Document:

Exhibit 4.3

 

ESCROW AGREEMENT

 

THIS ESCROW AGREEMENT,
dated as of December 4, 2006 (this “Agreement”), is entered into by and between
Blackhawk Biofuels, LLC, a
Delaware limited liability company (the “Company”), and State Bank, an Illinois banking corporation,
located in Freeport, Illinois (the “Escrow Agent”).

 

RECITALS

 

A.                                   The Company
is raising equity capital to construct and operate a biodiesel plant in
Stephenson County, Illinois or such other location as may be determined by the
Company.

 

B.                                     The Company
is offering up to an aggregate of 17,500,000 Class A Units, at a purchase price
of $2.00 per Unit, to investors pursuant an offering registered with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the “Offering”).

 

C.                                     Each
investor who subscribes to purchase Units (a “Subscriber”) will execute a
Subscription Agreement, a Promissory Note and a signature page to the Company’s
Limited Liability Company Agreement, and will supply a check or other funds as
part or all of the purchase price for the Units (the foregoing documents and
funds, a “Subscription”). The terms of the Offering provide that Subscriptions
will be held in escrow until certain conditions for release from escrow are
satisfied and the Subscriptions and Offering proceeds are released to the
Company or until such Subscriptions are required to be returned to Subscribers.

 

D.                                    The minimum
investment by each Subscriber in the Offering is $25,000 (12,500 Units), with a
payment equal to at least ten percent (10%) of the total purchase price due at
the time the Subscription is made (an “Initial Payment”) and with payment for
the remaining balance of the total purchase price due upon 30 days written
notice from the Company pursuant to the terms of a promissory note (a “Promissory
Note”) to be executed and delivered as part of each Subscriber’s Subscription. Initial
Payments and payments received on Promissory Notes are herein referred to as “Payments.”

 

E.                                      The Company
and the Escrow Agent desire to enter into an agreement with respect to said
escrow of Subscriptions in an escrow account to be established with the Escrow
Agent (the “Escrow Account”) in accordance with the terms and conditions of
this Agreement.

 

NOW THEREFORE, in
consideration of the premises and covenants set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, for themselves, their successors and assigns,
hereby agree as follows:

 

1.                                      Definitions.
The following terms shall have the following meanings when used herein:

 

“Escrow Funds” shall mean
the funds deposited with the Escrow Agent pursuant to this Agreement, together
with any interest and other income thereon.

 

 

“Escrow Closing Date”
shall mean                            ,
            [one year and 90 days following the effective date of
the registration statement filed with the Securities and Exchange Commission],
unless prior to such date, the Company provides written notice to the Escrow
Agent of the extension of the Escrow Closing Date in accordance with applicable
federal and state laws, in which case the Escrow Closing Date shall mean the
extended date established by such extension.

 

“Final Offering Closing Date”
shall mean                            ,
              [one year following the effective date of the
registration statement filed with the Securities and Exchange Commission],
unless prior to such date, the Company provides written notice to the Escrow
Agent of the extension of the Final Offering Closing Date in accordance with
applicable federal and state laws, in which case the Final Offering Closing
Date shall mean the extended date established by such extension.

 

“Notice of Escrow Closing”
shall mean a written certificate that is signed on behalf of the Company by a
duly authorized officer thereof stating that the following conditions to the
release of Subscriptions and Escrow Funds from escrow have been satisfied:

 

(i)                                     The
Company has received, approved and deposited in escrow Subscriptions (including
Payments and Promissory Notes) for $20,000,000 or more, exclusive of interest;

 

(ii)                                  The
Company has received a written commitment or commitments for senior and
subordinated debt financing which, combined with the total amount of Payments
and Promissory Notes deposited in escrow and funds from grants and other
resources, would equal at least $58,400,000; and

 

(iii)                               The Company has received
the air emission source permit necessary to commence construction of a 30
million gallon per year biodiesel plant on a site available to the Company (by
ownership, lease, option or otherwise).

 

“Payment Instrument”
shall mean a check, money order, promissory note, or similar instrument
received by the Company as a Payment for the Units subscribed for by any
Subscriber in the Offering.

 

“Subscription Accounting”
shall mean an accounting prepared by the Company of all Subscriptions for Units
received by the Company as of the date of such accounting for which Payment(s)
has been deposited into the Escrow Account, indicating for each Subscription
(i) the Subscriber’s name, address and federal taxpayer identification number,
(ii) the amount of the Payment(s) received for the subscribed Units, (iii) the
date of deposit by the Company of the Payment Instrument relating thereto and
notations of any nonpayment of the Payment Instrument submitted with any such
Subscription, and (iv) any rejection of any such Subscription in whole or in
part by the Company, or any other termination, for whatever reason, of any such
Subscription.

