Document:

Exhibit 10.2

Base Contract for Sale and
Purchase of Natural Gas

This Base Contract is
entered into as of the following date: July 1, 2007.  The parties to this Base Contract are the
following:

	
  BP Canada Energy Marketing
  Corp.

  	
  and

  	
   

  	
  Millennium Ethanol, LLC

  
	
  c/o BP Canada
  Energy Company

  	
   

  	
   

  	
  27283 447th Avenue, Marion, SD 57043

  
	
  1200, 240 4th
  Avenue SW, Calgary, Alberta, T2P 2H8

  	
   

  	
   

  	
   

  
	
  Duns Number:
  24-879-9413

  	
   

  	
   

  	
  Duns Number: 60-264-4127

  
	
  Contract Number:

  	
   

  	
   

  	
  Contract Number:

  
	
  U.S. Federal Tax
  ID Number: 36-3697994

  	
   

  	
   

  	
  U.S. Federal Tax ID Number: 20-3477343

  
	
   

  	
   

  	
   

  	
   

  
	
  For
  Force Majeure send to marketing location.

  	
   

  	
   

  	
   

  
	
  Other
  Notices:

  	
   

  	
   

  	
  Notices:

  
	
  1200, 240 4
  Avenue SW, Calgary Alberta T2P 2H8

  	
   

  	
   

  	
  27283 447th Avenue, Marion, SD 57043

  
	
  Attn: Natural
  Gas Marketing – Contract Administration

  	
   

  	
   

  	
  Attn: Risk Management

  
	
  Phone:
  403-233-1873               Fax:
  403-233-5611

  	
   

  	
   

  	
  Phone: 605-648-3941            Fax:
  605-648-3943

  
	
   

  	
   

  	
   

  	
   

  
	
  Confirmations:

  	
   

  	
   

  	
  Confirmations:

  
	
  240 4 Avenue SW,
  Calgary Alberta T2P 2H8

  	
   

  	
   

  	
  27283 447th Avenue, Marion, SD 57043

  
	
  Attn:
  Verifications Department

  	
   

  	
   

  	
  Attn: Risk Management

  
	
  Phone: N/A               Fax:
  403-233-5611

  	
   

  	
   

  	
  Phone: 605-648-3941            Fax:
  605-648-3943

  
	
   

  	
   

  	
   

  	
   

  
	
  Invoices
  and Payments:

  	
   

  	
   

  	
  Invoices and Payments

  
	
  1200, 240 4
  Avenue SW, Calgary Alberta T2P 2H8

  	
   

  	
   

  	
  27283 447th Avenue, Marion, SD 57043

  
	
  Attn: Gas &
  Power Accounting Dept.

  	
   

  	
   

  	
  Attn: Brent Edwards

  
	
  Phone:
  403-233-1459               Fax:
  403-237-8476

  	
   

  	
   

  	
  Phone: 605-648-3941            Fax:
  604-648-3943

  
	
   

  	
   

  	
   

  	
   

  
	
  If
  invoicing the Omaha office ONLY:

  	
   

  	
   

  	
   

  
	
  4211 South 143
  Circle Omaha NE 68137

  	
   

  	
   

  	
   

  
	
  Attn: Natural
  Gas Accounting

  	
   

  	
   

  	
   

  
	
  Phone:
  402-505-8800               Fax:
  402-505-4500

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Wire
  Transfer or ACH Numbers (if applicable):

  	
   

  	
   

  	
   

  
	
  BANK: J.P.
  Morgan Chase Bank, Chicago IL, Branch 100

  	
   

  	
   

  	
  BANK:

  	
   

  
	
  WIRE Transit: 021000021               ACCT:
  1122183

  	
   

  	
   

  	
   

  
	
  ACH Transit: 071000013               
  ACCT: 1122183

  	
   

  	
   

  	
  Transit: 

  	
   

  	
   ACCT: 

  	
   

  
	
  Other Details: Credit: BP Canada Energy Marketing
  Corp. – Gas & Power 

  	
  Other Details:

  
								

 

This Base Contract incorporates by reference for all purposes the
General Terms and Conditions for Sale and Purchase of Natural Gas published by
the North American Energy Standards Board. 
The parties hereby agree to the following provisions offered in said
General Terms and Conditions.  In the
event the parties fail to check a box, the specified default provision shall
apply.  Select only one box from each section:

	
  Section 1.2

  Transaction Procedure

  	
  x   Oral
  (default)

  o    Written

  	
  Section
  7.2

  Payment
  Date

  	
  x   25th Day of Month following Month of delivery (default) If paying by check, payment must be received by Seller no later than
  the Payment Date.

  
	
  Section 2.5

  Confirm

  Deadline

  	
  o   2
  Business Days after receipt (default)
 x  5
  Business Days after receipt

  	
  Section 7.2

  Method of

  Payment

  	
  x   Wire
  transfer (default)

  o    Automated
  Clearinghouse Credit (ACH)

  o    Check

  
	
  Section
  2.6

  Confirming Party

  	
  o    Seller
  (default)

  o    Buyer

  x   Either
  Party may

  	
  Section 7.7

  Netting

  	
  x   Netting
  applies (default)

  o    Netting
  does not apply

  
	
  Section
  3.2

  Performance Obligation

  	
  x   Cover
  Standard (default)

  Spot Price Standard

  	
  Section 10.3.1

  Early Termination

  Damages

  	
  x   Early Termination Damages  Apply (default)

  o    Early Termination Damages  Do Not Apply

  
	
  

  Note: The following Spot Price Publication applies to both of the immediately
  preceding.

  	
  Section 10.3.2

  Other Agreement

  Setoffs

  	
  x   Other
  Agreement Setoffs Apply (default)

  o    Other
  Agreement Setoffs Do Not Apply

  
	
  Section
  2.26

  Spot Price

  Publication

  	
  x   Gas
  Daily Midpoint (default)

  o                                                            

  	
  Section
  14.5

  Choice Of Law

  	
  

  New York                                                            

  
	
  Section 6

  

  Taxes

  	
  x   Buyer
  Pays At and After Delivery Point (default)

  o    Seller
  Pays Before and At Delivery Point

  	
  Section
  14.10

  Confidentiality

  	
  x   Confidentiality
  applies (default)

  o    Confidentiality
  does not apply

  
	
  x Special Provisions Number of sheets attached: Two

  
	
  o Addendum(s):

  	
   

  	
   

  
						

 

IN WITNESS WHEREOF, the parties hereto have executed
this Base Contract in duplicate.

	
  BP Canada Energy Marketing Corp.

  	
   

  	
  Millennium Ethanol, LLC

  	 

	
  By

  	
   

  	
   

  	
  By

  	
   

  	 

	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	 

	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	 

	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  
												

 

	
  Copyright © 2002 North American Energy
  Standards Board, Inc.

  	
   

  	
  NAESB Standard 6.3.1

  
	
  All Rights Reserved

  	
   

  	
  April 19, 2002

  

 

General Terms and Conditions

Base Contract for Sale and
Purchase of Natural Gas

SECTION 1.                 PURPOSE
AND PROCEDURES

1.1.          These General Terms and Conditions are
intended to facilitate purchase and sale transactions of Gas on a Firm or
Interruptible basis.  “Buyer” refers to
the party receiving Gas and “Seller” refers to the party delivering Gas.  The entire
agreement between the parties shall be the Contract as defined in Section 2.7.

The
parties have selected either the “Oral Transaction Procedure” or the “Written
Transaction Procedure” as indicated on the Base Contract.

Oral
Transaction Procedure:

1.2.          The parties will use
the following Transaction Confirmation procedure.  Any Gas purchase and sale transaction may be
effectuated in an EDI transmission or telephone conversation with the offer and
acceptance constituting the agreement of the parties.  The parties shall be legally bound from the
time they so agree to transaction terms and may each rely thereon.  Any such transaction shall be considered a
“writing” and to have been “signed”. 
Notwithstanding the foregoing sentence, the parties agree that
Confirming Party shall, and the other party may, confirm a telephonic
transaction by sending the other party a Transaction Confirmation by facsimile,
EDI or mutually agreeable electronic means within three Business Days of a
transaction covered by this Section 1.2 (Oral Transaction Procedure) provided
that the failure to send a Transaction Confirmation shall not invalidate the
oral agreement of the parties. 
Confirming Party adopts its confirming letterhead, or the like, as its
signature on any Transaction Confirmation as the identification and
authentication of Confirming Party.  If
the Transaction Confirmation contains any provisions other than those relating
to the commercial terms of the transaction (i.e., price, quantity, performance
obligation, delivery point, period of delivery and/or transportation
conditions), which modify or supplement the Base Contract or General Terms and
Conditions of this Contract (e.g., arbitration or additional representations
and warranties), such provisions shall not be deemed to be accepted pursuant to
Section 1.3 but must be expressly agreed to by both parties; provided that the
foregoing shall not invalidate any transaction agreed to by the parties.

Written
Transaction Procedure:

1.2.          The parties will use the following Transaction
Confirmation procedure.  Should the
parties come to an agreement regarding a Gas purchase and sale transaction for
a particular Delivery Period, the Confirming Party shall, and the other party
may, record that agreement on a Transaction Confirmation and communicate such
Transaction Confirmation by facsimile, EDI or mutually agreeable electronic
means, to the other party by the close of the Business Day following the date
of agreement.  The parties acknowledge
that their agreement will not be binding until the exchange of nonconflicting
Transaction Confirmations or the passage of the Confirm Deadline without
objection from the receiving party, as provided in Section 1.3.

