EXHIBIT 10.16


 


AMENDED AND RESTATED CAPITALIZATION AGREEMENT


 


THIS AMENDED AND RESTATED CAPITALIZATION
AGREEMENT (the “Agreement”) is made and entered into as
of this 14th day of February, 2007, by and between Rawhide Management, LLC, a
South Dakota limited liability company (“Rawhide”) and Illini Bio-Energy, LLC,
an Illinois limited liability company (“Illini” or the “Company”).


 


RECITALS


 


WHEREAS, Illini
intends to develop and operate an ethanol plant capable of producing 100
million gallons of ethanol per year in Logan County, Illinois (the “Ethanol
Plant”);


 


WHEREAS, Rawhide
desires to invest in the Ethanol Plant;


 


WHEREAS, the Parties
desire to amend and restate in its entirety that certain Amended and Restated
Capitalization Agreement executed on January 9, 2007 to set forth in this
Agreement the terms and conditions under which the Rawhide shall invest in
Illini and under which Illini shall accept such investment.


 


NOW THEREFORE, for
and inconsideration of their respective obligations and undertakings as
hereinafter set forth, the receipt and sufficiency of which is hereby
acknowledged, the Parties do hereby agree to incorporate the above recitals as
part of this Agreement and amend and restate in its entirety the Amended and
Restated Capitalization Agreement executed on January 9, 2007 as follows:


 


ARTICLE I


Defined Terms


 


Each term defined in this Section, when used in this Agreement, shall,
unless the context otherwise requires, have the following meaning:


 


1.1          “Illini
Offering.”  The equity
offering (currently expected to be registered with the SEC) described in
Section 3.1 below.


 


1.2          “Effective
Date.”  The date after which
this Agreement has been fully executed by both of the parties hereto, and
ratified or adopted by resolution of each of their respective boards of
directors.


 


1.3          “Escrow
Closing Date.”  The day that
Illini releases proceeds from the Illini Offering from escrow in accordance
with and pursuant to the terms of the Illini Offering.


 


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1.4          “Fully
Diluted Basis.” All units outstanding and all existing warrants and
future warrants that may be issued at a future date.


 


1.5          “Initial
Credit Advances.”  The funds
advanced to Illini by Rawhide pursuant to Article II below.


 


1.6          “Capitalization.”  The amount that Illini agrees to allow
Rawhide to invest in the Illini Offering pursuant to Section 3.3 below.


 


1.7          “Rawhide
Offering.”  The private
placement offering described in Section 3.2 below.


 


1.8          “Seed
Capital Investors.”  Those
investors in Illini that are shown on attached Exhibit A and hold units in
Illini as of the date of this Agreement.


 


1.9          “Qualified
Expenses.”  Start-up costs,
included but not limited to the costs necessary to perform initial grading and
dirt work; complete permitting, engineering, surveying, and land acquisition;
commence initial construction and pay related legal and accounting costs.


 


1.10        “Unrelated
Third Party.”  A person, firm
or entity other than:  (i) Illini,
Rawhide and/or their successors in interest; (ii) a subsidiary of Illini,
Rawhide or their successors in interest; (iii) an officer, director, or
employee of Illini, Rawhide, any subsidiary of Illini or Rawhide or their
successors in interest; or (iv) an entity fifty one percent (51%) or more of
the equity of which is directly or indirectly owned by Illini, Rawhide or their
successors in interest and/or their subsidiaries and/or any one or more of
their respective officers, directors, or employees.


 


ARTICLE II


Initial Credit Advance


 


2.1          Initial
Credit Advance. Commencing on  the Effective
Date, Rawhide shall provide at least $10,800,000 in Initial Credit Advances to
Illini as set forth in this Article II and pursuant to a separate loan
agreement containing customary terms and conditions. Once advanced, said amounts
shall be credited with interest at the Applicable Federal Rate for short term
credit. The parties agree that Rawhide’s obligation to make Initial Credit
Advances is contingent upon Rawhide obtaining adequate financing, to be
determined in Rawhide’s sole discretion, to make the Initial Credit Advance and
that any failure by Rawhide to make a Initial Credit Advance due to inadequate
financing shall not give rise to a termination of this Agreement except as
specifically provided in Section 5.2(B) and (C). As a condition to Rawhide
making Initial Credit Advances, Illini shall agree that there shall be no
material changes to the business plan, capitalization or governance of Illini
without Rawhide’s prior written consent, except that Illini shall be entitled to
grant additional warrants to its directors pursuant to and in accordance with
the


 


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terms of the line of credit agreement with such directors in existence
prior to the date of this Agreement without the consent of Rawhide.


