Document:

Exhibit 10.1

 

MANAGEMENT CONSULTING AGREEMENT

 

THIS
MANAGEMENT CONSULTING AGREEMENT (“Agreement”) is made and entered into
effective July 26, 2005, by and between Ethanol Grain Processors, LLC, a
Tennessee limited liability company with its principal office located at 1918
McDonald Road, Rives, Tennessee 38253 and mailing address of P.O. Box 95,
Obion, Tennessee 38240 (“EGP”) and The Patterson Group, LLC, a Tennessee
limited liability company with its principal office at and mailing address of
308 Windemere Woods Drive, Nashville, Tennessee 37215 (“Patterson Group”).

 

WHEREAS,
EGP is a development stage company organized to develop, finance, construct and
operate a proposed large-scale dry-grind ethanol processing plant (the “Ethanol
Plant”) in or around Obion, Tennessee (the “Ethanol Project”);

 

WHEREAS,
Patterson Group possesses skills, knowledge, and know-how relevant to the needs
of EGP; and

 

WHEREAS,
EGP retained Patterson Group as a consultant in the role of Chief Financial
Officer for EGP effective June 1, 2005, and in the role of Chief Executive
Officer effective July 26, 2005; and

 

WHEREAS,
Patterson Group desired to serve as a consultant for EGP in connection with the
Ethanol Project on the terms and conditions set forth herein which include
among other things a covenant not to compete; and

 

WHEREAS,
EGP and Patterson Group recognize that, in performing consulting services to
EGP hereunder, Patterson Group has had, and will in the future have, extensive
access to EGP’s confidential planning, development, manufacturing, processing,
financial, accounting, human resources, supplier/vendor, and marketing
information; and has had, and will have, opportunities to cultivate valuable
business relationships with EGP’s customers, employees, suppliers, vendors and
advisors; and

 

WHEREAS,
EGP and Patterson Group also enter into this Agreement to confirm their
agreement to protect EGP’s trade secrets, confidential information and
customer, employee, investor and other third-party relationships.

 

NOW
THEREFORE, in consideration of the foregoing and mutual obligations herein, and
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties mutually confirm and ratify their agreement on
the subject matter hereof and agree as follows:

 

Section 1.               Scope
of Work.

 

1.1           Patterson
Group is engaged by EGP to provide management services to EGP as and in the
capacity of the Chief Executive Officer and Chief Financial Officer of 

 

 

EGP,
each of which shall be an officer position with EGP.  In those capacities, Patterson Group shall
have the responsibility and authority to perform all services, acts or things
necessary or advisable to fulfill the duties of Chief Executive Officer and
Chief Financial Officer as is customary and reasonable for persons in such
management positions to manage and control the day-to-day operations of EGP and
to accomplish the purposes of EGP, and as otherwise determined by EGP’s Board
of Governors, in a professional and workmanlike manner consistent with the
policies, procedures and business plans adopted by EGP’s Board of
Governors.  Patterson Group shall have
the full authority and responsibility of a Chief Executive Officer and Chief
Financial Officer as defined by EGP’s Board of Governors (the “Board”), and
Patterson Group hereby agrees to render such services and accept such authority
and responsibility on behalf of EGP. 
Without limiting the foregoing, Patterson Group agrees to provide the
following services:

 

1.1.1        Patterson
Group shall have general active management of the business of EGP, and shall
have responsibility for all administrative and operational aspects of EGP and
for hiring and supervising all employees;

 

1.1.2        Patterson
Group shall provide and supervise all business planning and budgeting,
including short-term and long-range planning, and shall develop and present
policies to the Board for their review and approval regarding decision-making
to enable EGP to progress in the implementation of its business plan;

 

1.1.3        Patterson
Group shall serve as the contact between the Board and the other consultants
and advisors to EGP, and shall supervise and manage the day-to-day activities
of the other consultants and advisors;

 

1.1.4        Patterson
Group shall notify the Board of material events affecting EGP’s business plan
in a timely manner under the circumstances, coordinate meetings of the Board
and EGP’s members, and prepare agendas for such meetings;

