# **Exhibit 10.2**

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# OPTION AGREEMENT

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

 

## W I T N E S S E T H:

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WHEREAS,Seller is the owner in fee simple of a certain parcel of real property in OgleCounty, Illinois consisting of 81.081 acres said real property being moreparticularly described on Exhibit A, which is attached hereto, and by thisreference, incorporated herein, together with all improvements andappurtenances 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 optionto purchase the Property upon the terms and conditions hereinafter set forth;and

 

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

 

## I.     GRANT OF OPTION.

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# (a)                                  Uponthe terms, conditions and provisions herein contained, Seller hereby grants toPurchaser an option (the “Option”), as set forth herein, to purchase theProperty from Seller.

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# (b)                                 Theoption 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 OptionPeriod shall be Twenty Thousand Dollars ($20,000.00).  Purchaser shall receive an offset against the consideration duefor the Option Period which offset shall be equal to the amount previouslydeposited by Purchaser under the Seller’s Purchase Options which previouslydeposited amount is Twenty Thousand Dollars ($20,000.00).

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# II.   PURCHASEPRICE.

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

 

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# III.  EXERCISE OF OPTION.

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Purchaser mayexercise its Option to purchase the Property at any time on or before theexpiration 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 Purchaserelects to exercise the Option, the Closing, subject to the terms ofSection VI A and B below and delivery of possession to Purchaser of theProperty, shall occur on the day and time designated by Purchaser in the OptionNotice, provided, however that day must be a business day and must be not lessthan thirty (30) days after the date of the Option Notice and no later thansixty (60) days after the date of the Option Notice. If Purchaser does notelect to exercise the Option prior to the end of the Option Period the Optionshall terminate automatically at the end of the Option Period, and except asotherwise provided herein, this Agreement and all further rights andobligations of the parties hereunder shall be terminated.

 

# IV.   PAYMENTOF PURCHASE PRICE.

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

 

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

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## (b)                                 Purchasershall be responsible for all the general real estate taxes, without anyproration, even if the same are not then due.

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

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# V.   CLOSINGAND CONVEYANCE OF TITLE.

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

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

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### (i)                                     arecordable warranty deed conveying to Purchaser or to Purchaser’s designeemarketable fee simple title to the Property, subject only to the PermittedExceptions described below in this Agreement;

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### (ii)                                  anAffidavit of Title covering the Property, in customary form;

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### (iii)                               anALTA statement to the Title Company;

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### (iv)                              Stateand County real estate transfer tax declaration prepared and executed bySeller;

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### (v)                                 anaffidavit 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 of1986 as amended;

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### (vi)                              suchdocuments (in recordable form) as are necessary to comply with the disclosurerequirements of the Illinois Responsible Property Transfer Act; if any;

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

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# VI.   INSPECTION DOCUMENTS.

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#### A.           Title InsuranceCommitment

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

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

 

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which Seller has knowledge or control. At any time prior to the expiration of fifteen (15) days after receiptby Purchaser of the Commitment, Purchaser shall have the right to advise Sellerof any defect or objection thereto. Seller shall then have until fifteen (15) days from the date ofPurchaser’s objection to correct or satisfy all defects or objections. If suchdefects and objections are not corrected or satisfied within said period, thenPurchaser, at its option, may elect to terminate this Agreement withoutliability to Seller by written notice to Seller, in which case, Seller shallpromptly 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 acceptingtitle to such objections or defects, if the Option is exercised, proceed toClosing. At Closing, Purchaser may, at Seller’s expense, cause the amount ofthe Commitment to be increased to the amount of the Purchase Price.

 

#### B.             Survey.          [INTENTIONALLY DELETED]

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###### C. Entry Rights. [INTENTIONALLYDELETED]

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# VII.  GOVERNMENTAL APPLICATIONS.