 


2.2          Funding
Requests. From time to time from and after the Effective Date, as
funds are required to pay for Qualified Expenses, Illini may request Initial
Credit Advances from Rawhide (a “Funding Request”). Each Funding Request shall
be in writing and be supported by a contract, invoice, or bill showing that the
Initial Credit Advance is required at that time to pay a Qualified Expense. Each
Funding Request shall be signed by an officer of Illini stating that it is a
Qualified Expense.


 


2.3          Payment. After
a Funding Request is received, Rawhide agrees to pay the amount requested in
the Funding Request to Illini subject to the provisions of Section 2.1. All
such payments to Illini shall be due and payable within five (5) business days
of receipt of the Funding Request applicable thereto, or if later, as specified
in the applicable contract, bill or invoice. Illini shall maintain a record of
all funds advanced by Rawhide pursuant to this Section, including, without
limitation, copies of all Funding Requests and supporting documentation, and
said records shall be open for inspection by Rawhide. Rawhide shall maintain a
record of all payments made pursuant to this Section, including all paid
receipts and cancelled checks applicable thereto, and said records shall be
open for inspection by Illini.


 


2.4          Application
Towards Subscription Price of Units. On such date that Rawhide
subscribes for units in the Illini Offering, the aggregate amount advanced to
Illini by Rawhide pursuant to this Article II, together with the interest
accrued thereon, shall be applied towards the down payment on the subscription
price, and thereafter, the amount of such advance so applied shall no longer be
considered a credit advance subject to repayment but shall instead be
considered a down payment on the subscription price which is subject to the
terms of the Illini Offering. In the event this Agreement is terminated for any
reason prior to that date or that Rawhide does not subscribe for units in the
Illini Offering for any reason, the aggregate amount advanced by Rawhide to
Illini pursuant to this Article II, together with interest accrued thereon,
shall be repaid to Rawhide on the earlier of the Escrow Closing Date, the date
upon which Illini or its unit holders receive alternate financing in the event
that the Illini Offering does not succeed, or March 1, 2008. In the event that
Rawhide subscribes for units and thereafter the Illini Offering fails, Illini
shall not be required to return the down payment to Rawhide in cash along with
other subscribers, but shall instead execute a promissory note providing that
amount shall accrue interest from that date at the Applicable Federal Rate for
short term credit and containing other customary terms and conditions. The
amounts due under that promissory note shall be repaid to Rawhide on the
earlier of the date upon which Illini or its unit holders receive alternate
financing or March 1, 2008.


 


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ARTICLE III


Capitalization


 


3.1          Illini Offering. As soon as reasonably
possible, Illini agrees, at its sole cost and expense, to initiate the Illini
Offering wherein they will make an offering of equity pursuant wherein Illini
shall offer a maximum of 36,000,000 units at a price of $2.50 each, and
thereafter, Illini agrees to use commercially reasonable efforts to obtain
subscriptions for units with a purchase price of at least $35,000,000. Provided,
however, that unless and until Rawhide’s right to subscribe for units in Illini
is terminated as hereinafter provided in Section 5.2 below, the parties agree
that Illini will not accept subscriptions for more than 49% of the total units
of Illini on a Fully Diluted Basis without first obtaining prior written
consent from Rawhide. The Parties acknowledge that the Illini Offering is
currently expected to be an offering registered with the Securities and
Exchange Commission (“SEC”). However, if for any reason, the Illini Offering is
instead conducted as a private placement, Rawhide’s right to subscribe for
units as described in this Article III shall survive, unless and until Rawhide’s
right to subscribe for units in Illini is terminated as hereinafter provided in
Section 5.2 below.


 


3.2          Rawhide Offering. As soon as is reasonably
possible, and in all events on or before March 1, 2007, Rawhide shall initiate,
at its sole cost and expense, the Rawhide Offering pursuant to which Rawhide
shall make a commercially reasonable effort to obtain sufficient subscriptions
to fund its capital investment in Illini as set forth in Section 3.3 below. It
is agreed that although the Rawhide Offering shall be designed to raise an
aggregate amount of approximately $250,000,000 for investment in Illini and two
other projects, it shall nevertheless be structured so as to allow the Rawhide
Offering to be closed in phases so as to permit Rawhide’s investment in Illini
once Rawhide has received subscriptions for a minimum of $200,000,000 if Illini
is either the first or the second project ready for construction.


