Document:

EXHIBIT 10.25

 

PURCHASE AGREEMENT

 

THIS AGREEMENT is made as of
 February 1, 2008 (the “Effective Date”), between Black Eagle Minerals, L.C., a
Virginia limited liability company (“Seller”), and
Tennessee Valley Agri-Energy, LLC, a Delaware limited liability company (“Buyer”).

 

In consideration of this
Agreement (“Agreement”), Seller and Buyer agree as follows:

 

1.             Sale
of Property.  Seller shall sell to
Buyer, and Buyer shall buy from Seller, the following property (collectively,
the “Property”):

 

(a)                                  Real Property.  The real property located in Section 9,
Township 4 South, Range 12 West, Colbert County, Pride Alabama,  depicted as “Parcel A” on the attached Exhibit A
 (the “Land”) together with all easements, benefits, covenants,
conditions and servitudes of any type or nature, whether now owned or hereafter
acquired, which are appurtenant to the Land, including, without limitation, all
minerals, oil, gas and other hydrocarbon substances on or under the Land, to
the extent such  easements, benefits,
covenants, conditions and servitudes are owned by Seller, as well as all
development rights, air rights, water, water rights and water stock relating to
the Land.  (Collectively, the “Real Property”).  The Real Property shall be conveyed by
covenants of special warranty subject to (i) all matters of public record
in the public records of Colbert County , Alabama and of the State of Alabama
other than security interests or judgments perfected against the Land arising
from or related to debt obligations of the Seller, (ii)) all matters that are
visible upon the Land,  (iii) all
matters that would be disclosed by an accurate survey of the Land, and (iv) the
encumbrances and other matters listed on Exhibit B attached hereto
including, without limitation certain use rights and any renewals thereof  (the “Vulcan
Use Rights”) encumbering the Real Property for the benefit of Vulcan
Construction Materials, LP and its successors and assignees (“Vulcan”), (Items (i) through (iv) being
collectively referred to hereinafter as the “Permitted
Encumbrances”).  As soon as
reasonably possible after the Effective Date, Buyer shall at its expense, cause
the surveyor preparing the Survey provided for in Section 5(b) below,
to prepare and certify to Seller and Buyer (i) that the legal description
of the Land and (ii) that the legal description provided properly and
accurately describes the area depicted as “Parcel A”  and (iii) the number of square feet of
area contained in the Land. The legal description shall be subject to the
reasonable approval of Seller and Buyer and when it is mutually approved by the
parties hereto, it shall be attached to this Agreement as Exhibit A-1.

 

(b)                                 Permits.  Seller’s interests in the rights, privileges,
interests, licenses, claims, permits and licenses (the “Permits”) used in the ownership and
operation of the Real Property and not required by Seller or its present lessee’s
to operate any portion of property to be retained by Seller, and only to the
extent they are assignable. Further, to the extent the assignment of any Permit
requires the consent from the grantor of the Permit to such assignment, the
conveyance of the Permit is conditioned upon

 

 

such
grantor’s consent, with Seller exercising reasonable efforts to obtain such
consent, but without liability for its failure to obtain it.

 

(c)                                  Records.  Copies of all records of Seller regarding the
Real Property, including all records regarding management and leasing, real
estate taxes and assessments, tenants, appraisals, environmental and soil
reports, and reports regarding the physical condition of the Property, but
excluding tax returns and such other records as are normally viewed as
confidential or which are required by applicable law to be maintained by
Seller. (The “Records”).

 

2.             Purchase
Price and Manner of Payment.

 

(a)                                  Purchase Price.  The total purchase price for the Property
(the “Purchase Price”) is Seven
Million Five Hundred Thousand and 00/100 Dollars ($7,500,000.00).  Buyer shall pay the Purchase Price to Seller
as follows:  by wire transfer of U.S.
Federal Funds to be received in Title’s trust account on or before 2:00 p.m.
on the Closing Date.

 

(b)                                 Deposit.  Buyer shall pay to Seller a deposit (the “Initial Deposit”) in the amount of Fifty
Thousand and 00/100 Dollars ($50,000.00) upon the execution of this
Agreement.  Pursuant to Section 3 of
this Agreement, Buyer may elect to make two (2) additional deposits, each
in the amount of Fifty Thousand and 00/100 Dollars ($50,000.00) (the “Additional Deposits”).  The Initial Deposit and the Additional
Deposits, if any, are collectively referred to herein as the “Deposit”. 
Except as provided for herein, any Deposit paid by Buyer to Seller
hereunder shall be nonrefundable and shall not be credited against the Purchase
Price.

 

3.             Contingencies.  The obligation of Buyer to close the purchase
of the Property is contingent upon each of the following:

 

(a)                                  Representations and Warranties.  The representations
and warranties of Seller contained in this Agreement must be true to the
knowledge of the Seller as of the effective date of this Agreement and, subject
to written modification by Seller as may be delivered to Buyer prior to the
Closing Date, on the Closing Date as if made on the Closing Date. Seller shall
have delivered to Buyer at closing a certificate dated as of the Closing Date,
signed by an authorized representative of Seller, certifying that such
representations and warranties, subject to the written modifications made by
Seller and delivered to Buyer, are true to the knowledge of the Seller as of the
Closing Date (the “Bring-down Certificate”).
Seller shall give Buyer written notice if, during the period from the Effective
Date to the Closing Date; any of Seller’s warranties or representations becomes
untrue in any material part. If, subsequent to the Effective Date but prior to
Closing, Seller delivers to Buyer written notice (including the Bring Down
Certificate) to the effect that any warranty or

 

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representation
has become untrue in any material part, then Buyer may, by notice in writing
delivered to Seller, terminate this Agreement. Thereupon, Seller shall retain
the Deposit (unless it is ultimately determined that Seller knew the warranty
or representation was untrue in a material part when made by the Seller, in
which case the Deposit shall be paid to Buyer) and neither party shall be
further liable to the other hereunder, except for obligations specifically
stated herein to survive such termination.

 

(b)                                 Title.  Title shall have been found acceptable, or
been made acceptable, in accordance with the requirements and terms of Section 5
below.

 

(c)                                  Performance of Seller’s Obligations.  Seller shall have
performed all of the obligations required to be performed by Seller under this
Agreement, as and when required by this Agreement.  Seller’s obligations include the following:

 

(i)            Seller
shall allow Buyer, and Buyer’s contractors and agents, access to the Real
Property without charge and at all reasonable times for the purpose of Buyer’s
investigation and testing the same, all of such work shall be undertaken at the
risk of Buyer and its contractors and agents. Buyer shall pay all costs and
expenses of such investigation and testing and shall hold Seller and the Real
Property harmless from all costs and liabilities relating to the Buyer’s, and
Buyer’s contractor’s and/or agent’s activities. 
Buyer shall further repair and restore any damage to the Real Property
caused by or occurring during Buyer’s testing and return the Real Property
and/or Personal Property to substantially the same condition as existed prior
to such entry.

 

(ii)           Immediately
upon the execution of this Agreement, the Seller shall deliver to Buyer a copy
of all existing surveys of the Property in the possession or control of the
Seller.

 

(iii)          Prior
to and subsequent to the Closing, Seller shall without charge to Buyer
reasonably cooperate in Buyer’s attempts to obtain all governmental approvals
necessary in Buyer’s judgment in order to make that use of the Property which
Buyer intends; provided, however, Seller shall not be required to participate
in and Buyer shall not take any action which has an adverse effect upon or
interferes with the Vulcan Use Rights. 
Prior to and after the Closing, Seller shall join in such rezoning
applications, plats, environmental worksheets and other documents as may
reasonably required by governmental bodies to accomplish the foregoing,
provided Seller shall not be required to incur any material expense, liability
or obligation in doing so; provided, however, Seller shall not be required to
participate in and Buyer shall not take any action which has an adverse effect
upon or interferes with the Vulcan Use Rights. Notwithstanding any term or
condition of this Agreement to the contrary, Buyer may not, without Seller’s
written consent, change the legal status of the Property prior to Closing in
any manner that restricts, burdens or limits in any material way the manner in
which the Property may be used compared to its status as of the Effective Date
or which imposes any material burden on the Property which, if Buyer does not
proceed with the transaction, remains and adversely affects Seller or the
Property and its use. The

 

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aforementioned
prohibited actions are referred to as “Prohibited
Changes.” The provisions of this subparagraph shall specifically
survive the Closing or the termination of this Agreement.

 

(iv)                              Within thirty (30) days from the date hereof, Seller shall
make available to Buyer true and correct copies of all Permits relative to the
Real Property being sold for the Buyer’s review and analysis.

 

(v)                                 Seller shall used all commercially reasonable efforts to
obtain prior to the expiration of the Initial Contingency Period and at its
expense (except for survey costs, which shall be the obligation of Buyer), to
obtain all necessary approvals from all governmental authorities to cause the
Land to be a legally subdivided as necessary for the conveyance of the Land as
contemplated by this Agreement and for the Land to be taxed as a separately
taxed parcel of land after the Closing (the “Subdivision”)
Notwithstanding the foregoing, subject to approval by  Title, Seller may withhold the recording of
the Subdivision upon the real property records until Closing, provided Seller
provides assurances reasonably acceptable to Buyer to the effect that the
Subdivision will be accepted for recording with the Closing Documents provided
for herein and that the recording of the Subdivision will not delay the
recording of the Deed or any of Buyer’s financing documents.

 

(d)                                 Testing.  Buyer shall have determined, on or before the
Contingency Date, that it is satisfied with the results of and matters
disclosed by soil tests, engineering inspections, hazardous waste and environmental
reviews of the Property, feasibility studies and any other tests, inspections
or reviews which Buyer in its sole determination deems necessary or desirable,
all such tests, inspections and reviews to be obtained at Buyer’s sole cost and
expense, a copy of which shall be furnished to Seller.

 

(e)                                  Document Review.  Buyer shall have determined, on or before the
Contingency Date, that it is satisfied with its review and analysis of the
Permits and all other documents and records relating to the Property.

 

(f)                                    Government Approvals.  Subject in all respects to the provision of Section 3(c) (iii) relating
to Prohibited Changes Buyer shall have obtained at its sole cost and expense on
or before the Closing Date all final governmental approvals necessary in Buyer’s
judgment in order to make the use of the Property which Buyer intends.

 

(g)                                 Financing.  Buyer shall have obtained, on or before the
Contingency Date, all commitments for equity and the debt financing as Buyer,
in its sole determination, deems necessary.

 

(h)                                 Subdivision.
Seller having completed the Subdivision in the manner set forth above on or
before the expiration of the Contingency.

 

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(i)                                     No Condemnation.  As of the Closing Date, there shall be no
pending or threatened condemnation or taking of any part of the Real Property
or any means of ingress or egress thereto (other than an immaterial taking,
which, in Buyer’s reasonable judgment, does not materially adversely affect the
intended use of the Real Property by Buyer).

 

(j)                                     No Change in Law.  As of the Closing Date, no order, statute,
rule, regulation, executive order, injunction, stay, decree or restraining
order shall have been enacted, entered, promulgated or enforced by any
governmental authority that (i) prohibits the consummation of the
transactions contemplated hereby or (ii) has a material adverse impact on
the Property or the income therefrom, including, without limitation, Buyer’s
intended use of the Property, and no litigation or governmental proceeding
seeking such an order shall be pending or threatened.