1.3.          If
a sending party’s Transaction Confirmation is materially different from the
receiving party’s understanding of the agreement referred to in Section 1.2,
such receiving party shall notify the sending party via facsimile, EDI or
mutually agreeable electronic means by the Confirm Deadline, unless such
receiving party has previously sent a Transaction Confirmation to the sending
party.  The failure of the receiving
party to so notify the sending party in writing by the Confirm Deadline
constitutes the receiving party’s agreement to the terms of the transaction
described in the sending party’s Transaction Confirmation.  If there are any material differences between
timely sent Transaction Confirmations governing the same transaction, then
neither Transaction Confirmation shall be binding until or unless such
differences are resolved including the use of any evidence that clearly
resolves the differences in the Transaction Confirmations.  In the event of a conflict among the terms of
(i) a binding Transaction Confirmation pursuant to Section 1.2, (ii) the
oral agreement of the parties which may be evidenced by a recorded
conversation, where the parties have selected the Oral Transaction Procedure of
the Base Contract, (iii) the Base Contract, and (iv) these General
Terms and Conditions, the terms of the documents shall govern in the priority
listed in this sentence.

1.4.          The parties agree that each party may
electronically record all telephone conversations with respect to this Contract
between their respective employees, without any special or further notice to
the other party.  Each party shall obtain
any necessary consent of its agents and employees to such recording.  Where
the parties have selected the Oral Transaction Procedure in Section 1.2 of the
Base Contract, the parties agree not to contest
the validity or enforceability of telephonic recordings entered into in
accordance with the requirements of this Base Contract.  However, nothing herein shall be construed as
a waiver of any objection to the admissibility of such evidence.

SECTION 2.                 DEFINITIONS

The terms set forth below shall have the meaning
ascribed to them below.  Other terms are
also defined elsewhere in the Contract and shall have the meanings ascribed to
them herein.

2.1.          “Alternative
Damages” shall mean such damages, expressed in dollars or dollars per MMBtu, as
the parties shall agree upon in the Transaction Confirmation, in the event
either Seller or Buyer fails to perform a Firm obligation to deliver Gas in the
case of Seller or to receive Gas in the case of Buyer.

2.2.          “Base
Contract” shall mean a contract executed by the parties that incorporates these
General Terms and Conditions by reference; that specifies the agreed selections
of provisions contained herein; and that sets forth other information required
herein and any Special Provisions and addendum(s) as identified on page one.

2.3.          “British thermal unit” or “Btu” shall
mean the International BTU, which is also called the Btu (IT).

 2
 

2.4.          “Business Day” shall mean any day
except Saturday, Sunday or Federal Reserve Bank holidays.

2.5.          “Confirm Deadline” shall mean 5:00
p.m. in the receiving party’s time zone on the second Business Day following
the Day a Transaction Confirmation is received or, if applicable, on the
Business Day agreed to by the parties in the Base Contract; provided, if the
Transaction Confirmation is time stamped after 5:00 p.m. in the receiving party’s
time zone, it shall be deemed received at the opening of the next Business Day.

2.6.          “Confirming
Party” shall mean the party designated in the Base Contract to prepare and
forward Transaction Confirmations to the other party.

2.7.          “Contract” shall mean the
legally-binding relationship established by (i) the Base Contract, (ii)
any and all binding Transaction Confirmations and (iii) where the parties have
selected the Oral Transaction Procedure in Section 1.2 of the Base Contract,
any and all transactions that the parties have entered into through an EDI
transmission or by telephone, but that have not been confirmed in a binding
Transaction Confirmation.

2.8.          “Contract Price” shall mean the amount
expressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the
purchase of Gas as agreed to by the parties in a transaction.

2.9.          “Contract Quantity” shall mean the
quantity of Gas to be delivered and taken as agreed to by the parties in a
transaction.

2.10.        “Cover Standard”, as referred to in
Section 3.2, shall mean that if there is an unexcused failure to take or
deliver any quantity of Gas pursuant to this Contract, then the performing
party shall use commercially reasonable efforts to (i) if Buyer is the
performing party, obtain Gas, (or an alternate fuel if elected by Buyer and
replacement Gas is not available), or (ii) if Seller is the performing party,
sell Gas, in either case, at a price reasonable for the delivery or production
area, as applicable, consistent with: 
the amount of notice provided by the nonperforming party; the immediacy
of the Buyer’s Gas consumption needs or Seller’s Gas sales requirements, as
applicable; the quantities involved; and the anticipated length of failure by
the nonperforming party.

2.11.        “Credit Support Obligation(s)” shall
mean any obligation(s) to provide or establish credit support for, or on behalf
of, a party to this Contract such as an irrevocable standby letter of credit, a
margin agreement, a prepayment, a security interest in an asset, a performance
bond, guaranty, or other good and sufficient security of a continuing nature.

2.12.        “Day” shall mean a period of 24
consecutive hours, coextensive with a “day” as defined by the Receiving
Transporter in a particular transaction.

2.13.        “Delivery Period” shall be the period
during which deliveries are to be made as agreed to by the parties in a
transaction.

2.14.        “Delivery Point(s)” shall mean such
point(s) as are agreed to by the parties in a transaction.

2.15.        “EDI” shall mean an electronic data
interchange pursuant to an agreement entered into by the parties, specifically
relating to the communication of Transaction Confirmations under this Contract.

2.16.        “EFP” shall mean the purchase, sale or
exchange of natural Gas as the “physical” side of an exchange for physical
transaction involving gas futures contracts. 
EFP shall incorporate the meaning and remedies of “Firm”, provided that
a party’s excuse for nonperformance of its obligations to deliver or receive
Gas will be governed by the rules of the relevant futures exchange regulated
under the Commodity Exchange Act.

2.17.        “Firm” shall mean that either party may
interrupt its performance without liability only to the extent that such
performance is prevented for reasons of Force Majeure; provided, however, that
during Force Majeure interruptions, the party invoking Force Majeure may be
responsible for any Imbalance Charges as set forth in Section 4.3 related to
its interruption after the nomination is made to the Transporter and until the
change in deliveries and/or receipts is confirmed by the Transporter.

2.18.        “Gas” shall mean any mixture of
hydrocarbons and noncombustible gases in a gaseous state consisting primarily of
methane.

2.19.        “Imbalance Charges” shall mean any fees,
penalties, costs or charges (in cash or in kind) assessed by a Transporter for
failure to satisfy the Transporter’s balance and/or nomination requirements.

2.20.        “Interruptible” shall mean that either
party may interrupt its performance at any time for any reason, whether or not
caused by an event of Force Majeure, with no liability, except such
interrupting party may be responsible for any Imbalance Charges as set forth in
Section 4.3 related to its interruption after the nomination is made to the
Transporter and until the change in deliveries and/or receipts is confirmed by
Transporter.

2.21.        “MMBtu” shall mean one million British
thermal units, which is equivalent to one dekatherm.

2.22.        “Month” shall mean the period beginning
on the first Day of the calendar month and ending immediately prior to the
commencement of the first Day of the next calendar month.

2.23.        “Payment Date” shall mean a date, as
indicated on the Base Contract, on or before which payment is due Seller for
Gas received by Buyer in the previous Month.

2.24.        “Receiving Transporter” shall mean the
Transporter receiving Gas at a Delivery Point, or absent such receiving
Transporter, the Transporter delivering Gas at a Delivery Point.

2.25.        “Scheduled Gas” shall mean the quantity
of Gas confirmed by Transporter(s) for movement, transportation or management.

2.26.        “Spot Price “ as referred to in Section
3.2 shall mean the price listed in the publication indicated on the Base
Contract, under the listing applicable to the geographic location closest in
proximity to the Delivery Point(s) for the relevant Day; provided, if there is
no single price published for such location for such Day, but there is
published a range of prices, then the Spot Price shall be the average

 3
 

of
such high and low prices.  If no price or
range of prices is published for such Day, then the Spot Price shall be the
average of the following: (i) the price (determined as stated above) for
the first Day for which a price or range of prices is published that next
precedes the relevant Day; and (ii) the price (determined as stated above)
for the first Day for which a price or range of prices is published that next
follows the relevant Day.

2.27.        “Transaction Confirmation” shall mean a
document, similar to the form of Exhibit A, setting forth the terms of a
transaction formed pursuant to Section 1 for a particular Delivery Period.

2.28.        “Termination
Option” shall mean the option of either party to terminate a transaction in the
event that the other party fails to perform a Firm obligation to deliver Gas in
the case of Seller or to receive Gas in the case of Buyer for a designated
number of days during a period as specified on the applicable Transaction
Confirmation.

2.29.        “Transporter(s)” shall mean all Gas
gathering or pipeline companies, or local distribution companies, acting in the
capacity of a transporter, transporting Gas for Seller or Buyer upstream or
downstream, respectively, of the Delivery Point pursuant to a particular
transaction.

SECTION 3.                 PERFORMANCE
OBLIGATION

3.1.          Seller
agrees to sell and deliver, and Buyer agrees to receive and purchase, the
Contract Quantity for a particular transaction in accordance with the terms of
the Contract.  Sales and purchases will be
on a Firm or Interruptible basis, as agreed to by the parties in a
transaction.

The
parties have selected either the “Cover Standard” or the “Spot Price Standard”
as indicated on the Base Contract.