 


3.3          Rawhide Capital Investment in Illini. Subject
to, and in accordance with, the terms and conditions of the Illini Offering and
effectiveness of the registration statement on Form SB-2, or in the event
Illini conducts a private placement, upon delivery to Rawhide of a private
placement memorandum and Rawhide’s representation that it is an accredited
investor, Rawhide agrees to then subscribe for a minimum of fifty-one percent
(51%) of the total units which are anticipated to be outstanding in Illini at
the end of the Illini Offering, in order to, along with debt financing, reach
the Escrow Closing Date (the “Initial Subscription”). In addition, provided
that Rawhide has subscribed for units in the Illini Offering pursuant to this
Agreement Rawhide agrees that on the later of 90 days following the
effectiveness of the registration statement on Form SB-2 or August 15, 2007, it
will subscribe for any units which remain unsold out of the total units in the
Illini Offering which are anticipated, along with debt financing, to be needed
to reach the Escrow Closing Date. This subscription shall also be subject to,
and in accordance with, the terms and conditions of the Illini Offering. Notwithstanding
anything in this Agreement to the contrary, Illini agrees that, provided
Rawhide makes the Initial Subscription as described in this section 3.3, then
at the closing of the Illini Offering, Rawhide shall own not less than 51% of
the total units of Illini on a Fully Diluted Basis and the subscription of
Rawhide shall be adjusted by the parties if necessary to reach that percentage.


 


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3.4          Payment to
Seed Capital Investors. On the Escrow Closing Date, Illini shall
deliver the following to the Seed Capital Investors from the proceeds of the Illini
Offering:


 


(A) a cash payment in an amount equal to
$4.00 per unit (for a total payment of $5,660,000 in the aggregate) for each
seed capital unit owned in Illini and set forth on Exhibit A; and


 


(B) at Illini’s option any one of the following:


 


(i) a total of 2,465,500 units in Illini to
be distributed among the Seed Capital Investors in accordance with their
percentage of ownership of seed capital units in Illini as set forth on Exhibit
A, or otherwise as determined by the Illini board of directors (provided,
however, that the warrants outstanding as of the Effective Date to purchase
807,500 Illini units at an exercise price of $1.00 per unit shall be
extinguished), or


 


 (ii) a
total of 1,981,000 units in Illini to be distributed among the Seed Capital
Investors in accordance with their percentage of ownership of seed capital
units in Illini as set forth on Exhibit A, or otherwise as determined by the
Illini board of directors, and the warrants outstanding as of the Effective
Date to purchase 807,500 Illini units at an exercise price of $1.00 per unit
shall not be extinguished;  or


 


(iii) a combination of options (i) and (ii)
above with the intent of economically balancing the value received whereby
Illini will receive 1,981,000 units in Illini to be distributed among the Seed
Capital Investors in accordance with their percentage of ownership of seed
capital units in Illini as set forth on Exhibit A, or otherwise as determined
by the Illini board of directors, and then choose to extinguish some portion of
the warrants for 807,500 units and, in exchange, receive units equal to the
number extinguished multiplied by $1.50 and divided by $2.50. In that event,
the remaining number of warrants shall not be extinguished.


 


(C) at Illini’s option any one of the following:


 


(i) an additional number of units in Illini
to be calculated on the Escrow Closing Date by taking the total number of any
additional warrants, if any, that may have been issued to Illini’s directors
pursuant to and in accordance with the terms of the line of credit agreement
with such directors in existence prior to the date of this Agreement,
multiplied by $1.50 and divided by $2.50 (provided, however, that the
additional warrants calculated on the Escrow Closing Date shall be
extinguished), or


 


(ii) the additional warrants calculated on
the Escrow Closing Date, if any, shall not be extinguished; or


 


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(iii) a combination of options (i) and (ii)
above with the intent of economically balancing the value received whereby
Illini will choose to extinguish some portion of the additional warrants
calculated on the Escrow Closing Date, if any, and, in exchange, receive units
equal to the number extinguished multiplied by $1.50 and divided by $2.50. In
that event, the remaining number of additional warrants, if any, shall not be
extinguished.