 

 

2.                                      Appointment
of and Acceptance by Escrow Agent. The Company hereby appoints the Escrow
Agent to serve as escrow agent hereunder, and the Escrow Agent hereby accepts
such appointment and agrees to act as Escrow Agent in accordance with the terms
of this Agreement.

 

3.                                      Deposits into Escrow.

 

a.                                       Delivery of Subscriptions.  All Subscriptions received by the Company or
its agents prior to the termination of this Agreement shall, as soon as
practicable after such receipt, be forwarded to the Escrow Agent for deposit
into the Escrow Account. All Payment Instruments shall be delivered to the
Escrow Agent within five (5) business days from the date of the receipt
thereof, endorsed (if appropriate) to the Escrow Agent, together with a list of
the applicable Subscribers, showing, with respect to each such Subscriber, the
Subscriber’s name and address, subscription date, amount of subscription and
amount paid. From time to time and upon request by the Escrow Agent, the
Company shall provide a Subscription Accounting to the Escrow Agent.

 

ALL ESCROW FUNDS SHALL REMAIN THE PROPERTY OF THE SUBSCRIBERS ACCORDING
TO THEIR RESPECTIVE INTERESTS, SHALL NOT BE OR BECOME THE PROPERTY OR ASSETS OF
THE COMPANY, AND SHALL NOT BE SUBJECT TO ANY LIEN OR CHARGE BY THE ESCROW
AGENT, ANY LIEN OR CLAIM BY THE COMPANY OR BY JUDGMENT OR CREDITORS CLAIMS
AGAINST THE COMPANY, UNTIL RELEASED TO THE COMPANY IN ACCORDANCE WITH SECTION
4 HEREOF. IN NO EVENT SHALL ANY OF THE ESCROW FUNDS BE COMMINGLED WITH
DEPOSIT ACCOUNTS OF THE ESCROW AGENT OR OTHERWISE TREATED AS A DEPOSIT ACCOUNT
OF THE ESCROW AGENT OR REFLECTED ON THE FINANCIAL STATEMENTS OF THE ESCROW
AGENT.

 

b.                                      Availability of Funds. Notwithstanding
anything to the contrary contained in this Agreement, the Company understands
and agrees that all Payment Instruments received by the Escrow Agent hereunder
are subject to collection requirements of presentment and final payment, and
that the funds represented thereby cannot be drawn upon or disbursed until such
time as final payment in collected funds has been made and is no longer subject
to dishonor. Upon receipt, the Escrow Agent shall process each Payment
Instrument it receives for collection, and the proceeds thereof shall be held
as part of the Escrow Funds and disbursed in accordance with Sections 4 and 5
hereof. If, upon presentment for payment, any Payment Instrument is dishonored,
the Escrow Agent shall notify the Company of such dishonor and return such
Payment Instrument to the Company to take whatever action it deems necessary. The
Escrow Agent shall have no duty or responsibility to establish whether any
Payment Instrument is valid and enforceable or represents collectible funds and
shall have no duty or responsibility to take any action for the collection
(other than deposit for payment) or enforcement of any Payment Instrument. The
Company agrees to indemnify and hold the Escrow Agent harmless from any and all
loss on account of any Payment Instrument which is dishonored.

 

 

4.                                      Release of Subscriptions and Escrow Funds to the Company.

 

a.                                       Escrow Closing. Promptly upon receipt of the following
documents from or at the direction of the Company, the Escrow Agent shall
release the Subscriptions and Escrow Funds to the Company.

 

1.                                       A Notice of Escrow Closing in the form
attached hereto as Exhibit A; and

 

2.                                       Subscription
Accounting as of the date of the Notice of Escrow Closing.

 

Escrow
Funds shall be remitted to the Company by wire transfer or such other means as
may be requested by the Company.

 

The Escrow Agent shall have no duty or responsibility to review or seek
to determine the truth, accuracy or sufficiency of documents contemplated or
referred to in the Notice of Escrow Closing. The Escrow Agent shall have no
duty to review any Subscription Accounting, it being the understanding and
agreement of the parties hereto that the Escrow Agent shall release the
Subscriptions and disburse the Escrow Funds upon receipt of documents the
Escrow Agent believes, without any duty of further inquiry, to conform to the
requirements set forth in this Section 4(a).

 

b.                                      Issuance and Registration of Units. Until the
terms of this Agreement have been met and the Subscriptions have been released
and Escrow Funds have been disbursed to the Company, the Company shall not
issue any Units to Subscribers or register any Units in the names of any
Subscribers, and Subscribers shall have no ownership interest in any Units
until the Units are so issued and registered.