Cover
Standard:

3.2.          The sole and exclusive remedy of the
parties in the event of a breach of a Firm obligation to deliver or receive Gas
shall be recovery of the following: (i) in the event of a breach by Seller on
any Day(s), payment by Seller to Buyer in an amount equal to the positive
difference, if any, between the purchase price paid by Buyer utilizing the
Cover Standard and the Contract Price, adjusted for commercially reasonable
differences in transportation costs to or from the Delivery Point(s),
multiplied by the difference between the Contract Quantity and the quantity
actually delivered by Seller for such Day(s); or (ii) in the event of a breach
by Buyer on any Day(s), payment by Buyer to Seller in the amount equal to the
positive difference, if any, between the Contract Price and the price received
by Seller utilizing the Cover Standard for the resale of such Gas, adjusted for
commercially reasonable differences in transportation costs to or from the
Delivery Point(s), multiplied by the difference between the Contract Quantity
and the quantity actually taken by Buyer for such Day(s); or (iii) in the event
that Buyer has used commercially reasonable efforts to replace the Gas or
Seller has used commercially reasonable efforts to sell the Gas to a third
party, and no such replacement or sale is available, then the sole and
exclusive remedy of the performing party shall be any unfavorable difference
between the Contract Price and the Spot Price, adjusted for such transportation
to the applicable Delivery Point, multiplied by the difference between the Contract
Quantity and the quantity actually delivered by Seller and received by Buyer
for such Day(s).  Imbalance Charges shall
not be recovered under this Section 3.2, but Seller and/or Buyer shall be
responsible for Imbalance Charges, if any, as provided in Section 4.3.  The amount of such unfavorable difference
shall be payable five Business Days after presentation of the performing
party’s invoice, which shall set forth the basis upon which such amount was
calculated.

Spot
Price Standard:

3.2.          The sole and exclusive remedy of the parties
in the event of a breach of a Firm obligation to deliver or receive Gas shall
be recovery of the following: (i) in the event of a breach by Seller on any
Day(s), payment by Seller to Buyer in an amount equal to the difference between
the Contract Quantity and the actual quantity delivered by Seller and received
by Buyer for such Day(s), multiplied by the positive difference, if any,
obtained by subtracting the Contract Price from the Spot Price; or (ii) in the
event of a breach by Buyer on any Day(s), payment by Buyer to Seller in an
amount equal to the difference between the Contract Quantity and the actual
quantity delivered by Seller and received by Buyer for such Day(s), multiplied
by the positive difference, if any, obtained by subtracting the applicable Spot
Price from the Contract Price.  Imbalance
Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer
shall be responsible for Imbalance Charges, if any, as provided in Section
4.3.  The amount of such unfavorable
difference shall be payable five Business Days after presentation of the
performing party’s invoice, which shall set forth the basis upon which such
amount was calculated.

3.3.          Notwithstanding Section 3.2, the
parties may agree to Alternative Damages in a Transaction Confirmation executed
in writing by both parties.

3.4.          In addition to Sections 3.2 and 3.3, the parties may provide for a
Termination Option in a Transaction Confirmation executed in writing by both
parties.  The Transaction Confirmation
containing the Termination Option will designate the length of nonperformance
triggering the Termination Option and the procedures for exercise thereof, how
damages for nonperformance will be compensated, and how liquidation costs will
be calculated.

SECTION 4.                 TRANSPORTATION,
NOMINATIONS, AND IMBALANCES

4.1.          Seller
shall have the sole responsibility for transporting the Gas to the Delivery
Point(s).  Buyer shall have the sole
responsibility for transporting the Gas from the Delivery Point(s).

4.2.          The parties shall coordinate their
nomination activities, giving sufficient time to meet the deadlines of the
affected Transporter(s).  Each party
shall give the other party timely prior Notice, sufficient to meet the
requirements of all Transporter(s) involved in the transaction, of the
quantities of Gas to be delivered and purchased each Day.  Should either party become aware that actual
deliveries at the Delivery Point(s) are greater or lesser than the Scheduled Gas,
such party shall promptly notify the other party.

 4
 

4.3.          The
parties shall use commercially reasonable efforts to avoid imposition of any
Imbalance Charges.  If Buyer or Seller
receives an invoice from a Transporter that includes Imbalance Charges, the
parties shall determine the validity as well as the cause of such Imbalance
Charges.  If the Imbalance Charges were
incurred as a result of Buyer’s receipt of quantities of Gas greater than or
less than the Scheduled Gas, then Buyer shall pay for such Imbalance Charges or
reimburse Seller for such Imbalance Charges paid by Seller.  If the Imbalance Charges were incurred as a
result of Seller’s delivery of quantities of Gas greater than or less than the
Scheduled Gas, then Seller shall pay for such Imbalance Charges or reimburse
Buyer for such Imbalance Charges paid by Buyer.

SECTION 5.                 QUALITY
AND MEASUREMENT

All
Gas delivered by Seller shall meet the pressure, quality and heat content
requirements of the Receiving Transporter. 
The unit of quantity measurement for purposes of this Contract shall be
one MMBtu dry.  Measurement of Gas
quantities hereunder shall be in accordance with the established procedures of
the Receiving Transporter.

SECTION 6.                 TAXES

The parties have selected
either “Buyer Pays At and After Delivery Point” or “Seller Pays Before and At
Delivery Point” as indicated on the Base Contract.

Buyer Pays At and After Delivery Point:

Seller
shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or
charges imposed by any government authority (“Taxes”) on or with respect to the
Gas prior to the Delivery Point(s). 
Buyer shall pay or cause to be paid all Taxes on or with respect to the
Gas at the Delivery Point(s) and all Taxes after the Delivery Point(s).  If a party is required to remit or pay Taxes
that are the other party’s responsibility hereunder, the party responsible for
such Taxes shall promptly reimburse the other party for such Taxes.  Any party entitled to an exemption from any
such Taxes or charges shall furnish the other party any necessary documentation
thereof.

Seller Pays Before and At Delivery Point:

Seller
shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or
charges imposed by any government authority (“Taxes”) on or with respect to the
Gas prior to the Delivery Point(s) and all Taxes at the Delivery Point(s).  Buyer shall pay or cause to be paid all Taxes
on or with respect to the Gas after the Delivery Point(s).  If a party is required to remit or pay Taxes
that are the other party’s responsibility hereunder, the party responsible for
such Taxes shall promptly reimburse the other party for such Taxes.  Any party entitled to an exemption from any
such Taxes or charges shall furnish the other party any necessary documentation
thereof.

SECTION 7.                 BILLING,
PAYMENT, AND AUDIT

7.1.          Seller
shall invoice Buyer for Gas delivered and received in the preceding Month and
for any other applicable charges, providing supporting documentation acceptable
in industry practice to support the amount charged.  If the actual quantity delivered is not known
by the billing date, billing will be prepared based on the quantity of
Scheduled Gas.  The invoiced quantity
will then be adjusted to the actual quantity on the following Month’s billing
or as soon thereafter as actual delivery information is available.

7.2.          Buyer
shall remit the amount due under Section 7.1 in the manner specified in the
Base Contract, in immediately available funds, on or before the later of the
Payment Date or 10 Days after receipt of the invoice by Buyer; provided that if
the Payment Date is not a Business Day, payment is due on the next Business Day
following that date.  In the event any
payments are due Buyer hereunder, payment to Buyer shall be made in accordance
with this Section 7.2.

7.3.          In the event payments become due
pursuant to Sections 3.2 or 3.3, the performing party may submit an invoice to
the nonperforming party for an accelerated payment setting forth the basis upon
which the invoiced amount was calculated. 
Payment from the nonperforming party will be due five Business Days
after receipt of invoice.

7.4.          If
the invoiced party, in good faith, disputes the amount of any such invoice or
any part thereof, such invoiced party will pay such amount as it concedes to be
correct; provided, however, if the invoiced party disputes the amount due, it
must provide supporting documentation acceptable in industry practice to
support the amount paid or disputed.  In
the event the parties are unable to resolve such dispute, either party may
pursue any remedy available at law or in equity to enforce its rights pursuant
to this Section.

7.5.          If
the invoiced party fails to remit the full amount payable when due, interest on
the unpaid portion shall accrue from the date due until the date of payment at
a rate equal to the lower of (i) the then-effective prime rate of interest
published under “Money Rates” by The Wall Street Journal, plus two percent per
annum; or (ii) the maximum applicable lawful interest rate.

7.6.          A
party shall have the right, at its own expense, upon reasonable Notice and at
reasonable times, to examine and audit and to obtain copies of the relevant
portion of the books, records, and telephone recordings of the other party only
to the extent reasonably necessary to verify the accuracy of any statement,
charge, payment, or computation made under the Contract.  This right to examine, audit, and to obtain
copies shall not be available with respect to proprietary information not
directly relevant to transactions under this Contract.  All invoices and billings shall be conclusively
presumed final and accurate and all associated claims for under- or
overpayments shall be deemed waived unless such invoices or billings are
objected to in writing, with adequate explanation and/or documentation, within
two years after the Month of Gas delivery. 
All retroactive adjustments under Section 7 shall be paid in full by the
party owing payment within 30 Days of Notice and substantiation of such
inaccuracy.

7.7.          Unless
the parties have elected on the Base Contract not to make this Section 7.7
applicable to this Contract, the parties shall net all undisputed
amounts due and owing, and/or past due, arising under the Contract such that
the party owing the greater amount shall make a single payment of the net
amount to the other party in accordance with Section 7; provided that no
payment required to be made pursuant to the terms of any Credit Support
Obligation or pursuant to Section 7.3 shall be subject to netting under this
Section.  If the parties have executed a
separate netting agreement, the terms and conditions therein shall prevail to
the extent inconsistent herewith.

 5
 

SECTION
8.         TITLE, WARRANTY, AND INDEMNITY

8.1.          Unless
otherwise specifically agreed, title to the Gas shall pass from Seller
to Buyer at the Delivery Point(s). 
Seller shall have responsibility for and assume any liability with
respect to the Gas prior to its delivery to Buyer at the specified Delivery
Point(s).  Buyer shall have
responsibility for and any liability with respect to said Gas after its
delivery to Buyer at the Delivery Point(s).