 


ARTICLE IV


Governance and Operating Agreement


 


4.1          Amendments
to the Existing Articles of Organization and Operating Agreement of Illini.
As soon as practical after the Effective Date and prior to the Illini Offering,
Illini shall cause its Articles of Organization and/or Operating Agreement (as
may be appropriate in the circumstances) to be amended and, so long thereafter
as this Agreement shall remain in effect, and thereafter in the event of
termination or expiration of this Agreement, Rawhide shall vote its units in
conformity with, the following:


 


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(A)          Composition
of Board of Directors. Between the Effective Date and the date upon which
the Illini operating agreement is next amended, the Board of Directors will be
composed of the current initial directors and three (3) advisory directors who
shall be appointed by Rawhide. Beginning upon the date upon which the Illini
operating agreement is next amended, the directors appointed by Rawhide shall
become actual directors with all of the rights of the other Illini directors
and any quorum required for the Illini board of directors to thereafter take
action shall require the presence of at least one director appointed by
Rawhide. Provided, however, that if Illini gives the Rawhide appointed
directors notice of two consecutive director meetings as provided in the Illini
operating agreement, and at least one Rawhide appointed director does not
attend either meeting, personally or telephonically, then thereafter no Rawhide
appointed director shall necessarily be required for purposes of a quorum. Notwithstanding
the foregoing, the Rawhide appointed directors shall continue to be counted
toward the minimum quorum requirement. Following the Escrow Closing Date, the
Board will be composed of a total of nine (9) directors, four (4) of whom will
be appointed by the initial directors of Illini to represent the Seed Capital
Investors (the “Illini Appointed Directors”), and five (5) of whom will be
appointed by Rawhide (the “Rawhide Appointed Directors”). Once appointed, a
director may only be removed “for cause,” and an individual who has previously
been removed for cause shall not at any time thereafter be eligible to serve as
a director of Illini. The Illini Appointed Directors shall serve until the
first special or annual meeting of the members following the date on which
substantial operations of the Illini ethanol plant commence. After the
expiration of the initial terms of the Illini Appointed Directors, four (4)
directors shall be elected by the members for staggered terms of three (3)
years at the first special or annual meeting; provided however, that Rawhide
shall not be entitled to vote for the election of any directors that the
members are entitled to elect. The five (5) Rawhide Appointed Directors shall
not be elected by the members and shall continue to be appointed by and serve
at the pleasure of Rawhide.


 


Additionally, the Illini directors, as elected by the members, shall
annually appoint a member, from among themselves, to the board of directors of
Rawhide. Ernest Moody shall be the first director so appointed. If Ernest Moody
resigns, the directors of Illini, as elected by the members, shall then appoint
a successor. Once appointed to the Rawhide board of directors, that director
may  be removed “for cause,” and an
individual who has previously been removed for cause shall not at any time
thereafter be eligible to serve as a director of Rawhide.


 


(B)          Anti-Dilution.
As of the Effective Date of this Agreement and except to the extent the same is
required in connection with an initial public offering or as required pursuant
to and in accordance with the terms of the line of credit agreement with the
Illini directors in existence prior to the date of this Agreement, Illini shall
not be authorized to issue any rights, warrants or options of any kind to
purchase or acquire any units of Illini or any other securities of any type having
a similar effect; Illini shall not be authorized to grant any unit bonuses; no
units shall be issued for a price that is less than $2.50 per unit.


 


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(C)          Required
Tax Distributions. Except as restricted by applicable loan covenants or
restrictions agreed to by Illini in connection with any loan, credit or other
financing, the Directors shall make reasonable efforts to provide for cash
distributions each year in amounts which are sufficient to permit the members
to make timely payment of the pro-rata share of the income tax attributable to
income and profit of Illini for such year.


 


(D)          Sale
of Control.


 


(i)            If
at any time one or more member(s) (the “Selling Group Members”) holding the
majority of voting units of Illini desires to sell or otherwise transfer fifty
percent (50%) or more of the voting units which they own in Illini to an
Unrelated Third Party (a “Proposed Transferee”), said member(s) shall require
the Proposed Transferee to provide a bona fide written offer that specifies a
price payable in cash, shares, ownership interests or other consideration for
the units and for specific terms and conditions of such transaction (a “Purchase
Offer”), the Selling Group of Member(s) shall not sell any units to such
Proposed Transferee unless the remaining members are first given the right to
participate in such sale on a pro rata basis (based on the relative ownership
interests held by each member) and at the same price per unit and otherwise
upon the same terms and conditions as are applicable to all of the Selling
Group Member(s).


