Exhibit 10.2


 


OPTION AGREEMENT


 


This Option
Agreement (the “Agreement”) is made and entered into by and between ILLINOIS
RIVER ENERGY, LLC a Delaware limited liability company, (hereinafter referred
to as “Purchaser” or “IRE”) and JAMES D. CARMICHAEL (hereinafter referred to as
“Seller”).


 


W I T N E S S E T H:


 


WHEREAS,
Seller is the owner in fee simple of a certain parcel of real property in Ogle
County, Illinois consisting of 81.081 acres said real property being more
particularly described on Exhibit A, which is attached hereto, and by this
reference, incorporated herein, together with all improvements and
appurtenances thereon or appertaining thereto (hereinafter referred to as the
“Property” or the “Subject Property”); and


 


WHEREAS,
Purchaser desires to obtain and Seller desires to grant to Purchaser, an option
to purchase the Property upon the terms and conditions hereinafter set forth;
and


 


NOW, THEREFOR,
in consideration of the foregoing and the mutual covenants, promises and
undertakings set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:


 


I.     GRANT OF OPTION.


 


(a)                                  Upon
the terms, conditions and provisions herein contained, Seller hereby grants to
Purchaser an option (the “Option”), as set forth herein, to purchase the
Property from Seller.


 


(b)                                 The
option period (“Option Period”) shall commence on July 29, 2003
(“Effective Date”) and end three hundred sixty five (365) days thereafter on July 28,
2004 at 11:59 p.m. Central Standard Time. The consideration for the Option
Period shall be Twenty Thousand Dollars ($20,000.00).  Purchaser shall receive an offset against the consideration due
for the Option Period which offset shall be equal to the amount previously
deposited by Purchaser under the Seller’s Purchase Options which previously
deposited amount is Twenty Thousand Dollars ($20,000.00).


 


II.   PURCHASE
PRICE.


 


In the event the Option is exercised, the Purchase Price (as
hereinafter defined) for the Property is One Million Nine Hundred Sixty Four
Thousand Two Hundred and Sixty-Three and 88/100 Dollars ($1,964,263.88),
together with interest on One Million Three Hundred and Sixteen Thousand Eight
Hundred and Forty-Four and 52/100 Dollars ($1,316,844.52) that being the
amounts paid by Seller under Seller’s Purchase Options after Purchaser’s
reimbursement of certain expenses incurred by Seller under said Purchase
Options, said interest to accrue from July 22, 2003 at the rate of five percent
per annum (5%) to the date of Closing (“Purchase Price”).


 

















 


III.  
EXERCISE OF OPTION.


 


Purchaser may
exercise its Option to purchase the Property at any time on or before the
expiration of the Option Period, as the same may be extended pursuant to Section I
(c), above, by delivery of written notice thereof (“Option Notice”) to Seller.


 


If Purchaser
elects to exercise the Option, the Closing, subject to the terms of
Section VI A and B below and delivery of possession to Purchaser of the
Property, shall occur on the day and time designated by Purchaser in the Option
Notice, provided, however that day must be a business day and must be not less
than thirty (30) days after the date of the Option Notice and no later than
sixty (60) days after the date of the Option Notice. If Purchaser does not
elect to exercise the Option prior to the end of the Option Period the Option
shall terminate automatically at the end of the Option Period, and except as
otherwise provided herein, this Agreement and all further rights and
obligations of the parties hereunder shall be terminated.


 


IV.   PAYMENT
OF PURCHASE PRICE.


 


In the event
Purchaser elects to exercise the Option, the Purchase Price shall be payable to
Seller at the time and in the manner hereinafter set forth:


 


(a)                                  The
Purchase Price, as adjusted pursuant to the terms of this Agreement, shall be
paid to Seller at Closing by cash, wire transfer or cashier’s check.


 


(b)                                 Purchaser
shall be responsible for all the general real estate taxes, without any
proration, even if the same are not then due.


 


(c)                                  The
Closing shall take place on the Closing Date through First Northwestern Title
Company of Oregon, Illinois (the “Title Company”) in Oregon, Illinois.
Purchaser shall pay all costs of obtaining the Title Insurance Policy (as
hereinafter defined), the Survey, if any and the reports set forth in
Section VI below if any. Purchaser shall pay any closing fee charged by
the Title Company.  Purchaser shall pay
any state and county transfer taxes (unless the transaction is exempt from such
taxes at the time of Closing). At Closing, Purchaser shall pay such other costs
and expenses, not otherwise provided for herein, which are normally charged to
Purchasers of real property in the local area. 
At Closing, Seller shall pay costs incurred with respect to the release
of any mortgages or liens on the Property occurring by or through Seller.