8.2.          Seller warrants that it will have the
right to convey and will transfer good and merchantable title to all Gas sold
hereunder and delivered by it to Buyer, free and clear of all liens,
encumbrances, and claims.  EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND IN
SECTION 14.8, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY
OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE, ARE DISCLAIMED.

8.3.          Seller agrees to indemnify Buyer and save it
harmless from all losses, liabilities or claims including reasonable attorneys’
fees and costs of court (“Claims”), from any and all persons, arising from or
out of claims of title, personal injury or property damage from said Gas or
other charges thereon which attach before title passes to Buyer.  Buyer agrees
to indemnify Seller and save it harmless from all Claims, from any and all
persons, arising from or out of claims regarding payment, personal injury or
property damage from said Gas or other charges thereon which attach after title
passes to Buyer.

8.4.          Notwithstanding
the other provisions of this Section 8, as between Seller and Buyer, Seller
will be liable for all Claims to the extent that such arise from the failure of
Gas delivered by Seller to meet the quality requirements of Section 5.

SECTION 9.                 NOTICES

9.1.          All
Transaction Confirmations, invoices, payments and other communications
made pursuant to the Base Contract (“Notices”) shall be made to the addresses
specified in writing by the respective parties from time to time.

9.2.          All Notices required hereunder may be
sent by facsimile or mutually acceptable electronic means, a nationally
recognized overnight courier service, first class mail or hand delivered.

9.3.          Notice shall be given when received on a
Business Day by the addressee.  In the
absence of proof of the actual receipt date, the following presumptions will
apply.  Notices sent by facsimile shall
be deemed to have been received upon the sending party’s receipt of its
facsimile machine’s confirmation of successful transmission.  If the day on which such facsimile is
received is not a Business Day or is after five p.m. on a Business Day, then
such facsimile shall be deemed to have been received on the next following
Business Day.  Notice by overnight mail
or courier shall be deemed to have been received on the next Business Day after
it was sent or such earlier time as is confirmed by the receiving party.  Notice via first class mail shall be
considered delivered five Business Days after
mailing.

SECTION 10.               FINANCIAL
RESPONSIBILITY

10.1.        If
either party (“X”) has reasonable grounds for insecurity regarding the
performance of any obligation under this Contract (whether or not then due) by
the other party (“Y”) (including,
without limitation, the occurrence of a material change in the creditworthiness of Y), X may demand Adequate
Assurance of Performance.  “Adequate
Assurance of Performance” shall mean sufficient security in the form, amount
and for the term reasonably acceptable to X, including, but not limited to, a standby
irrevocable letter of credit, a prepayment, a security interest in an asset or
a performance bond or guaranty (including the issuer of any such security).

10.2.        In the event (each an “Event of Default”)
either party (the “Defaulting Party”) or its guarantor shall: (i) make an
assignment or any general arrangement for the benefit of creditors; (ii) file a
petition or otherwise commence, authorize, or acquiesce in the commencement of
a proceeding or case under any bankruptcy or similar law for the protection of
creditors or have such petition filed or proceeding commenced against it; (iii)
otherwise become bankrupt or insolvent (however evidenced); (iv) be unable to
pay its debts as they fall due; (v) have a receiver, provisional liquidator,
conservator, custodian, trustee or other similar official appointed with
respect to it or substantially all of its assets; (vi) fail to perform any
obligation to the other party with respect to any Credit Support Obligations
relating to the Contract; (vii) fail to give Adequate Assurance of Performance
under Section 10.1 within 48 hours but at least one  Business Day of a written request by the
other party; or (viii) not have
paid any amount due the other party hereunder on or before the second Business
Day following written Notice that
such payment is due; then the other party (the “Non-Defaulting Party”) shall
have the right, at its sole election, to immediately withhold and/or suspend
deliveries or payments upon Notice and/or to terminate and liquidate the
transactions under the Contract, in the manner provided in Section 10.3, in
addition to any and all other remedies available hereunder.

10.3.        If an Event of Default has occurred and
is continuing, the Non-Defaulting Party shall have the right, by Notice to the Defaulting Party, to
designate a Day, no earlier than the Day such Notice
is given and no later than 20 Days after such Notice is given, as an
early termination date (the “Early Termination Date”) for the liquidation and
termination pursuant to Section 10.3.1 of all transactions under the Contract,
each a “Terminated Transaction”.  On the
Early Termination Date, all transactions will terminate, other than those
transactions, if any, that may not be liquidated and terminated under
applicable law or that are, in the reasonable opinion of the Non-Defaulting
Party, commercially impracticable to liquidate and terminate (“Excluded
Transactions”), which Excluded Transactions must be liquidated and terminated
as soon thereafter as is reasonably practicable, and upon termination shall be
a Terminated Transaction and be valued consistent with Section 10.3.1
below.  With respect to each Excluded
Transaction, its actual termination date shall be the Early Termination Date
for purposes of Section 10.3.1.

 

 6
 

 

The parties have selected either “Early Termination
Damages Apply” or “Early Termination Damages Do Not Apply” as indicated on the
Base Contract.

Early Termination Damages Apply:

10.3.1.       As of the Early Termination Date, the
Non-Defaulting Party shall determine, in good faith and in a commercially
reasonable manner, (i) the amount owed (whether or not then due) by each party
with respect to all Gas delivered and received between the parties under
Terminated Transactions and Excluded Transactions on and before the Early Termination
Date and all other applicable charges relating to such deliveries and receipts
(including without limitation any amounts owed under Section 3.2), for which
payment has not yet been made by the party that owes such payment under this
Contract and (ii) the Market Value, as defined below, of each Terminated
Transaction.  The Non-Defaulting Party
shall (x) liquidate and accelerate each Terminated Transaction at its Market
Value, so that each amount equal to the difference between such Market Value
and the Contract Value, as defined below, of such Terminated Transaction(s)
shall be due to the Buyer under the Terminated Transaction(s) if such Market
Value exceeds the Contract Value and to the Seller if the opposite is the case;
and (y) where appropriate, discount each amount then due under clause (x) above
to present value in a commercially reasonable manner as of the Early
Termination Date (to take account of the period between the date of liquidation
and the date on which such amount would have otherwise been due pursuant to the
relevant Terminated Transactions).

For purposes of this Section 10.3.1, “Contract Value” means the amount
of Gas remaining to be delivered or purchased under a transaction multiplied by
the Contract Price, and “Market Value” means the amount of Gas remaining to be
delivered or purchased under a transaction multiplied by the market price for a
similar transaction at the Delivery Point determined by the Non-Defaulting
Party in a commercially reasonable manner. 
To ascertain the Market Value, the Non-Defaulting Party may consider,
among other valuations, any or all of the settlement prices of NYMEX Gas
futures contracts, quotations from leading dealers in energy swap contracts or
physical gas trading markets, similar sales or purchases and any other bona
fide third-party offers, all adjusted for the length of the term and
differences in transportation costs.  A
party shall not be required to enter into a replacement transaction(s) in order
to determine the Market Value.  Any
extension(s) of the term of a transaction to which parties are not bound as of
the Early Termination Date (including but not limited to “evergreen
provisions”) shall not be considered in determining Contract Values and Market
Values.  For the avoidance of doubt, any
option pursuant to which one party has the right to extend the term of a
transaction shall be considered in determining Contract Values and Market
Values.  The rate of interest used in
calculating net present value shall be determined by the Non-Defaulting Party
in a commercially reasonable manner.

Early Termination Damages Do Not Apply:

10.3.1.       As
of the Early Termination Date, the Non-Defaulting Party shall determine, in
good faith and in a commercially reasonable manner, the amount owed (whether or
not then due) by each party with respect to all Gas delivered and received
between the parties under Terminated Transactions and Excluded Transactions on
and before the Early Termination Date and all other applicable charges relating
to such deliveries and receipts (including without limitation any amounts owed
under Section 3.2), for which payment has not yet been made by the party that
owes such payment under this Contract.

The parties have selected either “Other Agreement Setoffs
Apply” or “Other Agreement Setoffs Do Not Apply” as indicated on the Base
Contract.

Other Agreement Setoffs Apply:

10.3.2.       The Non-Defaulting Party shall net or
aggregate, as appropriate, any and all amounts owing between the parties under
Section 10.3.1, so that all such amounts are netted or aggregated to a single
liquidated amount payable by one party to the other (the “Net Settlement
Amount”).  At its sole option and without
prior Notice to the Defaulting Party, the Non-Defaulting Party may setoff (i)
any Net Settlement Amount owed to the Non-Defaulting Party against any margin
or other collateral held by it in connection with any Credit Support Obligation
relating to the Contract; or (ii) any Net Settlement Amount payable to the
Defaulting Party against any amount(s) payable by the Defaulting Party to the
Non-Defaulting Party under any other agreement or arrangement between the
parties.

Other Agreement Setoffs Do Not Apply:

10.3.2.       The
Non-Defaulting Party shall net or aggregate, as appropriate, any and all
amounts owing between the parties under Section 10.3.1, so that all such
amounts are netted or aggregated to a single liquidated amount payable by one
party to the other (the “Net Settlement Amount”).  At its sole option and without prior Notice
to the Defaulting Party, the Non-Defaulting Party may setoff any Net Settlement
Amount owed to the Non-Defaulting Party against any margin or other collateral
held by it in connection with any Credit Support Obligation relating to the
Contract.