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# Selleracknowledges that Purchaser may, at its own expense, file applications withfederal, state, and local governmental bodies for annexation, annexationagreements, zoning, planned development, special use, variation, subdivision,subdivision improvement agreements, and building and related permits andapprovals (collectively, “Zoning”) for a commercial or industrial use of theProperty.  Upon Purchaser’s request,Seller will promptly execute written authorizations and related ownershipdisclosures respecting such applications and attend (if necessary) all meetingsrequired under the terms of the applicable zoning ordinances, codes and/orIllinois Compiled Statutes reasonably necessary to obtain the Zoning.  Without limiting the generality of theforegoing, Seller covenants and agrees to promptly execute and deliver any andall agreements and petitions that may be necessary or desirable in order tore-zone the Property and to annex the Property to the City of Rochelle (the“City”).  In addition, Seller covenantsand agrees not to contest or oppose, Purchaser’s proposed use of the Propertyin any proceeding or public hearing before any federal, state or localgovernmental entity.   Notwithstandinganything contained in this Section of this Agreement to the contrary,Seller shall not be required to incur any personal liability by cooperatingwith Purchaser pursuant to the terms of this Section of this Agreementincluding, without limitation, the execution and delivery of any agreements,petitions or other documents.  Purchaserexpressly agrees that no re-zoning annexation or other activities of Purchaserwith respect to the Property shall be binding on the Property, or Seller,unless Purchaser shall first waive all unfulfilled contingencies or conditionsof this Agreement and proceed to Closing.

 

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VIII.  NOTICES

 

All noticesand requests permitted or required to be given hereunder shall be in writingand 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 receiptrequested, with adequate postage affixed, if mailed by registered or certifiedmail, or (c) on the date when sent, charges pre-paid, if delivered by reputablecommercial overnight delivery service or U.S. Express Mail as evidenced byservice receipt or by Express Mail postmark. All notices shall be addressed to the addressee stated herein below orat such other address, as either party shall designate in writing in the mannerhereinabove set forth.

 

Address of Seller:

 

James D. Carmichael

15114 E. Illinois Route 64

Rochelle, Illinois 61068

Telephone: (815) 562-5991

Facsimile:  {IntentionallyDeleted}

 

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.

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

 

# X.   CONFIDENTIALITY

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UnlessPurchaser gives its prior written consent, Seller shall not make any publicstatements or comments regarding (i) the proposed purchase and salecontemplated by this Agreement, or (ii) the contemplated development of theProperty by Purchaser or its assignee. In addition to the foregoing, unless Purchaser gives its prior writtenconsent Seller shall not disseminate any press releases or announcements,whether written or oral, to the media or the general public with respect to thesubject transaction including, without limitation, the purchase price or anyother business terms of this Agreement. Nothing contained in this Section of this agreement shall beconstrued as restricting or prohibiting Seller from making any disclosures withrespect to this transaction, including any of the terms of this Agreement, asSeller determines, in the exercise of Seller’s sole discretion, may benecessary or convenient, for the purpose of making or performing any of theLeases permitted under Section XVI (a) of this Agreement, or for thepurpose of performing other provisions of this Agreement. Purchaser shall be entitledto recover compensatory damages from Seller for a violation of thisSection of this Agreement. Purchaser shall also be entitled to any otherequitable relief including specific

 

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

 

# XI.   EMINENTDOMAIN AND CASUALTY.

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If, during theterm of this Agreement, any portion of the Property shall be taken by eminentdomain, or is the subject of eminent domain proceedings threatened orcommenced, or suffers a casualty, Seller shall promptly notify Purchaserthereof, and immediately provide Purchaser with copies of any writtencommunication from any condemning authority. If any of said events occur with respect to a material portion of theProperty which interferes substantially with Purchaser’s contemplated use, ordamages a material portion of the improvements, then, in that event, Purchasershall have the right to rescind this Agreement, in which event this Agreement shallbecome null and void and the Option Price shall be immediately returned toPurchaser (but not the interest earned on the Option Price). If any of saidevents occur and Purchaser still desires to close, then (a) if thetransfer 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 priorto Closing, the entire Property shall be conveyed to Purchaser at Closinghereunder; (c) if Seller has received payment for such condemnation ortaking prior to the Closing hereunder, or has received insurance proceeds priorto Closing the amount of such payment shall be a credit against the PurchasePrice payable by Purchaser hereunder; or (d) if Seller has not receivedsuch payment at the time of Closing, Seller shall assign to Purchaser allclaims and rights on account of such insurance or arising out of such taking.

