Document:

Exhibit 10.2

 

AGREEMENT

 

I.                                        DEFINITIONS
AND PURCHASE PRICE

 

1.               Owner.

 

As used in
this Agreement, “Owner” refers to:

 

David L.
Scully Trust #4

David L. Scully, Peter D. Scully

And James K. Hotchkiss, Trustees

c/o Scully Estates

P.O. Box 566

Lincoln, Il 62656

 

Fax No.: (847)
425-9515

 

2.               Purchaser

 

As used
herein, “Purchaser” refers to:

 

Illini
Bio-Energy

205 South Walnut St.

Rochester, IL 62563

 

Fax No.: (217)
498-9622

 

3.               The Property

 

As used
herein, the term, “Property” means the real estate located in Logan County,
Illinois and depicted on the plat map attached hereto, consisting of 220 acres,
more or less in the aggregate, and having the following legal description:

 

That part of
the Northwest Quarter of Section 21 lying Southwesterly of the CNIC Railroad
right-of-way; that part of the Northeast Quarter of Section 20 lying
Southwesterly of the CNIC Railroad right-of-way; and that part of the Southeast
Quarter of Section 17 which lies East and South of the Interstate 55
right-of-way and Southwesterly of the CNIC Railroad right-of-way, all being
situated in Township 21 North, Range 3 West of the Third Principal Meridian.

 

Logan County, Illinois.

 

4.               Purchase
Price.

 

As used herein, the term “Purchase
Price” means the sum of $12,000.00 per acre for 220 Acres, or $2,640,000. Said
purchase price shall be subject to the escalation clause at Section 12 of this
agreement. Final purchase price shall be based on acreage determined by a
survey to be provided by the sellers.

 

1

 

II.                                   OPTION
AREEMENT

 

1.               Grant
of Initial Option. Upon payment by Purchaser of $12,500.00, (the “Initial
Option Payment”) Owner grants to Purchaser the option to purchase the Property
for the Purchase Price. The term of the option commences upon execution of this
agreement by all parties, and shall continue through a date 15 calendar months
from the date of execution of this agreement by Owner. (the “Option Period”). This
is an exclusive option.

 

2.               Extension
of Option Period. The Initial Option Period may be extended by Purchaser
one time only for an additional 9 months from the date of its expiration, with
payment of $7,500.00 on or before the initial expiration date. (“Extension
Payment”)  The Initial Option Period may
be extended by Purchaser only if zoning and permitting has not been obtained by
Purchaser on or before the end of the Initial Option Period.

 

3.               Payments.
The Initial Option Payment shall be made within 5 days of Owner’s execution of
this Agreement. Any Extension Payment shall thereafter be made to Owner at the
address given above.

 

4.               Notice.
Purchaser shall notify Owner in writing of all extensions upon making an
Extension Payment; however, failure to give notice will not void an extension
if the extension payment is timely made.

 

5.               Exercise
of Option; Creation of Contract. Purchaser may exercise its option at any
time during the Option Period, by delivering written notice of such exercise to
Owner personally, or by sending written notice of such exercise by regular mail
to Owner at the address set forth above, postmarked on or before expiration
date. Exercise of the option shall give rise to a Contract to Purchase Real
Estate, section III, below.

 

6.               Application
of Option Payments. The Initial Option Payment is entirely non-refundable
except as stated in paragraph 8, or in the case of the failure of the Seller to
obtain the farm tenant’s agreement in accordance with paragraph 11. All option
payments shall, in the event the option is exercised, be applied toward the
purchase price.

 

7.               Recordation.
Purchaser may at its expense record a memorandum of this option agreement with
the Recorder of Deeds of Logan County, Illinois.

 

8.               Inspection
and Testing. During the Option Period, Purchaser, its agents and consulting
and environmental engineers, shall have free and unrestricted access to the
Property at reasonable times to make soil borings and otherwise investigate
underground conditions, and to conduct nondestructive tests or surveys,
provided that Purchaser shall be liable to Owner and Farm Tenant for all
damages to the Property or growing crops thereon. Purchaser may, at its
expense, have a Phase One Environmental Study performed with respect to the
Property. If such study discloses the presence or possibility of toxic or
hazardous materials requiring remediation under federal, state and local law,
Owner may cause such remediation to be made at Owner’s expense. If Owner is
unwilling or unable to cause the remediation of the Property, Purchaser may
void this Contract, and all option payments shall be returned to Purchaser,
except $5,000.00, which Owner may retain.