 

1.1.5        Patterson
Group shall have the responsibility and power and authority to see that all
orders and resolutions of the Board are carried into effect;

 

1.1.6        Patterson
Group shall keep or supervise the keeping of accurate financial records for
EGP, and shall supervise all accounting, payroll, purchasing, cash management,
financial planning, budgeting, auditing, tax and financial management reporting
for EGP, including preparation of federal, state and local tax returns,
financial statement audits, and reporting to the Treasurer of EGP and to the
Board;

 

1.1.7        Patterson
Group shall deposit or supervise the deposit of all monies, drafts, and checks
in the name of and to the credit of EGP in such banks and depositories as the
Board shall designate from time to time, shall 

 

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endorse
or supervise the endorsement for deposit all notes, checks, and drafts received
by EGP as ordered by the Board, making proper vouchers therefore, shall
disburse EGP funds and issue checks and drafts in the name of EGP as ordered or
otherwise authorized by the Board, and, whenever requested, shall render or
supervise the rendering of an account of all its transactions as CEO or CFO and
of the financial condition of EGP;

 

1.1.8        Patterson
Group shall manage and supervise all media and community relations, and
government affairs activities; and

 

1.1.9        Patterson
Group shall perform such other services as reasonably agreed upon by Patterson
Group and the Board.

 

1.2           Patterson
Group will devote the time, attention, skill and energy to the business of EGP
as is necessary to perform the services contemplated by this Agreement,
provided that, at a minimum, Patterson Group shall devote one person on a
full-time basis as necessary to perform the services contemplated by this
Agreement and provided further that Patterson Group shall appoint James K.
Patterson as the individual from Patterson Group to perform the services
contemplated by this Agreement.

 

1.3           In order
for Patterson Group to perform the services described in Section 1.1
above, it may be necessary for EGP to provide Patterson Group with Confidential
Information (as defined below) regarding EGP’s business and products.  EGP will rely heavily upon Patterson Group’s
integrity and prudent judgment to use this information only in the best
interests of EGP.

 

1.4           In
rendering services under this Agreement, Patterson Group shall conform to high
professional standards of work and business ethics.  In no event shall Patterson Group take any
action or accept any assistance or engage in any activity that would result in
any governmental body, or other person, entity or organization acquiring any
rights of any nature in EGP’s proprietary and confidential information.

 

1.5           Other than
utilizing the services of James K. Patterson, Patterson Group shall not use the
service of any other person, entity or organization in the performance of its
duties under this Agreement without the prior written consent of EGP.

 

1.6           Patterson
Group shall provide the Board with such written, periodic reports as the Board
may reasonably request and, upon termination of this Agreement, a final report
if requested.  These reports shall become
proprietary information of EGP.

 

1.7           Notwithstanding
the foregoing, the property, funds, affairs, and the management and supervision
of the business and affairs of EGP shall continue to be the responsibility of
the Board of Governors of EGP.  With
respect to managing the 

 

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day-to-day
operations of EGP and performing the services outlined herein, Patterson Group
shall be guided by and adhere to any policies established by the Board.

 

Section 2.               Term
and Compensation.

 

2.1           The term
of this Agreement shall be for the period from the effective date hereof until
the date that EGP, upon the recommendation of Patterson Group, hires a
permanent Chief Executive Officer of EGP following EGP reaching financial
closing on its Ethanol Project, unless earlier terminated as provided in Section 10
hereof.

 

2.2           During the
term of this Agreement, EGP shall pay to Patterson Group a consulting fee of
$1,500 per week, to be paid weekly upon presentation of Patterson Group’s
invoice for services.  In the event this
Agreement terminates for any reason prior to the completion of a full week of
service by Patterson Group, EGP shall pay Patterson Group a prorated amount
equal to the number of the days in the week Patterson Group actually provided
services.

 

2.3           As
additional compensation for performing management services to EGP hereunder,
EGP agrees to pay the following compensation to Patterson Group:

 

2.3.1        A
deferred compensation amount of $125,000 shall be due and payable at financial
closing of the Ethanol Project. 
Financial closing of the Ethanol Project shall be defined as when EGP
has closed on sufficient debt, equity and other financing to construct the Ethanol
Plant and commence start-up operations with an amount of working capital EGP
believes to be reasonable, commonly known as “loan closing date.”