 


V.   CLOSING
AND CONVEYANCE OF TITLE.


 


(a) Subject to the terms of Section III
above, and Sections VI A and VI B below, the closing of the purchase of the
Property shall be held on the date set forth in the Option Notice (“Closing” or
“Closing Date”).


 


(b) Seller shall deliver to Purchaser, on or
before the Closing Date, the following closing documents:


 


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(i)                                     a
recordable warranty deed conveying to Purchaser or to Purchaser’s designee
marketable fee simple title to the Property, subject only to the Permitted
Exceptions described below in this Agreement;


 


(ii)                                  an
Affidavit of Title covering the Property, in customary form;


 


(iii)                               an
ALTA statement to the Title Company;


 


(iv)                              State
and County real estate transfer tax declaration prepared and executed by
Seller;


 


(v)                                 an
affidavit from Seller stating (a) its taxpayer identification number, and  (b) that it is not a “foreign person”
within the meaning of Section 1445 et seq. of the Internal Revenue Code of
1986 as amended;


 


(vi)                              such
documents (in recordable form) as are necessary to comply with the disclosure
requirements of the Illinois Responsible Property Transfer Act; if any;


 


(vii)                           such
title exceptions that are set forth in Seller’s Option Agreements including
such title exceptions as are contained in any deed, or deeds  received by Seller under the Seller’s Option
Agreements.


 


VI.   
INSPECTION DOCUMENTS.


 


A.           Title Insurance
Commitment


 


Seller shall obtain, and deliver to
Purchaser, at Purchaser’s sole cost and expense, within twenty (20) days from
the Execution Date a current standard commitment for an owner’s policy of title
insurance (the “Commitment”), issued by the Title Company as agent for Chicago
Title Insurance Company, under which Chicago Title Insurance Company shall
agree to insure in the name of Purchaser fee simple title to the Property upon
delivery of Seller’s aforesaid deed to Purchaser.  The Commitment shall initially be in the minimum amount required
by the Title Company for issuance without regard to the Purchase Price. The
Property shall be subject only to current general real estate taxes not yet
delinquent (and shall not otherwise be subject to any special taxes,
assessments, levies, liens or charges made by any public agency or governmental
body for any improvements installed on-site or off-site); the title exceptions
set forth on Exhibit “B”, which is attached hereto, and by this reference,
incorporated herein, title exceptions caused by Purchaser, title exceptions
pertaining to liens or encumbrances of a definite or ascertainable amount,
which may be removed by the payment of money at Closing, and which the Seller
shall remove at that time by using the funds to be paid upon the delivery of
the Deed (collectively, the “Permitted Exceptions”).


 


With delivery of the Commitment, Seller shall also deliver or cause to
be delivered to Purchaser at Purchaser’s expense copies of any easements,
covenants or agreements benefiting or affecting the Property, whether or not of
record, of 


 


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which Seller has knowledge or control. 
At any time prior to the expiration of fifteen (15) days after receipt
by Purchaser of the Commitment, Purchaser shall have the right to advise Seller
of any defect or objection thereto. 
Seller shall then have until fifteen (15) days from the date of
Purchaser’s objection to correct or satisfy all defects or objections. If such
defects and objections are not corrected or satisfied within said period, then
Purchaser, at its option, may elect to terminate this Agreement without
liability to Seller by written notice to Seller, in which case, Seller shall
promptly return the Option Price to Purchaser or, at Purchaser’s option,
Purchaser may elect to accept title subject to such objections or defects and,
without Seller having liability to Purchaser by reason of Purchaser accepting
title to such objections or defects, if the Option is exercised, proceed to
Closing. At Closing, Purchaser may, at Seller’s expense, cause the amount of
the Commitment to be increased to the amount of the Purchase Price.


 


B.             Survey.          [INTENTIONALLY DELETED]


 


 


C. Entry Rights. [INTENTIONALLY
DELETED]


 


 


VII.  
GOVERNMENTAL APPLICATIONS.


 