 

(k)                                  Bankruptcy and Related Matters.  At no time on or
before the Closing shall any of the following have been done by, against or
with respect to Seller: (i) the commencement of a case under Title 11 of
the U.S. Bankruptcy Code, as now constituted or hereafter amended, or under any
applicable Federal or state bankruptcy law or similar law; (ii) the
appointment of a trustee or receiver of any property interest; (iii) an
assignment for the benefit of creditors; (iv) an attachment, execution or
other judicial seizure of a substantial property interest; or (v) the
taking of, failure to take, or submission to any action indicating an inability
to meet its financial obligations as they accrue.

 

(l)                                     Further Assurances.  Seller, at the request of Buyer, shall have
furnished, executed, and delivered such documents, instruments, certificates,
notices, or other further assurances, in form and substance reasonably
acceptable to Seller, as Buyer shall reasonably request as necessary to effect
complete consummation of this Agreement and the transactions contemplated by
this Agreement.

 

The Contingency Date shall
be one hundred twenty (120) days from the date hereof (the “Contingency Date”).  The first one hundred twenty days of this
Agreement after the Effective Date and ending on the Contingency Date is also
referred to herein as the “Initial Contingency Period”.
If any of the foregoing contingencies have not been satisfied on or before the
stated date, then this Agreement may be terminated, at Buyer’s option, by
written notice from Buyer to Seller. 
Upon such termination, the Deposit shall be retained by Seller and
neither party will have any further rights or obligations regarding this
Agreement or the Property, except the indemnification in Section 12
herein.  All the contingencies set forth
in this section are specifically stated and agreed to be for the sole and
exclusive benefit of the Buyer and the Buyer shall have the right to
unilaterally waive any contingency by written notice to Seller.  Buyer may, at its option, extend the
Contingency Date for two (2) separate periods of one hundred twenty (120)
days each (the “Contingency Date Extensions”).  If Buyer desires to elect a Contingency Date
Extension, Buyer shall deliver written notice (the “Extension
Notice”) to Seller on or before the expiration of the then current
contingency period and the Extension Notice shall be accompanied by an
Additional Deposit in the amount of Fifty Thousand and 00/100 Dollars
($50,000.00) for each of the Contingency Date Extensions.

 

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4.                                       Closing.  The closing of the purchase and sale
contemplated by this Agreement (the “Closing”)
shall occur thirty (30) days after the Contingency Date, or Contingency Date
Extension, if extended or such earlier date as Buyer may establish upon twenty
(20) days written notice to Seller (the “Closing
Date”).  Time is of the
essence for the performance of this Agreement. 
The Closing shall take place at 10:00 a.m. local time at the office
of Seller’s counsel, or at such other place as may be agreed to.  Seller agrees to deliver possession of the
Property to Buyer on the Closing Date. 
The year in which the Closing Date occurs is referred to herein as the “Closing Year”.

 

A.            Seller’s Closing Documents.  On the Closing Date, Seller shall execute
and/or deliver to Buyer the following (collectively, the “Seller’s Closing Documents”):

 

(1)                                  Deed.  A Warranty Deed (the “Deed”), containing covenants of special
warranty, in a form reasonably satisfactory to Buyer and Seller, conveying the
Real Property to Buyer, free and clear of all encumbrances, except the
Permitted Encumbrances.

 

(2)                                  Use Agreement.  An Easement and Use Agreement (the “Use Agreement”) in a form acceptable to
Seller and Buyer the purpose of which is generally described in the attached Exhibit C.  Seller and Buyer shall use commercially
reasonable efforts to promptly negotiate and finalize the form of the Use
Agreement and obtain the joinder to the Use Agreement from such other parties
and Seller and Buyer deem necessary. 
When the parties have agreed upon the form of the Use Agreement, such
form shall be substituted for the Exhibit C attached hereto.

 

(3)                                  Right of First
Refusal Agreement.  The Right
of First Refusal Agreement (the “Right of
First Refusal”) provided for in Section 9 of this Agreement, in
a form reasonably satisfactory to Seller and Buyer and, when mutually approved,
attached hereto as Exhibit D.

 

(4)                                  Repurchase
Right.  The Repurchase Right (the “Repurchase Right”) provided for in Section 9
of this Agreement and in a form reasonably satisfactory to Seller and Buyer
and, when mutually approved, attached hereto as Exhibit E.

 

(5)                                  Assignment of
Permits.   An Assignment of the Permits
in form reasonably satisfactory to Buyer, assigning the Permits to Buyer,
together with the consent of all parties having a right to consent to such
Assignment  as allowed by the controlling
governmental agencies.

 

(6)                                  Bring-down
Certificate.  The Bring-down
Certificate.

 

(7)                                  Seller’s
Affidavit.  An
Affidavit of Seller indicating that on the Closing Date there are no
outstanding, unsatisfied judgments, tax liens or bankruptcies against or
involving Seller or the Real Property; that there has been no skill, labor or
material furnished to the Real Property for which payment is due and has not
been made or for which mechanics’ liens could be filed or for which arrangement
have not been made for payment in a manner reasonably satisfactory to Buyer and
Title; and that, to the knowledge of Seller, there are no other unrecorded
interests in the Real Property, 

 

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together with whatever owner’s
affidavit and/or indemnity, reasonably acceptable in form and substance to
Seller, which may be reasonably required by Title to issue an Owner’s Policy of
Title Insurance with the standard exceptions waived.

 

(8)                                  Original
Documents.  Original
copies of the Permits, and if originals are not in possession of Seller, then
Seller shall furnish true and accurate copies thereof.

 

(9)                                  FIRPTA
Affidavit.  A
non-foreign affidavit, properly executed and in recordable form, containing
such information as is required by IRC Section 1445(b) (2) and
its regulations.

 

(10)                            Other Documents.  All other documents reasonably determined by
Buyer or Title to be necessary to transfer the Property to Buyer upon the terms
and conditions set forth in this Agreement, all in a form reasonably acceptable
to Seller, Buyer and Title.

 

B.            Buyer’s Closing Documents.  On the Closing Date, Buyer shall execute
and/or deliver to Seller the following (collectively, the “Buyer’s Closing Documents”) (with Seller’s
Closing Documents and Buyer’s Closing Documents sometimes being collectively
referred to as the “Closing Documents”):

 

(1)                                  Purchase Price.  The Balance, by wire transfer of U.S. Federal
Funds to be received in Title’s trust account on the Closing Date.

 

(2)                                  Use Agreement.  The Use Agreement.

 

(3)                                  Right of First Refusal.

 

(4)                                  Repurchase
Right.

 

(5)                                  Title Documents.  Other documents as may be reasonably required
by Title in order to record the Seller’s Closing Documents and issue the Title
Insurance Policy required by this Agreement.

 

Seller and Buyer agree to
the following prorations and allocation of costs regarding this Agreement:

 

(b)                                 Title Insurance and Closing Fee.  Buyer will pay all
costs of the Commitment and the UCC Searches, defined below.  Buyer will pay all additional premiums
required for the issuance of any title insurance policy required by Buyer.  The closing fee or charge imposed by any
closing agent designated by the Title shall be paid by the Buyer.

 

(c)                                  Deed Tax.  Buyer shall pay all state deed tax, transfer
tax, or similar imposition regarding the Warranty Deed to be delivered by
Seller under this Agreement

 

(d)                                 Sales Tax.  Seller will pay all sales tax due regarding
the transaction contemplated by this Agreement.

 

7

 

(e)                                  Real Estate Taxes and Special Assessments.  Seller shall pay,
on or before the Closing Date, all special assessments levied, pending or
constituting a lien against the Real Property as of the Closing Date including
without limitation any installments of special assessments including interest
payable with general real estate taxes in 2007. 
General real estate taxes and installments of special assessments
payable therewith (“Taxes”)
payable in all years prior to the Closing Year will be paid by Seller.  Subject to Seller’s obligation with respect
to special assessments, real estate taxes due and payable in the Closing Year
shall be prorated between Seller and Buyer as of the Closing Date.  Buyer shall pay the Taxes due and payable in
all years subsequent to the Closing Year. 
If the amount of the Taxes cannot be determined on the Closing Date,
Seller will deposit with Title, from the Purchase Price, an amount equal to
110% of the most current estimate of such taxes and special assessment
installments, assuming for estimating purposes that the Real Property will be
fully assessed.  Such deposit will be
held in escrow and all interest earnings on such deposit will be paid to
Seller.  Title will retain such deposit
to pay Seller’s share of the Taxes payable when due, paying any excess over to
Seller.  Seller will pay any deficiency, when
such general real estate taxes and installments of special assessments
including interest payable therewith are known.

 

(f)                                    Recording Costs.  Buyer will pay the cost of recording all
documents, except for those documents that Seller specifically undertakes to
obtain and record pursuant to Section 5 of this Agreement.

 

(g)                                 Operating Costs.  All operating costs of the Property
including, without limitation, insurance and maintenance to the extent any is
required, will be allocated between Seller and Buyer as of the Closing Date so
that Seller pays that part of such operating costs that are attributable to the
operation of the Property before the Closing Date and Buyer pays that part of
such operating costs that are attributable to the operation of the Property
from and after the Closing Date.

 

(h)                                 Attorneys’ Fees.  Each of the parties will pay its own
attorneys’ fees, except that a party defaulting under this Agreement or any
closing document will pay the reasonable attorneys’ fees and court costs
incurred by the nondefaulting party to enforce its rights regarding such
default.

 

5.             Title
Examination.  Title Examination will
be conducted as follows:

 

(a)                                  Title Evidence.  Within twenty (20) days after the Effective
Date, Seller shall deliver to Buyer (i) any abstract of title covering the
Property in Seller’s possession or under its control and (ii) a copy of
any existing title insurance policies or title insurance commitments covering
the Property. Seller is not obligated to down date the abstract or the title
insurance commitment.  Buyer shall, as
soon as reasonably practical after it received the abstract of title, furnish
the following (collectively, the “Title
Evidence”) with a copy to Seller:

 

8

 

(1)                                  Title Insurance
Commitment.  A
commitment (the “Commitment”) for
an ALTA 2002 Form of Owner’s Policy of Title Insurance (the Title Policy
insuring title to the Real Property, deleting standard exceptions and including
affirmative insurance regarding zoning, contiguity, appurtenant easements and
such other matters as may be identified by Buyer, in the amount of the Purchase
Price, issued by a national title insurance company selected by Buyer (“Title”). 
The Commitment will commit Title to insure title to the Property subject
only to the Permitted Encumbrances.  The
Commitment shall be accompanied by true and correct copies furnished by Buyer
of all instruments noted as encumbrances therein.

 

(2)                                  UCC Searches.  A report of UCC Searches made of the Uniform
Commercial Code records of the Secretary of State of Alabama, made by said
Secretary of State, or by a search firm acceptable to Buyer, showing no UCC
filings which constitute a current security interest in and to any of the
Property.

 

(b)                                 Survey.  Buyer shall, at its election and at its
expense, cause an ALTA/ACSM current survey of the Land and the area affected by
the Use Agreement provided for herein (collectively “Seller’s Property”) to be
prepared by an Alabama Registered Surveyor (the “Survey”) which Survey shall be certified and delivered to
Seller, Buyer and Title and such other parties as Buyer elects. Buyer shall use
best efforts to cause the Survey to be prepared promptly after the execution of
this Agreement.