 


(ii)           In
such event, each member wishing to participate shall notify the President of
Illini in writing of such intention within thirty (30) days of the Selling
Member(s)’ receipt of the Purchase Offer.


 


(iii)          The
Selling Member(s) and each participating Member shall sell to the Proposed
Transferee all, or at the option of the Proposed Transferee, any part (however,
if less that all, then such sale must be pro-rata among Selling Members and
participating Member(s)), of the ownership interests proposed to be sold by
them at not less than the price and upon other terms and conditions, if any,
not more favorable to the Proposed Transferee than those in the Purchase Offer.


 


(iv)          If
any units are sold pursuant to this Section 4.1(D) to any purchaser who is not
a party to this Agreement, such purchaser shall execute a counterpart of this
Agreement and Illini’s Operating Agreement as an express condition precedent to
the purchase of such units.


 


(E)           Right to Compel
Sale.


 


(i)            If
at any time a proposal for a sale of all or substantially all of the voting
units in Illini to, or a merger or consolidation of Illini with or into an
Unrelated Third Party for a specified price per unit payable in cash, shares,
ownership interests or any other consideration and on specified terms and
conditions (a “Sale Proposal”)  shall  have been approved by the requisite
number of


 


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members required to approve the Sale Proposal under the Articles of
Organization and Operating Agreement of Illini and any applicable law, then the
members who so approved the Sale Proposal (the “Approving Members”)  may  require all of the remaining
members (the “Remaining Members”) to sell all of the units held by them to the
party or parties whose Sale Proposal was accepted as hereinabove provided, for
the same  pro-rata consideration and
otherwise upon the same terms and conditions set forth in the Sale Proposal,
provided only that the price per unit and the terms and conditions applicable
to the remaining members are no less favorable than the per unit price and the
terms and conditions which apply to the Approving Members (a “Compelled Sale”).


 


(ii)           Illini, if so instructed in writing
by the Approving Members, shall send written notice (the “Compelled Sale
Notice”) of the exercise of the rights of the Approving Members to each of the
Remaining Members setting forth the consideration to be paid pursuant to the
Sale Proposal and the other terms and conditions of the transaction. In such
event, each Remaining Member, and, if applicable, Illini, upon receipt of the
Compelled Sale Notice, shall be obligated to (i) vote their units in favor of
such Sale Proposal at any meeting of members of Illini called to vote on or
approve such Sale Proposal, (ii) sell all of their units to such Unrelated
Third Party at the price and upon the terms and conditions set forth in the
Sale Proposal, and (iii) otherwise take all action necessary in the reasonable
opinion of the purchaser’s legal counsel to consummate the sale, including,
without limitation, providing access to documents and records of Illini,
entering into an agreement reflecting the terms of the Sale Proposal,
surrendering ownership certificates, giving any customary and reasonable
representations and warranties to the effect that such member has good title to
their units, that said member is duly authorized to transfer such unit to the
purchaser and that said units are, or will when delivered be free from all
taxes, liens or encumbrances, and executing and delivering any certificates or
other documents, reasonably requested by the Approving Members and their
counsel, to cause Illini and the Approving Members to consummate such Compelled
Sale. Any such Compelled Sale Notice may be rescinded by the Approving Members
by delivering written notice thereof to all of the Remaining Members.


 


(iii)          The obligations of
the members pursuant to this Section 4.1(E) are subject to the satisfaction of
the condition that, in the event that the members are required to provide any
representations, warranties or indemnities in connection with the Compelled
Sale (other than representations, warranties and indemnities concerning each
member’s valid ownership of its ownership interests, free of all liens and
encumbrances, and each member’s authority to enter into and consummate the
Compelled Sale), then each member shall not be liable for more than its pro
rata share (based upon the consideration received) of any liability for misrepresentation,
breach of warranty or indemnity and such liability shall not exceed the total
purchase price received by such member for its ownership interests and such
liability shall be satisfied solely out of any funds escrowed for such purpose.


 


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(iv)          In
the event of such a sale, all members shall bear their pro rata share (based
upon the amount of consideration received) of any costs incurred in connection
with the sale of units to the extent such costs are reasonably and necessarily
incurred for the benefit of all holders of all units and are not otherwise paid
by Illini or the purchaser. Costs incurred by any member on its own behalf will
not be considered costs of the Compelled Sale hereunder.