Seller
acknowledges that Purchaser may, at its own expense, file applications with
federal, state, and local governmental bodies for annexation, annexation
agreements, zoning, planned development, special use, variation, subdivision,
subdivision improvement agreements, and building and related permits and
approvals (collectively, “Zoning”) for a commercial or industrial use of the
Property.  Upon Purchaser’s request,
Seller will promptly execute written authorizations and related ownership
disclosures respecting such applications and attend (if necessary) all meetings
required under the terms of the applicable zoning ordinances, codes and/or
Illinois Compiled Statutes reasonably necessary to obtain the Zoning.  Without limiting the generality of the
foregoing, Seller covenants and agrees to promptly execute and deliver any and
all agreements and petitions that may be necessary or desirable in order to
re-zone the Property and to annex the Property to the City of Rochelle (the
“City”).  In addition, Seller covenants
and agrees not to contest or oppose, Purchaser’s proposed use of the Property
in any proceeding or public hearing before any federal, state or local
governmental entity.   Notwithstanding
anything contained in this Section of this Agreement to the contrary,
Seller shall not be required to incur any personal liability by cooperating
with Purchaser pursuant to the terms of this Section of this Agreement
including, without limitation, the execution and delivery of any agreements,
petitions or other documents.  Purchaser
expressly agrees that no re-zoning annexation or other activities of Purchaser
with respect to the Property shall be binding on the Property, or Seller,
unless Purchaser shall first waive all unfulfilled contingencies or conditions
of this Agreement and proceed to Closing.


 


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VIII.  NOTICES


 


All notices
and requests permitted or required to be given hereunder shall be in writing
and shall be deemed effective (a) on the date delivered, if hand delivered, (b)
on the date mailed by registered or certified U.S. Mail, return receipt
requested, with adequate postage affixed, if mailed by registered or certified
mail, or (c) on the date when sent, charges pre-paid, if delivered by reputable
commercial overnight delivery service or U.S. Express Mail as evidenced by
service receipt or by Express Mail postmark. 
All notices shall be addressed to the addressee stated herein below or
at such other address, as either party shall designate in writing in the manner
hereinabove set forth.


 


Address of Seller:


 


James D. Carmichael


15114 E. Illinois Route 64


Rochelle, Illinois 61068


Telephone: 
(815) 562-5991


Facsimile:  {Intentionally
Deleted}


 


Address of Purchaser:


 


Illinois River Energy


1201 S. 7th Street, Suite 110


Rochelle, Illinois, 61068


Telephone: (815) 562-0650


Facsimile: (815) 562-0720


 


IX.   
BINDING UPON SUCCESSORS AND ASSIGNS.


 


All of the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.


 


X.   CONFIDENTIALITY


 


Unless
Purchaser gives its prior written consent, Seller shall not make any public
statements or comments regarding (i) the proposed purchase and sale
contemplated by this Agreement, or (ii) the contemplated development of the
Property by Purchaser or its assignee. 
In addition to the foregoing, unless Purchaser gives its prior written
consent Seller shall not disseminate any press releases or announcements,
whether written or oral, to the media or the general public with respect to the
subject transaction including, without limitation, the purchase price or any
other business terms of this Agreement. 
Nothing contained in this Section of this agreement shall be
construed as restricting or prohibiting Seller from making any disclosures with
respect to this transaction, including any of the terms of this Agreement, as
Seller determines, in the exercise of Seller’s sole discretion, may be
necessary or convenient, for the purpose of making or performing any of the
Leases permitted under Section XVI (a) of this Agreement, or for the
purpose of performing other provisions of this Agreement. Purchaser shall be entitled
to recover compensatory damages from Seller for a violation of this
Section of this Agreement. Purchaser shall also be entitled to any other
equitable relief including specific


 


5

















 


performance and an injunction
prohibiting any violation of this Section. 
Any remedy shall not be deemed to be an exclusive remedy for Seller’s
violation of this Section, but shall be in addition to all other remedies
available at law or in equity to Purchaser. 
Seller’s obligations under this Section shall survive the Closing
of this Agreement.


 


XI.   EMINENT
DOMAIN AND CASUALTY.


 


If, during the
term of this Agreement, any portion of the Property shall be taken by eminent
domain, or is the subject of eminent domain proceedings threatened or
commenced, or suffers a casualty, Seller shall promptly notify Purchaser
thereof, and immediately provide Purchaser with copies of any written
communication from any condemning authority. 
If any of said events occur with respect to a material portion of the
Property which interferes substantially with Purchaser’s contemplated use, or
damages a material portion of the improvements, then, in that event, Purchaser
shall have the right to rescind this Agreement, in which event this Agreement shall
become null and void and the Option Price shall be immediately returned to
Purchaser (but not the interest earned on the Option Price). If any of said
events occur and Purchaser still desires to close, then (a) if the
transfer to the condemning authority takes place prior to Closing hereunder,
the remainder of the Property shall be conveyed to Purchaser at Closing;
(b) if the transfer to the condemning authority has not taken place prior
to Closing, the entire Property shall be conveyed to Purchaser at Closing
hereunder; (c) if Seller has received payment for such condemnation or
taking prior to the Closing hereunder, or has received insurance proceeds prior
to Closing the amount of such payment shall be a credit against the Purchase
Price payable by Purchaser hereunder; or (d) if Seller has not received
such payment at the time of Closing, Seller shall assign to Purchaser all
claims and rights on account of such insurance or arising out of such taking.