10.3.3.       If
any obligation that is to be included in any netting, aggregation or setoff
pursuant to Section 10.3.2 is unascertained, the Non-Defaulting Party may in
good faith estimate that obligation and net, aggregate or setoff, as
applicable, in respect of the estimate, subject to the Non-Defaulting Party
accounting to the Defaulting Party when the obligation is ascertained.  Any amount not then due which is included in
any netting, aggregation or setoff pursuant to Section 10.3.2 shall be
discounted to net present value in a commercially reasonable manner determined
by the Non-Defaulting Party.

10.4.        As soon as practicable after a
liquidation, Notice shall be given by the Non-Defaulting Party to the
Defaulting Party of the Net Settlement Amount, and whether the Net Settlement
Amount is due to or due from the Non-Defaulting Party.  The Notice shall include a written statement
explaining in reasonable detail the calculation of such amount, provided that
failure to give such Notice shall not affect the validity or enforceability of
the liquidation or give rise to any claim by the Defaulting Party against the
Non-Defaulting Party.  The Net Settlement
Amount shall be paid by the close of business on the second Business Day
following such Notice, which date shall not be earlier than the Early
Termination Date.  Interest on any unpaid portion of the Net
Settlement Amount shall accrue from the date due until the

 

 7
 

date of payment at a rate equal to the lower of
(i) the then-effective prime rate of interest published under “Money Rates”
by The Wall Street Journal, plus two percent per annum; or (ii) the maximum
applicable lawful interest rate.

10.5.        The parties agree that the transactions
hereunder constitute a “forward contract” within the meaning of the United
States Bankruptcy Code and that Buyer and Seller are each “forward contract
merchants” within the meaning of the United States Bankruptcy Code.

10.6.        The Non-Defaulting Party’s remedies
under this Section 10 are the sole and exclusive remedies of the Non-Defaulting
Party with respect to the occurrence of any Early Termination Date.  Each party reserves to itself all other
rights, setoffs, counterclaims and other defenses that it is or may be entitled
to arising from the Contract.

10.7.        With respect to this Section 10, if the
parties have executed a separate netting agreement with close-out netting
provisions, the terms and conditions therein shall prevail to the extent
inconsistent herewith.

SECTION 11.               FORCE
MAJEURE

11.1.        Except
with regard to a party’s obligation to make payment(s) due under Section 7,
Section 10.4, and Imbalance Charges under Section 4, neither party shall be
liable to the other for failure to perform a Firm obligation, to the extent
such failure was caused by Force Majeure. 
The term “Force Majeure” as employed herein means any cause not reasonably
within the control of the party claiming suspension, as further defined in
Section 11.2.

11.2.        Force
Majeure shall include, but not be limited to, the following:
(i) physical events such as acts of God, landslides, lightning,
earthquakes, fires, storms or storm warnings, such as hurricanes, which result
in evacuation of the affected area, floods, washouts, explosions, breakage or
accident or necessity of repairs to machinery or equipment or lines of pipe;
(ii) weather related events affecting an entire geographic region, such as
low temperatures which cause freezing or failure of wells or lines of pipe;
(iii) interruption and/or curtailment of Firm transportation and/or
storage by Transporters; (iv) acts of others such as strikes, lockouts or
other industrial disturbances, riots, sabotage, insurrections or wars; and
(v) governmental actions such as necessity for compliance with any court
order, law, statute, ordinance, regulation, or policy having the effect of law
promulgated by a governmental authority having jurisdiction.  Seller and Buyer shall make reasonable
efforts to avoid the adverse impacts of a Force Majeure and to resolve the
event or occurrence once it has occurred in order to resume performance.

11.3.        Neither party shall be entitled to the
benefit of the provisions of Force Majeure to the extent performance is
affected by any or all of the following circumstances: (i) the curtailment
of interruptible or secondary Firm transportation unless primary, in-path, Firm
transportation is also curtailed; (ii) the party claiming excuse failed to
remedy the condition and to resume the performance of such covenants or
obligations with reasonable dispatch; or (iii) economic hardship, to include, without limitation, Seller’s
ability to sell Gas at a higher or more advantageous price than the Contract
Price, Buyer’s ability to purchase Gas at a lower or more advantageous price
than the Contract Price, or a regulatory agency disallowing, in whole or in
part, the pass through of costs resulting from this Agreement; (iv) the loss of
Buyer’s market(s) or Buyer’s inability to use or resell Gas purchased
hereunder, except, in either case, as provided in Section 11.2; or (v) the loss
or failure of Seller’s gas supply or depletion of reserves, except, in either case,
as provided in Section 11.2.  The
party claiming Force Majeure shall not be excused from its responsibility for
Imbalance Charges.

11.4.        Notwithstanding anything to the contrary
herein, the parties agree that the settlement of strikes, lockouts or other
industrial disturbances shall be within the sole discretion of the party
experiencing such disturbance.

11.5.        The party whose performance is prevented by
Force Majeure must provide Notice to the other party.  Initial Notice may be given orally; however, written Notice with reasonably
full particulars of the event or occurrence is required as soon as reasonably
possible.  Upon providing written Notice
of Force Majeure to the other party, the affected party will be relieved of its
obligation, from the onset of the Force Majeure event, to make or accept
delivery of Gas, as applicable, to the extent and for the duration of Force
Majeure, and neither party shall be deemed to have failed in such obligations
to the other during such occurrence or event.

11.6.        Notwithstanding
Sections 11.2 and 11.3, the parties may agree to alternative Force Majeure
provisions in a Transaction Confirmation executed in writing by both parties.

SECTION 12.               TERM

This
Contract may be terminated on 30 Day’s written Notice, but shall remain in
effect until the expiration of the latest Delivery Period of any
transaction(s).  The rights of either
party pursuant to Section 7.6 and Section 10, the obligations to make payment
hereunder, and the obligation of either party to indemnify the other, pursuant
hereto shall survive the termination of the Base Contract or any transaction.

SECTION 13.               LIMITATIONS

FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY
OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES
SHALL BE THE SOLE AND EXCLUSIVE REMEDY. 
A PARTY’S LIABILITY HEREUNDER SHALL BE LIMITED AS SET FORTH IN SUCH
PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED.  IF NO REMEDY OR MEASURE OF
DAMAGES IS EXPRESSLY PROVIDED HEREIN OR IN A TRANSACTION, A PARTY’S LIABILITY
SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. 
SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND
ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED.  UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER
PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR
INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY
STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE.  IT IS THE INTENT OF THE PARTIES THAT THE
LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT
REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY
PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR
PASSIVE. 

 8
 

TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER
ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS
INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE
APPROXIMATION OF THE HARM OR LOSS.

SECTION 14.               MISCELLANEOUS

14.1.        This
Contract shall be binding upon and inure to the benefit of the successors,
assigns, personal representatives, and heirs of the respective parties hereto,
and the covenants, conditions, rights and obligations of this Contract shall
run for the full term of this Contract. 
No assignment of this Contract, in whole or in part, will be made
without the prior written consent of the non-assigning party (and shall not
relieve the assigning party from liability hereunder), which consent will not
be unreasonably withheld or delayed; provided, either party may (i) transfer,
sell, pledge, encumber, or assign this Contract or the accounts, revenues, or
proceeds hereof in connection with any financing or other financial
arrangements, or (ii) transfer its interest to any parent or affiliate by
assignment, merger or otherwise without the prior approval of the other
party.  Upon any such assignment, transfer
and assumption, the transferor shall remain principally liable for and shall
not be relieved of or discharged from any obligations hereunder.

14.2.        If any
provision in this Contract is determined to be invalid, void or unenforceable
by any court having jurisdiction, such determination shall not invalidate,
void, or make unenforceable any other provision, agreement or covenant of this
Contract.

14.3.        No
waiver of any breach of this Contract shall be held to be a waiver of any other
or subsequent breach.

14.4.        This
Contract sets forth all understandings between the parties respecting each
transaction subject hereto, and any prior contracts, understandings and
representations, whether oral or written, relating to such transactions are
merged into and superseded by this Contract and any effective transaction(s).  This Contract may be amended only by a
writing executed by both parties.

14.5.        The
interpretation and performance of this Contract shall be governed by the laws
of the jurisdiction as indicated on the Base Contract, excluding, however, any
conflict of laws rule which would apply the law of another jurisdiction.

14.6.        This
Contract and all provisions herein will be subject to all applicable and valid
statutes, rules, orders and regulations of any governmental authority having
jurisdiction over the parties, their facilities, or Gas supply, this Contract
or transaction or any provisions thereof.

14.7.        There
is no third party beneficiary to this Contract.

14.8.        Each
party to this Contract represents and warrants that it has full and complete
authority to enter into and perform this Contract.  Each person who executes this Contract on
behalf of either party represents and warrants that it has full and complete
authority to do so and that such party will be bound thereby.

14.9.        The
headings and subheadings contained in this Contract are used solely for
convenience and do not constitute a part of this Contract between the parties
and shall not be used to construe or interpret the provisions of this Contract.

14.10.      Unless
the parties have elected on the Base Contract not to make this Section 14.10
applicable to this Contract, neither party shall disclose directly or
indirectly without the prior written consent of the other party the terms of
any transaction to a third party (other than the employees, lenders, royalty
owners, counsel, accountants and other agents of the party, or prospective
purchasers of all or substantially all of a party’s assets or of any rights
under this Contract, provided such persons shall have agreed to keep such terms
confidential) except (i) in order to comply with any applicable law, order,
regulation, or exchange rule, (ii) to the extent necessary for the enforcement
of this Contract , (iii) to the extent necessary to implement any transaction,
or (iv) to the extent such information is delivered to such third party for the
sole purpose of calculating a published index. 
Each party shall notify the other party of any proceeding of which it is
aware which may result in disclosure of the terms of any transaction (other
than as permitted hereunder) and use reasonable efforts to prevent or limit the
disclosure.  The existence of this
Contract is not subject to this confidentiality obligation.  Subject to Section 13, the parties shall be
entitled to all remedies available at law or in equity to enforce, or seek
relief in connection with this confidentiality obligation.  The terms of any transaction hereunder shall
be kept confidential by the parties hereto for one year from the expiration of
the transaction.