 


(F)           Waiver of
Dissenter’s Rights Except in Limited Circumstances. Except as otherwise
provided herein, each member shall disclaim, waive and agree, to the fullest
extent permitted by law, not to assert dissenters’ or similar rights. If at any
time the sale of all or substantially all of the assets of the Company to or
the merger or consolidation of the Company with or into a third party who/which
is not an Unrelated Third Party, is approved by the members as required by the
organizational documents of the Company and applicable law (a “Sale Proposal”),
then in that event and notwithstanding any other provisions of the Articles of
Organization and/or Operating Agreement of the Company to the contrary, any
member, excluding only members who have affirmatively voted in favor of such
Sale Proposal if a vote of the membership is required, shall be entitled to
dissent from such Sale Proposal and demand and receive payment of the fair
market value of their units without discount of any kind for minority interest
or lack of control.


 


(G)          Right to Participate in Rawhide Public
Offering or Private Sale of Majority Interest. In the event that
Rawhide or any direct or indirect owner or affiliate of Rawhide proposes to
offer its equity securities to the public, or in the event that Rawhide or any
direct or indirect owner or affiliate of Rawhide proposes to offer to the
public equity securities of another entity which is directly or indirectly
engaged in the production of ethanol, or in the event that one or more
member(s) holding the majority of voting units of Rawhide desires to sell or
otherwise transfer fifty percent (50%) or more of the voting units which they
own in Rawhide to an Unrelated Third Party in a private sale (“Liquidity Event”),
Rawhide agrees to include, or cause to be included, in such offering or private
sale, Illini or the outstanding equity securities (including derivatives) of
Illini in a manner which would permit the holders of the outstanding equity
securities of Illini, at their option, to participate in such offering or
private sale on a basis which would provide such holders the right to sell,
exchange or otherwise transfer or liquidate their interest in Illini on a
pro-rata or other equitable basis with other participants in such offering or
sale. In the event that the offering includes equity securities offered on
behalf of the issuer to provide funding for the operation or expansion of the
issuer’s business and equity securities offered by or on behalf of selling
equity holders, the obligation of the issuer to include equity securities held
by the holders of outstanding equity securities of Illini in such offering
shall be subject to the good faith judgment of the managing underwriter for
such offering provided that such holders are not treated differently, on a pro
rata or other equitable basis, from other selling equity holders in that
regard. Additionally, if Rawhide causes such Liquidity Event to occur, Rawhide
agrees to take all steps necessary immediately prior to the effective date of
the merger or consolidation to permit the


 


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acceleration of the exercise date of any outstanding warrants held by
members so that a member holding such a warrant may immediately exercise such
warrant.


 


(H)          Membership Voting.
As to any matter to which the members are entitled to vote, each member shall
have the right to one (1) vote for each unit registered in the name of such
member as shown in the unit ledger.


 


(I)            No Super
Majority Requirements. Actions requiring member consent shall be approved
with the affirmative vote of the members holding a majority of the voting units.
This shall include, but is not limited to, mergers and consolidations,
dispositions of all or substantially all of the assets of Illini, amendments to
the Operating Agreement, and dissolution of Illini. Notwithstanding the
foregoing provisions of this section 4.1(I), no amendment to Illini’s Operating
Agreement shall reduce any member’s rights provided in this Article IV unless
at least three-fourths of the units adversely affected consent.


 


ARTICLE V


Terms and Termination


 


5.1.         Term. This Agreement shall commence as of
the Effective Date and shall remain in effect thereafter unless and until the
same is provided in Section 5.2 below.


 


5.2.         Termination. This Agreement shall be
terminated as of the first to occur of the following events:


 


(A)          The written agreement
of the Parties hereto; or


 


(B)          Immediately in the
event Rawhide fails to make an Initial Credit Advance to Illini in the amount
of $500,000 upon the Effective Date; or


 


(C)          Immediately in the
event that Rawhide fails to make Initial Credit Advances to Illini in an
aggregate amount of $3,600,000 by May 15, 2007; or


 


(D)          Immediately in the
event Rawhide fails to make the Initial Subscription; or


 


(E)           Immediately in the
event Rawhide shall fail to pay, when due, any amounts required to be paid by
Rawhide to Illini in relation to the Illini Offering, or any subscription
agreement executed by the parties; or