 

2

 

9.               Assignments.
Purchaser may assign this option to a third party only with the prior written
consent of Seller, which consent may be withheld in Seller’s sole discretion. “Third
Party” does not include an entity under common ownership and control with
Purchaser, to which Purchaser may freely assign this option. If Purchaser
assigns this option contract to a third party, Purchaser shall have no further
obligations with respect to this option or to any contract resulting from the
exercise of option by the assignee.

 

10.         Zoning
and Permitting. Purchaser shall, during the Initial and any Extension
Period, pursue zoning and acquisition of permits to enable the Property to be
used for an ethanol production plant, with reasonable diligence. Seller shall
cooperate in such zoning and permit acquisition activities, and shall execute
such documents as are reasonably requested by Purchaser.

 

11.         Tenants
in Possession. Pursuant to written leases, Seller has rented the Property
to farm tenants for crop year 2005, and this option is subject to such tenants’
rights. Pursuant to the terms of such leases, Seller hereby authorizes
Purchaser access to the Property to facilitate inspection and testing as set
forth in Paragraph 8 hereof, provided that Purchaser shall pay for any crop
damage or damage to the Property caused thereby. Seller may lease the property
to a farm tenant or tenants for crop year 2006. However, any such lease shall
terminate no later than December 1, 2006. If Purchaser has not closed on the
purchase of the Property by December 1, 2006, then Seller may lease the
Property for crop year 2007, and any such lease will terminate no later than
December 1, 2007. Any farm lease entered into for the 2006 and 2007 crop year
shall be subject to the condition that Purchaser shall continue to have access
to the Property in accordance with said Paragraph 8, provided that Purchaser
shall pay for any crop damage or damage to the Property caused thereby. If
Purchaser takes title to the Property at any time growing crops remain on the
Property, then Purchaser may elect to destroy such crops and pay the tenant or
tenants the fair market value thereof.

 

Purchaser and
Seller acknowledge that improvements have been erected on the Property, and
that such improvements are owned by a tenant of Seller, and that Purchaser
shall negotiate directly with such tenant to acquire the improvements. Seller
shall have no obligation to reimburse Purchaser the amount of the Initial
Option Payment or any Extension Payment in the event Purchaser is unable to
acquire the aforesaid improvements from the tenant.

 

This Paragraph
11 shall survive the exercise of the option by Purchaser, and shall survive
closing.

 

12.         Escalation
Clause:  The Purchase Price of
$12,000 per acre shall be increased at a rate of 4% (simple interest, prorated
on a daily basis of 365 days per year) from May 1, 2005 until the date of
closing.

 

13.         Drainage:  Prior to exercising this option, Purchaser
shall work with Sellers’ manager, James Walden, to develop an acceptable
drainage plan approved by Seller in writing. Such plan will insure adequate
drainage of adjoining farm land after Purchaser’s acquisition of the Property
and construction of the proposed ethanol production plant. Any and all expenses
associated with the development and implementation of such drainage plan, the
relocation and/or strengthening of drainage tiles, and any other charges
attendant to the survey and relocation of tile lines shall

 

3

 

be borne by Purchaser. Upon closing the purchase contemplated by this
Agreement, Purchaser shall and does hereby grant Seller a permanent access
easement to drainage tile lines that are located on Purchaser’s Property and
benefit adjoining farm land. Upon request of Seller, Purchaser shall execute
such documents as Seller shall deem necessary and appropriate to memorialize
and record its easement interests on and across the purchased Property.

 

After
acquisition of the Property, Purchaser shall have the perpetual obligation to
maintain the aforesaid drainage tiles located on and across its Property. If
Purchaser shall fail to do so, then Seller, its heirs, agents or assigns, may
elect to enter upon the Property to repair or rebuild the drainage system to a
standard acceptable to Seller, and Purchaser shall pay or reimburse Seller for
all costs associated with any such repair or rebuilding of the drainage system.

 

This Option
Agreement is executed by the Purchaser on this 29th day of June,
2005 and constitutes an offer to Owner, which will remain open until midnight,
on July 15, 2005. If Owner delivers or faxes an executed agreement to Purchaser
by that date and time, this option agreement shall be effective. If Owner does
not deliver or fax an executed agreement to Purchaser by that date and time,
the offer is withdrawn. If Owner faxes the agreement to Purchaser, Owner shall
deliver or mail an agreement containing Owner’s original signatures to
Purchaser within 20 working days.