 

5.                                      Return of Subscriptions and Escrow Funds to Subscribers.

 

a.                                       Failure to Obtain Minimum Offering Proceeds. If,
by the date that is five (5) business days after the Final Offering Closing
Date, the Escrow Agent is not in receipt of approved Subscriptions, including
Payments and Promissory Notes, but exclusive of interest, which total
$20,000,000 or more, then the Escrow Agent shall (i) notify the Company in
writing that the minimum Subscriptions required for the Offering have not been
received, (ii) as soon as practicable but no later than thirty (30) days
following the Final Offering Closing Date, return the Subscriptions and Escrow
Funds then held by the Escrow Agent directly to the Subscribers by certified
mail, including a check in the amount of the Payments received in respect of
such Subscriptions and on deposit in the Escrow Account, together with interest
earned on the amount of such Payments and without deduction except as stated in
Sections 7 and 13 of and Exhibits B and C to this Agreement (interest earned
will be calculated at the end of the month of account termination and may be
disbursed through a separate payment following calculation) and (iii) notify
the Company in writing of such return.

 

b.                                      Failure to Reach Escrow Closing. If, by
the date that is five (5) business days after the Escrow Closing Date, the
Escrow Agent is not in receipt of the documents described in Section 4(a), then
the Escrow Agent shall (i) notify the Company in writing that the conditions

 

 

set forth in Section 4(a) have
not been satisfied, (ii) as soon as practicable but no later than thirty (30)
days following the Escrow Closing Date, return the Subscriptions and Escrow
Funds then held by the Escrow Agent directly to the Subscribers by certified
mail, including a check in the amount of the Payments received in respect of
such Subscriptions and on deposit in the Escrow Account, together with interest
earned on the amount of such Payments and without deduction except as stated in
Sections 7 and 13 of and Exhibits B and C to this Agreement (interest earned
will be calculated at the end of the month of account termination and may be
disbursed through a separate payment following calculation) and (iii) notify
the Company in writing of such return.

 

c.                                       Rejection of Any Subscription. As soon as
practicable but no later than thirty (30) days after receipt by the Escrow
Agent of written notice from the Company that the Company intends to reject a
Subscriber’s Subscription in whole or in part, the Escrow Agent shall return
directly to the applicable Subscriber, by certified mail, the Subscriber’s
Subscription, including funds equal to the Payment(s) made by or on behalf of
such Subscriber, together with interest earned on the amount of such Payments
and without deduction except as stated in Section Sections 7 and 13 of and
Exhibits B and C to this Agreement (interest earned will be calculated at the
end of the month of account termination and may be disbursed through a separate
payment following calculation).

 

d.                                      Abandonment of Offering. As soon as
practicable but no later than thirty (30) days after receipt by the Escrow
Agent of written notice from the Company that it is abandoning the Offering,
the Escrow Agent shall return directly to the Subscribers by certified mail the
Subscribers’ Subscriptions, including funds equal to the Payments made by or on
behalf of each such Subscriber, together with interest earned on the amount of
such Payments and without deduction except as stated in Sections 7 and 13 of
and Exhibits B and C to this Agreement (interest earned will be calculated at
the end of the month of account termination and may be disbursed through a
separate payment following calculation).

 

e.                                       Accounting. In connection with a return of
funds to Subscribers pursuant to this Section 5, the Company shall provide the
Escrow Agent with a Subscription Accounting. Under no circumstances may a
Subscriber receive less than the principal amount of all Payments made by the
Subscriber in connection with a return of funds to Subscribers pursuant to this
Section 5.

 

6.                                      Suspension of Performance or Disbursement Into Court. If, at
any time, there shall exist any dispute between the Company, the Escrow Agent,
any Subscriber or any other person with respect to the holding or disposition
of any portion of any Subscription or Escrow Funds or any other obligations of
the Escrow Agent hereunder, or if at any time the Escrow Agent is unable to
determine, to the Escrow Agent’s reasonable satisfaction, the proper
disposition of any portion of the Subscriptions or the Escrow Funds or the
Escrow Agent’s proper actions with respect to its obligations hereunder, or if
the Escrow Agent is uncertain concerning its duties or rights under this
Agreement, or if the Escrow Agent shall have received instructions, claims or
demands from the Company or Subscribers or others which, in its opinion, are in
conflict with any of the provisions of this Agreement, or if the Company has
not within 30 days of the furnishing by the Escrow Agent of a notice of
resignation pursuant to Section 9 hereof appointed a successor Escrow Agent to
act hereunder, then the Escrow Agent may, in its sole discretion, consult legal
counsel selected by it and take either or both of the following actions:

 