 


XII.  
MISCELLANEOUS AND STATE LAW.


 


Whenever it is
provided in this Agreement that days shall be counted, the first day to be
counted shall be the day following the date on which the event causing the
period to commence occurs.  If the day
for performance of any action hereunder falls on a Saturday, Sunday, or legal
holiday, then the time for performance shall be deemed extended to the next
succeeding business day.  This Agreement
shall be construed under the laws of the State of Illinois.


 


XIII.  
BROKER’S COMMISSION.


 


Seller and
Purchaser warrant and represent to each other that neither of them have dealt
with any real estate broker in connection with this Agreement.  Seller and Purchaser shall indemnify and
hold each other harmless from and against any and all claims of all brokers,
finders or brokerage commissions, or other like payment, arising out of, or in
any way related to, the transactions contemplated by this Agreement and
occasioned by the actions of such indemnifying party including, without
limitation, attorneys’ fees incurred in connection with such claims.  This indemnification shall survive the
closing or termination of the Agreement and is applicable whether or not a
default of either Purchaser or Seller occurs


 


6

















 


XIV.  
DEFAULT.


 


A.   If Purchaser exercises the
Option, all contingencies are satisfied and the sale and purchase of the
Property as contemplated by this Agreement is not consummated because of
Purchaser’s default, Seller shall provide Purchaser with written notice
describing the alleged defaults and a demand to cure the same within twenty-one
(21) days thereafter, and in the event Purchaser fails to cure within the
aforesaid twenty-one (21) period, then Seller may, at Seller’s option, as
Seller’s exclusive remedies, either: (a) terminate this Agreement by giving
written notice of such termination to Purchaser, whereupon the Option Price and
the interest earned thereon shall be retained by Seller and all rights, duties
and obligations of all the parties hereunder shall expire and this Agreement
shall in all respects become null and void, or (b) seek and obtain
specific performance of this Agreement. 
It is expressly intended by the provisions of the preceding sentence to
exclude such other rights and remedies as may be provided for or allowed by law
or in equity including, without limitation, any right to seek damages,
compensatory or otherwise.  The terms
and limitations of this Section of this Agreement shall not be construed
to limit any of Seller’s remedies that are specifically set forth in other
Sections of this Agreement.


 


B.  If Purchaser exercises the Option, all
contingencies are satisfied and the sale and purchase of the Property as
contemplated by this Agreement is not consummated because of Seller’s default,
Purchaser shall provide Seller with written notice describing the alleged
defaults and a demand to cure the same within twenty-one (21) days thereafter,
and in the event Seller fails to cure within the aforesaid twenty-one (21)
period, then Purchaser may, at Purchaser’s option, as Purchaser’s exclusive
remedies, either: (a) terminate this Agreement by giving written notice of such
termination to Seller, whereupon the Option Price, including the interest
earned thereon, if any, shall be returned to Purchaser and all rights, duties
and obligations of all the parties hereunder shall expire and this Agreement
shall in all respects become null and void, or (b) seek and obtain
specific performance of this Agreement. 
It is expressly intended by the provisions of the preceding sentence to
exclude such other rights and remedies as may be provided for or allowed by law
or in equity including, without limitation, any right to seek damages,
compensatory or otherwise. The terms and limitations of this Section of
this Agreement shall not be construed to limit any of Purchaser’s remedies that
are specifically set forth in other Sections of this Agreement.


 


XV.   MODIFICATIONS.


 


This Agreement
may not be amended, modified or changed, nor shall any waiver of any provision
hereof be effective, except by an instrument in writing and signed by the party
against whom enforcement of any such waiver, amendment, modification, change or
discharge is sought.


 


XVI.  
OPERATION OF PROPERTY PRIOR TO CLOSING.


 


Except to the
extent expressly provided by the terms of this Agreement, and except as
expressly consented to by Purchaser in writing (which consent will not be
unreasonably withheld), the Seller agrees that, prior to Closing:


 


7

















 


(a)                                  Except
as otherwise set forth in this Agreement, neither Seller nor its agents or
representatives shall enter into any lease pertaining to any portion of the
Property;


 


(b)                                 neither
the Seller nor its agents or representatives shall enter into any contracts or
other agreements, whether oral or written, pertaining to any portion of the
Property nor shall Seller sell mortgage, encumber, pledge, release or otherwise
alienate any of its right, title or interest in the Property;


 


(c)                                  neither
Seller nor its agents or representatives shall permit any grading or
excavations of the Property, or any removal of trees therefrom nor shall they
construct any building improvements thereon during the term of this Agreement;


 


(d)                                 Seller
shall cause the Property to be maintained in its present condition in
compliance with applicable laws, ordinary wear and tear excepted; and


 


(e)                                  except
as otherwise contemplated hereunder, neither Seller nor its agents or
representatives shall perform any act or fail to perform any act not in the
ordinary course of business as conducted on the Property as of the date hereof.