 

# XII.  MISCELLANEOUS AND STATE LAW.

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Whenever it isprovided in this Agreement that days shall be counted, the first day to becounted shall be the day following the date on which the event causing theperiod to commence occurs.  If the dayfor performance of any action hereunder falls on a Saturday, Sunday, or legalholiday, then the time for performance shall be deemed extended to the nextsucceeding business day.  This Agreementshall be construed under the laws of the State of Illinois.

 

# XIII.  BROKER’S COMMISSION.

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Seller andPurchaser warrant and represent to each other that neither of them have dealtwith any real estate broker in connection with this Agreement.  Seller and Purchaser shall indemnify andhold 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 inany way related to, the transactions contemplated by this Agreement andoccasioned by the actions of such indemnifying party including, withoutlimitation, attorneys’ fees incurred in connection with such claims.  This indemnification shall survive theclosing or termination of the Agreement and is applicable whether or not adefault of either Purchaser or Seller occurs

 

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# XIV.  DEFAULT.

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#### A.   If Purchaser exercises theOption, all contingencies are satisfied and the sale and purchase of theProperty as contemplated by this Agreement is not consummated because ofPurchaser’s default, Seller shall provide Purchaser with written noticedescribing 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 theaforesaid twenty-one (21) period, then Seller may, at Seller’s option, asSeller’s exclusive remedies, either: (a) terminate this Agreement by givingwritten notice of such termination to Purchaser, whereupon the Option Price andthe interest earned thereon shall be retained by Seller and all rights, dutiesand obligations of all the parties hereunder shall expire and this Agreementshall in all respects become null and void, or (b) seek and obtainspecific performance of this Agreement. It is expressly intended by the provisions of the preceding sentence toexclude such other rights and remedies as may be provided for or allowed by lawor in equity including, without limitation, any right to seek damages,compensatory or otherwise.  The termsand limitations of this Section of this Agreement shall not be construedto limit any of Seller’s remedies that are specifically set forth in otherSections of this Agreement.

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B.  If Purchaser exercises the Option, allcontingencies are satisfied and the sale and purchase of the Property ascontemplated by this Agreement is not consummated because of Seller’s default,Purchaser shall provide Seller with written notice describing the allegeddefaults 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 exclusiveremedies, either: (a) terminate this Agreement by giving written notice of suchtermination to Seller, whereupon the Option Price, including the interestearned thereon, if any, shall be returned to Purchaser and all rights, dutiesand obligations of all the parties hereunder shall expire and this Agreementshall in all respects become null and void, or (b) seek and obtainspecific performance of this Agreement. It is expressly intended by the provisions of the preceding sentence toexclude such other rights and remedies as may be provided for or allowed by lawor in equity including, without limitation, any right to seek damages,compensatory or otherwise. The terms and limitations of this Section ofthis Agreement shall not be construed to limit any of Purchaser’s remedies thatare specifically set forth in other Sections of this Agreement.

 

# XV.   MODIFICATIONS.

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This Agreementmay not be amended, modified or changed, nor shall any waiver of any provisionhereof be effective, except by an instrument in writing and signed by the partyagainst whom enforcement of any such waiver, amendment, modification, change ordischarge is sought.

 

# XVI.  OPERATION OF PROPERTY PRIOR TO CLOSING.

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

 

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(a)                                  Exceptas otherwise set forth in this Agreement, neither Seller nor its agents orrepresentatives shall enter into any lease pertaining to any portion of theProperty;

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(b)                                 neitherthe Seller nor its agents or representatives shall enter into any contracts orother agreements, whether oral or written, pertaining to any portion of theProperty nor shall Seller sell mortgage, encumber, pledge, release or otherwisealienate any of its right, title or interest in the Property;

 

(c)                                  neitherSeller nor its agents or representatives shall permit any grading orexcavations of the Property, or any removal of trees therefrom nor shall theyconstruct any building improvements thereon during the term of this Agreement;

 

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

 

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

 

# XVII.  WAIVER.

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

 

# XVIII.  CLOSING CONTINGENCIES.

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

 

(a)                                  Purchasershall be able to obtain, at Purchaser’s expense, a standard owner’s titleinsurance policy (“Title Insurance Policy”) consistent with the Commitmentrequired under the terms of this Agreement from the Title Company on theClosing date; and

 

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

 

In the eventthat any one or more of the contingencies set forth in the preceding sentenceshall not be satisfied or met by the Closing Date, Purchaser, at its option,may waive the satisfaction thereof, without Seller having liability toPurchaser by reason of Purchaser waiving the satisfaction thereof and proceedto Closing or terminate this Agreement, without liability to Seller, in whichcase, Seller shall promptly refund the Option Price (but not the interestearned on the Option Price).