In the event that disclosure is required by a
governmental body or applicable law, the party subject to such requirement may
disclose the material terms of this Contract to the extent so required, but
shall promptly notify the other party, prior to disclosure, and shall cooperate
(consistent with the disclosing party’s legal obligations) with the other party’s
efforts to obtain protective orders or similar restraints with respect to such
disclosure at the expense of the other party.

14.11       The parties may
agree to dispute resolution procedures in Special Provisions attached to the
Base Contract or in a Transaction Confirmation executed in writing by both
parties.

DISCLAIMER:  The purposes of this Contract are to facilitate
trade, avoid misunderstandings and make more definite the terms of contracts of
purchase and sale of natural gas. 
Further, NAESB does not mandate the use of this Contract by any
party.  NAESB
DISCLAIMS AND EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGES AND AGREES
TO NAESB’S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR
REPRESENTATIONS, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS
CONTRACT OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR
CONDITIONS OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS OR
SUITABILITY FOR ANY PARTICULAR PURPOSE (WHETHER OR NOT NAESB KNOWS, HAS REASON
TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE),
WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR
BY COURSE OF DEALING.  EACH USER OF THIS
CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL NAESB BE LIABLE FOR ANY
DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES
ARISING OUT OF ANY USE OF THIS CONTRACT.

 9
 

 

	
  

  	
  TRANSACTION
  CONFIRMATION

  	
  EXHIBIT A

  

FOR IMMEDIATE DELIVERY

 

	
  

  	
   

  	
   

  
	
  

  	
   

  	
  Date:                                                           
  ,          

  
	
   

  	
  Transaction
  Confirmation #:

  
	
   

  	
   

  	
   

  

This Transaction
Confirmation is subject to the Base Contract between Seller and Buyer dated
                                        .
The terms of this Transaction Confirmation are binding unless disputed in
writing within 2 Business Days of receipt unless otherwise specified in the
Base Contract.

	
  SELLER: 

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
  Attn:

  	
   

  	
  Attn:

  
	
  Phone:

  	
   

  	
  Phone:

  
	
  Fax:

  	
   

  	
  Fax:

  
	
  Base Contract No.

  	
   

  	
  Base Contract No.

  
	
  Transporter: 

  	
   

  	
  Transporter:

  
	
  Transporter Contract Number:

  	
   

  	
  Transporter Contract Number:

  
	
   

  
	
  Contract Price:  $            /MMBtu or

  	
   

  
	
   

  	
   

  
	
  Delivery Period:  Begin:
                         ,        End:
                     ,            

  
	
   

  
	
  Performance Obligation and Contract Quantity: (Select
  One) 

  
	
   

  
	
  Firm (Fixed Quantity):

             MMBtus/day 

       o  EFP

  	
  Firm (Variable Quantity):             MMBtus/day
  Minimum
              MMBtus/day
  Maximum subject to Section 4.2. at election of 

  	
  Interruptible:

  Up to
              MMBtus/day

  
	
   

  	
  o
  Buyer or o
  Seller

  	
   

  
	
   

  	
   

  	
   

  
	
  Delivery Point(s):                                           
  

  (If a pooling point is used, list a specific geographic and
  pipeline location):

  
	
   

  
	
  Special Conditions:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Seller:

  	
   

  	
  Buyer:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  Date: 

  
								

 

 10

BP Canada Energy Marketing Corp.

1200, 240 - 4 Avenue S.W.

P.O. Box 200

Calgary, Alberta

T2P 2H8

Canada

July 1, 2007

Millennium Ethanol, LLC

27283 – 447th Avenue

Marion, SD

57043

Attention:  Steve Domm

Re:                             Agency
Agreement, Energy Management & Consulting Services, LLC (“Party X”) as
agent for Millennium Ethanol, LLC (“Party Y”)

Re:                           Base
Contract for Sale and Purchase of Natural Gas dated July 1, 2007 between BP
Canada Energy Marketing Corp. (“BP Canada”) and Millennium Ethanol, LLC

This letter agreement confirms that:

1.             Until BP Canada is
otherwise notified in writing and in advance by Party Y, Party X is fully
authorized to enter into and execute Transactions (as defined in the
Agreement), as agent, on behalf of Party Y (including converting the Contract
Price to a Fixed Price from time to time in accordance with the provisions of
the Agreement) and Party Y agrees that all such Transactions are and will be
binding on Party Y as if such Party had entered into the Transactions on its
own behalf.

2.             Until BP Canada is
otherwise notified in writing and in advance, Party X is Party Y’s fully
authorized agent to act on behalf of Party Y in all matters under the
Agreement, including without limitation; all accounting, conduct of operations,
requests or nomination for gas, the receipt and giving of all correspondence,
notices, invoices and payments required or permitted under the Agreement.  Any reference to acts or obligations of Party
Y in the Agreement shall, where the context requires, include Party X as Party
Y’s agent.  For greater certainty, BP
Canada shall be entitled to rely on all acts or omissions of Party X as having
been duly authorized by Party Y and same will be binding on and against Party Y
as if such acts or omissions had been performed or omitted by Party Y itself.

3.             Any correspondence,
notices, invoices or payments provided by BP Canada to, or covenants performed
by BP Canada for the benefit of Party X, shall be deemed to have been provided
in trust to and for the benefit of, Party Y.

4.             Party X shall be
authorized to agree to and execute any and all amendments to the Agreement as
against BP Canada, these executions or elections will be binding on Party Y.

5.             Party X agrees that
any funds received from party Y in respect of the Agreement will be received by
Party X in trust for BP Canada.

6.             Party Y will be, and
remain, primarily liable for payment due to BP Canada for gas delivered under
the Agreement and any other payment obligations under the Agreement.  BP Canada will be entitled to look to, and
enforce the Agreement against Party Y directly without having to look to Party
X first.

Further, in the event
that BP Canada does not receive payment when due, or if BP Canada, in its sole
discretion, has concerns about Party X’s ability to pay, BP Canada may serve
Party Y with written direction to pay BP Canada directly any and all amounts
due for gas delivered or to be delivered under the Agreement.  In that event, Party Y and Party X agree to
be bound by the Direction to Pay.

7.             Party Y indemnifies
and saves BP Canada harmless from any actions, losses or damages which may be
incurred as a result of BP Canada’ reliance on the acts or omissions of party X
authorized herein.

8.             During the term of
this Agency, and until Party Y or Party X advises otherwise in writing, the
address for service, notices and invoicing Party Y under the Agreement will be
as indicated on the Contract noted above between BP Canada and Party Y.

9.             This Letter Agreement
may be executed in counterpart, no one copy of which need be executed by all
parties.  When a counterpart has been
executed by each of the parties, all copies together shall constitute one
agreement and shall be a valid and binding agreement between the parties.

If you are in
agreement with the foregoing, please execute all three signatory pages to this
Letter Agreement and return to our office. 
We will then forward a complete copy to each party for their records.

	
  Accepted and agreed to this

  	
   

  	
  Accepted and agreed to this

  
	
  day of
                                           ,
  2007.

  	
   

  	
  day of
                                            ,
  2007.

  
	
   

  	
   

  	
   

  
	
  Millennium Ethanol, LLC

  	
   

  	
  Energy Management & Consulting Service, LLC

  
	
   

  	
   

  	
   

  
	
  Per:

  	
   

  	
   

  	
  Per:

  	
   

  	
   

  
						

 

Accepted and agreed to
this              

day of                                           ,
2007.

BP Canada
Energy Marketing Corp.

	
  Per:

  	
   

  	
   

  

 

SPECIAL PROVISIONS ATTACHED TO AND
FORMING PART OF

THE BASE CONTRACT FOR SALE AND
PURCHASE OF NATURAL GAS

dated July 1, 2007

by and
between

BP Canada Energy Marketing Corp.

and

Millennium
Ethanol, LLC

Section 1. Purpose & Procedures

Delete Section 1.3 and replace with the following:

“If a sending party’s Transaction Confirmation is
materially different from the receiving party’s understanding of the agreement
referred to in Section 1.2, such receiving party shall notify the sending party
via facsimile, EDI or mutually agreeable electronic means by the Confirm
Deadline, unless such receiving party has previously sent a Transaction
Confirmation to the sending party.  The
failure of the receiving party to so notify the sending party in writing by the
Confirm Deadline constitutes the receiving party’s agreement to the terms of
the transaction described in the sending party’s Transaction Confirmation.  If there are any material differences between
timely sent Transaction Confirmations governing the same transaction, or if the
receiving party has timely objected to the terms of the sending party’s
Transaction Confirmation, such transaction remains valid and the parties remain
legally bound thereby, however, both parties shall in good faith attempt to
resolve such differences.  Once such
material differences are resolved, the Confirming Party shall transmit a
written Transaction Confirmation to the other party, and such Transaction
Confirmation shall be accepted (or disputed) pursuant to the provisions of this
Section 1.3.  The provisions of this
Section 1.3 may be repeated as many times as necessary to produce a written
Transaction Confirmation that is accepted or deemed accepted by the receiving
party.  In the event of a conflict among
the terms of (i) a binding Transaction Confirmation pursuant to Section
1.2, (ii) the oral agreement of the parties (which may be evidenced by a
recording of such transaction, oral testimony, data in a computer system, trade
tickets, and/or notes), where the parties have selected the Oral Transaction
Procedure of the Base Contract, (iii) the Base Contract, and
(iv) these General Terms and Conditions, the terms of the items shall
govern in the priority listed in this sentence.”