 

(c)                                  Buyer’s Objections.  Within twenty (20) days after receiving the
last of the Title Evidence, Buyer shall make written objections (the “Objections”) to the form and/or contents
of the Title Evidence, including the Permitted Encumbrances.  Buyer’s failure to make Objections within
such time period will constitute a waiver of Objections.  Any matter shown on such Title Evidence and
not objected to by Buyer shall be a Permitted Encumbrance hereunder. Seller
will have sixty (60) days after receipt of the Objections to advise Buyer in
writing what, if any, Objections, Seller agrees to cure. Unless Seller
specifically agrees to cure an Objection, Seller is not obligated to cure any
Objection, except to cause the Property to be released from liens resulting
from debt obligations created, allowed or suffered by Seller.  If an Objection based on a debt obligation
created, allowed or suffered by Seller can be satisfied with the payment of
money and Seller fails to satisfy same by the Closing Date, Buyer shall have
the right to apply a portion of the cash payable to Seller at the Closing to
satisfaction of such Objection and the amount so applied shall reduce the
amount of cash payable to Seller at the Closing.  If
Seller agrees to cure one or more Objections, Seller shall have twenty (20)
days after the date it agrees to cure the Objections to complete same, during
which time the Closing Date, if it intervenes during that period, shall be
postponed until seven (7) days after the expiration of the cure period. If
the Objections that Seller agrees to cure are not cured within the twenty (20)
day cure period, Buyer will have the option to do any of the following:

 

(1)           Terminate
this Agreement; in which case the Deposit shall remain the property of Seller;
or

 

9

 

(2)           Waive
the Objections and proceed to close.

 

(3)           As to Objections that Seller has
specifically agreed to cure, seek specific performance or its actual damages
resulting from Seller’s default.

 

(d)                                 Subsequent Changes to Title.  Subsequent to the delivery of the Objections,
if any, if any other matters affecting or encumbering title to the Property
arise that are not created or caused by Seller or parties acting under Seller
(the “Additional Title Matters”),
then Buyer may, at its expense, cause such Additional Title Matters to be
removed or deleted of record in a manner reasonably satisfactory to Buyer if
Buyer, or, in the alternative and provided the Additional Title Matters were
not caused or created by Buyer or parties acting under Buyer, Buyer may
terminate this Agreement and, if, and only if, the Objection is to an
encumbrance which is not a Permitted Encumbrance, receive refund of any Deposit
paid to date.

 

6.             Covenants of Seller.

 

(a)                                  Operation Prior to Closing.  During the period from the date of Seller’s acceptance
of this Agreement to the Closing Date (the “Executory
Period”), Seller shall operate and maintain the Property in the
ordinary course of business in accordance with its past practices, including
the maintenance of adequate liability insurance and insurance against loss by
fire, windstorm and other hazards, casualties and contingencies, including
vandalism and malicious mischief. 
However, except for the demolition contracts contemplated by subsection
6(e) below, Seller shall execute no contracts, leases or other agreements
(other than may be required for compliance with the Permits) regarding the
Property during the Executory Period that are not terminable on or before the
Closing Date, without the written consent of Buyer, which consent may be withheld
by Buyer at its sole discretion.

 

(b)                                 Consents.  Seller shall use commercially reasonable
efforts to obtain any approvals, waivers or other consents of third parties
which are to be obtained by Seller and are required to consummate the
transactions contemplated by this Agreement; provided, however, Seller shall
not be required to incur any material expense, liability or obligation to
obtain any such approvals, waivers or consents of third parties. Seller,
without incurring any material cost or liability, shall cooperate with Buyer in
obtaining any approvals, waivers or other consents of third parties required to
consummate the transactions contemplated by this Agreement.

 

(c)                                  Liens.  Seller shall keep the Land and the
Improvements free and clear of all liens, claims or demands, including, but not
limited to, mechanics’ liens, arising from or related to work performed and
materials provided before the Closing, and if any such lien is filed or levied,
Seller secure its release on or prior to Closing.

 

(d)                                 Insurance.  Seller shall maintain all insurance with
respect to the Property in effect on the date hereof until the Closing Date
with substantially the same coverage and limits.

 

10

 

(e)                                  Removal of Equipment and Materials.  Seller shall, at
its sole expense, remove from the Property all equipment, structures, and
materials; provided, however, Seller shall not be obligated to remove material
at or below grade or to remove concrete pads or tunnels currently located on
the Land.  The foregoing work is referred
to as the “Seller’s Work”.  Seller shall complete the Seller’s Work
within ninety (90) days after the Closing Date and shall commence and proceed
to complete the Seller’s Work as expeditiously as is reasonably possible.  Seller may subsequent to Closing, complete
the Seller’s Work and Buyer grants Seller a limited license to enter upon the
Property subsequent to Closing for the purpose of completing the Seller’s Work
provided that Seller coordinates with Buyer regarding the shared use and
staging of Seller’s and Buyer’s respective construction activities.  Seller shall pay all costs and expenses
related to the Seller’s Work and shall indemnify and hold Buyer and the Real
Property harmless from all costs and liabilities relating to the Seller’s Work,
which obligations shall survive the Closing.

 

7.             Representations
and Warranties of Seller.  Seller
represents and warrants to Buyer as follows:

 

(a)                                  Company Organization; Authority.  Seller is a limited
liability company duly organized and is in good standing under the laws of the
State of Virginia; and is duly qualified to transact business in the State of
Alabama; Seller has the requisite power and authority to enter into and perform
this Agreement and those Seller’s Closing Documents signed by it; such
documents have been duly authorized by all necessary action on the part of the
Seller and have been duly executed and delivered; such execution, delivery and
performance by Seller of such documents does not conflict with or result in a
violation of Seller’s Articles of Organization or Membership Agreements, or any
judgment, order, or decree of any court or arbiter to which Seller is a party;
such documents are valid and binding obligations of Seller, and are enforceable
in accordance with their terms.

 

(b)                                 Title to Real Property.  Seller owns the Real Property, free and clear
of any encumbrances arising from debt obligations of the Seller but subject to
the Permitted Encumbrances.

 

(c)                                  Permits.  Seller has made available to Buyer a correct
and complete copy of each Permit and its amendments in relation to the property
being purchased.  To the knowledge of
Seller, the Permits are in full force, and Seller is not in default in any
material respect under the Permits.  To
the knowledge of Seller, no other permits are required from any governmental
entity in order to operate the Property as it is now operated.

 

(d)                                 Utilities.  Seller has received no written notice of
actual or threatened reduction or curtailment of any utility service now
supplied to the Real Property.

 

(e)                                  Assessments.  Seller has received no written notice of
actual or threatened special assessments or reassessments of the Real Property.

 

11

 

(f)                                    Environmental Laws.  To the knowledge of Seller , no toxic or
hazardous substances or wastes, pollutants or contaminants (including, without
limitation, asbestos, urea formaldehyde, the group of organic compounds known
as polychlorinated biphenyls, petroleum products including gasoline, fuel oil,
crude oil and various constituents of such products, and any hazardous
substance as defined in the Comprehensive Environmental Response Compensation
and Liability Act of 1980 (“CERCLA”),
42 U.S.C. §9601-9657, as amended and as in effect as of the date of this
Agreement) have been generated, treated, stored, released or disposed of, or
otherwise placed, deposited in or located on the Property in violation of any
applicable law  currently  in effect nor has any activity been
undertaken on the Property that would cause (i) the Property to become a
treatment, storage or disposal facility within the meaning of, or otherwise
bring the Property within the ambit of, the Resource Conservation and Recovery
Act of 1976 (“RCRA”), 42 U.S.C.
§6901 et  seq., or any similar state law or local ordinance as
such laws and ordinances are presently enacted, (ii) a release or
threatened release of toxic or hazardous wastes or substances, pollutants or
contaminants, from the Property that would require a response pursuant to
CERCLA, or any similar state law or local ordinance as such laws and ordinances
are presently enacted, or (iii) the discharge of pollutants or effluents
into any water source or system, the dredging or filling of any waters or the
discharge into the air of any emissions, that would require a permit under the
Federal Water Pollution Control Act, 33 U.S.C. §1251 et  seq., or
the Clean Air Act, 42 U.S.C., §7401 et  seq., or any similar state
law or local ordinance, other than those activities on the Property for which
Seller, its predecessors or a third party held a permit or for which a permit
was not required by applicable law in effect at the time of the activity.  To the knowledge of Seller , there are no substances
or conditions in or on the Property that would be the basis of an enforceable
claim or cause of action under RCRA, CERCLA or any other federal, state or
local environmental statutes, regulations, ordinances or other environmental
regulatory requirements as such laws, ordinances and environmental regulatory
requirements are presently enacted.  To
the knowledge of Seller, no above ground or underground tanks, are located in
or about the Property in violation of applicable law as presently enacted or have
been located under, in or about the Property and have subsequently been removed
or filled in violation of applicable law as presently enacted. To the extent
storage tanks exist on or under the Real Property, to Seller’s knowledge, such
storage tanks have been duly registered with all appropriate regulatory and
governmental bodies as required applicable law as presently enacted and, to the
knowledge of Seller, otherwise are in compliance in all material respects with
applicable Federal, state and local statutes, regulations, ordinances and other
regulatory requirements as presently enacted.

 

(g)                                 Rights of Others to Purchase Property.  Seller has not
entered into any other contracts for the sale of the Property, nor are there
any rights of first refusal or options to purchase the Property.

 

(h)                                 Seller’s Defaults.   To the knowledge of Seller, Seller is not in
default in any material respect concerning any of its obligations or
liabilities regarding the Property.

 

12

 

(i)                                     FIRPTA.  Seller is not a “foreign person,” “foreign
partnership,” “foreign trust” or “foreign estate” as those terms are defined in
Section 1445 of the Internal Revenue Code.

 

(j)                                     Use of Real Property.  To the knowledge of Seller, the Real Property
is usable for its current uses without being in violation in any material
respect of any applicable federal, state, local or other governmental building,
zoning, health, safety, platting, subdivision or other law, ordinance or
regulation, or any applicable private restriction, and such use is a legal
conforming use.

 

(k)                                  Proceedings.  There is no action, litigation,
investigation, condemnation or proceeding of any kind pending or, to the
knowledge of Seller, threatened against Seller or any portion of the Property.

 

(l)                                     Compliance with Laws.  To Seller’s actual knowledge, Seller and the
Property comply in all material respects with all applicable laws, ordinances, rules and
regulations applicable to the ownership or operation of the Property.

 

(m)                               Disclaimer of Warranties.  For purposes of clarity, Seller has not made
and does not make any representations or warranties to Buyer whatsoever,
express or implied, or arising by operation of law, with respect to the
Property, or any part thereof, including, but in no way limited to, any
warranty of condition, merchantability, habitability or fitness for a
particular purpose, value, profitability, marketability, title (other than that
it is free from liens arising from or related to debt obligations of the Seller),
or, the disclosure of the facts and circumstances within the actual knowledge
of Seller which are required to be disclosed by Items 7(a) through (l) herein
above.

 

For purposes of this Section 7,
the term “to the knowledge of Seller” shall mean and be limited to the actual
knowledge of Ed Bunn, Jason Davidson and Joe Shawhan. The foregoing shall not
create any personal liability on the part of the aforementioned individuals for
any breach or default of this Agreement.