 

2.3.2        In
addition to the deferred compensation amount, an additional financial closing
bonus amount of $125,000 shall also be due and payable at financial closing of
the Ethanol Project, as defined for purposes of the deferred compensation
amount.

 

2.3.3        If
EGP does not reach financial closing of the Ethanol Project for any reason
(either as a result of failure to obtain necessary funding, abandonment of the
project, or otherwise), the deferred compensation payment and the financial
closing bonus payment are not due and payable or otherwise owing to Patterson
Group, nor any portion thereof.  However,
other than reaching financial closing of the Ethanol Project, there are no
contingencies or performance metrics whatsoever tied to the payment of either
amount or other conditions to EGP’s payment obligations of the foregoing
amounts that must be satisfied, except when this Agreement is terminated
under Section 10.2 hereof, in which case EGP shall not have any obligation
or liability (and shall be forever relieved and discharged of its obligation
and liability) to make the foregoing Section 2.3 payments;  

 

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and
provided further that the foregoing Section 2.3 payments shall be adjusted
as follows in event EGP does not reach financial closing on the Ethanol Project
due to a transfer by EGP of all or substantially all of its assets to another
person:

 

2.3.3.1     If
the transfer will result in a liquidating distribution to EGP’s members equal
to or in excess of 100% of their aggregate capital contributions, then EGP may
not transfer its assets unless the other person agrees to assume and make
payment of 100% of the Section 2.3 payments at financial closing of the
project;

 

2.3.3.2     If
the transfer will result in a liquidating distribution to EGP’s members in an
amount less than their aggregate capital contributions, then EGP may not
transfer its assets unless the other person agrees to assume and make payment
of the same percentage of the Section 2.3 payments as the EGP members are
receiving on their capital contributions, at financial closing of the project;

 

2.3.3.3     If
the transfer will result in noncash consideration being paid or received by EGP’s
members, then Patterson Group will be entitled to payment of the Section 2.3
payments at financial closing of the project by the person in the same noncash
consideration received by the EGP members, in an amount equal to what Patterson
Group would have received at the time of the payment to the EGP members had the
Section 2.3 payment been considered capital contributions to EGP at $1.00
per unit.

 

2.4           As
additional compensation for performing management services to EGP hereunder as
Chief Executive Officer, EGP agreed to issue Patterson Group or James K.
Patterson, as sole member of Patterson Group, a membership interest in EGP
quantified by 100,000 membership units, effective July 26, 2005 (“Compensatory
Units”), said contribution of services valued by EGP at $100,000.  The parties acknowledge that the members of
EGP approved changes to the Operating Agreement of EGP on August 23, 2005,
to authorize the issuance of membership units to officers as compensation at
not less than $1.00, and that the Compensatory Units were issued pursuant to
said change and authorization.  EGP
hereby ratifies and confirms the issuance of the Compensatory Units to James K.
Patterson as compensation for services provided and to be provided hereunder by
Patterson Group as CEO, effective as of August 23, 2005, which is the date
of the amendment to the Operating Agreement authorizing the issuance of units
for compensation at $1.00.  EGP agrees
that its books and records shall be adjusted to reflect the issuance of said
Compensatory Units to James K. Patterson, effective August 23, 2005.  The parties further agree that:

 

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2.4.1        The
Compensatory Units (and the issuance thereof) are not and shall not be subject
to forfeiture of any kind whatsoever, including the termination of this
Agreement;

 

2.4.2        EGP
shall cause its books and records to show a capital contribution by James K.
Patterson in the amount of $100,000 in respect of the Compensatory Units (i.e.,
$100,000 will be credited to the capital account of James K. Patterson);

 

2.4.3        Patterson
Group understands and agrees that it will receive a Form 1099 reporting
that EGP paid Patterson Group with non-cash property valued at $100,000 for
services rendered, by issuing James K. Patterson the Compensatory Units, and
Patterson Group consents to said direct issuance;