Section
3. Performance Obligation

Add the following as
Section 3.5:

“Notwithstanding
anything to the contrary in this Contract (including, without limitation,
anything in Section 11 of this Contract), in the event (i) a transaction has a
Firm performance obligation, and (ii) Seller is unable to sell and deliver the Contract
Quantity for such transaction as a result of an event of Force Majeure or Buyer
is unable to purchase and receive the Contract Quantity for such transaction as
a result of an event of Force Majeure, and (iii) the Delivery Period for such
transaction is at least one calendar Month, and (iv) the Contract Price is a
Fixed Price (as defined below), then (a) if the FOM Price (as defined below) is
above the Fixed Price, Seller shall pay Buyer for each MMBtu of Gas not
delivered and/or received the difference between the FOM Price and the Fixed
Price, or (b) if the FOM Price is below the Fixed Price, Buyer shall pay Seller
for each MMBtu of Gas not delivered and/or received the difference between the
Fixed Price and the FOM Price.  “Fixed
Price” means, a Contract Price for a transaction that is expressed as a flat
dollar amount (Fixed Price includes prices that were converted from an
index-based price to a flat dollar amount upon the mutual agreement of the
parties or as a result of a party exercising a price option that resulted in a
maximum price or a minimum price).  “FOM
Price” means the price per MMBtu, stated in the same currency as the
transaction subject to such Force Majeure event, for the first of the Month
delivery, as published in the first issue of a publication commonly-accepted by
the natural gas industry (selected by the Seller in a commercially reasonable
manner) for the calendar Month of such Force Majeure event for the geographic
location closest in proximity to the Delivery Point(s) for the relevant Day
adjusted for the basis differential between the Delivery Point(s) and such
published geographic location determined by the Seller in a commercially
reasonable manner.”

Section
7. Billing, Payment and Audit

In the first
sentence of Section 7.2 delete the words “the later of”.

In Section 7.7 add
the following after the words “subject to netting under this Section” at the
end of the first sentence:  “provided
further, however, that the party due payment under Section 7.3 may net all sums
due thereunder against any amounts payable by it when making payments under
Section 7.”

Section
10. Financial Responsibility

Add the following as the
third paragraph of Section 10.3.1. “Early Termination Damages Apply”:

“The
Non-Defaulting Party shall also aggregate the costs that the Non-Defaulting
Party incurs in liquidating and accelerating each Terminated Transaction, or
otherwise settling obligations arising from the cancellation and termination of
each Terminated Transaction, including brokerage fees, commissions, and other
similar transaction costs and expenses reasonably incurred by the
Non-Defaulting Party including costs associated with hedging its obligations,
transaction costs associated with obtaining replacement suppliers or markets
(e.g. brokerage fees, or other such payments), additional transmission costs,
ancillary services

 1
 

costs and  like costs incurred in moving the replacement
Gas to or from the Delivery Point, and reasonable attorneys’ fees and other
reasonable litigation costs incurred in connection with enforcing its rights
under this Agreement (collectively “Costs”) and such Costs shall be due to the
Non-Defaulting Party.”

Delete the words “and
without prior Notice to the Defaulting Party” in the second sentence of Section
10.3.2 “Other Agreements Setoffs Apply”.

“Delete everything
after the “(ii)” in the second sentence of Section 10.3.2. “Other Agreements
Setoffs Apply” and replace with the following: 
“(ii) any Net Settlement Amount payable to the Defaulting Party against
any amount(s) payable in Dollars or any other currency by the Defaulting Party
to the Non-Defaulting Party and/or its Affiliates under any other agreement or
arrangement between the Defaulting Party and the Non-Defaulting Party and/or
its Affiliates.  The obligations of the
Non-Defaulting Party, the Non-Defaulting Party’s Affiliates, and the Defaulting
Party under this Contract or otherwise in respect of such amounts shall be
deemed satisfied and discharged to the extent of any such set-off.  For this purpose, the amounts subject to the
set-off may be converted at the applicable prevailing exchange rate into U.S.
Dollars by the Non-Defaulting Party.  
The Non-Defaulting Party will give the Defaulting Party Notice of any
set-off effected under this section provided that failure to give such notice
shall not affect the validity of the set-off. 
Nothing in this paragraph shall be deemed to create a charge or other
security interest.  The rights
provided by this Section are in addition to and not in limitation of any other
right or remedy (including any right to set-off, counterclaim, or otherwise
withhold payment) to which a party may be entitled (whether by operation of
law, contract or otherwise).   “Affiliate” means, in relation to any party,
any entity controlled, directly or indirectly, by such party, any entity that
controls, directly or indirectly, such party or any entity directly or
indirectly under common control with such party. For this purpose, “control” of
any entity or person means ownership of a majority of the voting power of the
entity or person.  “Set-off” as used
herein means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the Non-Defaulting Party
is entitled or subject  to (whether
arising under this Contract, another contract, applicable law or otherwise)
that is exercised by, or imposed on, the Non-Defaulting Party.”

Delete Section 10.5 in
its entirety and replace with the following:

“The parties
specifically agree that this Contract and all transactions pursuant hereto are “forward
contracts” as such term is defined in the United States Bankruptcy Code and
that each party is a “forward contract merchant” as such term is defined in the
United States Bankruptcy Code.  Each
party further agrees that the other party is not a “utility” as such term is
used in 11 U.S.C. Section 366, and each party agrees to waive and not to assert
the applicability of the provisions of 11 U.S.C. Section 366 in any bankruptcy
proceeding involving such party.  In addition,
each party agrees that, for any Gas actually consumed (rather than resold) by
such party, if Gas is not delivered pursuant to this Contract, the local gas
distribution utility for such party is the provider of last resort and can
supply such party’s Gas consumption needs.”

Section
11. Force Majeure

Delete Section 11.4 in its entirety and replace with
the following:  “Notwithstanding anything
to the contrary in this Section 11, the parties agree that the settlement of
strikes, lockouts, or other industrial disturbances shall be within the
sole discretion of the party experiencing such disturbance; and further agree
that, upon the occurrence of any event
of Force Majeure, neither party shall be obligated to purchase or sell Gas
hereunder if such purchase or sale would result in material economic impact to
such party under this Contract.”

Add as new Section 11.7, “Without restricting the
generality of Section 14.3, if an event of Force Majeure occurs, the
party affected may, in its sole discretion and without notice to the other
party, determine not to make a claim of Force Majeure and to waive its rights
hereunder as they would apply to such event. 
Such determination or waiver shall not preclude the affected party from
claiming Force Majeure in respect of any subsequent event, including any event
that is substantially similar to the event in respect of which such
determination or waiver is made.”

Section
14. Miscellaneous

Delete Section 14.3 in its entirety and replace with the
following:  “No waiver of any breach of
this Contract, or delay, failure or refusal to exercise or enforce any rights
under this Contract, shall be held to be a waiver of any other or subsequent
breach, or be construed as a waiver of any such right then existing or arising
in the future.”

Add the following as Section 14.12:

“This Contract
shall be considered for all purposes as prepared through the joint efforts of
the parties and shall not be construed against one party or the other as a
result of the manner in which this Contract was negotiated, prepared, drafted
or executed.”

Add the following as
Section 14.13:

“If any index used
to determine the price under a transaction ceases to be available, the parties
agree to promptly negotiate on a good faith basis a mutually satisfactory alternate
price or reference publication to take effect as of the date the prior index is
unavailable.  If the parties cannot agree
on an alternative price or reference publication within thirty (30) days of the
index ceasing to be available, then the parties shall refer the matter to
binding arbitration.  Arbitration shall
be governed by the Federal

 2
 

Arbitration Act (9
U.S.C. Section 1, et seq.) and conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association.”

Add the following as
Section 14.14:

“Each party will
be deemed to represent to the other party each time a transaction is entered
into that:  (a) it is acting for its own
account, and it has made its own independent decisions to enter that
transaction and as to whether that transaction is appropriate or proper for it
based upon its own judgment and upon advice from such advisors as it has deemed
necessary; (b) it is not relying on any communication (written or oral) of the
other party as investment advice or as a recommendation to enter into that
transaction; it being understood that information and  explanations related to the terms and
conditions of a transaction shall not be considered investment advice or a
recommendation to enter into that transaction; (c) no communication (written or
oral) received from the other party shall be deemed to be an assurance or
guarantee as to the expected results of that transaction; (d) it is capable of
assessing the merits and understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms, conditions and
risks of that transaction; (e) it is capable of assuming, and assumes, the
risks of that transaction; and (f) the other party is not acting as a fiduciary
for, or an advisor to, it in respect of that transaction.”

	
  BP Canada Energy Marketing Corp.

  	
   

  	
  Millennium Ethanol, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 3Exhibit 10.1

THIRD AMENDMENT TO

REAL ESTATE OPTION AGREEMENT

THIS THIRD AMENDMENT  is entered into between Freeport Area
Economic Development Foundation, an Illinois not-for-profit corporation, herein referred to as “Optionor,”
and Blackhawk Biofuels, LLC, herein
referred to as “Optionee.”

RECITALS

A.    Optionor and Optionee have previously entered
into a Real Estate Option Agreement; and Amendment to Real Estate Option
Agreement; and a Second Amendment to Real Estate Option Agreement, a copy of
said documents are attached hereto and incorporated by reference.