 

Seller will indemnify Buyer,
its successors and assigns, against, and will hold Buyer, its successors and
assigns, harmless from, any expenses or damages including reasonable attorneys’
fees, that Buyer incurs because of the breach of any of the above
representations and warranties, whether such breach is discovered before or
after closing, unless disclosed in writing to Buyer prior to Closing or
disclosed in the Bring Down Certificate. 
Each of the representations and warranties herein contained shall
survive for two (2) years from the date of the Closing.  Consummation of this Agreement by Buyer with
knowledge of any breach of such representations and warranties by Seller will
not constitute a waiver or release by Buyer of any claims due to such breach;
provided, however, Buyer shall provide Seller with written notice of any such
breach immediately upon Buyer having knowledge thereof and shall give Seller a
reasonable opportunity to cure any such breach and to mitigate any damages to
Seller arising therefrom or related thereto. Notwithstanding the foregoing,
Seller shall have no liability for damages for the breach of any of the
warranties and representations contained herein   until any individual claim therefore exceeds
the amount of $25,000. Seller’s liability for damages for the breach of any of
the warranties and representations contained herein 

 

13

 

shall be limited to actual
damages (and not special or consequential damages) and shall be limited to the
sum of $2,000,000.00 

 

8.                                       Representations and Warranties of Buyer.  Buyer represents
and warrants to Seller that Buyer is a limited liability company duly organized
in the State of Delaware and is qualified to transact business in the State of
Alabama; that Buyer has the requisite company power and authority to enter into
this Agreement and the Buyer’s Closing Documents signed by it; such documents
have been duly authorized by all necessary corporate action on the part of
Buyer and have been duly executed and delivered; that the execution, delivery
and performance by Buyer of such documents do not conflict with or result in
violation of Buyer’s Articles of Organization or Membership Agreements or any
judgment, order or decree of any court or arbiter to which Buyer is a party;
such documents are valid and binding obligations of Buyer, and are enforceable
in accordance with their terms.  Buyer
will indemnify Seller, its successors and assigns, against, and will hold
Seller, its successors and assigns, harmless from, any expenses or damages,
including reasonable attorneys’ fees, that Seller incurs because of (i) the
breach of any of the above representations and warranties, whether such breach
is discovered before or after closing and (ii) the ownership, operation
and maintenance of the Property by Buyer, its successors and assigns, after the
Closing.   Consummation of this Agreement
by Seller with knowledge of any breach of such warranties and representations
by Buyer will not constitute a waiver or release by Seller of any claims due to
such breach, provided, however, Seller shall provide Buyer with written notice
of any such breach immediately upon Buyer having knowledge thereof and shall
give Buyer a reasonable opportunity to cure any such breach and to mitigate any
damages to Seller arising therefrom or related thereto. Each of the
representations and warranties herein contained shall survive for two (2) years
from the date of the Closing.  
Notwithstanding the foregoing, Buyer shall have no liability for damages
for the breach of any of the warranties and representations contained herein
until any individual claim therefore exceeds the amount of $25,000. Buyer’s
liability for damages for the breach of any of the warranties and
representations contained herein shall be limited to actual damages (and not
special or consequential damages) and, together with Buyer’s liability under Section 12
of this Agreement, shall be limited to a total sum of $2,000,000.00.

 

9.                                       Right of First Refusal and Repurchase Right.

 

(a)                                  Right of First Refusal.  Seller is the owner of certain real property
(the “Adjacent Property”) lying
adjacent to the Property.  At Closing,
Seller shall grant to Buyer a right of first refusal if Seller receives an
offer to sell all or any part of the Adjacent Property, which offer Seller
desires to accept (the “Right of First
Refusal”).  The Right of First
Refusal shall be subject to any rights previously granted to Seller’s present
lessee or any tenant or user of the Adjacent Property.

 

(b)                                 Repurchase Right.  At Closing, Buyer shall grant Seller the
right, but not the obligation, to repurchase the Property if Buyer does not
commence construction of its intended improvements within one (1) year
after the Closing Date (the “Repurchase Right”).

 

10.                                 Condemnation.  If, prior to the Closing Date, eminent domain
proceedings are commenced against all or any material part of the Property (as
reasonably determined by Buyer), 

 

14

 

Seller
shall immediately give notice to Buyer of such fact and at Buyer’s option (to
be exercised within thirty (30) days after Seller’s notice), this Agreement
shall terminate, in which event neither party will have further obligations
under this Agreement. Thereupon, the Deposit shall be retained by Seller;
provided, however, if Seller manipulated the eminent domain proceedings in bad
faith for the purpose of thwarting the intent of this Agreement, $50,000 of the
Deposit shall be paid to Seller and the balance of the Deposit, if any, shall
be paid to Buyer   If Buyer shall fail to
give such notice, there shall be no reduction in the Purchase Price, and Seller
shall assign to Buyer at the Closing Date all of Seller’s right, title and
interest in and to any award made or to be made in the condemnation proceedings
which relates to the Real Property.

 

11.           Broker’s
Commission.  Seller and Buyer
represent and warrant to each other that they have dealt with no brokers,
finders or the like in connection with this transaction, and agree to indemnify
each other and to hold each other harmless against all claims, damages, costs
or expenses of or for any other such fees or commissions resulting from their
actions or agreements regarding the execution or performance of this Agreement,
and will pay all costs of defending any action or lawsuit brought to recover
any such fees or commissions incurred by the other party, including reasonable
attorneys’ fees.

 

12.           Indemnification
of Seller.  Buyer shall indemnify
Seller, its members, managers, affiliates, successors, assigns and lessees against,
and hold each harmless from, all liabilities or losses (including reasonable
attorneys’ fees and other costs of defense in defending against claims) arising
out of the ownership, operation or maintenance of the Property after the
Closing, except with respect to matter caused, created or allowed by Seller
prior to Closing. Buyer shall take no action, allow any omission or conduct any
activity upon the Property before or after the Closing which interferes with
the use of the Adjacent Property by Seller’s present lessee or the exercise of
any of the Vulcan Use Rights. Such rights of indemnification will not arise to
the extent that (a) the party seeking indemnification actually receives
insurance proceeds or other cash payments directly attributable to the
liability in question, (net of the cost of collection, including reasonable
attorneys’ fees and other costs of defense) or (b) to the degree the claim
for indemnification arises out of the negligence or intentional acts of Seller
or parties acting under Seller’s control or direction. Buyer’s liability
contained herein shall be as to Seller’s “losses”, the actual losses or
liability actually incurred by Seller (as opposed to consequential or special
losses or damages) after Seller having taken reasonable steps to mitigate its
losses.   Any indemnity agreement made by
Buyer in favor of Seller as part of the Use Agreement shall be in addition to,
and shall not be limited by, the indemnification provisions of this Section 12.

 

13.           Assignment.  Buyer may assign its rights under this
Agreement without the consent of Seller provided the assignee confirms to
Seller in writing at the time of such assignment  that it intends to use the Property for a use
materially the same as Buyer’s intended use. Any assignment to a third party
that intends to use the Property for a use that is materially different than
Buyer’s intended use is prohibited. Any such assignment will not relieve such
assigning party of its obligations under this Agreement.

 

14.           Survival.  All of the terms of this Agreement will
survive and be enforceable after the Closing except as noted herein.

 

15

 

15.           Notices.  Any notices required or permitted to be given
hereunder shall be in writing and shall be effective (i) when delivered
personally, (ii) when received by overnight courier service or (iii) three
(3) days after being deposited in the United States Mail (sent certified
or registered, return receipt requested), in each case addressed as follows (or
to such other address as the parties hereto may designate in the manner set
forth herein):

 

	
  If to Seller:

  	
   

  	
  Black
  Eagle Minerals, L.C.

  
	
   

  	
   

  	
  c/o
  Central Coal Company

  
	
   

  	
   

  	
  148
  Bristol East Road

  
	
   

  	
   

  	
  Bristol,
  Virginia 24202

  
	
   

  	
   

  	
  Attn:
  Ed Bunn

  
	
   

  	
   

  	
  Email:
  edbunn@eagelcompany.net

  
	
   

  	
   

  	
  Fax:
  276-669-3543

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  E.
  Forrest Jones, Jr.

  
	
   

  	
   

  	
  Jones &
  Associates

  
	
   

  	
   

  	
  No. 13
  Kanawha Blvd. W.

  
	
   

  	
   

  	
  Charleston,
  WV 25302

  
	
   

  	
   

  	
  Email:
  efjones@efjones.com

  
	
   

  	
   

  	
  Fax:
  (304) 345-2456

  
	
   

  	
   

  	
   

  
	
  If to Purchaser:

  	
   

  	
  Tennessee
  Valley Agri-Energy, LLC

  
	
   

  	
   

  	
  540
  Little Dry Creek Road

  
	
   

  	
   

  	
  Pulaski,
  Tennessee 38478

  
	
   

  	
   

  	
  Attn:
  Bartt McCormack

  
	
   

  	
   

  	
  Email:
  barttmcc@walesstation.com

  
	
   

  	
   

  	
  Fax:
  (931) 424-6168

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Lindquist &
  Vennum P.L.L.P.  .

  
	
   

  	
   

  	
  4200
  IDS Center

  
	
   

  	
   

  	
  80
  South Eighth Street

  
	
   

  	
   

  	
  Minneapolis,
  MN 55402

  
	
   

  	
   

  	
  Attn:
  Michael S. Margulies

  
	
   

  	
   

  	
  Email:
  mmargulies@lindquist.com

  
	
   

  	
   

  	
  Fax:
  (612) 371-3207

  
	
   

  	
   

  	
   

  

 

Notices shall be deemed
effective on the earlier of the date of receipt or the date of deposit as
aforesaid.  Any party may change its
address for the service of notice by giving written notice of such change to
the other party, in any manner above specified, ten (10) days prior to the
effective day of such change.

 

16.           Captions.  The paragraph headings or captions appearing
in this Agreement are for convenience only, are not a part of this Agreement
and are not to be considered in interpreting this Agreement.

 

16

 

17.           Entire
Agreement; Modification.  This
written Agreement constitutes the complete agreement between the parties and
supersedes any prior oral or written agreements between the parties regarding
the Property.  There are no verbal
agreements that change this Agreement and no waiver of any of its terms will be
effective unless in writing executed by the parties.

 

18.           Binding
Effect.  This Agreement binds and
benefits the parties and their successors and assigns.

 

19.           Controlling
Law.  This Agreement has been made
under the laws of the State of Alabama and such laws will control its
interpretation.

 

20.           Remedies.  If Buyer defaults under this Agreement, and
remains in default for a period of thirty (30) days after the date Seller
delivers written notice of default to Buyer, then Seller may terminate this
Agreement by notice in writing delivered to Buyer.  Thereupon, the Deposit shall be retained by
Seller as liquidated damages hereunder. 
The foregoing termination procedure shall be the sole remedy of Seller
for Buyer’s default under this Agreement and the sole damages payable to Seller
for Buyer’s default; provided, however, Seller may further recover any amount
payable to Seller for damages to the Property as set forth in Section 3(c)(i) herein
above or for indemnification obligations of Buyer to Seller as set forth in
this Agreement .  If Seller defaults in the
performance of its obligations hereunder, Buyer may pursue, under Alabama Law,
the right to specific performance, provided that any such action for specific
performance must be commenced within three (3) months after the date of
Seller’s default. If   Buyer prevails in
an action for specific performance, Buyer shall also be entitled to receive its
costs and expenses of bringing the action, including reasonable attorney’s and
professional fees; provided, however, in such event, Seller shall not be liable
to Buyer for the collective amount of any costs of performance and costs and
expenses of bringing the action, including reasonable attorney’s and
professional fees, in an amount greater than One Million Dollars
($1,000,000.00). If, but only if, a court of competent jurisdiction determines
that the remedy of specific performance is not available, then Buyer may seek
its actual damages and all of Buyer’s costs and expenses of bringing the
action, including reasonable attorneys’ fees and professional fees, resulting
from Seller’s default; provided, however, in such event, Seller shall not be
liable to Buyer for the collective amount of any actual damages and costs and
expenses of bringing the action, including reasonable attorneys’ fees and
professional fees, or other relief, in an amount greater than One Million
Dollars ($1,000,000.00).   In no event
shall Seller be liable to Buyer for special, consequential or punitive damages
and Buyer hereby waives any claim with respect thereto.

 

21.           Counterparts.  This Agreement may be executed in multiple
counterparts which, when taken together, shall constitute a single instrument.