 

a.                                       Suspend
the performance of any of its obligations under this Agreement until such
dispute, uncertainty or conflict shall be resolved to the reasonable
satisfaction of the Escrow Agent or until a successor Escrow Agent shall have
been appointed (as the case may be); provided,
however, that the Escrow Agent shall continue to hold the
Subscriptions and to invest the Escrow Funds in accordance with Section 7
hereof; and/or

 

b.                                      Petition (by
means of an interpleader action or any other appropriate method) any court of
competent jurisdiction of the state of Illinois, for instructions with respect
to such dispute or uncertainty, and pay into such court all Subscriptions and
Escrow Funds for holding and disposition in accordance with the instructions of
such court, and the Escrow Agent shall thereupon be discharged from all further
duties under this Escrow Agreement.

 

The
Escrow Agent shall have no liability to the Company, any Subscriber or any
other person with respect to any such suspension of performance or disbursement
into court, specifically including any liability or claimed liability that may
arise, or be alleged to have arisen, out of or as a result of any delay in the
disbursement of Escrow Funds or any delay in or with respect to any other
action required or requested of the Escrow Agent, except in instances of the
Escrow Agent’s bad faith, gross negligence or willful misconduct. The Company
shall indemnify and hold the Escrow Agent harmless for any reasonable attorneys’
fees incurred by the Escrow Agent in consulting legal counsel pursuant to this
Section 6.

 

7.                                      Investment of Funds. The Escrow Agent shall invest and
reinvest the Escrow Funds as the Company shall direct (subject to applicable
minimum investment requirements) in writing; provided,
however, that no
investment or reinvestment may be made except in the following:

 

a.                                       Direct
obligations of the United States of America or obligations the principal of and
the interest on which are unconditionally guaranteed by the United States of
America;

 

b.                                      Savings
accounts, certificates of deposit or repurchase agreements of any bank, trust
company or national banking association (including the Escrow Agent and its
affiliates); or

 

c.                                       United
States Treasury Money Market funds (money market funds investing exclusively in
U.S. Treasury securities and other investments that are backed by the full
faith and credit of the United States of America).

 

Until otherwise directed
by the Company, the Escrow Funds shall be invested as set forth on Exhibit B to
this Agreement.

 

If the Escrow
Agent has not received written instructions from the Company when an investment
decision needs to be made, the Escrow Agent shall invest the Escrow Funds, or
such portion thereof as to which no written instructions have been received, in
any of the investments described in clause (a) or clause (c) as it deems
appropriate. Each of the foregoing investments shall be made in the name of the
Escrow Agent in its stated capacity hereunder. No investment shall be made in
any instrument or security that has a maturity of greater than three (3) months
or would mature after                           ,
              [one year and 90 days following the effective date of 

 

 

the
registration statement filed with the Securities and Exchange Commission],
and any and all investments hereunder shall be made in investments that are
currently marketable or may be liquidated within five (5) business days without
penalty or charge. Notwithstanding anything to the contrary contained herein,
the Escrow Agent may, without notice to the Company, sell or liquidate any of
the foregoing investments at any time if the proceeds thereof are required for
any release of funds permitted or required hereunder. The Escrow Agent shall
have no liability for any loss or diminution in the Escrow Account resulting
from investments made in accordance with the provisions of this Agreement.
Notwithstanding anything to the contrary herein, in no event may Escrow Funds
be held in any deposit account of the Escrow Agent in an amount that exceeds
$100,000.

 

Transaction costs associated with the investment of
the Escrow Funds, such as commissions, brokerage fees and the like, shall be
paid out of the Escrow Funds, but in no event shall such costs exceed the
amount of interest earned on the Escrow Funds.

 

8.                                      Inspection of Records. The Company may, at any time upon
reasonable notice, inspect and copy the records of the Escrow Agent, insofar as
they relate to this Agreement, for the purpose of determining compliance with
and conformance to the provisions of this Agreement and the Subscriptions. Any
costs to copy the records of the Escrow Agent shall be the sole responsibility
of the Company.