 

2.4.4        The
parties agree to the foregoing reporting and treatment of the Compensatory
Units;

 

2.4.5        Patterson
Group further agrees and understands that the Compensatory Units are in all
instances issued pursuant to and subject to the Operating Agreement of EGP
dated October 28, 2004, as amended, a copy of which has been provided to
Patterson Group;

 

2.4.6        EGP
ratifies and confirms that James K. Patterson was admitted to EGP as a member
effective July 26, 2005; and

 

2.4.7        James
K. Patterson, pursuant to Sections 6.1 and/or 10.6 of the Operating Agreement,
and in consideration of and as a condition of being admitted as a member
effective August 23, 2005 and being issued the Compensatory Units, by his
signature below, hereby agrees to the issuance and the foregoing reporting and
treatment of the Compensatory Units, and hereby confirms his agreement to
become a party to the Operating Agreement and to be bound in all respects by
the terms and conditions of the Operating Agreement on and after August 23,
2005.

 

2.5           As
additional consideration for performing management services to EGP hereunder as
Chief Executive Officer, EGP hereby confirms the grant of an option to purchase
up to 25,000 units of membership interests in EGP, at an exercise price of
$1.00 per unit, upon and pursuant to the terms and conditions as set forth in
the form of Unit Purchase Option attached hereto as Exhibit A.

 

2.6           As
additional consideration for performing management services to EGP hereunder as
Chief Executive Officer, EGP agreed to and hereby confirms the Board’s
appointment of James K. Patterson as a Governor of EGP during term of this Agreement,
to serve on its Board of Governors, subject in all instances to the Operating
Agreement.

 

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2.7           EGP agrees
to reimburse Patterson Group for all actual, reasonable and necessary
expenditures that are directly related to the performance of services on behalf
of EGP hereunder by Patterson Group. 
Patterson Group shall receive reimbursement upon turning in valid
receipts and other documentation for such expenditures.  In addition, any expenditure that exceeds
amounts established by board policy as requiring prior approval must be
authorized by another officer of EGP in writing prior to the expenditure.

 

2.8           During the
term of this Agreement, Patterson Group shall be responsible for all payroll
and other taxes arising from compensation paid to him under this Agreement.

 

2.9           During the
term of this Agreement, Patterson Group shall not participate in any benefit
plan EGP provides to its employees.

 

2.10         EGP will not
obtain any workers’ compensation insurance for Patterson Group during the term
of this Agreement.

 

Section 3.               Independent
Contractor.

 

3.1           Patterson
Group is an independent contractor and not an employee of EGP, and this
Agreement is not intended to create, and shall not be construed as creating,
between EGP and Patterson Group the relationship of principal and agent, joint
or co-venturers, copartners, or any other similar relationship, the existence
of which is hereby expressly denied.  The
manner in which Patterson Group’s services are rendered shall be within its
sole control and discretion.

 

3.2           Except in
the performance of its duties and obligations hereunder, unless specifically
authorized in writing to do so, Patterson Group shall not have the power or
authority to bind EGP by any representation, promise or commitment, and
Patterson Group shall not make any representation to the contrary to any third
party.

 

Section 4.               Standard
of Care; Limitation of Liability; Indemnification.

 

4.1           In
performing the services hereunder, Patterson Group and its employees and agents
shall perform their duties in a manner reasonably believed by them to be in the
best interest of EGP, subject always to the control of the Board of Governors
of EGP as to matters of company policy, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances.

 

4.2           Neither
Patterson Group nor James K. Patterson shall be personally liable to EGP for
monetary damages for a breach of duty by such person hereunder, in accordance
with and to the extent of the limitation of liability afforded governors and
officers of EGP under Section 5.6 of the Operating Agreement of EGP.