 


XVII.  
WAIVER.


 


Either party
shall have the right to waive any condition or contingency in this Agreement
for the benefit of the party granting such waiver.  Any such waiver shall be in writing and shall be signed by the
party waiving such condition or contingency.


 


XVIII.  
CLOSING CONTINGENCIES.


 


Notwithstanding
anything to the contrary contained in this Agreement, and notwithstanding
Purchaser’s election to exercise the Option and issuance of an Option Notice,
Purchaser shall not be obligated to close hereunder unless:


 


(a)                                  Purchaser
shall be able to obtain, at Purchaser’s expense, a standard owner’s title
insurance policy (“Title Insurance Policy”) consistent with the Commitment
required under the terms of this Agreement from the Title Company on the
Closing date; and


 


(b)                                 Seller
shall provide Purchaser the closing documents described above in Section V
(b).


 


In the event
that any one or more of the contingencies set forth in the preceding sentence
shall not be satisfied or met by the Closing Date, Purchaser, at its option,
may waive the satisfaction thereof, without Seller having liability to
Purchaser by reason of Purchaser waiving the satisfaction thereof and proceed
to Closing or terminate this Agreement, without liability to Seller, in which
case, Seller shall promptly refund the Option Price (but not the interest
earned on the Option Price).


 


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XIX.  
RISK OF LOSS.


 


The risk of
loss or damage to the Property until the Closing shall be borne by Seller.


 


XX.   TIME
IS OF ESSENCE.


 


Time is of the
essence of this Agreement.


 


XXI.  
SECTION 1031 EXCHANGE.


 


The parties
agree that they shall cooperate with one another in the event either party
wishes to make the transaction contemplated herein part of a tax deferred
exchange under Section 1031 of the Internal Revenue Code, provided,
however, that such cooperation shall not include:  (a) an extension of the Closing Date unless specifically agreed
to by the other party; (b) the payment of any costs or expenses, or the
assumption of any liability, by the other party; (c) any requirement that the
other party enter into the chain of title to any real estate other than the
Property to effectuate the exchange; (d) the assignment of Seller’s covenants,
representations and warranties under this Agreement to any third party in a
manner which releases the Seller or any assignee of Seller.  In addition, the party not requesting the
exchange shall consent to the assignment of this Agreement from the requesting
party to a qualified exchange intermediary in a form mutually agreed upon by
Seller and Purchaser.  The party
requesting the exchange shall indemnify and hold the other party, its
directors, officers, employees and agents harmless from any liability
(including attorneys fees and costs) arising out of the exchange.


 


XXII.  
ENTIRE AGREEMENT.


 


This
Agreement, together with the Exhibits hereto, represents the entire agreement
and understanding of the parties hereto with reference to the transactions set
forth herein, and no representations, warranties or covenants have been made in
connection with this Agreement other than those expressly set forth herein and
in the Exhibits. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement and all prior drafts
of this Agreement, all of which are merged into this Agreement.  The Exhibits attached hereto are a part of
this Agreement as if fully set forth herein.


 


XXIII.   MEMORANDUM.


 


Upon the
request of Purchaser, Seller shall execute a recordable memorandum of this
Agreement provided, however, Purchaser shall concurrently execute a recordable
release of the Memorandum and deliver it to the Title Company together with
such written instructions for holding and recording the release at the end of
the Option Period as are mutually acceptable to the Title Company, Purchaser
and Seller.


 


XXIV.  RULES OF CONSTRUCTION.


 


This Agreement
shall be given a reasonable construction and no rule of construction against
the Party who drafted or prepared this document shall be applied to this
Agreement.