 


(F)           Immediately, in the
event Rawhide enters into an assignment of all or substantially all of its
assets for the benefit of creditors; there is filed by or against Rawhide a
petition to have Rawhide declared bankrupt; there is filed by or against
Rawhide a petition for reorganization or other similar arrangement under any
bankruptcy


 


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or insolvency law or statute; or a trustee or receiver is appointed to
take possession of all or substantially all of Rawhide’s assets; or


 


(G)          Immediately, in the
event the existing Seed Capital Investors fail to ratify and approve this
Agreement and the amendment to the Articles of Organization and Operating
Agreement required herein on or before April 1, 2007.


 


5.3.         Effect of Termination. In the event this
Agreement is terminated, Rawhide shall have no further rights or obligations of
any kind to provide further funds to Illini including, without limitation, any
further right or obligation to provide funding pursuant to either Article II or
III hereof. In such event, this Agreement shall terminate and be of no further
force or effect whatsoever as between the parties hereto except that if this
Agreement is terminated, Rawhide shall be entitled to be repaid any funds
advanced by Rawhide to Illini pursuant to Article II above. For clarification
purposes, it is agreed that if this Agreement is terminated, Illini shall have
the absolute right to sell in whole or in part and/or to seek funding for its
project to or from any other source Illini may determine, in its sole
discretion, to be appropriate; and Rawhide expressly agrees that it will
execute any documents which Illini may reasonably request to acknowledge the
fact that its interest in the project has terminated and not take any action
whatsoever, specifically including, without limitation, any attempt to assign
its interest in this Agreement to any third party that is intended to interfere
with or impede any such effort by Illini.


 


ARTICLE VI


Conditions


 


6.1.         Conditions to Illini’s
Obligations. Illini shall be under no obligation
to accept Rawhide’s Initial Subscription as contemplated by this Agreement
unless on or prior to the subscription date, Rawhide has performed all of its
agreements and undertakings hereunder on or prior to that time, and the
following additional conditions have been fulfilled:


 


(A)          Rawhide is duly authorized to
subscribe to and purchase such units;


 


(B)          There are no actions, suits, or,
proceedings pending or, to the knowledge of Rawhide, threatened against
Rawhide, its properties or its assets in any court or before any governmental
or administrative agency that could have a material or adverse effect on the
Ethanol Plant or on the financial condition of Illini, and Rawhide is not in
default under any order, judgment or decree of any court or governmental or
administrative agency.


 


(C)          Rawhide has provided
to Illini a full disclosure as to the identity of all persons having a direct
or indirect record or beneficial interest in Rawhide, whether by the holding of
securities, by agreement, by the attributes of corporate or entity governance
or otherwise.


 


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(D)          A written
representation is received by Illini from Rawhide that neither this Agreement
nor the transactions, investments and transfers of funds contemplated by this
Agreement will violate, or cause any person or entity having a direct or
indirect interest in this Agreement, in such transactions, investments or
transfers or in any party to this Agreement to violate any laws, rules or regulations
of the United States or the State of Illinois, including, without limitation,
the U.S. Patriot Act, applicable banking laws and regulations and other laws
and regulations relating to commerce, investments and securities.


 


(E)           A written
representation is received by Illini from Rawhide that is in good standing with
the state of its organization and that Rawhide is not an “Investment Company”
as defined by the Investment Company Act of 1940.


 


ARTICLE VII


Other Terms


 


7.1          Choice of Law. The Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois and the
exclusive venue shall be Sangamon County Circuit Court or the U.S. District
Court for the Central District of Illinois, Springfield Division.


 


7.2          Time of the
Essence. Time is of the essence of this Agreement, and each party
agrees to perform any acts herein required of such party and to execute and
deliver any documents required to carry out the provisions of this Agreement,
promptly within the time periods herein described.


 


7.3          Assignment.
Neither this Agreement nor any of the rights, privilege or obligations afforded
to or required by any of the parties hereto shall be assignable in whole or in
part without the prior written consent of all of the parties hereto, which
consent can be granted or withheld by a party in its sole discretion.


 


7.4          Entire
Agreement. This Agreement, including the other agreements and
documents referred to herein, contains the entire agreement among the parties
hereto with respect to the subject matters hereof and shall override and
replace any and all prior agreements or understandings (including, but not
limited to, the Amended and Restated Capitalization Agreement executed on
January 9, 2007), whether written or oral, and all negotiations leading up to
the execution of this Agreement.


