 	“ tie spacing	 	$	43.00	 	 	$	506,076.92	 	 	 	 	 
	23538
	 	tie plates	 	 	 	 	 	11”	 	DS	 	$	6.60	 	 	$	155,353.85	 	 	 	 	 
	980.8
	 	pair joint bars	 	 	 	 	 	4	 	hole	 	$	45.00	 	 	$	44,134.62	 	 	 	 	 
	3923
	 	bolts w/washers	 	 	 	 	 	 	 	each	 	$	2.00	 	 	$	7,846.15	 	 	 	 	 
	15300
	 	tons of ballast	 	 	 	 	 	8	 	“ under ties	 	$	16.00	 	 	$	244,800.00	 	 	 	 	 
	10908
	 	tons of sub-ballast	 	 	 	 	 	6	 	“ x 22’ x 2800#	 	$	0.00	 	 	$	0.00	 	 	 	 	 
	294.2
	 	kegs 5/8 spikes	 	 	 	 	 	3	 	per plate	 	$	88.00	 	 	$	25,892.31	 	 	 	 	 
	11769
	 	anchors	 	 	 	 	 	12	 	per rail	 	$	1.50	 	 	$	17,653.85	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Sales tax	 	 	 	$	0.04	 	 	$	62,792.64	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Sub-total Material	 	 	 	 	 	$	1,632,608.74	 	 	$	85.37	 
	 
	 
	 	Labor, Equipment, Fuel, Per Diem	 	per foot of track	 	 	29	 	 	$	554,625.00	 	 	 	 	 
	 
	 	Travel Expenses	 	 	 	 	 	 	 	per foot of track	 	 	3	 	 	$	57,375.00	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	VRB Cost per Track Foot	 	 	 	 	 	$	2,187,233.74	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Overhead + Profit	 	 	10	%	 	$	443,184.25	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	2,630,417.98	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Track Cost per Foot	 	 	 	 	 	$	137.54	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Switch Items
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1
	 	AREMA switch package	 	 	11	 	number	 	$	19,500.00	 	 	$	19,500.00	 	 	 	 	 
	1
	 	switch ties-new	 	 	 	 	 	 	 	sets	 	$	5,544.00	 	 	$	5,544.00	 	 	 	 	 
	9.2
	 	tons rail	 	 	112	 	 	39	 	lengths	 	$	780.00	 	 	$	7,187.98	 	 	 	 	 
	160
	 	tie plates	 	 	 	 	 	DS	 	size	 	$	6.60	 	 	$	1,056.00	 	 	 	 	 
	12
	 	pair joint bars	 	 	 	 	 	4	 	hole	 	$	45.00	 	 	$	540.00	 	 	 	 	 
	48
	 	bolts	 	 	 	 	 	 	 	each	 	$	2.00	 	 	$	96.00	 	 	 	 	 
	120
	 	Tons ballast	 	 	 	 	 	 	 	ton	 	$	16.00	 	 	$	1,920.00	 	 	 	 	 
	4
	 	kegs	 	 	 	 	 	 	 	per switch	 	$	86.00	 	 	$	344.00	 	 	 	 	 
	600
	 	anchors	 	 	 	 	 	 	 	per switch	 	$	1.50	 	 	$	900.00	 	 	 	 	 
	1
	 	Ergonomic switchstand	 	 	 	 	 	 	$	1,100.00	 	 	$	1,100.00	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Sales tax	 	 	 	 	0.04	 	 	$	1,483.52	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Sub-total Material	 	 	 	 	 	$	39,671.50	 	 	 	 	 
	 
	 
	 	Labor, Equipment, Fuel, Per Diem	 	 	 	 	 	 	 	$	7,000.00	 	 	 	 	 
	 
	 	Travel Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	$	600.00	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	VRB Cost	 	 	 	 	 	$	47,271.50	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Overhead + Profit	 	 	10	%	 	$	4,727.15	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	51,998.65	 
	 
	 	 	 	 	 	 	 	 	 	Switch Cost Each	 	 	$	51,998.65	 	 	 	 	 
	 
	 	Track Construction — Exhibit A	 	 	 	 	 	 	 	 	 	 	 	 

Track Construction Exhibit A

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