 

	
  Owner:

  	
   

  	
  Purchaser:

  
	
   

  	
   

  	
   

  	
   

  
	
  David L. Scully Trust #4

  	
  Illini Bio-Energy, an Illinois cooperative

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  /s/ David L. Scully, Trustee

  	
   

  	
  By:

  	
   

  	
  /s/ Ernest D. Moody, President

  	
   

  
	
   

  	
   

  	
   

  	
  David L. Scully, Trustee

  	
   

  	
   

  	
   

  	
  Authorized Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  /s/ Peter D. Scully, Co-trustee

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Peter D. Scully, Co-trustee

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  /s/ James K. Hotchkiss, Co-trustee

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  James K. Hotchkiss, Co-trustee

  	
   

  	
   

  	
   

  
												

 

III.                              CONTRACT
TO PURCHASE REAL ESTATE

 

Purchaser’s
exercise of the option constitutes an agreement for Purchaser to purchase, and
for Owner to sell, the Property for the Purchase Price in accordance with the
following terms and conditions.

 

1.               Owner
shall, within 30 days after the exercise of option, furnish a commitment for an
owners title insurance policy issued by an affiliate of Chicago Title Insurance
Company, or other company acceptable to Purchaser, for the amount of the
purchase price. Owner shall pay for the Owner’s search charges, and Purchaser
shall pay the premium for such policy together with

 

4

 

Purchaser’s search charges. The commitment shall show merchantable
title to the Property in Owner, subject only to the following:

 

a.               All
real estate taxes, special assessments and special service area taxes now a
lien, levied, or confirmed after the date hereof, except as hereinafter
provided.

 

b.              Building,
uses and occupancy restrictions, if any.

 

c.               Zoning
laws and ordinances.

 

d.              Easements
of record or in place affecting the premises, if any.

 

e.               Drainage
ditches, feeders and laterals, if any.

 

f.                 Mortgage
or other liens that may be eliminated at closing by application of the purchase
price.

 

g.              Subject
to rights of tenants in possession, as set forth in paragraph 11 of the Option
Agreement.

 

2.               Purchaser
shall, within 15 days after receiving such title evidence, provide Owner or his
agent with any written objections to the merchantability of the title. Purchaser
may in its sole discretion waive any or all objections, and in such case, Owner
shall proceed to closing.

 

3.               This
transaction shall be closed within 45 days after Purchaser’s exercise of the
Option unless the closing must be extended in order to clear title in accordance
with paragraph 2. Owner shall deliver possession on the date of closing. All
prorations, including rents, general real estate taxes and special service area
taxes, shall be made as of the date of closing, based upon latest available
information. Special assessments are not subject to proration. Rather, at
Purchaser’s option, all remaining installments of special assessments shall be
paid by Owner at or prior to closing, or due credit shall be given to Purchaser
at closing. Mortgages and other liens shall be cleared by application of the
purchase price.

 

4.               At
closing Owner shall convey and transfer the Property to Purchaser by recordable
warranty deed, releasing homestead. The Purchase Price, subject to credits and
prorations, shall be paid and all documents relative to the transaction shall
be signed and delivered. Purchaser shall pay the real estate transfer tax in
connection with the sale of the Property.

 

5.               Should
Purchaser materially breach this contract, the Owner’s remedy shall be, at
Owner’s option, (a) to retain the earnest money in full satisfaction of all
claims and damages; or (b) have specific performance. In the event of Owner’s
material breach of this contract, Purchaser may elect, at Purchaser’s sole
option, to (a) void the contract and have a return of its earnest money; or (b)
affirm the contract, and have any available rights and remedies at law or in
equity, including but not limited to specific performance.

 

6.               At
any time prior to closing, Purchaser and its agents and consulting and
environmental engineers shall have free and unrestricted access to the Property
at all times to make soil borings and to conduct tests and surveys of
underground conditions, provided that if

 

5

 

Purchaser shall be liable to all damages to the Property or growing
crops thereon. Purchaser may, at its expense, have a Phase One Environmental
Study performed with respect to the Property. If such study, or if any such
study made pursuant to paragraph 8 of the Option Agreement, discloses the
presence or possibility of toxic or hazardous materials requiring remediation
under federal, state and local law, Owner may cause such remediation to be made
at Owner’s expense. If Owner is unwilling or unable to cause the remediation of
the Property, Purchaser may void this Contract, and all earnest money
previously paid shall be returned to Purchaser, except $5,000.00, which Owner
may retain.

 

7.               Time
is of the essence of this Contract. The warranties and agreements herein contained
shall extend to and be obligatory upon the heirs, executors, administrators,
successors and assigns of me parties hereto.

 

8.               All
notices and demands to or by the parties shall be in writing. The mailing of
any such notice or demand to the Owner or to the Purchaser at their respective
addresses set forth above shall be considered sufficient service. If there is
more than one Owner or Purchaser, the mailing of notice or demand to any one
Owner or Purchaser shall be considered to be sufficient notice or demand on all
Owners or Purchasers.