 


7.5          Amendment.
This Agreement shall not be amended or modified except by written amendment
signed by each of the parties hereto.


 


7.6          Notices.
All notices, requests, demands or other communications hereunder shall be in
writing and shall be deemed to have been duly given upon personal delivery to
the other parties, or deposited in the United States mail, to the addressees at


 


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the addresses herein designated or such other address as may be
designated in writing by notice given in the manner provided herein:


 


	
   

  	
  If to Illini:

  	
  Illini Bio-Energy, LLC

  
	
   

  	
   

  	
  3600 Wabash Avenue

  
	
   

  	
   

  	
  Suite C

  
	
   

  	
   

  	
  Springfield, Illinois 62711

  
	
   

  	
   

  	
  Attn: Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
  If to Rawhide:

  	
  Rawhide Management, LLC

  
	
   

  	
   

  	
  3500 S. Phillips Ave, Suite 241

  
	
   

  	
   

  	
  Sioux Falls, South Dakota 57105

  
	
   

  	
   

  	
  Attn: President

  



 


7.7          Waiver.
The waiver by any party hereto of any failure to perform hereunder, whether
intentional or not, must be in writing and signed by the waiving party and
shall not be deemed to extend to any prior or subsequent breach hereunder and
shall not affect in any way any rights arising by virtue of any such prior or
subsequent occurrence.


 


7.8          Captions.
The division of this Agreement into recitals, paragraphs, subparagraphs and
exhibits is for convenience of reference only and shall not affect the
interpretation or construction of this Agreement.


 


7.9          Severability.
Except to the extent the same would materially deprive any party to this
Agreement of the benefit of their bargain, in the event that one or more of the
terms, provisions, or covenants, or any portion of any of them, contained in
this Agreement are unenforceable or are declared invalid for any reason
whatsoever, such unenforceability or invalidity shall not affect the
enforceability or validity of the remaining terms, provisions or covenants, or
portions of any of them, contained in this Agreement, and except to the extent
the same would materially deprive any party to this Agreement of the benefit of
their bargain, each such unenforceable or invalid portion thereof shall be
severable from the remainder of this Agreement and the remainder of this
Agreement shall be interpreted as if such unenforceable or invalid term,
provision or covenant, or portion thereof, had not been included as a part
thereof.


 


7.10        Injunctive
Relief. The parties hereto acknowledge that breach of any of the
terms or provisions of this Agreement could cause irreparable injury which by
its nature would be continuing and substantial, but not capable of precise
measurement, and for which no adequate remedy at law exists. Accordingly, in
the event of an actual or threatened breach of any of the terms or provisions
of this Agreement, the parties hereto agree that the non-breaching parties
shall be entitled to equitable relief without the necessity of posting bond,
including without limitation, entry of preliminary, temporary and permanent
injunctions and orders of specific performance. Such remedies shall, however,
be cumulative and not exclusive and shall be in addition to any other legal or


 


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equitable remedy or remedies which such non-breaching parties or any of
them may have, including the recovery of damages.


 


7.11        Incorporation
by Reference. The recitals contained at the beginning of this
Agreement and all exhibits which are referred to herein and attached hereto are
incorporated herein and expressly made a part hereof by this reference with the
same force and effect as if the same were set forth in the body of this
Agreement in their entirety.


 


7.12        Name Rights.
Rawhide agrees it shall not take any action to prevent the
assignment by Illini of the name “Illini Bio-Energy”, or any related logo or
trademark, to any person or entity, regardless of whether or not such person or
entity is an affiliate or member of Illini.


 


	
   

  	
  RAWHIDE:

  
	
   

  	
   

  
	
   

  	
  Rawhide Management, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
        John T. Porter

  
	
   

  	
  2/15/07

  
	
   

  	
   

  
	
   

  	
  ILLINI:

  
	
   

  	
   

  
	
   

  	
  Illini Bio-Energy, LLC

  



 


Signing of this document has been approved by the Executive Committee
of Illini Bio-Energy this 14th day of February, 2007 and is subject
to further approval of the Illini Bio-Energy Board of Directors and final
approval and adoption by the seedstock shareholders of Illini Bio-Energy.


 


Ermest D. Moody


Chairman


2/14/07


 


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