 

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# XIX.  RISK OF LOSS.

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

 

# XX.   TIMEIS OF ESSENCE.

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Time is of theessence of this Agreement.

 

# XXI.  SECTION 1031 EXCHANGE.

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The partiesagree that they shall cooperate with one another in the event either partywishes to make the transaction contemplated herein part of a tax deferredexchange 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 agreedto by the other party; (b) the payment of any costs or expenses, or theassumption of any liability, by the other party; (c) any requirement that theother party enter into the chain of title to any real estate other than theProperty to effectuate the exchange; (d) the assignment of Seller’s covenants,representations and warranties under this Agreement to any third party in amanner which releases the Seller or any assignee of Seller.  In addition, the party not requesting theexchange shall consent to the assignment of this Agreement from the requestingparty to a qualified exchange intermediary in a form mutually agreed upon bySeller and Purchaser.  The partyrequesting the exchange shall indemnify and hold the other party, itsdirectors, officers, employees and agents harmless from any liability(including attorneys fees and costs) arising out of the exchange.

 

# XXII.  ENTIRE AGREEMENT.

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

 

XXIII.   MEMORANDUM.

 

Upon therequest of Purchaser, Seller shall execute a recordable memorandum of thisAgreement provided, however, Purchaser shall concurrently execute a recordablerelease of the Memorandum and deliver it to the Title Company together withsuch written instructions for holding and recording the release at the end ofthe Option Period as are mutually acceptable to the Title Company, Purchaserand Seller.

 

XXIV.  RULES OF CONSTRUCTION.

 

This Agreementshall be given a reasonable construction and no rule of construction againstthe Party who drafted or prepared this document shall be applied to thisAgreement.

 

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XXV.   DP TRADE AGREEMENT 

 

IRE has, ormay have, entered into a certain Real Estate Exchange Agreement (the “ExchangeAgreement”) with DP Industrial L.L.C. (“DP”), pursuant to which, among otherthings, DP may take title to the Subject Property and IRE may take title to aportion of DP’s land consisting of approximately 81.3 acres (the “AlternativeEthanol Production Facility Land”).  Insuch event, IRE intends to use the Alternative Ethanol Production Facility Landas and for the Ethanol Production Facility and DP intends to use the SubjectProperty for industrial manufacturing, warehouse and distribution and relateduses.  In the event that: (i) the Cityof Rochelle (the “City”) enters into an annexation agreement with DP relatingto the Alternative Ethanol Production Facility Land and other land (the “DPAnnexation Agreement”); and (ii) within the DP Annexation Agreement or anyrider thereto DP agrees to be responsible for paying the costs of certaininfrastructure improvements; and (iii) the City enters into an annexationagreement with IRE relating to the Subject Property (the “IRE AnnexationAgreement”); and (iv) the Subject Property and the Alternative EthanolProduction Facility Land are annexed by the City; and (v) the ExchangeAgreement closes within a reasonable time after the Subject Property and theAlternative Ethanol Production Facility Land are annexed by the City, then uponthe occurrence of the foregoing events, the Seller agrees to:  (i) exchange the Subject Property for theAlternative Ethanol Production Facility Land pursuant to the terms of theExchange Agreement meaning and intending to include, acceptance of the  subject to that certain first right ofrefusal given to DP in the Exchange Agreement; and (ii) grant to IRE an Optionto Purchase the Alternative Ethanol Production Facility Land upon the sameterms and conditions as are set forth within this Option Agreement, meaning andintending to include the right to purchase the Alternative Ethanol ProductionFacility Land in lieu of the Subject Property (the “IRE Alternative EthanolProduction Facility Land Option”); and (iii) if DP pays the Due DiligencePayment referred to in the Exchange Agreement (approximately $630,000.00) toIRE, then Seller shall have the right to receive from IRE the amount of  $16,121.19 per acre for 9.201 acres, thatbeing the difference between the Subject Property acres of 90.288 acres and theExchange Property of 81.087 acres, (the “Acreage Payment”)and IRE shall have theright to retain  the balance of the aforesaidDue Diligence Payment.  Notwithstandinganything contained in this Agreement to the contrary Seller’s agreement totrade the Subject Property for the Exchange Property is expressly conditionedupon Seller receiving Seller’s aforesaid share of the Due Diligence Payment.