 

9.               This
Agreement is the entire agreement of the parties with respect to its subject
matter, and all prior representations and negotiations are expressly disclaimed.
This Agreement may be amended only by a writing signed by all the parties.

 

10.         The
parties represent that no commission is due to any broker as a result of this
transaction. All parties waive any claim of conflict if any party is affiliated
with any broker.

 

11.         All
actions for breach of this contract shall be brought only in a court of
competent jurisdiction in Logan County, Illinois, and the parties agree to such
court’s jurisdiction over the person and that venue is proper therein. In the
event of litigation, the substantially prevailing party shall be entitled to an
award of its costs, expenses and reasonable attorneys fees.

 

6Exhibit 10.3

 

AMENDED LETTER OF INTENT

 

Date:                                                                   February
16, 2006

 

Parties:                                                    Fagen, Inc., a Minnesota corporation, (“Fagen”)
and

Illini Bio-Energy, an Illinois
Limited Liability Company, (“Owner”)

 

WHEREAS, Owner is an entity organized to
facilitate the development and construction of a 50 MGY dry mill, coal-fired
fuel ethanol plant (the “Facility” or “Project’); and

 

WHEREAS, Fagen is an engineering and
construction firm capable of providing development assistance to the Project,
as well as designing and constructing the Facility being developed by Owner;
and

 

WHEREAS, Fagen and Owner entered into a
letter of intent dated July 6, 2004, for the Project and the parties have
agreed to amend and replace that Letter of Intent between the parties relating
to the Project and Fagen and Owner agree that this letter, upon execution and
return by Owner, will constitute a letter of intent between Fagen and Owner
(the “Letter of Intent”) and shall supersede the July 6, 2004 letter of
intent in all respects, except as set forth herein; and

 

WHEREAS, Fagen acknowledges that Owner has
converted its ownership structure to an Illinois limited liability company (the
“LLC”) and Fagen hereby expressly consents to Owner’s assignment of this Letter
of Intent to the LLC and, upon assignment to the LLC, both parties agree to be
bound by and to perform, observe, and comply with all the terms of this Letter
of Intent as if originally entered into with the LLC.

 

NOW, THEREFORE,
in consideration of the promises and mutual covenants set forth herein, Owner
and Fagen agree to use best efforts in jointly developing this Project under
the following terms:

 

1.                                       The
foregoing recitals are incorporated in and made part of this Letter of Intent.

 

2.                                       Owner
agrees that Fagen will Design-Build the Facility if determined by Owner to be
feasible and if adequate financing is obtained. Should Owner choose to develop
or pursue a relationship with a company other than Fagen to provide the
preliminary engineering or design-build services for the Project, then Owner
shall reimburse Fagen for all expenses Fagen has incurred in connection with
the Project based upon Fagen’s standard rate schedule plus all third party
costs incurred from the date of the former Letter of Intent dated July 6, 2004,
between Fagen and Owner. Such expenses include, but are not limited to, labor
rates and reimbursable expenses such as legal charges for document review and
preparation, travel expenses, reproduction costs, long distance phone costs,
and postage. If Fagen’s services are terminated by Owner, title to the
technical data, which may include preliminary engineering drawings and layouts
and proprietary process related information, shall remain with Fagen; however,
Owner shall, upon payment of the foregoing expenses, have the limited license
to use the above described technical data, excluding proprietary process
related information, for completing documentation required for construction,
operation, repair and maintenance of the Project, at Owner’s sole risk.

 

1

 

Owner
acknowledges that the technical data provided by Fagen under this Letter of
Intent shall be preliminary and may not be suitable for construction and agrees
that any use of such technical data without Fagen’s involvement shall be at
Owner’s sole risk.

 

If Fagen intentionally
or by gross negligence fails or refuses to comply with its commitments
contained in this Letter of Intent, Fagen shall absorb all of its own expenses,
and Owner shall have the right to terminate the Letter of Intent immediately
upon written notice to Fagen, and Owner shall be released from its obligations
to pay or reimburse Fagen as described above.

 

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

 

•                  The
appropriate location of the proposed Facility; and

•                  Business
plan development.

 

Fagen assumes
no risk or liability of representation or advice to Owner by assisting in
evaluating the above. All decisions made regarding feasibility, financing, and
business risks are the Owner’s sole responsibility and liability. In addition,
Owner will very strongly consider project consultants recommended by Fagen and
will obtain traditional financing from financial institutions recommended by
Fagen that have successfully financed previous Fagen projects (a list which
will be furnished by Fagen, Inc).