 

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4.3           EGP, its
receiver, or its trustee (in the case of its receiver or trustee, to the extent
of EGP’s property) shall indemnify, defend, save harmless, and pay all
judgments and claims against, and reasonable expenses of, Patterson Group and
James K. Patterson and each of them, relating to any liability or damage or
reasonable expense incurred with respect to a proceeding if such person was a
party to the proceeding in its or his performance of their duties hereunder or
as an officer of EGP, to the same extent EGP is obligated to indemnify, defend,
save harmless, and pay all judgments and claims against, and reasonable
expenses of, present and former governors and officers of EGP under Section 5.6
of the Operating Agreement of EGP.

 

Section 5.               Confidential
Information.

 

5.1           In
performing services under this Agreement, Patterson Group may be exposed to and
be required to use EGP’s “Confidential Information” (as defined below).  Patterson Group agrees that he will not use,
directly or indirectly, such Confidential Information for the benefit of any
person, entity or organization other than EGP or disclose such Confidential
Information without the express written authorization of an officer of EGP to
do so, either during or after the term of this Agreement.

 

5.2           “Confidential
Information” means information not generally known whether presently existing
or developed in the future by EGP, including, but not limited to trade secrets
about EGP’s Ethanol Project which includes information relating to product
strategies, financing strategies, organizational strategies, site location
strategies, permitting strategies, design/build and other contract discussions
and strategies, technical know-how, trade secret information, financial
information, plant specifications, prospective investor lists and strategies,
pricing policies, operational methods, marketing information including without
limitation strategy, sales, finance and business systems and techniques,
business plans, and other business affairs of EGP relating to the Ethanol
Project.  All information of EGP that is
disclosed to Patterson Group or which Patterson Group obtains access, whether
originated by Patterson Group on behalf of EGP or by EGP or others, shall be
presumed to be Confidential Information.

 

5.3           Upon the
termination of this Agreement for any reason, Patterson Group shall immediately
deliver to EGP all Confidential Information, including, but not limited to,
trade secrets, vendor and customer information, plant and product design
information and information related to the management and operation of EGP’s
Ethanol Plant, together with any other material belonging to EGP, whether
Confidential Information or not, that is in Patterson Group’s possession or
control.

 

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Section 6.               Rights
and Data.

 

6.1           All ideas,
concepts, drawings, models, designs, methods, information, works of authorship,
documents and tangible items prepared by Patterson Group for or submitted to
EGP by Patterson Group in connection with the services rendered under this
Agreement shall belong exclusively to EGP and shall be deemed to be works made
for hire (“Deliverable Items”).  To the
extent that any of the Deliverable Items may not, by operation of law, be works
for hire, Patterson Group hereby assigns to EGP the ownership of copyright or
patent in the Deliverable Items, and EGP shall have the right to obtain and
hold in its own name any trademark, patent or copyright registration, and any
other registrations and similar protection that may be available in the
Deliverable Items.  Patterson Group
agrees to give EGP or its designees all assistance reasonably required to
perfect such rights.

 

6.2           No license
or right is granted to Patterson Group, either expressly or by implication,
estoppel or otherwise, to use, execute, publish, reproduce, prepare derivative
works based upon, distribute copies, or publicly display the Deliverable Items
either during or after the term of this Agreement.

 

Section 7.               Inventions.

 

7.1           Patterson
Group agrees that all “Inventions” (as defined below) that Patterson Group may
conceive or reduce to practice in the performance of his services for EGP
during the term of this Agreement and all Inventions that may be conceived or
reduced to practice by Patterson Group and are based in whole or part upon
Confidential Information Patterson Group obtained or conceived as a result of
his performing services for EGP shall be the exclusive property of EGP and are
hereby assigned by Patterson Group without charge to EGP.  Patterson Group may utilize any inventions,
if EGP signs a written release to that effect.

 

7.2           “Invention”
shall mean any invention, discovery, work of authorship, modification,
improvement, concept or idea, whether patentable or not, including, but not
limited to any and all intellectual property, products, technologies, machines,
devices, instruments, processes, methods, techniques, know-how and formulae.

 

Section 8.               Non-competition
and Non-solicitation.