 

9.                                      Resignation and Removal of Escrow Agent. The Escrow Agent
may resign from the performance of its duties hereunder at any time by giving
thirty (30) days’ prior notice to the Company and upon providing an accounting
of all Subscriptions and Escrow Funds accepted, held and disbursed by the
Escrow Agent hereunder. The Escrow Agent may be removed, with or without cause,
by the Company, at any time upon thirty (30) days’ prior written notice to the
Escrow Agent. Such resignation or removal shall take effect upon the
appointment of a successor Escrow Agent, as provided herein below, and upon
receipt by the Company and a successor Escrow Agent of an accounting of all
Subscriptions and Escrow Funds accepted, held and disbursed by the Escrow Agent
hereunder. Upon any such notice of resignation or removal, the Company shall
appoint a successor Escrow Agent hereunder. Upon the acceptance in writing of
any appointment as Escrow Agent hereunder by a successor Escrow Agent, and upon
receipt of the full accounting referred to above, such successor Escrow Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Escrow Agent, and the retiring Escrow
Agent shall be discharged from its duties and obligations under this Agreement,
but shall not be discharged from any liability hereunder for the Escrow Agent’s
bad faith, gross negligence or willful misconduct occurring prior to such
succession. Notwithstanding anything to the contrary herein provided, in the event
the Escrow Agent resigns as Escrow Agent hereunder and no successor Escrow
Agent has been designated and accepted appointment as successor Escrow Agent
within forty-five (45) days following the date of the Escrow Agent’s notice of
resignation, the Escrow Agent shall have the right to deposit all property held
pursuant to this Agreement into the registry of any court of competent
jurisdiction of the state of Illinois and notify the parties hereto of such
deposit, and thereupon the Escrow Agent shall be discharged from all further
duties and responsibilities as Escrow Agent under this Agreement. After any
Escrow Agent’s resignation or removal, the provisions of this Agreement 

 

 

shall continue to apply as to any actions taken or
omitted to be taken by it while it was Escrow Agent under this Agreement.

 

10.                               Duty and Liability of Escrow Agent. The sole duty of the Escrow
Agent, other than as herein specified, shall be to receive the Subscriptions
and Escrow Funds and hold them subject to release, in accordance herewith, and
the Escrow Agent shall be under no duty to determine whether the Company is
complying with the requirements of this Agreement or any applicable laws or
regulations, including but not limited to federal or state securities laws, in
tendering to the Escrow Agent said proceeds from the sale of the Units. The
Escrow Agent may conclusively rely upon and shall be protected in acting upon
any statement, certificate, notice, request, approval, consent, order or other
document believed by it to be genuine and to have been signed or presented by
the proper party or parties. The Escrow Agent shall have no duty or liability
to verify any such statement, certificate, notice, request, consent, order or
other document, and its sole responsibility shall be to act only as expressly
set forth in this Agreement. The Escrow Agent shall be under no obligation to
institute or defend any action, suit or proceeding in connection with this
Agreement unless first indemnified to its satisfaction. The Escrow Agent may
consult counsel with respect to any question arising under this Agreement and
the Escrow Agent shall not be liable for any action taken or omitted upon
advice of such counsel except in the event of the Escrow Agent’s bad faith,
willful misconduct or gross negligence. The Escrow Agent shall not be required
to act upon or take notice of any direction, demand, notice, communication or
instructions provided to the Escrow Agent by any Subscriber, but shall act upon
and take notice solely of notices, communications and instructions provided to
the Escrow Agent by the Company or as otherwise set forth in this Agreement. The
Escrow Agent shall have no implied duties or obligations and shall not be
charged with knowledge or notice of any fact or circumstance not specifically
set forth herein or in any notices given to it in accordance with the notice
provisions of this Agreement. The Escrow Agent shall have no liability with
respect to the transfer or distribution of any funds made by the Escrow Agent
pursuant to transfer or wiring instructions provided to the Escrow Agent by any
party to this Agreement. The Escrow Agent shall not be obligated to take any
legal action or to commence any proceedings in connection with the Escrow
Account or this Agreement, or to appear in, prosecute or defend in any such
legal action or proceedings. In performing its duties under this Agreement, or
upon the claimed failure to perform its duties, the Escrow Agent shall have no
liability except for the Escrow Agent’s bad faith, willful misconduct or gross
negligence. In no event shall the Escrow Agent be liable for incidental,
indirect, special, consequential or punitive damages. The Escrow Agent shall
have no duty by reason of this Agreement to prepare or file any federal or
state tax report or return with respect to the Escrow Account or any income
earned thereon, except that the Escrow Agent may be required to prepare IRS
Forms 1099 and provide such forms to the IRS and the Subscribers as may be
required under IRS regulations with respect to interest or other income earned
on the Escrow Funds. Required Forms 1099 for 2006 will be issued to the Company
if the Notice of Escrow Closing is given on or prior to December 31, 2006;
required Forms 1099 for 2006 will be sent to the Subscribers, together with
payment of interest earned in respect of Payments attributable to the
Subscriptions of the respective Subscribers, if the Notice of Escrow Closing is
given on or after January 1, 2007. The Escrow Agent acts as a depository only
and is not responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness or validity of any instrument deposited with it
hereunder, or with respect to form or execution of the same, or the identity,
authority, or right of any person executing or depositing the same. Specifically,
without limiting the generality of the foregoing, the Escrow Agent shall 

 

 

have no liability with respect to the enforceability
of any Promissory Note executed and delivered as part of each Subscriber’s
Subscription.