 

Seller and Buyer have
executed this Agreement as of the date first written above.

 

[Remainder
of Page Intentionally Left Blank]

 

17

 

[Signature Page of
Seller to Purchase Agreement]

 

 

	
   

  	
  SELLER

  
	
   

  	
   

  
	
   

  	
  Black Eagle Minerals, L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /S/
  E. D. Bunn

  
	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
    Manager

  

 

 

[Signature Page of
Buyer to Purchase Agreement]

 

 

	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  Tennessee Valley
  Agri-Energy, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /S/
  Bartt R. McCormack

  
	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
    Chairman/President

  

 

 

SCHEDULE OF
EXHIBITS

 

EXHIBIT A – Real Property
Depiction

 

EXHIBIT A-1 – Real Property
Legal Description

 

EXHIBIT B – Permitted
Encumbrances

 

EXHIBIT C – Use Agreement
Summary (to be substituted by the Use Agreement when completed)

 

EXHIBIT D – Right of First
Refusal

 

EXHIBIT E – Repurchase Right

 

 

EXHIBIT A

 

Depiction of
the Real Property

 

 

A-1

 

EXHIBIT A-1

 

Legal
Description of the Real Property

 

A-1-1

 

EXHIBIT B

 

Permitted
Encumbrances

 

1.  All utility and
governmental easements, rights-of-way and rights of entry.

 

2.  All agreements with the
Norfolk Southern railroad and its affiliates with respect to the location,
operation, use or crossing of the rail facilities presently located on Seller’s
Property.

 

3.  All governmental permits
held by Seller or Seller’s lessee with respect to Seller’s Property.

 

4.  All agreement between
Seller and Seller’s present lessee with respect to use of Seller’s Property by
Seller’s present lessee.

 

5.  All agreements
contemplated by this Agreement.

 

B-1

 

EXHIBIT C

 

Use Agreement
Summary

 

Seller and Buyer shall enter
into an Easement and Use Agreement (the “Use Agreement”).  The Use Agreement will, without limitation,
include the following:

 

(a)                                  Non-exclusive
easements running from Seller for the benefit of the Buyer and the Real
Property over and across Seller’s Property for the purpose of ingress and
egress to the Real Property and for the use of the roadways as currently
located within Seller’s Property which are not currently leased or controlled
by Seller’s present lessee;

 

(b)                                 Non-exclusive
rights to use the railway lines now existing on Seller’s Property;

 

(c)                                  Exclusive
easement rights to use certain dock areas located on Seller’s Property,
together with non-exclusive rights to use wharf area adjacent to the dock
areas;

 

(d)                                 Non-exclusive
utility easements; and

 

(e)                                  Non-exclusive
grant of an easement for drainage purposes over Seller’s Property.

 

The Use Agreement will
recognize the Vulcan Use Rights and will attempt, to the greatest degree
possible, to create the use rights in favor of Buyer in such a manner that such
use rights do not conflict or interfere with the Vulcan Use Rights.  To the extent that any of the rights proposed
to be granted under the Use Agreement would interfere or conflict with the
Vulcan Use Rights, such grant shall be conditioned upon Vulcan’s written
consent and, in any event, Seller and Buyer intend to obtain the acknowledgment
and consent of Vulcan to the Use Agreement.

 

The Use Agreement will
provide for the delegation of responsibility for certain common area
maintenance within Seller’s Property for common areas that benefit Seller,
Vulcan, and Buyer and will provide for the equitable sharing of the common area
maintenance costs.

 

The Use Agreement will
create an easement over and across the Real Property consisting  of a strip of land along the perimeter of the Real
Property to allow for the construction and maintenance of a rail car loading
area or areas, with structural improvements, serving the rail tracks located on
the Seller’s Property.

 

The Use Agreement will
provide that if the ownership of the plant facility to be constructed on the Real
Property becomes separate from the ownership of the Real Property, the owner of
the plant facility shall be jointly or severally liable for the performance and
payment of the TVAE liabilities and obligations under the Use Agreement.

 

The Use Agreement will
obligate the owner of the Real Property to pay to Seller a Tonnage Charge (the “Tonnage Charge”) as generally described in the Letter of
Intent between Seller and Buyer dated November 7, 2007.

 

C-1

 

EXHIBIT D

 

Right of
First Refusal

 

D-1

 

EXHIBIT E

 

Repurchase
Right

 

E-1EXHIBIT 10.26

 

	
  FAGEN

  	
   

  	
  501 West Hwy.
  212, P.O Box 159

  
	
   

  	
   

  	
  Granite Falls,
  MN 56241

  
	
  INC.

  	
   

  	
   

  	
  www.fageninc.com

  	
  320-564-3324

  
							

 

	
  Civil –
  Mechanical – Electrical Contractors

  	
   

  	
  320-564-3278 fax

  

 

February 1, 2008

 

Tennessee Valley
Agri-Energy, LLC

Attention:  Bartt McCormack

540 Little Dry
Creek Road

Pulaski, TN 38478

 

Re:          Tennessee Valley
Agri-Energy, LLC Ethanol Project

 

Dear Bartt:

 

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

 

The Parties agree
to effect the Transaction subject only to the execution and delivery (in each
case in a form satisfactory to Fagen) of a definitive Design-Build
Agreement and other ancillary instruments and agreements (the “Transaction
Documents”). The Parties agree that the Transaction Documents must be
executed and delivered by the parties thereto no later than December 31,
2009 (the “Closing Date”); or this Letter of Intent will terminate in
accordance with Paragraph 11(a) hereof.

 

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

 

(a)           Fagen agrees to provide Owner with those
services as described in this Letter of Intent which are necessary for Owner to
develop a detailed description of a one hundred ten (110) million gallons per
year (“MGY”) nameplate capacity, dry grind ethanol production facility
located at Tuscumbia, Alabama (the “Plant”) and to establish a price for
which Fagen would provide design, engineering, procurement of equipment and
construction services for the Plant. The description of the Plant will be
sufficiently detailed to permit an analysis of the Owner’s lump-sum cost to
develop the Plant and to develop an economic pro forma sufficient to determine
if the Plant can be financed.

 

(b)           Fagen
will also provide Owner with assistance in evaluating, from both a technical
and business perspective, the appropriate location of the Plant and business
plan development. Fagen will assume no risk or liability of representation or
advice to Owner by assisting in evaluating the above and all

 

 

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

 

(c)           Fagen
will also provide Owner with conceptual design and technical information
required to support Owner’s application for a construction air permit prior to
the commencement of Plant Construction.

 

(d)           If Owner determines
that the Plant is economically feasible and desires to proceed with the
development of the Plant, then Owner
agrees to enter into a Lump Sum Design-Build contract with Fagen for the
design, procurement of equipment and construction of the Plant (the “Design-Build
Agreement”).

 

(e)           Owner shall offer Fagen the right to invest in the project. Unless otherwise
specifically agreed between Fagen and Owner, such investment shall be offered
on the same terms and conditions as all other investors.

 

(f)            Owner agrees that the Design-Build Agreement
will be Fagen’s chosen form of Design-Build Agreement and will contain
among other things, those terms and conditions set forth in the Contract Price
and General Terms and Conditions sections of this Letter of Intent.

 

2.     Contract Price. Owner shall pay Fagen One Hundred
Forty-eight Million Six Hundred Thousand Dollars ($148,600,000) (the “Contract
Price”) as full consideration to Fagen for complete performance of the
services described in the Design-Build Agreement and all costs incurred in
connection therewith.  The Contract Price
is based upon Fagen’s standard plant design, attached hereto as Exhibit A,
and shall be subject to adjustments to reflect any deviations from standard
design requested by Owner; provided, however, that all requested deviations
from Fagen’s standard design must be submitted to Fagen by Owner no later than
the earlier of: (a) the date upon which the Phase I engineering is
scheduled to be delivered to Owner pursuant to the Phase I and Phase II
Engineering Services Agreement (as such term is defined herein); or (b) 
the date upon which the Design-Build Agreement is executed. The Contract Price
shall be subject to the following:

 

(a)           The Contract Price
shall not include any costs related to union labor or prevailing wage
requirements. If any action by Owner, a change in applicable law, a governmental
authority (as those terms are defined in the Design-Build Agreement) acting
pursuant to a change in applicable law, or local or regional 

 

2

 

labor
considerations or availability, shall require Fagen, in its reasonable
judgment, to employ union labor or compensate labor at prevailing wages, the
Contract Price shall be adjusted upwards to include any increased costs, of any
kind or nature, associated with such labor or wages including but not limited to
site security and personnel costs. Such adjustment shall include, but not be
limited to, increased labor, subcontractor, and material and equipment costs
resulting from any union or prevailing wage requirement; provided, however,
that if an option is made available to either employ union labor, or to
compensate labor at prevailing wages, such option shall be at Fagen’s sole
discretion and that if such option is executed by Owner without Fagen’s
agreement, Fagen shall have the right to terminate this Letter of Intent or the
Design-Build Agreement, as applicable, and receive compensation pursuant to
Paragraph 4(c) hereof or the terms of the Design-Build Agreement,
whichever is applicable.

 

(b)           If the Construction
Cost Index published by Engineering News-Record Magazine (“CCI”) for the
month in which a Notice to Proceed is given to Fagen is greater than 8045.14 (October 2007),
the Contract Price shall be increased by a percentage amount equal to the
percentage increase in CCI.

 

(c)           Due to rapidly
accelerating costs of certain specialty materials required for Plant
Construction, in addition to any adjustment provided for in Paragraph 2(b) hereof,
Fagen shall also add a surcharge to the Contract Price of one half of one
percent (0.50%) for each calendar month that has passed between August 2008
and the month in which a valid Notice to Proceed is given to Fagen, up to a
maximum of twelve months of adjustment. By way of example, if a valid Notice to
Proceed is given in August 2008 and the CCI has increased two percent (2%)
over such period of time, the total adjustment to the Contract Price shall be
two percent (2%) in accordance with Paragraph 2(b). By way of further example,
if a valid Notice to Proceed is given in August 2009 and the CCI has
increased two percent (2%) over such period of time, the total adjustment to
the Contract Price shall be two percent (2%) in accordance with Paragraph 2(b) plus
one half of one percent (0.50%) for each of the twelve months from August 2008
to the delivery of a valid Notice to Proceed in accordance with this paragraph,
for a total adjustment of eight percent (8%).

 

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

 

(a)           Fagen
will have no responsibility for and will not perform any site preparation
work. Owner’s site responsibilities, in each instance in accordance with
applicable specifications provided by Fagen, will include, but will not be
limited to:

 

	
  i.

  	
   

  	
  Obtaining land and legal
  authority to use the site for its intended purpose;

  
	
   

  	
   

  	
   

  
	
  ii.

  	
   

  	
  site grading including
  soil stabilization and the costs connected therewith;

  

 

3

 

	
  iii.

  	
   

  	
  final grading, seeding,
  and mulching;

  
	
   

  	
   

  	
   

  
	
  iv.

  	
   

  	
  site security,
  including any site fencing;

  
	
   

  	
   

  	
   

  
	
  v.

  	
   

  	
  procuring boundary and
  topographic surveys;

  
	
   

  	
   

  	
   

  
	
  vi.

  	
   

  	
  procuring soil borings
  and geotechnical reports;

  
	
   

  	
   

  	
   

  
	
  vii.

  	
   

  	
  obtaining all operating
  permits, including any fees, bonding, and required testing;

  
	
   

  	
   

  	
   

  
	
  viii.

  	
   

  	
  obtaining storm water
  runoff permit and erosion control/land disturbance permit;

  
	
   

  	
   

  	
   

  
	
  ix.