 

8.1           Patterson
Group acknowledges that during its engagement with EGP it, at the expense of
EGP, was and will be specially trained in the business of EGP, it will
establish favorable relations with the investors, customers, clients, and
accounts of EGP and it will have access to certain trade secrets and confidential
information of EGP, all of which have economic significance to EGP.  Therefore, in consideration of this Agreement
and the training and relations incident to Patterson Group’s engagement, and to
further protect the trade secrets and

 

9

 

confidential
information of EGP, Patterson Group agrees that, during the term of this
Agreement and for a period of twelve (12) months following its termination, for
any reason, (a) Patterson Group will not engage in, and will not render
services in any manner or capacity to (e.g., as an employee, independent
contractor, advisor, consultant, principal, agent, partner, officer, director,
stockholder, or otherwise), will not own an interest in, or otherwise affiliate
with the business of any person or organization that is engaged in or about to
become engaged in, any business in competition with the business of EGP in
Western Tennessee or Western Kentucky; and (b) Patterson Group will not
call upon, solicit or divert, or attempt to divert, investors, clients,
customers, suppliers or accounts of the business of the Company, regardless of
their location (which Patterson Group acknowledges constitute trade secret and
confidential information of the Company).

 

8.2           Section 8.1
does not prohibit Patterson Group from owning or purchasing any corporate
securities that are regularly traded on a recognized stock exchange or
over-the-counter market, or from purchasing and holding less than 10% of the
securities of a privately held company for personal passive investment
purposes, or from purchasing and owning any securities of EGP.

 

8.3           During the
term of this Agreement and for a period of one (1) year following its
termination, for any reason, Patterson Group shall not directly or indirectly
solicit, hire, recruit, or encourage any employee or agent of EGP to leave EGP
or work for any person or entity that is engaged in business in the Ethanol
Industry.

 

Section 9.               Right
to Injunctive Relief.

 

9.1           Patterson
Group acknowledges that a breach of any of the terms of Section 5, 6, 7 or
8 of this Agreement will result in irreparable harm to EGP and that a remedy at
law for such breach is inadequate and that EGP shall therefore be entitled to
any and all equitable relief, including, but not limited to, injunctive relief
and any other remedy allowed by law.  In
light of the unique knowledge of Patterson Group with respect to the business
of EGP, Patterson Group acknowledges and agrees that the restrictive covenants
contained herein are reasonable in duration and scope and not unduly
restrictive, and are necessary to protect the legitimate business interests of
EGP.  The parties agrees that if any
provision of this Agreement is held to be unlawful or unenforceable in any
respect, such illegality or unenforceability shall not affect the legality or
enforceability of any other provision of this Agreement.  In the event the terms of these restrictive
covenants are determined by a court of competent jurisdiction to be
unreasonable or over broad, the parties hereby authorize and request the court to
apply the “blue pencil doctrine” to modify the unreasonable or overly broad
covenant to make it valid and enforceable against Patterson Group.

 

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Section 10.             Termination.

 

10.1         This
Agreement shall terminate at the conclusion of its initial term, unless earlier
terminated in accordance with this Section 10.

 

10.2         If
this Agreement is terminated pursuant to this Section 10.2 (under any one
or more of the Sections 10.2.1, 10.2.2, or 10.2.3) prior to EGP reaching
financial closing of the Ethanol Project (as defined in Section 2.3
hereof), EGP shall not have any obligation or liability (and shall be forever
relieved and discharged of its obligation and liability) to make the payment
obligations to Patterson Group under Section 2.3 hereof.

 

10.2.1      This
Agreement shall terminate automatically upon the death or permanent disability
of James K. Patterson.

 

10.2.2      Patterson
Group may terminate this Agreement upon sixty days’ written notice, for any
reason.

 

10.2.3      EGP
may terminate this Agreement at any time, effective immediately upon written
notice to Patterson Group, if Patterson Group shall be in material and
continuing breach of any of its responsibilities or obligations under this
Agreement and shall have failed to cure such breach within thirty (30) days of
receiving written notice from EGP of the existence of such breach; provided,
however, that the termination of this Agreement by EGP shall not relieve
EGP of its payment obligations to Patterson Group under Section 2.3
hereof, unless such termination is for acts or omissions of Patterson Group or
James K. Patterson that involve intentional misconduct, gross negligence or a
reckless or intentional disregard for and violation of the law, in which case
EGP shall not have any obligation or liability (and shall be relieved and
discharged of its obligation and liability) to make the Section 2.3
payments.