 


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XXV.   DP TRADE AGREEMENT 


 


IRE has, or
may have, entered into a certain Real Estate Exchange Agreement (the “Exchange
Agreement”) with DP Industrial L.L.C. (“DP”), pursuant to which, among other
things, DP may take title to the Subject Property and IRE may take title to a
portion of DP’s land consisting of approximately 81.3 acres (the “Alternative
Ethanol Production Facility Land”).  In
such event, IRE intends to use the Alternative Ethanol Production Facility Land
as and for the Ethanol Production Facility and DP intends to use the Subject
Property for industrial manufacturing, warehouse and distribution and related
uses.  In the event that: (i) the City
of Rochelle (the “City”) enters into an annexation agreement with DP relating
to the Alternative Ethanol Production Facility Land and other land (the “DP
Annexation Agreement”); and (ii) within the DP Annexation Agreement or any
rider thereto DP agrees to be responsible for paying the costs of certain
infrastructure improvements; and (iii) the City enters into an annexation
agreement with IRE relating to the Subject Property (the “IRE Annexation
Agreement”); and (iv) the Subject Property and the Alternative Ethanol
Production Facility Land are annexed by the City; and (v) the Exchange
Agreement closes within a reasonable time after the Subject Property and the
Alternative Ethanol Production Facility Land are annexed by the City, then upon
the occurrence of the foregoing events, the Seller agrees to:  (i) exchange the Subject Property for the
Alternative Ethanol Production Facility Land pursuant to the terms of the
Exchange Agreement meaning and intending to include, acceptance of the  subject to that certain first right of
refusal given to DP in the Exchange Agreement; and (ii) grant to IRE an Option
to Purchase the Alternative Ethanol Production Facility Land upon the same
terms and conditions as are set forth within this Option Agreement, meaning and
intending to include the right to purchase the Alternative Ethanol Production
Facility Land in lieu of the Subject Property (the “IRE Alternative Ethanol
Production Facility Land Option”); and (iii) if DP pays the Due Diligence
Payment referred to in the Exchange Agreement (approximately $630,000.00) to
IRE, then Seller shall have the right to receive from IRE the amount of  $16,121.19 per acre for 9.201 acres, that
being the difference between the Subject Property acres of 90.288 acres and the
Exchange Property of 81.087 acres, (the “Acreage Payment”)and IRE shall have the
right to retain  the balance of the aforesaid
Due Diligence Payment.  Notwithstanding
anything contained in this Agreement to the contrary Seller’s agreement to
trade the Subject Property for the Exchange Property is expressly conditioned
upon Seller receiving Seller’s aforesaid share of the Due Diligence Payment.


 


XXVI.   ANNEXATION AGREEMENT


 


Seller
acknowledges that the annexation agreement for the Subject Property, currently
contemplated by Purchaser with respect to the Subject Property, includes: an
obligation to convey and/or dedicate a 50’ right-of-way on Caron Road, a 25’
utility easement along Caron Road, the acreage for a railroad right-of-way to
the Barth property, (which is subject to the City of Rochelle’s obligation to
pay for the same at a price of $17,500.00 per acre), the 40’ roadway dedication
on Steward Road, the 70’ additional property for the overpass, (which is
subject to the City of Rochelle’s obligation to pay for the same at a price of
$17,500.00 per acre) and the 30’ utility easement located north of the overpass
property and north of Steward Road to the west line of the Barth property.
Purchaser expressly agrees that no re-zoning annexation or other activities of
Purchaser with respect to the Subject Property shall be binding on the Subject


 


10

















 


Property, or Seller, unless
Purchaser shall first waive all unfulfilled contingencies or conditions of this
Agreement and proceed to Closing. Seller acknowledges that the Exchange
Agreement and the related rider to the annexation agreement for the Exchange
Property, currently contemplated by Purchaser with respect to the Exchange
Property, includes: an agreement to dedicate the existing 40 foot right of way
for Steward Road to Ogle County and a 25 to 30 foot easement for utilities to
the City of Rochelle which utility easement shall be adjacent to and parallel
with Steward Road.  In the event the
Exchange Agreement Closes, and Seller becomes the Owner of the Alternative
Ethanol Production Facility Land, then in that event, Seller agrees to dedicate
the 40 foot right of way of Steward Road to Ogle County and a 25 to 30 foot
easement for utilities to the City of Rochelle.


 


XXVII.   SELLER’S CLOSING
COSTS


 


As additional
consideration for Seller entering into this Agreement, Purchaser agrees to pay
to Seller all closing costs which would otherwise be customarily incurred or
paid by the Seller under this Agreement, Seller’s Purchase Options, the
Exchange Agreement, and the Alternative Ethanol Production Facility Land Option
including but not limited to, title insurance commitment or policy fees, title
insurance company closing fees, escrow and exchange fees, surveys, transfer
taxes, attorneys fees and recording fees. 
Aforesaid payment for closing costs shall be made on the day of closing
the respective agreements. At the Closing of Seller’s Purchase Options, Seller
agrees to pay toward Purchasers attorney’s fees the sum of $60,000.00 which
amount Purchaser agrees to reimburse Seller on the date of Closing this
Agreement or on the date DP pays the Due Diligence Payment referred to in the
Exchange Agreement, whichever date occurs first.