 

4.                                       Fagen
agrees to Design-Build the Facility, utilizing ICM, Inc. technology in the
plant process, for a lump sum price (“Lump Sum Price”) of $76,655,090. If, as
of the date a Notice to Proceed is given, the Construction Cost Index published
by Engineering News-Record Magazine (“CCI”) for the month in which the Notice
to Proceed is issued, has increased over the CCI published in the Engineering
News-Record for September 2005 (CCI as of September 2005 = 7540.38), the Lump
Sum Price and any additional options will be increased by an equal percentage
amount. In addition, such price assumes the use of Illinois-sourced coal as the
energy source for the Facility and is contingent on (1) Owner selecting
specific site(s) which have been approved by Fagen (which approval cannot be
unreasonably withheld) and Owner has received subscriptions for the purchase of
$5.5 million of equity interests on or before June 30, 2007, and (2) Owner
securing commitments for debt financing for the Facility on or before December
31, 2008. Additionally, if the above conditions are met, Owner may add total
cogeneration to the Facility for an additional cost of $7,725,000. Should Owner
choose to add a “step down turbine” to its Facility, the additional cost shall
be $2,350,000. The above-mentioned prices in the previous two sentences are
subject to the price escalation referred to above.

 

Owner is aware
that the above stated Lump Sum Price is based on the design including two (2)
steam tube dryers and does not include an RTO (Regenerative Thermal Oxidizer)
for the dryer emissions. In the event an RTO and/or additional dryers beyond
two (2) are needed for this plant, each such item will be an “add-on” item to
the Lump Sum Price at a price to be established at the time the Design Build
Agreement is executed in its final form.

 

In addition,
the Lump Sum Price referred to above assumes the use of nonunion labor. Owner
acknowledges that it has taken no action which would impose a union labor or
prevailing

 

2

 

wage requirement on Fagen,
Owner or the Project. The parties acknowledge and agree that if after the date
hereof, a change in applicable law, or a governmental authority acting pursuant
to a change in applicable law, or an action by the Owner shall require Fagen to
employ union labor or compensate labor at prevailing wages, the Lump Sum Price
shall be adjusted upwards to include any increased costs associated with such
labor or wages.

 

5.                                       Fagen
will assist Owner in locating appropriate management for the Facility.

 

6.                                       Fagen
will assist Owner in presenting information to potential lenders and various
entities or agencies that may provide project development assistance, so long
as the Project has 5% or less dilution. In addition, pro forma projections
shall be greater than 20% ROI by year five.

 

7.                                       During
the term of this Letter of Intent, Owner agrees that Fagen will be the
exclusive Developer and Design-Builder for the Owner in connection with matters
covered by this Letter of Intent, and Owner shall not disclose any information
related to this Letter of Intent to a competitor or prospective competitor of
Pagan. Notwithstanding the above, Owner may disclose the terms of this Letter
of Intent for purposes of raising capital for the Project in which Owner must
file a registration statement with the Securities and Exchange Commission
whereby the Letter of Intent must be disclosed.

 

8.                                       This
Letter of Intent shall terminate on December 31, 2008, if the conditions of
Section 3 have not been met by that date. The termination date and the dates
provided in Section 3 may be extended upon mutual written agreement of the
Parties.

 

9.                                       Fagen
and Owner agree to negotiate in good faith and enter into a definitive lump sum
design-build agreement, including exhibits thereto, acceptable to the Parties.

 

10.                                 The
Parties agree that this Letter of Intent may be modified only by written
agreement by the Parties.

 

11.                                 The
Parties will jointly agree on the timing and content of any public disclosure,
including, but not limited to, press releases, relating to Fagen’s involvement
in Owner’s Project, and no such disclosure shall be made without mutual consent
and approval, except as may be required by applicable law. Fagen will not
unreasonably withhold permission for public disclosure of information that is
not proprietary, confidential or otherwise detrimental to the private nature of
the business of Fagen, Inc. or Fagen Engineering, Inc.

 

12.                                 This
Letter of Intent may be executed in one or more counterparts, each of which
when so executed and delivered shall be deemed an original, but all of which
taken together constitute one and the same instrument. Signatures which have
been affixed and transmitted by facsimile shall be binding to the same extent
as an original signature, although the Parties contemplate that a fully
executed counterpart with original signatures will be delivered to each Party.

 

3

 

	
  Illini Bio-Energy, LLC

  	
  Fagen, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   /s/
  Ernest D. Moody

  	
   

  	
  By:

  	
   /s/ O.
  Wayne Mitchell

  	
   

  
	
   

  	
   

  	
   Ernest
  D. Moody

  	
   

  	
   O.
  Wayne Mitchell

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
  Chairman

  	
  Its: Sr. VP

  
							

 

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