 

10.3         Either
party may terminate this Agreement at any time, effective immediately upon
written notice to the other party, if the other party shall be in material and
continuing breach of any of its responsibilities or obligations under this
Agreement and shall have failed to cure such breach within thirty (30) days of
receiving written notice from the other party of the existence of such breach; provided,
however, that the termination of this Agreement by EGP shall not relieve
EGP of its payment obligations to Patterson Group under Section 2.3 hereof
(except to the extent provided for in Section 10.2.3 hereof).

 

10.4         The
provisions of Sections 2.3, 5, 6, 7, 8 and 10 of this Agreement, as applicable,
shall survive the termination of this Agreement and remain in full force and
effect thereafter.

 

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Section 11.             General
Provisions.

 

11.1         In the event
a court of competent jurisdiction holds any provision of this Agreement
unenforceable, such provision shall be severed and shall not affect the
validity or enforceability of the remaining provisions.

 

11.2         This
Agreement constitutes the complete agreement and sets forth the entire
understanding and agreement of the parties as to the subject matter of this
Agreement and supersedes all prior discussions and understandings in respect to
the subject matter of this Agreement, whether written or oral, except as
specifically provided otherwise herein.

 

11.3         No
modification, termination or attempted waiver of this Agreement, or any
provision thereof shall be valid unless in writing signed by the party against
whom the same is sought to be enforced.

 

11.4         The waiver
by EGP of a breach of any provision of this Agreement by Patterson Group shall
not operate as a waiver of any other or subsequent breach by Consultant.

 

11.5         This
Agreement may not be assigned by either party without the prior written consent
of the other party.

 

11.6         This
Agreement shall be governed by and construed in accordance with the laws of the
State of Tennessee.

 

11.7         Any notice
required or permitted to be given under this Agreement shall be sufficient if
in writing and sent by by certified/registered mail with return receipt
requested to the addresses first set above.

 

11.8         This
Agreement may be executed in any number of counterparts and each fully executed
counterpart shall be deemed an original.

 

11.9         Patterson
Group and EGP acknowledge that they enter this Agreement of their own free will
and that they have had ample time and opportunity to review and consider this
Agreement.

 

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IN WITNESS WHEREOF, this
Agreement is executed as of the date set forth above.

 

 

	
  ETHANOL GRAIN
  PROCESSORS, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  / Baxter Sanders /

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its

  	
  President

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE PATTERSON
  GROUP, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  / James K. Patterson /

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its

  	
  Chief Manager

  	
   

  	
   

  

 

 

In
consideration for EGP entering into this Agreement, and as owner of The Patterson
Group, LLC, the undersigned, James K. Patterson, agrees to be bound by and
adhere to each of the provisions of Sections 5, 6, 7, and 8 of this Agreement,
and further agrees to be bound by Section 2.4.7 hereof, each as of the
date first set forth above.

 

 

	
  / James K. Patterson /

  	
   

  
	
  James K.
  Patterson, individually

  

 

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AMENDMENT NO. 1

TO

MANAGEMENT CONSULTING AGREEMENT

 

THIS
AMENDMENT NO.1 (“Amendment) to MANAGEMENT CONSULTING AGREEMENT dated July 26,
2005 (“Agreement”) is made and entered into effective November 2, 2005, by
and between Ethanol Grain Processors, LLC, a Tennessee limited liability
company with its principal office located at 1918 McDonald Road, Rives,
Tennessee 38253 and mailing address of P.O. Box 95, Obion, Tennessee 38240
(“EGP”) and The Patterson Group, LLC, a Tennessee limited liability company
with its principal office at and mailing address of 308 Windemere Woods Drive,
Nashville, Tennessee 37215 (“Patterson Group”).