 

11.                               Indemnification. The Company shall indemnify and hold
harmless the Escrow Agent and each director, officer, employee and agent of the
Escrow Agent (collectively, the “Indemnified Parties”) from and against any and
all claims, demands, suits, actions or proceedings (including any inquiry or
investigation) arising directly or indirectly from or in connection with the
negotiation, preparation, execution, performance or failure of performance of
this Agreement or any transactions contemplated herein, whether or not any such
Indemnified Party is a party to any such action, proceeding, suit or the target
of any such inquiry or investigation. This indemnity and hold harmless
agreement shall include indemnity against all costs, expenses, damages and
liabilities, including reasonable attorneys’ fees, incurred by or asserted
against any of the Indemnified Parties in connection with any such claims,
demands, suits, actions or proceedings, except for any consequential damages
suffered by the Indemnified Parties as a result of any such claims, demands,
suits, actions or proceedings, which consequential damages are expressly
excluded from the foregoing indemnity. Provided, further, that the foregoing
indemnity shall not apply to any claims, demands, suits, actions or proceedings
arising from the bad faith, gross negligence or willful misconduct of any
Indemnified Parties. The provisions of this Section 11 shall survive the
termination of this Agreement, any release, return or distribution of
Subscriptions and Escrow Funds hereunder, and any resignation or removal of the
Escrow Agent.

 

12.                               Securities
Law Matters. The Escrow Agent shall have no duty or responsibility for
determining whether the Units or the offer and sale thereof conform to the
requirements of applicable Federal or state securities laws, including but not
limited to the Securities Act of 1933 and the Securities Exchange Act of 1934. The
Escrow Agent has not participated in the preparation or review of any sales or
offering material relating to the Units described in this Agreement. In
addition to any other indemnities provided for in this Agreement, the Company
shall indemnify and hold harmless the Escrow Agent and each of its officers,
directors, agents and employees from and against all claims, liabilities,
losses and damages (including attorneys’ fees) incurred by the Escrow Agent or
such persons and which directly or indirectly result from any violation or
alleged violation of Federal or state securities laws. The name of the Escrow
Agent or any similar words shall not be used by the Company or reproduced in
any prospectus or offering, sales or similar material utilized by the Company
or anyone acting on the Company’s behalf in connection with the offering or
sale of the Units, other than to state that Subscriptions will be deposited in
an escrow account that it has established with the Escrow Agent and describing
the terms and conditions on which the Subscriptions will be held and released. The
Escrow Agent understands and agrees that this Agreement shall be filed as an
exhibit to the registration statement filed with the Securities and Exchange
Commission relating to the Offering and with state securities authorities. The
Escrow Agent shall cooperate with the Company, at the Company’s cost, with
respect to any special requirements of the Securities and Exchange Commission
and state securities authorities regarding this Agreement and the terms of
escrow provided herein.

 

13.                               Fees and Expenses of Escrow Agent. The Escrow Agent shall be
entitled to compensation as described in Exhibit
C attached hereto, promptly paid by the Company at such time or
times as set forth therein, until the termination of this Agreement or the
resignation or

 

 

removal of the Escrow Agent, for the services provided by Escrow Agent
hereunder. The fees agreed upon for services rendered hereunder are intended as
full compensation for the Escrow Agent’s services as contemplated by this
Agreement; provided, however, that in the event the Escrow Agent performs any
service not specifically provided hereinabove at the request of the Company or
renders any material service not contemplated in this Agreement, or there is
any assignment or attachment of any interest in the subject matter of this
Agreement, or any material modification hereof, or if any material controversy
arises hereunder, or the Escrow Agent is made a party to any litigation
pertaining to this Agreement, or the subject matter hereof, then the Escrow
Agent shall be reasonably compensated for such extraordinary services and reimbursed
for all costs and expenses, including reasonable attorney’s fees, occasioned by
any delay, controversy, litigation or event, and the same shall be recoverable
from the Company, but not from the Escrow Account.

