LETTER OF INTENT Date: January 13, 2003 Parties: Fagen, Inc. of Granite Falls, MN (Fagen) and Golden Grain Energy, LLC of New Hampton, IA (Owner) Owner is an Iowa limited liability company organized by farmers and business people to facilitate the...

LETTER OF INTENT

Date:               January 13, 2003

Parties:           Xxxxx, Inc. of Granite Falls, MN (Fagen) and Golden Grain Energy, LLC of New Hampton, IA (Owner)

Owner is an Iowa limited liability company organized by farmers and business people to facilitate the development and building of a locally-owned 40 MGY ethanol plant in Iowa (the Facility).

Xxxxx is an engineering and construction firm capable of providing development assistance, as well as designing and constructing the Facility being considered by Owner.

Owner and Xxxxx agree to use best efforts in jointly developing this project under the following terms:

            1.         Owner agrees that Xxxxx will Design/Build the Facility if determined by Owner to be feasible and if adequate financing is obtained. Should Owner chose to develop or pursue a relationship with a company other than Xxxxx, Inc. to provide the preliminary engineering or design-build services for the project, then Owner shall reimburse Xxxxx, Inc. for all expenses Xxxxx, Inc. has incurred in connection with the Project based upon Xxxxx, Inc.’s standard rate schedule plus all third party costs incurred from June 21, 2002.  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 cost, and postage.  In the event Xxxxx, Inc.’s services are terminated by Owner, title to the technical data, which may include preliminary engineering drawings and layouts and proprietary process related information shall remain with Xxxxx, Inc.; however, Owner shall have the right to use the above described technical data, excluding proprietary process related information, for construction, operation, repair and maintenance of the Project.

            Should Xxxxx, Inc. intentionally or negligently fail or refuse to comply with it’s commitments contained in this Letter of Intent, Xxxxx, Inc. shall absorb all of its own expenses, and Owner shall have the right to terminate the Letter of Intent immediately upon written notice to Xxxxx, Inc. and Owner shall be released from its obligations to pay or reimburse Xxxxx, Inc. as described above.

            2.         Xxxxx will provide Owner with assistance in evaluating, from both a technical and business perspective:

• Owner organizational options;

• The appropriate location of the proposed Facility; and

• Business plan development.

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            3.         Xxxxx agrees to Design/Built the Facility at a capital cost as shown on the attached Exhibit 1.  Exhibit 1 assumes ICM technology is used in the plant process.

            4.         Xxxxx shall assist Owner in locating appropriate management for the Facility.

            5.         Xxxxx will assist Owner in presenting information to potential investors, potential lenders, and various entities or agencies that may provide project development assistance.

            6.         During the term of this Letter of Intent the Owner agrees that Xxxxx will be the exclusive Developer for the Owner in connection with matters covered by this Letter of Intent.  During the term of this Letter of Intent, Xxxxx agrees that it will not develop or construct another ethanol project or facility within 75 miles of New Hampton, Iowa.

            7.         This Letter of Intent shall terminate on December 31, 2003 unless the basic size and design of the Facility have been determined and mutually agreed upon, and a specific site or sites have been determined and mutually agreed upon, and at least 10% of the necessary equity has been raised.  Furthermore, this Letter of Intent shall terminate on December 31, 2004 unless financing for the Facility has been secured.  Either of the aforementioned dates may be extended upon mutual agreement of the parties.

Golden Grain Energy, LLC

By:       /s/ Xxxxxx Xxxxxxxx    

Its:        President

Date:    1-15-2003

Xxxxx, Inc.

By:       /s/ X. Xxxxx Xxxxxxxx

Its:        Vice-President

Date:    1/15/03

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Exhibit 1

Golden Grain Energy, LLC

40 MGY Dry Grind Ethanol Plant

Xxxxx, Inc.

January 13, 2003

Estimated Sources and Uses of Funds Statement*

Sources of Funds
	Equity								40	%
			Cash & Equity Equivalents					$	22,007,000
			Long-Term Debt						33,006,000
Total Sources of Funds								$	55,010,000
Uses of Funds
Design Construction & Startup
	Plant Construction (GMP, includes thermal oxidizer**)							$	45,300,000
	Land & Site - Developmental Cost (Est.)								2,000,000
	Administration Building & Furnishing								200,000
	Rail								750,000
	Startup Costs:
		Corn (10 days @ $2.25)			$	910,000
		Enzymes, Chemicals and other				250,000
		Spare Parts				500,000
		Other Startup Costs				750,000
	Subtotal								2,410,000
Organizational & Financing
	Financing Costs				$	2,500,000
	Organizational Costs					350,000
	Miscellaneous Costs					500,000
	Owners Contingency					1,000,000
									4,350,000
Total Uses of Funds								$	55,010,000

* General Assumptions:  Land & site development, startup, and organizational & financing costs are estimated.  Owner provides all plant and access roads, rails systems, substation if required, electrical distribution/transformers, gas line(s), process and fire water supply/pretreatment to & waste water systems (septic) from the designated areas within the plant site.  Assumes non-winter conditions for earthwork, concrete & building erection.  Other conditions may apply in the definitive construction agreement.

** Thermal Oxidizer will be required to meet PCA emission standards.  The Thermal Oxidizer installation also results in lower plant air emissions, much reduced dryer odor, and allows the plant to expand beyond the 20MGY production rate without triggering the EPA PSD permitting process.

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