  	
   

  	
  obtaining any necessary
  pollutant elimination discharge permit;

  
	
   

  	
   

  	
   

  
	
  x.

  	
   

  	
  obtaining a natural gas
  supply and service agreement and providing all gas piping to the use points,
  providing burner tip pressures as specified by Fagen, and supplying a digital
  flowmeter;

  
	
   

  	
   

  	
   

  
	
  xi.

  	
   

  	
  securing temporary
  utilities for the duration of construction and permanent electrical service,
  including all infrastructure design and installation for any line/service
  extensions, substation, primary feed and metering system, and on-site
  electrical distribution system up to and including the service transformers;

  
	
   

  	
   

  	
   

  
	
  xii.

  	
   

  	
  supplying a water
  source, storage, and water supply lines of appropriate quality and quantity;

  
	
   

  	
   

  	
   

  
	
  xiii.

  	
   

  	
  paying for a water
  pre-treatment system, including any building or structure required to house
  such system and other equipment, the cost of which is not included in the
  Contract Price, which shall be provided by a vendor selected by Fagen and
  designed and constructed by Fagen pursuant to a separate side-letter
  agreement executed by Owner and Fagen at Fagen’s standard time plus material
  rates during the relevant time period and at the relevant locale (the “Water
  Pre-Treatment System Agreement”), and maintaining and using such system,
  including the use of all chemicals specified for the operation of such water
  pre-treatment system, for the entirety of the warranty period, it being
  agreed that failure by Owner to maintain and properly use the water
  pre-treatment system for the duration of the warranty period shall void any
  and all warranties affected by such failure.

  
	
   

  	
   

  	
   

  
	
  xiv.

  	
   

  	
  providing wastewater
  discharge piping, septic tank and drainfield or connect to a municipal system
  as required for the sanitary sewer requirements of the Plant;

  
	
   

  	
   

  	
   

  
	
  xv.

  	
   

  	
  providing and maintain
  required ditches and permanent roads;

  
	
   

  	
   

  	
   

  
	
  xvi.

  	
   

  	
  constructing,
  furnishing, and equipping the administration building;

  
	
   

  	
   

  	
   

  
	
  xvii.

  	
   

  	
  providing maintenance
  and power equipment and spare parts;

  
	
   

  	
   

  	
   

  
	
  xviii.

  	
   

  	
  providing all rail
  design, engineering, and construction, including any railroad permits or
  approvals;

  
	
   

  	
   

  	
   

  
	
  xix.

  	
   

  	
  supplying drawings of
  rail system and administration building to Fagen; and

  
	
   

  	
   

  	
   

  
	
  xx.

  	
   

  	
  paying for the required
  fire protection system for the Plant, including any building or structure
  required to house such system, the cost of which is not included in the
  Contract Price, and which shall be provided by Fagen

  

 

4

 

	
   

  	
   

  	
  pursuant to a separate
  side-letter agreement executed by Owner and Fagen at Fagen’s standard time
  plus material rates during the relevant time period and at the relevant
  locale (the “Fire Protection System Agreement”).

  

 

(b)           Owner will enter into a
Phase I and Phase II Engineering Services Agreement with Fagen Engineering, LLC
(“Phase I and Phase II Engineering Services Agreement”). The Phase I and
Phase II Engineering Services Agreement will provide for commencement of  work on the Phase I and Phase II engineering
for the project as set forth therein. The Phase I engineering shall consist of
engineering and design of the Plant site and shall include: property layout;
grading, drainage and erosion control plan drawings; roadway alignment
drawings; culvert cross sections and details; and seeding and landscaping, if
required. The Phase II engineering shall consist of engineering and design of
site work and utilities for the Plant, all within the property line of the
Plant, including: property layout; site grading and drainage drawings; roadway
alignment; all utility layout including fire loop, potable water, well water if
applicable, sanitary sewer, utility water blowdown, and natural gas; geometric
layout; site utility piping tables; tank farm layout; tank farm details;
sections and details drawing, if required, and miscellaneous details drawing,
if required. Owner will pay Fagen Engineering, LLC One Hundred Eighty-five
Thousand Dollars ($185,000) for such engineering services pursuant to the terms
of that agreement, the full amount of which, upon payment in full, shall be
included in and credited to the Contract Price. Notwithstanding the foregoing
sentence, if a Notice to Proceed is not issued pursuant to the terms of the
Design-Build Agreement, or Financial Closing is not obtained, then Fagen
Engineering, LLC  shall keep the full
amount paid under the Phase I and Phase II Engineering Services Agreement as
compensation for the services provided thereunder.

 

(c)           Fagen
will provide reasonable assistance to Owner in obtaining Owner’s permits,
approvals and licenses. Notwithstanding the foregoing, Owner shall hold
harmless Fagen, its officers, directors, employees, and agents, for Owner’s
failure to comply with applicable laws in obtaining or maintaining the required
permits. The denial or revocation of any Owner-obtained permit as a result of
Owner’s failure to comply with applicable laws shall entitle Fagen to an
extension of contract times and an adjustment of Contract Price to the extent
affected by such denial or revocation and to any and all other remedies
available pursuant to the Design-Build Agreement and applicable law.

 

(d)           Owner
will provide:  surveys describing the
property’s boundaries; geotechnical studies describing subsurface conditions;
temporary and permanent easements, zoning and other requirements and
encumbrances to enable Fagen to perform the work; a legal description of
the site; as-built and record drawings of any existing structures;
environmental studies, reports, and statements describing the environmental
conditions, including hazardous conditions at the site.

 

5

 

(e)           Owner
will be responsible for securing and executing all necessary real estate
agreements to secure the site and is responsible for all costs incurred in
obtaining those agreements.

 

(f)            Fagen
may subcontract portions of the work.

 

(g)           Fagen
will provide up to two (2) weeks of training for Owner’s employees and, if
applicable, Owner’s Operator’s employees required for the operation and
maintenance of the Plant.

 

(h)           Owner
must obtain Escrow Closing prior to the issuance of a Notice to Proceed. For
purposes of this Letter of Intent, Escrow Closing means when Owner has
satisfied all of the conditions to release subscription proceeds from escrow in
its primary equity offering and such proceeds are released from escrow (“Escrow
Closing”).

 

(i)            Owner
will pay, at Fagen’s standard time plus material rates during the relevant time
period and at the relevant locale,  all
reasonable costs incurred by Fagen for frost removal so that winter
construction can proceed. Such costs will be in addition to, and not included
in, the Contract Price.

 

(j)            Fagen
will utilize certain proprietary property and information of ICM, Inc., a
Kansas corporation (“ICM”), in the design and construction of the
project, and may incorporate proprietary property and information of ICM
into the project. Owner’s use of the proprietary property and information of
ICM shall be governed by the terms and provisions of a license agreement
between Owner and ICM which shall be attached as an exhibit to the
Design-Build Agreement. Owner will be responsible for negotiating any requested
changes to the ICM license directly with ICM, not Fagen.

 

(k)           All
drawings, specifications, calculations, data, notes and other materials and
documents, including electronic data furnished by Fagen to Owner under the
Design-Build Agreement (“Work Product”) will be instruments of service
and Fagen will retain the ownership and property interests therein, including
copyrights thereto.

 

(l)            Upon
payment in full under the Design-Build Agreement, Fagen will grant Owner a
limited license to the Work Product for use solely in connection with the
operation, maintenance, and repair of the Plant. The limited license will not
permit Owner to use the Work Product in connection with any expansion or
enlargement of the Plant, however, nothing in the limited license granted to
Owner is intended to limit Owner’s use of the Plant’s actual production
capability as built.

 

6

 

(m)          Work
will commence following receipt of Owner’s written valid notice to proceed (“Notice
to Proceed”). At least twenty (20) days, but no more than forty-five (45)
days prior to Owner’s anticipated delivery of Notice to Proceed, Owner must
deliver notice to Fagen specifying the anticipated delivery date for Notice to
Proceed (“Pre-NTP Notice”). The Notice to Proceed cannot be given until (1) Owner
has title to the real estate on which the project will be constructed; (2) the
site work required of Owner under Phase I and such marked items under Phase II
in the Phase I and Phase II Engineering Services Agreement is completed;  (3) Owner has executed the Water
Pre-Treatment System Agreement and the Fire Protection System Agreement or such
other similar agreement necessary or appropriate for the Plant; (4) the
air permit(s) and/or other applicable local, state or federal permits
necessary so that construction can begin have been obtained; (5) Owner has
obtained Escrow Closing and delivered a certificate of escrow closing executed
by Owner along with a copy of the commitment letter(s) from Lenders in a form reasonably
acceptable to Fagen; (6) it appears reasonable that financial close on the
commitment letters provided in the foregoing clause will occur within ninety
(90) days of the issuance of the Notice to Proceed; (7) if applicable,
Owner has executed a sales tax exemption certificate and provided the same to
Fagen; (8) Owner has provided the name of its property/all-risk insurance
carrier and the specific requirements for fire protection; (9) Owner has
provided insurance certificates or copies of insurance policies demonstrating
that Owner has obtained the insurance policies required pursuant to the
Design-Build Agreement and naming additional insureds and protecting other
interests as prescribed therein, and (10)  Fagen has provided Owner written notification of its acceptance of the
Notice to Proceed, provided that Fagen shall not be required to accept the Notice
to Proceed earlier than twenty (20) days after receipt of the Pre-NTP Notice. Owner
must deliver the Pre-NTP Notice, complete the prerequisites to the issuance of
a valid Notice to Proceed, as listed in items number (1) through (9) of
this Paragraph, and submitted a Notice to Proceed, to Fagen for Fagen’s
acceptance by the earlier of the date that is one hundred and eighty (180) days
after the effective date of the Design-Build Agreement or March 1, 2010;
otherwise, the Design-Build Agreement may be terminated, at Fagen’s sole
option, thus releasing Fagen of all obligations.

 

(n)           “Substantial
Completion” will be the date on which the Plant construction has been
completed to a point that the Plant is ready to grind the first batch of corn
for producing ethanol and begin operation for its intended use as a one hundred
ten (110) MGY dry grind ethanol production facility. No production capacity is
guaranteed on the Substantial Completion date, but the Plant is largely
completed as of that date.

 

(o)           Substantial
Completion will occur within Six Hundred and Thirty-Five (635) days after the
date of the Notice to Proceed; provided, however, that, in addition to other
adjustments to this date as may be available pursuant to the Design-Build
Agreement, Design-Builder shall be entitled to a day for day extension of time
for 

 

7

 

attaining
Substantial Completion for each day in excess of forty-five (45) days that the
Pre-NTP Notice was delivered prior to Owner’s delivery of a valid Notice to
Proceed.

 

(p)           Fagen
will be entitled to an early completion bonus of Twenty Thousand Dollars
($20,000) for each day that Substantial Completion occurs in advance of five
hundred forty-five (545) days following delivery of the Notice to Proceed (“Early
Completion Bonus”). The Early Completion Bonus is earned for achieving
Substantial Completion early, but is not due until the final payment. There is
no cap on the Early Completion Bonus. The maximum Early Completion Bonus that may be
earned under this provision is Two Million Four Hundred Thousand Dollars
($2,400,000).