B.    The parties desire to further extend the date
for the exercise of the Option as herein set forth.

AGREEMENT

NOW, THERFORE, the parties agree as follows:

1.     Paragraph 3(b) of the Real Estate Option Agreement
is amended effective the date hereof to read as follows:

This Option shall remain in
effect until July 31, 2007.  Optionee may
exercise this Option at any time prior to said date.

2.     Except as herein set forth, all other terms
and conditions of the Real Estate Option Agreement remain the same and in full
force and effect.

IN WITNESS WHEREOF, the parties have executed this Second Amendment.

	
  

  	
  OPTIONOR:

  
	
   

  	
   

  
	
                Dated:  June
  25, 2007.

  	
  FREEPORT AREA ECONOMIC

  
	
   

  	
  DEVELOPMENT FOUNDATION

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Robert J. Skurla

  	
   

  
	
   

  	
   

  	
  Robert Skurla, Executive Director

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
                Dated:  June
  26, 2007.

  	
  BLACKHAWK BIOFUELS, LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Ronald Mapes

  	
   

  

 

This Instrument Prepared by:

Attorney Dan G. Fishburn

Snow, Hunter, Whiton &
Fishburn, Ltd.

8 East Stephenson Street

Freeport,
IL 61032 (815-235-2511)

REAL ESTATE OPTION AGREEMENT

THIS AGREEMENT entered into this 20th day of June, 2006, between Freeport Area Economic Development Foundation, an
Illinois not-for-profit corporation, herein referred to as “Optionor,”
whose address is 27 W. Stephenson Street, Freeport, Illinois 61032, and Blackhawk Biofuels, LLC, herein referred to
as “Optionee,” whose address is 22 S. Chicago Avenue, Freeport, Illinois 61032.

1.             Consideration and Grant of Option.  In
consideration of the payments herein set forth from Optionee to Optionor,
Optionor hereby grants to Optionee an option to purchase Lot 7 in the Replat of
Mill Race Industrial Park (a copy of the draft of the Replat is attached hereto
marked at Exhibit A) which is located in the Stephenson County Economic
Development area in Stephenson County, Illinois (herein referred to as the “Property”),
together with all easements and appurtenances thereto, for the price and within
the time specified herein.  This Real
Estate Option Agreement is contingent upon Optionor obtaining all necessary
government approval and the filing of the Replat of Mill Race Industrial Park
in accordance with the Replat which is attached hereto.  In the event the Replat is not approved, this
Option Agreement shall be null and void and any monies paid to Optionor by
Optionee shall be refunded to Optionee.

2.             Payment for Option. 
Optionee shall pay Optionor the sum of Eight Hundred Twenty-five Dollars
($825.00) per month on the first of each month commencing August 1, 2006, and
on the first of each month thereafter. 
Said payment shall be in consideration for the Option granted to
Optionee.  The payment will not be
applied to the purchase price in the event Optionee exercises this Option.  In the event Optionee fails to exercise the
Option according to its terms, Optionor shall retain all sums paid under the
terms of this Option Agreement.

3.             Exercise of Option.  This
option may be exercised by Optionee as follows:

a.             By written notice from Optionee to Optionor,
at the address provided herein, which written notice shall provide for a date
for closing within 60 days of the date of the written notice.

b.             This option shall remain in effect until
December 31, 2006.  Optionee may exercise
this option at any time prior to said date.

c.             If Optionee fails to exercise this option
within the time period set forth above, Optionee’s right to exercise the option
and purchase the Property shall automatically terminate and this agreement shall
be of no force and effect.

4.             Non-Exercise of Option.  In
the event Optionee does not exercise the option to purchase the Property, the
consideration paid to Optionor pursuant to Paragraph 2 above shall be forfeited
and remain the property of Optionor.

5.             Assess to Property. 
During the option period, Optionee shall be granted access to the
property to perform any necessary due diligence as required by Optionee.  Provided however, Optionee shall respect the
rights of the current tenants on the premises and shall not disrupt or
interfere with the tenants or their business. 
Optionee shall return the Property to its original condition after the
completion of any tests, surveys or inspections.  All costs of due diligence studies shall be
borne by Optionee.

6.             Purchase Price and Terms of Payment.  The
purchase price paid for the property shall be $15,000.00 per surveyed
acre.  Optionor and Optionee agree that
upon the exercise of the Option, the parties shall sign an Agreement for Deed,
prepared by Optionee’s attorney and approved by Optionor’s

attorney, the exercise of the option shall be
contingent upon both parties executing an Agreement for Deed which is
acceptable to both Optionor and Optionee. 
The purchase price shall be determined by survey, the total purchase
price shall be the number of surveyed acres times the price per acre as
hereinabove set forth.

7.             Notice.  All notices provided for in
this instrument, if not delivered in person, shall be sent by U.S. Certified
Mail, Return Receipt Requested, to the party at the address given above, or to
any other address either party may have designated for receipt of such notices
by written notice of a change of address.

8.             Representations. 
Optionor and Optionee hereby warrant and represent to each other that no
real estate broker has participated in this transaction and that this
instrument contains the entire agreement of the parties and that any prior
discussions or negotiations not set forth in this Agreement are of no further
force and effect.

9.             Assignment.  Optionor and Optionee agree
that this Option may be assigned by Optionee without the prior written consent
of Optionor and that assignee of Optionee shall have all rights of Optionee
hereunder.

10.           Governing
Law.  This Agreement shall be governed by the laws
of the State of Illinois.

11.           Prior
Agreement Void.  Upon the execution of this Amended Real
Estate Option Agreement, the prior Real Estate Option Agreement between the
parties dated March 10, 2006, shall be null and void and of no further force and
effect.

IN WITNESS WHEREOF, the parties have executed this Option the day and
year first above written.

	
   

  	
  OPTIONOR:

  
	
   

  	
   

  
	
   

  	
  FREEPORT AREA ECONOMIC DEVELOPMENT

  FOUNDATION

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Robert J. Skurla

  	
   

  
	
   

  	
   

  	
  Robert Skurla, Executive Director

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
  BLACKHAWK BIOFUELS, LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Ronald Mapes

  	
   

  
	
   

  	
   

  	
  Member

  

 

Instrument
Prepared by:

Attorney
Dan G. Fishburn

Snow,
Hunter, Whiton & Fishburn, Ltd.

8
East Stephenson Street

Freeport, IL 61032 (815-235-2511)

EXHIBIT A

[SURVEY]

AMENDMENT TO

REAL ESTATE OPTION AGREEMENT

THIS AMENDMENT TO REAL ESTATE OPTION AGREEMENT is entered into this 27th day of November, 2006, between Freeport Area Economic Development Foundation, an
Illinois not-for-profit corporation, as Optionor, and Blackhawk Biofuels, LLC, as Optionee.

1.             Extension of Option. 
Paragraph 3(b) of the Real Estate Option Agreement dated June 20, 2006
(the “Option Agreement”) is hereby amended to replace the date “December 31,
2006” with “March 31, 2007”.

2.             Other Terms of Option Agreement. 
Except as amended by paragraph 1 hereof, all other terms of the Option
Agreement shall remain in full force and effect between the parties.

IN WITNESS WHEREOF, the parties have executed this Amendment to Real
Estate Option Agreement the day and year first above written.

	
   

  	
  OPTIONOR:

  
	
   

  	
   

  
	
   

  	
  FREEPORT AREA ECONOMIC DEVELOPMENT

  FOUNDATION

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Robert J. Skurla

  	
   

  
	
   

  	
   

  	
  Robert Skurla, Executive Director

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
  BLACKHAWK BIOFUELS, LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Ronald Mapes

  	
   

  
	
   

  	
   

  	
  Chair

  

 

SECOND AMENDMENT TO

REAL ESTATE OPTION AGREEMENT

THIS SECOND AMENDMENT  is entered into between Freeport Area Economic
Development Foundation, an Illinois not-for profit Corporation,
herein referred to as “Optionor,” and Blackhawk Biofuels, LLC, herein
referred to as “Optionee.”

RECITALS

A.            Optionor and Optionee have entered into a
Real Estate Option Agreement dated June 20, 2006, a copy of said Agreement is
attached hereto marked Exhibit A.

B.            Optionor and Optionee entered into an
Amendment to Real Estate Option Agreement dated November 27, 2006.  The Amendment extended the Real Estate Option
Agreement until March 31, 2007.  A copy
of said Amendment is attached hereto marked Exhibit B.

C.            The parties desire to further extend the date
for the exercise of the Option as set forth.

AGREEMENT

NOW, THEREFORE, the parties agree as follows:

1.             Paragraph 3(b) of the Real Estate Option
Agreement is amended effective the date hereof to read as follows:

This Option shall remain in
effect until June 30, 2007.  Optionee may
exercise this Option at any time prior to said date.

2.             Except as herein set forth, all other terms
and conditions of the Real Estate Option Agreement remain the same and in full
force and effect.

IN WITNESS WHEREOF, the parties have executed this Second Amendment.

	
  

  	
  OPTIONOR:

  
	
   

  	
   

  
	
  Dated:  March
  20, 2007

  	
  FREEPORT AREA ECONOMIC 

  
	
   

  	
  DEVELOPMENT FOUNDATION 

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Robert J. Skurla

  	
   

  
	
   

  	
          Robert
  Skurla, Executive Director

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
  Dated:  March
  20, 2007

  	
  BLACKHAWK BIOFUELS, LLC 

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Ronald Mapes

  	
   

  
	
   

  	
          Ronald
  Mapes, Chair

  

 

This Instrument Prepared by:

Attorney Dan G. Fishburn

Snow, Hunter, Whiton &
Fishburn, Ltd.

8 East Stephenson Street

Freeport,
IL 61032 (815-235-2511)

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