 

14.                               Representations
and Warranties.

 

a.                                       The Company
makes the following representations and warranties to the Escrow Agent, as of
the date hereof:

 

1.                                       The Company is a
limited liability company duly organized, validly existing, and in good
standing under the laws of the state of Delaware, is authorized by the Illinois
Secretary of State to transact business in the State of Illinois, and has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder;

 

2.                                       This Agreement
has been duly approved by all necessary action of the Company, has been
executed by duly authorized persons of the Company, and constitutes a valid and
binding agreement of the Company, enforceable in accordance with its terms;

 

3.                                       The execution,
delivery, and performance by the Company of this Agreement will not violate,
conflict with, or cause a default under the Company’s governing instruments,
any applicable law or regulation, any court order or administrative ruling or
decree to which the Company is a party or any of its property is subject, or
any agreement, contract, indenture or other binding arrangement to which the
Company is a party or any of its property is subject; and

 

4.                                       The Company
hereby acknowledges that the status of the Escrow Agent is that of agent only
for the limited purposes set forth herein, and hereby represents and covenants
that no representations or implications shall be made that the Escrow Agent has
investigated the desirability or advisability of an investment in the Units or
has approved, endorsed or passed upon the merits of the investments therein and
that the name of the Escrow Agent has not and shall not be used in any manner
in connection with the offer or sale of the Units other than to state that the
Escrow Agent has agreed to serve as agent for the limited purposes set forth
herein.

 

 

b.                                      The
Escrow Agent represents and warrants to the Company, as of the date hereof,
that the Escrow Agent has all necessary powers and authority to act as an
escrow agent as set forth in this Agreement.

 

15.                               Consent to Jurisdiction and Venue. In the event that any
party hereto commences a lawsuit or other proceeding relating to or arising
from this Agreement, the parties hereto agree that the courts of the state of
Illinois shall have sole and exclusive jurisdiction and shall be proper venue
for any such lawsuit or judicial proceeding and the parties hereto waive any
objection to such venue. The parties hereto consent to and agree to submit to
the jurisdiction of the courts specified herein and agree to accept service or
process to vest personal jurisdiction over them in any of these courts.

 

16.                               Notice.
Any notice and other communications hereunder shall be in writing and shall be
deemed to have been validly served, given or delivered five (5) days after
deposit in the United States mail, by certified or registered mail with return
receipt requested and postage prepaid, at the time of delivery when delivered
personally, one (1) day after delivery to any overnight courier, or when
transmitted by facsimile transmission facilities, and addressed to the party to
be notified as follows:

 

If to the Company at:

 

Blackhawk Biofuels, LLC

Attention: Chair

22 South Chicago Avenue

Freeport, IL  61032

Fax:  (815) 235-4727

 

If to the Escrow Agent:

 

State Bank

Attn: Greg Cross

1718 South Dirck Drive

Freeport, IL  61032

Fax:  (815) 297-0901

 

or to such other address
as each party may designate for itself by like notice.

 

17.                               Amendment or Waiver. This Agreement and any provision hereof
may be amended, changed, waived, discharged, superseded, cancelled or
terminated only by a writing signed by the Company and the Escrow Agent. No
delay or omission by any party in exercising any right with respect hereto
shall operate as a waiver. A waiver on any one occasion shall not be construed
as a bar to, or wavier of, any right or remedy on any future occasion.

 

18.                               Severability. To the extent any provision of this Agreement
is prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.

 

 

19.                               Governing Law. This Agreement shall be construed and
interpreted in accordance with the internal laws of the state of Illinois
without giving effect to the conflict of laws principles thereof.

 

20.                               Entire Agreement. This Agreement constitutes the entire
agreement between the parties relating to the acceptance, collection, holding,
investment, release, return and disbursement of the Subscriptions and Escrow
Funds and sets forth in their entirety the obligations and duties of the Escrow
Agent with respect to the Subscriptions and Escrow Funds.

 

21.                               Binding
Effect. All of the terms of this Agreement, as amended from time to
time, shall be binding upon, inure to the benefit of and be enforceable by the
respective successors and assigns of the Company and the Escrow Agent;
provided, however, that neither this Agreement nor any rights or obligations
hereunder may be assigned by any party hereto without the express written
consent of each of the other party hereto.

 

22.                               Execution in Counterparts. This Agreement may be executed in
any number of counterparts, which, when so executed, shall constitute one and
the same agreement.

 

23.                               Termination. Upon the first to occur of the release of all
Subscriptions and disbursement of all amounts in the Escrow Account pursuant to
Section 4 or 5 hereof or deposit of all Subscriptions and all amounts in the
Escrow Account into court pursuant to Section 6 hereof, this Agreement shall
terminate and the Escrow Agent shall have no further responsibilities
whatsoever with respect to this Agreement or the Subscriptions or the Escrow
Funds, except that the Escrow Agent may be required to prepare and issue IRS
Forms 1099 to the appropriate party(ies) in the event that an IRS Form 1099
filing requirement arises with respect to interest or other income earned on
the Escrow Funds.

 

24.                               Further Assurances. Without consideration of any kind, the
Company shall execute and deliver, or cause to be executed and delivered, such
other instruments, and take, or cause to be taken, such other action, as shall
reasonably be requested by the Escrow Agent to allow the Escrow Agent to comply
with the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) or
any other applicable laws, rules, and regulations.