 

(q)           “Final
Completion” will be achieved once Owner reasonably determines that:
Substantial Completion has been achieved; any outstanding amounts owed by Fagen
to Owner have been paid; remaining items of work have been completed; clean-up
of the site has been completed; all permits required to have been obtained by
Fagen have been obtained; certain information including an affidavit stating
that there are no outstanding liens, a release from further compensation,
consent to final payment, and a hard copy of the as-built plans (which will
remain Work Product) has been provided to Owner; releases and waivers of all
claims and liens from Fagen and subcontractors have been provided; and the
Performance Tests have been successfully completed. Final Completion will occur
no more than ninety (90) days after the actual Substantial Completion date. The
90-day period between Substantial Completion and Final Completion will be tied
directly to actual Substantial Completion. By way of example, if Substantial
Completion is achieved 10 days early, then the 90-day period to Final
Completion would begin on that earlier date.

 

(r)            Fagen
will demonstrate certain performance guarantee criteria through performance
testing performed following Substantial Completion but prior to Final
Completion (“Performance Tests”).  Air permit testing shall be done by a third
party contractor retained by Owner.

 

(s)           Owner
will take control of the Plant after completion and acceptance of the
Performance Tests. The Performance Tests will be completed by Owner’s personnel
under Fagen’s direction.

 

(t)            Fagen
will pay liquidated damages at a daily amount equal to the daily Early
Completion Bonus amount for each day past 90 days after Substantial Completion
that Final Completion is not attained. Fagen’s liability for liquidated damages
shall be capped at and shall not exceed One Million Dollars ($1,000,000).

 

(u)           The aggregate liability
of Fagen, its Subcontractors, vendors, suppliers, agents and employees,  to Owner (or any successor thereto or
assignee thereof) for any 

 

8

 

and all claims and/or liabilities arising out of
or relating in any manner to the work or to Fagen’s performance or
non-performance of its obligations under the Design-Build Agreement, whether
based on contract, tort (including negligence), strict liability, or otherwise,
shall not exceed in the aggregate, the Contract Price and shall be reduced,
upon the issuance of each Application for Payment, by the total value of such
Application for Payment; provided, however, that upon the earlier of
Substantial Completion or such point in time that requests for payment pursuant
to the Design-Build Agreement have been made for ninety percent (90%) of the
Contract Price, Fagen’s aggregate liability shall be limited to the greater of (1) Ten
Percent (10%) of the Contract Price or (2) the amount of insurance
coverage available to respond to the claim or liability under any policy of
insurance provided by Fagen under the Design-Build Agreement.

 

(v)           The
warranty period for work completed pursuant to the Design-Build Agreement will
extend for one year past Substantial Completion. The Warranty will not apply to
defects caused by abuse, alterations, or failure to maintain the work by
persons other than Fagen or anyone for whose acts Fagen may be liable. The
warranty period will be extended one day for each day that such part of
the work repaired under such warranty is malfunctioning or not in conformance
with project requirements provided that Owner must report such non-conformance
or malfunction within seven (7) days of the appearance of such
non-conformance or malfunction.

 

(w)          Owner
will pay Fagen a mobilization fee in the amount of Twenty Million Dollars
($20,000,000) as soon as possible following the execution of the Design-Build
Agreement, and at the latest, at the earlier to occur of escrow closing or the
issuance of a Notice to Proceed.

 

(x)            Fagen
will request payment and Owner will pay Fagen in accordance with the following
procedures:

 

	
  i.

  	
   

  	
  On or before the
  twenty-fifth (25th) day of each month following the acceptance of Notice to
  Proceed Fagen will submit to Owner a request for payment (an “Application
  for Payment”). Along with each Application for Payment, except with
  respect to the first Application for Payment, Fagen will submit to Owner, via
  hardcopy or by electronic means including facsimile or portable document
  format, signed lien waivers for the work included in the Application for
  Payment submitted for the immediately preceding pay period and for which
  payment has been received.

  
	
   

  	
   

  	
   

  
	
  ii.

  	
   

  	
  The Application for
  Payment will constitute Fagen’s representation that the work has been
  performed consistent with the Transaction Documents and has progressed to the
  point indicated in the Application for Payment. No additional documentation
  will be provided to Owner in support of the Application for Payment. The work
  completed at the site and the

  

 

9

comparison of the
Application for Payment against the Schedule of Values shall provide sufficient
substantiation to Owner of the accuracy of the Application for Payment.  The Schedule of Values subdivides the work into
its respective parts, includes values for all items comprising the work, and
serves as the basis for the monthly progress payments.

 

iii.    The
Application for Payment may request payment for (i) completed work; (ii) prepayments
for materials or equipment for the project when prepayment is required by the
manufacturer or supplier of such materials or equipment; or (iii) equipment
and materials not yet incorporated into the project provided that (x) the materials and equipment are
suitably stored at the site or elsewhere, (y) the equipment and materials
are protected by suitable insurance, and (z) upon payment, Owner will
receive title to such equipment and materials.

 

iv.    Owner
shall make payment within ten (10) days of receipt of the Application for
Payment.  Failure to make such payment
will result in the accrual of interest at a rate of eighteen percent (18%) per
annum commencing five (5) days after the payment is due.  Failure to make such payment, except if due
to appropriate withholding of payment due to a good faith dispute, entitles
Fagen to stop work.

 

v.     If
Owner wishes to dispute any portion of the Application for Payment, Owner must
notify Fagen in writing within five (5) days of receipt of the Application
for Payment.  Such notice must state the
specific amounts Owner intends to withhold, the reasons and contractual basis
for withholding, and the specific measures Fagen must take to rectify Owner’s
concerns.  Regardless of a dispute as to
a portion of the Application for Payment, Owner must pay all undisputed amounts
by the payment due date.

 

vi.    Retainage
on progress payments made pursuant to the Design-Build Agreement will be capped
at five percent (5%) of the total price. 
Owner will retain ten percent (10%) of each payment up to a maximum of
five percent (5%) of the total Contract Price. 
Once five percent (5%) of the total price has been retained, Owner will
not retain any additional amounts from subsequent payments.  Owner will release retainage, less the amount
equal to the value of subcontractor lien waivers not yet obtained plus 200% of
the Punch List items needed to reach Final Completion, upon completion of the
Performance Tests.

 

vii.   Upon
Final Completion, Fagen will deliver to Owner a request for final payment.  Owner will make the final payment within
thirty (30) days after the receipt of such request.    Owner’s failure to make Final Payment will
void any and all warranties, whether express or implied, provided by Fagen  pursuant to the Design-Build Agreement.

 

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

 

10

 

(z)            Fagen
will not be responsible for differing site conditions including concealed or latent
physical conditions or subsurface conditions and will be entitled to a price
adjustment to the Contract Price to the extent that its cost and/or time of
performance is adversely impacted by the differing site conditions.

 

(aa)         “Force
Majeure Events” shall mean any cause or event beyond the reasonable control
of, and without the fault or negligence of a Party claiming Force Majeure,
including, without limitation, an emergency, floods, earthquakes, hurricanes,
tornadoes, adverse weather conditions not reasonably anticipated or acts of
God; sabotage; vandalism beyond that which could reasonably be prevented by a
Party claiming Force Majeure; terrorism; war; riots; fire; explosion;
blockades; insurrection; strike; slow down or labor disruptions (even if such
difficulties could be resolved by conceding to the demands of a labor group);
economic hardship or delay in the delivery of materials or equipment that is
beyond the control of a Party claiming Force Majeure, and action or failure to
take action by any governmental authority after the effective date of the
Design-Build Agreement (including the adoption or change in any rule or
regulation or environmental constraints lawfully imposed by such governmental
authority), but only if such requirements, actions, or failures to act prevent
or delay performance; and inability, despite due diligence, to obtain any
licenses, permits, or approvals required by any governmental authority.

 

(bb)         If Fagen is delayed at any time in the
commencement or progress of the work due to a delay in the delivery of, or
unavailability of, essential materials or labor to the project as a result of a
significant industry-wide economic fluctuation or disruption beyond the control
of and without the fault of Fagen or its subcontractors which is experienced or
expected to be experienced by certain markets providing essential materials,
equipment or labor to the project during the performance of the work and such
economic fluctuation or disruption adversely impacts  the price, availability, and delivery
timeframes of essential materials and equipment 
(such event an “Industry-Wide Disruption”), Fagen shall be entitled to
an equitable extension of the Contract Time on a day-for-day basis equal to
such delay and an equitable adjustment to the Contract Price.  The Owner and Fagen shall undertake
reasonable steps to mitigate the effect of such delays.  Notwithstanding any other provision to the
contrary, Fagen shall not be liable to the Owner for any expenses, losses or
damages arising from a delay, or unavailability of, essential materials or
labor to the project as a result of an Industry-Wide Disruption.

 

4.     Exclusivity, No Solicitation or Negotiations.

 

(a)           Neither
Owner, nor its affiliates, shareholders, members or other equity owners, or their
officers, representatives, agents or employees will solicit or negotiate,
directly or indirectly, with any third party to obtain the services
contemplated by 

 

11

 

this Letter of Intent.

 

(b)           During
the term of this Letter of Intent the Owner agrees that Fagen will have the
exclusive right to provide to Owner the services contemplated by the Letter of
Intent.  Owner will not disclose any
information related to this Letter of Intent to a competitor or prospective
competitor of Fagen, provided that disclosure required under applicable
securities laws or accounting principles shall be allowed.

 

(c)           Should Owner choose not
to develop the project or to develop or pursue a relationship with a company
other than Fagen to provide the preliminary engineering or design-build
services for the project, then Owner will reimburse Fagen for all expenses
Fagen has incurred in connection with the project based upon Fagen’s standard rate schedule plus all third party costs incurred
from the date of this Letter of Intent. 
Such expenses include, but are not limited to, labor rates and
reimbursable expenses such as legal charges for document review and
preparation, travel expenses, reproduction costs, long distance phone costs, and
postage.

 

(d)           In the event Fagen’s
services are terminated by Owner, title to the technical data, which may
include preliminary engineering drawings and layouts and proprietary process
related information, will remain with Fagen and any copies thereof will be
returned to Fagen.

 

(e)           Owner acknowledges that
the technical data provided by Fagen under this Letter of Intent is preliminary
and may not be suitable for construction. 
Owner agrees that any use of such technical data following termination
of Fagen’s services will be at Owner’s sole risk.

 

5.     Termination Fee.  In addition to the
Owner’s obligations set forth in Paragraph 4 hereof, and notwithstanding
anything herein to the contrary, in the event that Owner (a) terminates
this Letter of Intent; and (b) within twenty four (24) months thereafter (i) enters
into any written agreement for the design, construction, or operation of an
ethanol production facility with any third party; and (ii) commences
construction of such a facility with the third party; then in such event Owner
shall, within thirty (30) days of demand by Fagen, pay to Fagen a termination
fee in the amount of Five Hundred Thousand Dollars ($500,000) (the “Termination
Fee”).  In addition, Owner shall pay to
Fagen, upon written demand therefore, any and all costs and expenses, including
legal fees and expenses, incurred or suffered in the collection of the
Termination Fee.  Owner expressly agrees
that the terms and conditions set forth in this Paragraph 5 shall survive the
termination of this Letter of Intent and shall be binding on the Parties.

 

6.     Confidentiality.  Owner and Fagen have entered into that certain Confidentiality
and Non-Circumvention Agreement dated January 24, 2008 (“Confidentiality
Agreement”), which agreement is incorporated herein by reference
hereto.  Owner hereby acknowledges and
agrees that any Confidential Information, as such term is defined in the
Confidentiality 

 

12

 

Agreement, disclosed to Owner pursuant to or in
advancement of this Letter of Intent shall be subject to the terms and
conditions of the Confidentiality Agreement. 
Notwithstanding anything herein to the contrary, the Parties hereto
shall, with respect to information disclosed pursuant to or in advancement of
this Letter of Intent, have all rights and obligations as set forth in the
Confidentiality Agreement.