 

The
parties entered into a Management Consulting Agreement dated July 26, 2005
(“Agreement”).  In consideration of the
foregoing and mutual obligations therein and herein, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree to amend the Agreement as follows:

 

1.                             The
deferred compensation amount set forth in Section 2.3.1 of the Agreement
is hereby increased from $125,000 to $189,000.

2.                             The
additional financial closing bonus amount set forth in Section 2.3.2 is
hereby increased from $125,000 to $189,000.

3.                             All
references to these two amounts in the Agreement shall hereafter mean $189,000
respectively.

4.                             Absent
unusual circumstances, there will be no additional increases to either of these
two payments.

5.                             Except
to the extent amended hereby, all other terms and conditions of the Agreement
are confirmed and remain in full force and effect.

 

IN
WITNESS WHEREOF, this Amendment No. 1 to the Agreement is executed and
made effective as of November 2, 2005.

 

	
  ETHANOL GRAIN
  PROCESSORS, LLC

  	
   

  
	
   

  	
   

  
	
  By

  	
  / Baxter Sanders /

  	
   

  	
   

  
	
  Its

  	
  / President /

  	
   

  	
   

  
	
   

  	
   

  
	
  THE PATTERSON
  GROUP, LLC

  	
   

  
	
   

  	
   

  
	
  By

  	
  / James K. Patterson /

  	
   

  	
   

  
	
  Its

  	
  Chief Manager

  	
   

  	
   

  

 

In
consideration for EGP entering into this Amendment No. 1, and as owner of
The Patterson Group, LLC, the undersigned, James K. Patterson, hereby
re-affirms his agreement to be bound by and adhere to each of the provisions of
Sections 5, 6, 7, and 8 of the Agreement, and further re-affirms his agreement
to be bound by Section 2.4.7 of the Agreement, as of the date hereof.

 

 

	
  / James K. Patterson /

  	
   

  
	
  James K.
  Patterson, individuallyExhibit 10.2

 

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

 

UNIT PURCHASE
OPTION

 

To Purchase Capital Units of

 

ETHANOL GRAIN PROCESSORS, LLC

 

[November 9, 2004][January 21][June 2][July 26],
2005

 

THIS CERTIFIES
THAT, for good and valuable consideration, the receipt of which is hereby
acknowledged,                                     
[name of grantee] (the “Holder”) is entitled to subscribe for and purchase from
Ethanol Grain Processors, LLC, a Tennessee limited liability company (the “Company”),
on the terms and conditions set forth below, twenty-five thousand (25,000)
of the Company’s capital units at an exercise price of One Dollar ($1.00)
per unit, subject to anti-dilution adjustments as provided below.

 

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

 

1.             Vesting, Duration
and Forfeiture.  This Option becomes
exercisable, subject to the last sentence of this paragraph 1, on the date that
the Board of Governors of the Company determines that the Company has closed on
a sufficient amount of debt financing which, when added to the amount of the
subscription payments being held in escrow in connection with the Company’s
initial public offering of units, together with the amount of all other equity
proceeds and commitments the Company has received and all grant proceeds the
Company has received or been awarded, will allow the Company to construct the
proposed ethanol plant and provide reasonable working capital at plant start-up
(the “Vesting Date”).  This Option shall
expire five (5) years from the Vesting Date, with any remaining rights
terminating if not exercised prior to the close of business on the fifth (5th)
anniversary of the Vesting Date (the “Expiration Date”).  In the event the Holder shall, for any
reason, cease to be a member of the Board of Governors or an officer of the
Company prior to the Vesting Date, this Option shall automatically terminate.

 

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

 

 

if required) at the principal office of the Company together with
payment to it by certified or cashier’s check of the applicable purchase price.

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

	
   

  	
  ETHANOL GRAIN PROCESSORS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  / Baxter Sanders /

  
	
   

  	
  Name:

  	
  Baxter Sanders

  
	
   

  	
  Its:

  	
  President

  
				

 

3

 

Option Exercise Notice

 

Ethanol Grain Processors, LLC

1918 McDonald Road

Rives, TN  38253

 

Ladies and Gentlemen:

 

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

 

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

 

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

 

 

	
   

  	
  Dated:

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer I.D. Number

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