 

XXVI.   ANNEXATION AGREEMENT

 

Selleracknowledges that the annexation agreement for the Subject Property, currentlycontemplated by Purchaser with respect to the Subject Property, includes: anobligation 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 tothe Barth property, (which is subject to the City of Rochelle’s obligation topay for the same at a price of $17,500.00 per acre), the 40’ roadway dedicationon Steward Road, the 70’ additional property for the overpass, (which issubject 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 overpassproperty and north of Steward Road to the west line of the Barth property.Purchaser expressly agrees that no re-zoning annexation or other activities ofPurchaser with respect to the Subject Property shall be binding on the Subject

 

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Property, or Seller, unlessPurchaser shall first waive all unfulfilled contingencies or conditions of thisAgreement and proceed to Closing. Seller acknowledges that the ExchangeAgreement and the related rider to the annexation agreement for the ExchangeProperty, currently contemplated by Purchaser with respect to the ExchangeProperty, includes: an agreement to dedicate the existing 40 foot right of wayfor Steward Road to Ogle County and a 25 to 30 foot easement for utilities tothe City of Rochelle which utility easement shall be adjacent to and parallelwith Steward Road.  In the event theExchange Agreement Closes, and Seller becomes the Owner of the AlternativeEthanol Production Facility Land, then in that event, Seller agrees to dedicatethe 40 foot right of way of Steward Road to Ogle County and a 25 to 30 footeasement for utilities to the City of Rochelle.

 

XXVII.   SELLER’S CLOSINGCOSTS

 

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

 

XXVIII.   LEASE

 

At or aboutthe Closing of Sellers acquisition of the Subject Property or the ExchangeProperty, whichever the case may be, Seller will grant to Purchaser a Lease ofthe Subject Property or the Exchange Property, whichever the case may be, whichlease 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 orthe IRE Alternative Ethanol Production Facility Land Option, whichever the casemay be. The terms of the lease shall provide that all general real estate taxesaccruing during period of the applicable Option, (even if the same are not thendue) shall be paid by Purchaser when the same become due and payable, togetherwith all other expenses normally incident to the ownership of real estate. IREshall have the right to sublet the real estate for farming purposes whichsublease shall terminate by its own terms on a date not later than March 1in the calendar year this Agreement, or the IRE Alternative Ethanol ProductionFacility Land Option expires, whichever the case may be.  At all times during the existence of theLease, IRE will provide Seller with evidence that there is in place a customarycommercially reasonable Landlord Tenant liability insurance policy withreasonable 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 ofthe Subject Property or the IRE Alternative Ethanol Production Facility Land,or any removal of trees nor shall they construct any building improvementsthereon during the term of this Agreement and/or the Lease, unless Purchasershall proceed to either Closing under this Agreement or Closing under the IREAlternative Ethanol Production Facility Land Option, whichever the case maybe.  The

 

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Lease shall also provide, amongother things, except to the extent attributable to the negligent acts oromissions of Seller, its directors, employees, agents and contractors IRE shallindemnify and hold harmless the Subject Property, and/or the IRE AlternativeEthanol Production Facility Land and Seller, its and their successors andassigns, from all claims, suits, threats of suit, loss, costs (includingattorneys fees and costs of suit), injury (including personal injury), ordamage or liens arising from possession of the Subject Property and /or the IREAlternative Ethanol Production Facility Land. The Lease shall also providethat, in all events, Purchaser will keep the Subject Property and/or the IREAlternative Ethanol Production Facility Land free and clear of all liens,claims and demands, including mechanic’s liens, in connection with workperformed on the Subject Property and/or the IRE Alternative Ethanol ProductionFacility Land or any part thereof and materials provided in connection withsuch work, where such work was performed or contracted for or such materialswere provided or contracted for on or before the Closing Date.