 

7.     Publicity. 
Neither Owner nor any of its affiliates, shareholders, subcontractors,
or vendors or their officers, representatives, agents and employees will issue
any press or publicity release or otherwise release, distribute, announce, or
disseminate any information for publication concerning the Transaction, the
existence of the negotiations among Fagen and Owner, the participation of Fagen
in the Transaction, or any other matter affecting Fagen hereunder, without the
prior written consent of Fagen, which consent may be withheld for any reason,
except where such press or publicity release is required by order of a court or
necessary or appropriate under the rules or regulations of any
governmental agency.

 

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

 

8.     Disclaimer of Consequential Damages.  In no event will either Fagen or Owner be
liable to the other pursuant to this Letter of Intent, or for activities
conducted under this Letter of Intent, under any theory of recovery for any
indirect, special, incidental or consequential damages (including, without
limitation, loss of revenues or profits, loss of use, cost of replacement, cost
of capital and claims of customers, interest charges, or increased costs of
nature whatsoever).

 

9.     Legal Effect.  Although
this Letter of Intent does not contain all matters upon which agreement must be
reached in order for the Transaction to be consummated, Fagen and Owner wish to
set forth, prior to the execution of the Transaction Documents, their mutual
agreement as to the material terms and conditions of the Transaction.  Each Party agrees to negotiate in good faith
toward entering into the written, definitive and legally binding Transaction
Documents containing, among other terms and conditions, those terms and
conditions set forth in this Letter of Intent including, without limitation,
those terms set forth in Paragraphs 2 and 3 hereof; provided, however, that except as specifically
identified and set forth herein, nothing in this Agreement shall be read to
promise, guarantee, or otherwise secure on Owner’s behalf any specific
construction start date with respect to the Plant including but not limited to
any pour concrete date, scheduling slots or dates for the delivery of design
packages or to entitle Owner to any rights, privileges, or claims with respect
thereto or any right, privilege, or claim to any place on Fagen’s construction
schedule.  Notwithstanding the
foregoing, the provisions of this Paragraph and of Paragraphs 1, 4, 5, 6, 7, 8,
11, 12, 14, 17, and 18 hereof are agreed to be legally binding obligations of
the Parties upon the execution and acceptance of this Letter of Intent.

 

10.   Negotiation of Definitive Agreements. The
Transaction Documents will contain reasonable 

 

13

 

terms and
conditions regarding releases, payment obligations, cooperation as to tax
planning and structuring, other financial matters, legal opinions,
confidentiality, limitations of liability, assignment, breach, dispute
resolution, events of default, remedies, representations, warranties,
indemnifications and other provisions customary for similar transactions. Time
is of the essence in the performance of this Letter of Intent in all respects.

 

11.   Termination.  This Letter of Intent will terminate on February 1,
2009 unless the basic size and design of the Plant have been determined and
mutually agreed upon, a specific site or sites have been determined and
mutually agreed upon, and at least 10% of the necessary equity has been raised.
This date may be extended upon mutual written agreement of the Parties.  Furthermore, unless otherwise agreed to by
the Parties, this Letter of Intent will terminate:

 

(a)           at
the option of either Fagen or Owner if the Design-Build Agreement is not
completed and executed by the Closing Date; or

 

(b)           upon
the execution and delivery of the Transaction Documents; or

 

(c)           at
the option of Owner upon not less than thirty days written termination notice
by Owner, provided that a nonrefundable payment equal to 20% of the Termination
Fee must accompany the written termination notice, with the 80% balance of the
Termination Fee payable only in accordance with Section 5 above.

 

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

 

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

 

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

 

15.   Assignability; Binding Effect; Benefit. 
This Letter of Intent will inure to the benefit of and be
binding upon the Parties and their respective successors and assigns.  Nothing in this Letter of Intent, either expressed or implied, is intended to
confer on any person other than the Parties and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Letter of Intent.  Neither
Fagen nor Owner shall, without the written consent of the other, assign or
transfer this Letter of Intent, which consent shall not be unreasonably
withheld.  Any sale, transfer, or
disposition by Owner of 

 

14

 

over fifty percent (50%) of its assets or any sale, transfer, or
disposition of more than fifty percent (50%) of Owner to any single entity by
one or more entities holding interest in Owner shall be deemed an assignment
subject to this paragraph. 
Notwithstanding any consent granted by Fagen to any assignment, Owner
shall remain jointly liable for any failure of any assignee to fulfill its
obligations under this Letter of Intent, including but not limited to any
payment and confidentiality obligations established hereunder.

 

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

 

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

 

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

 

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

 

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

 

If the foregoing
terms accurately reflect your understanding of our discussions and are

 

15

 

acceptable to you,
please sign and return the enclosed counterpart of this Letter of Intent to
Fagen to the attention of Becky Dahl.

 

 

	
   

  	
  Yours sincerely,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fagen, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /S/ Ron Fagen

  
	
   

  	
  By:

  	
  Roland “Ron” Fagen

  
	
   

  	
  Title:

  	
  President and CEO

  
	
   

  	
   

  
	
  Accepted and agreed to this 14   

  	
   

  	
   

  
	
  day of February    , 2008.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Tennessee Valley Agri-Energy, LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /S/ Bartt R. McCormack

  	
   

  	
   

  
	
  By: Bartt R. McCormack

  	
   

  	
   

  
	
  Title: Chairman/President

  	
   

  	
   

  
				

 

16

 

EXHIBIT A

 

Standard
Scope of Work

 

Construct a
110 MGY dry mill fuel ethanol plant near Tuscumbia, Alabama.  The plant will grind approximately 39.3
million bushels of corn per year to produce approximately 110 MGY of denatured
fuel ethanol.  The plant will also
produce approximately 353,100 tons per year of 11% moisture dried distillers
grains with solubles (DDGS), and approximately 314,270 tons per year of raw
carbon dioxide (CO2) gas.

 

Delivered corn
will be dumped in the receiving building. 
The receiving building will have two truck grain receiving bays and a
rail receiving bay, including an underground conveyor from the rail pit to the
second truck receiving bay both of which share a common receiving leg.  The truck driver will drive onto one of two
pitless scales located near the administration building, be weighed and
sampled, then drive to the receiving building, dump the grain, then proceed
back to one of two pitless scales and obtain a final weight ticket.  Two independent 20,000-bu/hr legs will lift
the corn to storage bins with a total capacity of 1,000,000 bushels.  A dust collection system will be installed on
the grain receiving system to limit particulate emissions as described in the
Air Quality Permit application.

 

Corn is
cleaned in rotary scalpers before being milled in four parallel
hammermills.  Ground corn will be mixed
in a slurry tank, passed through a second, and then routed through a
hydroheater and cook tube following which steam is flashed off in a flash
vessel.  Cooked mash will continue
through liquefaction tanks and into one of the seven fermenters.  Simultaneously, propagated yeast will be
added to the mash as the fermenter is filling. 
After batch fermentation is complete, the beer will be pumped to the
beer well and then to the beer column to vaporize the alcohol from the
mash.  CO2 from the fermentation process
is vented to atmosphere through a scrubber for reducing emissions.

 

Alcohol
streams are dehydrated in the rectifier column, the side stripper and the
molecular sieve system.  Two hundred proof
alcohol is pumped to the tank farm day tank and blended with five percent
natural gasoline as the product is being pumped into one of two 1,500,000
gallon final storage tanks. A single 600 gpm truck and two uncovered 1,000 gpm
rail load out stations will be provided. 
Tank farm tanks include:  one tank
for 190 proof storage, one tank for 200 proof storage, one tank for denaturant
storage and two 1,500,000 gallon tanks for denatured ethanol storage.  Concrete truck loading secondary containment is by the
Design-Builder.  Track pan secondary
containment is by the Owner.  Pipe
connecting both to the tank farm basin are by the Owner.  The tank farm liner and tank foundations are
provided by the Design-Builder.

 

Corn mash from
the beer stripper is dewatered in the parallel centrifuges.  Wet cake is conveyed from the centrifuges to
the dryer(s) where the water is removed from the cake and the product is
dried to 11% moisture.  A wet cake pad is
located along side the DDGS dryer building to divert wet cake to the pad when
necessary or for limited production of wet cake for sales.  Water in the thin stillage is evaporated and
recycled by the Bio-Methanation system. 
Syrup is added to the wet cake entering the dryer(s).  DDGS is cooled and conveyed to flat storage
in the DDGS 

 

17

 

storage
building, then conveyed to DDGS storage silos. 
Transfer to silos is accomplished by scooping and pushing the product
with a front-end loader into an in-floor conveyor system.  The DDGS load out pit has capacity for
approximately one semi-trailer load. 
DDGS is weighed for shipment through a 15,000 bph bulk-weigh system
after being mechanically unloaded from the DDGS silos.  A truck or rail car can be loaded without
repositioning.

 

Fresh water
for the boilers, cooking, cooling tower and other processes will be obtained
from the Owner supplied water pretreatment system.  Boiler water will be pumped through a
deaerator scrubber and into a deaerator tank. 
Appropriate boiler chemicals will be added as preheated water is sent to
the HRSG.

 

Steam energy
will be provided by heat recovery steam generators (HRSG’s) recovering heat
from thermal oxidizers (TO’s) and utilizing a high percentage of condensate
return.

 

The TO’s are a
process used to thermally oxidize the exhaust gasses from the Dryers.  This process will be used to reduce VOCs and
particulates that are in the dryer exhaust and ensure compliance with
environmental regulations.  The energy
required to complete thermal oxidization will then be ducted to a waste heat
boiler that will produce 100% of the steam requirements of the ethanol
plant.  The exhaust gasses after passing
through the HRSG’s will be ducted through stack gas economizer(s) to
recover the majority of energy possible from the exhaust gas stream.  After the economizer(s), the gas stream will
be vented to atmosphere through a stack.

 

The process
will be cooled by circulating water through heat exchangers, a chiller, and a
cooling tower.

 

The design
includes a compressed air system consisting of air compressor(s), a receiver
tank, pre-filter, coalescing filter, and double air dryer(s).

 

The design
also incorporates the use of a clean-in-place (CIP) system for cleaning cook,
fermentation, evaporation, centrifuges, and other systems.  Fifty percent caustic soda is received by
truck and stored in a tank.

 

Under normal
operating circumstances, the plant will not have any wastewater discharges that
have been in contact with corn, corn mash, cleaning system, or contact process
water.  An ICM/Phoenix Bio-Methanator
will reduce the BOD in process water allowing complete reuse within the
plant.  The plant will have blowdown
discharges from the cooling tower, RO reject, softener reject, and may have
water discharge from any water pre-treatment processes.  Owner shall provide on-site connection to
sanitary sewer or septic system.

 

Most plant
processes are computer controlled by a distributed control system with
graphical user interface and three workstations.  The control room control console will have
dual monitors to facilitate operator interface between two graphics screens at
the same time.  Additional programmable
logic controllers (PLCs) will control certain process equipment.  Design-Builder provides lab equipment.

 

18

 

The cooking
system requires the use of anhydrous ammonia, and other systems require the use
of sulfuric acid.  Therefore, a storage
tank for ammonia and a storage tank for acid will be on site to store
reasonable quantities.  The ammonia
storage requires that plant management implement and enforce a Process Safety
Management (PSM) program.  The plant
design may require additional programs to ensure safety and to satisfy
regulatory authorities.

 

NOTE:  This Exhibit A is a general description
of the Plant’s basic design and operation only. 
It is not intended to be the final Project scope or to establish the
final specifications.  The final design
of the Plant, including equipment incorporated, and equipment specifications will
be reflected in the As Built Plans.

 

19

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