 


XXVIII.   LEASE


 


At or about
the Closing of Sellers acquisition of the Subject Property or the Exchange
Property, whichever the case may be, Seller will grant to Purchaser a Lease of
the Subject Property or the Exchange Property, whichever the case may be, which
lease shall contain a provision for rent in the amount of One Hundred Dollars
($100.00) and expire upon the expiration or termination of this Agreement or
the IRE Alternative Ethanol Production Facility Land Option, whichever the case
may be. The terms of the lease shall provide that all general real estate taxes
accruing during period of the applicable Option, (even if the same are not then
due) shall be paid by Purchaser when the same become due and payable, together
with all other expenses normally incident to the ownership of real estate. IRE
shall have the right to sublet the real estate for farming purposes which
sublease shall terminate by its own terms on a date not later than March 1
in the calendar year this Agreement, or the IRE Alternative Ethanol Production
Facility Land Option expires, whichever the case may be.  At all times during the existence of the
Lease, IRE will provide Seller with evidence that there is in place a customary
commercially reasonable Landlord Tenant liability insurance policy with
reasonable limits of coverage and naming Seller as an insured.   The Lease shall provide that neither Purchaser,
nor its agents or representatives, shall permit any grading or excavations of
the Subject Property or the IRE Alternative Ethanol Production Facility Land,
or any removal of trees nor shall they construct any building improvements
thereon during the term of this Agreement and/or the Lease, unless Purchaser
shall proceed to either Closing under this Agreement or Closing under the IRE
Alternative Ethanol Production Facility Land Option, whichever the case may
be.  The


 


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Lease shall also provide, among
other things, except to the extent attributable to the negligent acts or
omissions of Seller, its directors, employees, agents and contractors IRE shall
indemnify and hold harmless the Subject Property, and/or the IRE Alternative
Ethanol Production Facility Land and Seller, its and their successors and
assigns, from all claims, suits, threats of suit, loss, costs (including
attorneys fees and costs of suit), injury (including personal injury), or
damage or liens arising from possession of the Subject Property and /or the IRE
Alternative Ethanol Production Facility Land. The Lease shall also provide
that, in all events, Purchaser will keep the Subject Property and/or the IRE
Alternative Ethanol Production Facility Land free and clear of all liens,
claims and demands, including mechanic’s liens, in connection with work
performed on the Subject Property and/or the IRE Alternative Ethanol Production
Facility Land or any part thereof and materials provided in connection with
such work, where such work was performed or contracted for or such materials
were provided or contracted for on or before the Closing Date.


 


IN WITNESS
WHEREOF, Purchaser has executed this Agreement as of the 2nd day of July, 2003
(the “Execution Date”).


 


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  PURCHASER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ILLINOIS RIVER ENERGY, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Floyd
  Schultz

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Floyd Schultz, authorized agent

  	
   

  
					



 


 


This Agreement
is agreed to and accepted by Seller this 2nd day of July 2003.


 


	
   

  	
  SELLER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JAMES D. CARMICHAEL

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ James D. Carmichael

  	
   

  



 


 


Prepared by:


Charles P. Cole, Jr.


Attorney at Law


P.O. Box 24


Rochelle, Il 61068


 


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EXHIBIT A TO IRE/CARMICHAEL OPTION AGREEMENT


 


PART OF THE NORTHEAST QUARTER (NE1/4) OF THE NORTHEAST QUARTER (NE1/4)
AND PART OF THE SOUTHEAST QUARTER (SE1/4) OF THE NORTHEAST QUARTER (NE1/4) OF
SECTION THIRTY-ONE (31) AND PART OF THE NORTHWEST QUARTER (NW1/4) OF THE
NORTHWEST QUARTER (NW1/4) AND PART OF THE SOUTHWEST QUARTER (SW1/4) OF THE
NORTHWEST QUARTER (NW1/4) OF SECTION THIRTY-TWO (32), TOWNSHIP FORTY (40)
NORTH, RANGE TWO (2) EAST OF THE THIRD (3RD) PRINCIPAL MERIDIAN,
OGLE COUNTY, ILLINOIS, DESCRIBED AS FOLLOWS, TO WIT:


 