 

IN WITNESSWHEREOF, 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 Agreementis 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) OFSECTION THIRTY-ONE (31) AND PART OF THE NORTHWEST QUARTER (NW1/4) OF THENORTHWEST QUARTER (NW1/4) AND PART OF THE SOUTHWEST QUARTER (SW1/4) OF THENORTHWEST 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 ATTHE SOUTHWEST CORNER OF THE NORTHWEST QUARTER (NW1/4) OF SAIDSECTION THIRTY-TWO (32); THENCE EASTERLY ALONG THE SOUTH LINE THEREOF, ADISTANCE 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 THENORTHWEST QUARTER (NW1/4) OF SAID NORTHWEST QUARTER (NW1/4) AT AN ANGLE OF 90DEGREES 06 MINUTES 41 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBEDCOURSE, A DISTANCE OF 1826.40 FEET TO A POINT ON THE SOUTHERLY RIGHT OF WAYLINE OF F.A.I. ROUTE 88;  THENCESOUTHWESTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE, AT AN ANGLE OF 80 DEGREES03 MINUTES 05 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBED COURSE, ADISTANCE OF 1158.87 FEET;  THENCESOUTHWESTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE, AT AN ANGLE OF 177DEGREES 39 MINUTES 19 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBEDCOURSE, A DISTANCE OF 196.73 FEET TO A POINT ON THE EAST LINE OF THE NORTHEASTQUARTER (NE1/4) OF THE NORTHEAST QUARTER (NE1/4) OF SAIDSECTION THIRTY-ONE (31);  THENCESOUTHWESTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE, AT AN ANGLE OF 179DEGREES 57 MINUTES 48 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBEDCOURSE, A DISTANCE OF 403.72 FEET; THENCE SOUTHWESTERLY ALONG SAID SOUTHERLY RIGHT OF WAY LINE, AT AN ANGLEOF 182 DEGREES 22 MINUTES 56 SECONDS AS MEASURED CLOCKWISE FROM THE LASTDESCRIBED COURSE, A DISTANCE OF 954.59 FEET TO A POINT ON THE EASTERLY RIGHT OFWAY LINE OF CARON ROAD;  THENCESOUTHEASTERLY ALONG SAID EASTERLY RIGHT OF WAY LINE, AT AN ANGLE OF 81 DEGREES28 MINUTES 16 SECONDS AS MEASURED CLOCKWISE FROM THE LAST DESCRIBED COURSE, ADISTANCE OF 699.97 FEET;  THENCESOUTHEASTERLY, ALONG SAID EASTERLY RIGHT OF WAY LINE, BEING THE ARC OF ANON-TANGENTAL CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 11589.16 FEET ANDWHOSE CHORD FORMS AN ANGLE OF 181 DEGREES 31 MINUTES 20 SECONDS AS MEASUREDCLOCKWISE FROM THE LAST DESCRIBED COURSE, AN ARC DISTANCE OF 614.53 FEET;  THENCE SOUTHEASTERLY ALONG SAID EASTERLYRIGHT OF WAY LINE, AT AN ANGLE OF 181 DEGREES 33 MINUTES 18 SECONDS AS MEASUREDCLOCKWISE FROM THE LAST DESCRIBED CHORD, A DISTANCE OF 93.86 FEET TO A POINT ONTHE 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 104DEGREES 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 andsubsequent years.

#####  

##### 2.             Rights of the public, the State ofIllinois, the County, the Township and the municipality in and to that part ofthe 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 NorthernIllinois Gas Company, its successors and assigns, by instrument recordedOctober 11, 1968 in Book 54 at Page 365.

#####  

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

#####  

##### 7.             Annexation Agreement between theCity of Rochelle and DP Partners, DP Industrial (among others), or theirsuccessors in interest, including any Rider thereto.

#####  

##### 8.             Easement Agreement between the Cityof Rochelle and Yesac Farms, L.P.

#####  

##### 9.             Memorandum of Right of FirstRefusal between IRE and DP Partners, DP Industrial or their successors ininterest

 

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