 

25.                               Attorneys’ Fees. In the event of legal action to construe or
enforce the provisions of this Agreement, the party who substantially prevails
shall be entitled to collect its reasonable attorney’s fees, court costs and
related expenses from the losing party and the Court having jurisdiction of the
dispute shall be authorized to determine the amount of such fees, costs, and
expenses, and enter judgment therefor.

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed and effective as
of the date first above written.

 

 

	
   

  	
  BLACKHAWK BIOFUELS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Ronald Mapes

  
	
   

  	
  Name:

  	
   

  	
  Ronald Mapes

  
	
   

  	
  Its:

  	
   

  	
  Chairman

  
	
   

  	
  Federal Taxpayer I.D. number: 
  20-2760722

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STATE BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Greg Cross

  
	
   

  	
  Name:

  	
   

  	
  Greg Cross

  
	
   

  	
  Its:

  	
   

  	
  Senior Vice President

  
									

 

 

EXHIBIT A

 

Form of Notice
of Escrow Closing

 

(To be on
Company letterhead)

 

(Date)

 

State Bank

Attn: Greg Cross

1718 South Dirck Drive

Freeport, IL 
61032

 

Fax:  (815) 297-0901

 

Re: Blackhawk
Biofuels, LLC - Notice of Escrow Closing

 

Dear Sir/Madam:

 

You are hereby notified that the following
conditions to release of Subscriptions and Escrow Funds being held in the
Escrow Account for Blackhawk Biofuels, LLC (the “Company”) have been satisfied:

 

(i)                                     The
Company has received, approved and deposited in escrow Subscriptions (including
Payments and Promissory Notes) for $20,000,000 or more, exclusive of interest;

 

(ii)                                  The
Company has received a written commitment or commitments for senior and
subordinated debt financing which, combined with the total amount of Payments
and Promissory Notes deposited in escrow and funds from grants and other resources,
would equal at least $58,400,000; and

 

(iii)                               The Company has received
the air emission source permit necessary to commence construction of a 30
million gallon per year biodiesel plant on a site available to the Company (by
ownership, lease, option or otherwise).

 

 

IN WITNESS WHEREOF, the
undersigned hereby certifies he is duly authorized to execute this notice on
behalf of Blackhawk Biofuels, LLC.

 

 

	
   

  	
  BLACKHAWK BIOFUELS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
					

 

 

EXHIBIT B

 

Initial
Investment of Escrow Funds

 

 

EXHIBIT C

 

Compensation
of Escrow Agent

 

The compensation of the Escrow Agent under this Escrow Agreement shall
be determined in the following manner. It is the intent of the Escrow Agent to
invest the Escrow Funds in interest bearing facilities. The compensation of the
Escrow Agent shall be equal to 15 basis points of the yield on the Escrow Fund
from such facilities. Such compensation shall be calculated by the Escrow Agent
and paid by the Company. All yield on the Escrow Funds shall be added to the
Escrow Funds. The Escrow Agent shall also be reimbursed for its reasonable
out-of-pocket expenses under this Escrow Agreement, including reasonable
attorneys’ fees that may be incurred by the Escrow Agent in connection with its
entering into this Escrow Agreement.

 

3Exhibit
10.11

 

AMENDMENT
TO

 

REAL
ESTATE OPTION AGREEMENT

 

THIS
AMENDMENT TO REAL ESTATE OPTION AGREEMENT is entered into this 27th
day of November, 2006, between Freeport Area
Economic Development Foundation, an Illinois not-for-profit corporation,
as Optionor, and Blackhawk Biofuels, LLC,
as Optionee.

 

1.                                       Extension
of Option. Paragraph 3(b) of the Real Estate Option Agreement dated June
20, 2006 (the “Option Agreement”) is hereby amended to replace the date “December
31, 2006” with “March 31, 2007”.

 

2.                                       Other
Terms of Option Agreement. Except as amended by paragraph 1 hereof, all
other terms of the Option Agreement shall remain in full force and effect
between the parties.

 

IN WITNESS WHEREOF, the
parties have executed this Amendment to Real Estate Option Agreement the day
and year first above written.

 

	
   

  	
  OPTIONOR:

  
	
   

  	
   

  
	
   

  	
  FREEPORT AREA ECONOMIC 

  DEVELOPMENT FOUNDATION

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Robert J. Skurla

  
	
   

  	
   

  	
  Robert Skurla,
  Executive Director

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
  BLACKHAWK BIOFUELS, LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ Ronald Mapes

  
	
   

  	
   

  	
  Chair

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