BEGINNING AT
THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER (NW1/4) OF SAID
SECTION THIRTY-TWO (32); THENCE EASTERLY ALONG THE SOUTH LINE THEREOF, A
DISTANCE OF 1330.53 FEET TO THE SOUTHEAST CORNER OF THE SOUTHWEST QUARTER
(SW1/4) OF THE NORTHWEST QUARTER (NW1/4) OF SAID SECTION THIRTY-TWO (32);
THENCE NORTHERLY, ALONG THE EAST LINE THEREOF AND ALONG THE EAST LINE OF THE
NORTHWEST QUARTER (NW1/4) OF SAID NORTHWEST QUARTER (NW1/4) AT AN ANGLE OF 90
DEGREES 06 MINUTES 41 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBED
COURSE, A DISTANCE OF 1826.40 FEET TO A POINT ON THE SOUTHERLY RIGHT OF WAY
LINE OF F.A.I. ROUTE 88;  THENCE
SOUTHWESTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE, AT AN ANGLE OF 80 DEGREES
03 MINUTES 05 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBED COURSE, A
DISTANCE OF 1158.87 FEET;  THENCE
SOUTHWESTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE, AT AN ANGLE OF 177
DEGREES 39 MINUTES 19 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBED
COURSE, A DISTANCE OF 196.73 FEET TO A POINT ON THE EAST LINE OF THE NORTHEAST
QUARTER (NE1/4) OF THE NORTHEAST QUARTER (NE1/4) OF SAID
SECTION THIRTY-ONE (31);  THENCE
SOUTHWESTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE, AT AN ANGLE OF 179
DEGREES 57 MINUTES 48 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBED
COURSE, A DISTANCE OF 403.72 FEET; 
THENCE SOUTHWESTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE, AT AN ANGLE
OF 182 DEGREES 22 MINUTES 56 SECONDS AS MEASURED CLOCKWISE FROM THE LAST
DESCRIBED COURSE, A DISTANCE OF 954.59 FEET TO A POINT ON THE EASTERLY RIGHT OF
WAY LINE OF CARON ROAD;  THENCE
SOUTHEASTERLY ALONG SAID EASTERLY RIGHT OF WAY LINE, AT AN ANGLE OF 81 DEGREES
28 MINUTES 16 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBED COURSE, A
DISTANCE OF 699.97 FEET;  THENCE
SOUTHEASTERLY, ALONG SAID EASTERLY RIGHT OF WAY LINE, BEING THE ARC OF A
NON-TANGENTAL CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 11589.16 FEET AND
WHOSE CHORD FORMS AN ANGLE OF 181 DEGREES 31 MINUTES 20 SECONDS AS MEASURED
CLOCKWISE FROM THE LAST DESCRIBED COURSE, AN ARC DISTANCE OF 614.53 FEET;  THENCE SOUTHEASTERLY ALONG SAID EASTERLY
RIGHT OF WAY LINE, AT AN ANGLE OF 181 DEGREES 33 MINUTES 18 SECONDS AS MEASURED
CLOCKWISE FROM THE LAST DESCRIBED CHORD, A DISTANCE OF 93.86 FEET TO A POINT ON
THE SOUTH LINE OF THE SOUTHEAST QUARTER (SE1/4)


 


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OF THE NORTHEAST QUARTER
(NE1/4) OF SAID SECTION THIRTY-ONE (31); 
THENCE EASTERLY, ALONG THE SOUTH LINE THEREOF, AT AN ANGLE OF 104
DEGREES 59 MINUTES 59 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBED COURSE,
A DISTANCE OF 911.86 FEET TO THE POINT OF BEGINNING, CONTAINING 90.288 ACRES,
MORE OR LESS.


 


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EXHIBIT B


 


Title Exceptions


 


 


 


 


1.             Taxes for the year 2003 and
subsequent years.


 


2.             Rights of the public, the State of
Illinois, the County, the Township and the municipality in and to that part of
the premises in question taken, used or dedicated for roads or highways.


 


3.             Rights of way for drainage ditches,
drain tiles, feeders, laterals and underground pipes, if any.


 


5.             Easement granted to Northern
Illinois Gas Company, its successors and assigns, by instrument recorded
October 11, 1968 in Book 54 at Page 365.


 


6.             Annexation Agreement between the
City of Rochelle and IRE (among others), including any Rider thereto.


 


7.             Annexation Agreement between the
City of Rochelle and DP Partners, DP Industrial (among others), or their
successors in interest, including any Rider thereto.


 


8.             Easement Agreement between the City
of Rochelle and Yesac Farms, L.P.


 


9.             Memorandum of Right of First
Refusal between IRE and DP Partners, DP Industrial or their successors in
interest


 


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