Document:

Exhibit 4.3

 

ESCROW AGREEMENT

 

THIS ESCROW AGREEMENT,
dated as of August 1, 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, would equal at least $58,000,000; 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:

  	
   

  	
  Ronald Mapes

  	
   

  
	
   

  	
  Name:

  	
   

  	
  /s/ Ronald Mapes

  	
   

  
	
   

  	
  Its:

  	
   

  	
  Chairman

  	
   

  
	
   

  	
  Federal Taxpayer I.D. number: 20-2760722

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STATE BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  Greg Cross

  	
   

  
	
   

  	
  Name:

  	
   

  	
  /s/ Greg Cross

  	
   

  
	
   

  	
  Its:

  	
   

  	
  Senior Vice President

  	
   

  
						

 

 

EXHIBIT A

 

Form of
Notice of Escrow Closing

 

(To
be on Company letterhead)

 

August 1,
2006

 

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, would equal at least $58,000,000; 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:

  	
   

  	
  Ronald Mapes

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  /s/ Ronald Mapes

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
  Chairman

  	
   

  
						

 

 

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 10.1

 

REAL ESTATE OPTION AGREEMENT

 

THIS AGREEMENT entered into this 20th
day of June, 2006, between Freeport Area
Economic Development Foundation, an Illinois not-for-profit corporation,
herein referred to as “Optionor,” whose address is 27 W. Stephenson Street,
Freeport, Illinois 61032, and Blackhawk
Biofuels, LLC, herein referred to as “Optionee, “ whose address is
22 S. Chicago Avenue, Freeport, Illinois 61032.

 

1.                                       Consideration
and Grant of Option. In consideration of the payments herein set forth from
Optionee to Optionor, Optionor hereby grants to Optionee an option to purchase
Lot 7 in the Replat of Mill Race Industrial Park (a copy of the draft of the
Replat is attached hereto marked at Exhibit A) which is located in the
Stephenson County Economic Development area in Stephenson County, Illinois
(herein referred to as the “Property”), together with all easements and
appurtenances thereto, for the price and within the time specified herein. This
Real Estate Option Agreement is contingent upon Optionor obtaining all
necessary government approval and the filing of the Replat of Mill Race
Industrial Park in accordance with the Replat which is attached hereto. In the
event the Replat is not approved, this Option Agreement shall be null and void
and any monies paid to Optionor by Optionee shall be refunded to Optionee.

 

2.                                       Payment
for Option. Optionee shall pay Optionor the sum of Eight Hundred
Twenty-five Dollars ($825.00) per month on the first of each month commencing August 1,
2006, and on the first of each month thereafter. Said payment shall be in
consideration for the Option granted to Optionee. The payment will not be
applied to the purchase price in the event Optionee exercises this Option. In
the event Optionee fails to exercise the Option according to its terms,
Optionor shall retain all sums paid under the terms of this Option Agreement.

 

3.                                       Exercise
of Option. This option may be exercised by Optionee as follows:

 

a.                                       By
written notice from Optionee to Optionor, at the address provided herein, which
written notice shall provide for a date for closing within 60 days of the date
of the written notice.

 

b.                                      This
option shall remain in effect until December 31, 2006. Optionee may exercise
this option at any time prior to said date.

 

c.                                       If
Optionee fails to exercise this option within the time period set forth above,
Optionee’s right to exercise the option and purchase the Property shall
automatically terminate and this agreement shall be of no force and effect.

 

4.                                       Non-Exercise
of Option. In the event Optionee does not exercise the option to purchase
the Property, the consideration paid to Optionor pursuant to Paragraph 2 above
shall be forfeited and remain the property of Optionor.

 

1

 

5.                                       Assess
to Property. During the option period, Optionee shall be granted access to
the property to perform any necessary due diligence as required by
Optionee. Provided however, Optionee shall respect the rights of the current
tenants on the premises and shall not disrupt or interfere with the tenants or
their business. Optionee shall return the Property to its original condition
after the completion of any tests, surveys or inspections. All costs of due
diligence studies shall be borne by Optionee.

 

6.                                       Purchase
Price and Terms of Payment. The purchase price paid for the property shall
be $15,000.00 per surveyed acre. Optionor and Optionee agree that upon the
exercise of the Option, the parties shall sign an Agreement for Deed, prepared
by Optionee’s attorney and approved by Optionor’s attorney, the exercise of the
option shall be contingent upon both parties executing an Agreement for Deed
which is acceptable to both Optionor and Optionee. The purchase price shall be
determined by survey, the total purchase price shall be the number of surveyed
acres times the price per acre as hereinabove set forth.

 

7.                                       Notice.
All notices provided for in this instrument, if not delivered in person, shall
be sent by U.S. Certified Mail, Return Receipt Requested, to the party at the
address given above, or to any other address either party may have
designated for receipt of such notices by written notice of a change of
address.

 

8.                                       Representations.
Optionor and Optionee hereby warrant and represent to each other that no real
estate broker has participated in this transaction and that this instrument
contains the entire agreement of the parties and that any prior discussions or
negotiations not set forth in this Agreement are of no further force and
effect.

 

9.                                       Assignment.
Optionor and Optionee agree that this Option may be assigned by Optionee
without the prior written consent of Optionor and that assignee of Optionee
shall have all rights of Optionee hereunder.

 

10.                                 Governing
Law. This Agreement shall be governed by the laws of the State of Illinois.

 

11.                                 Prior
Agreement Void. Upon the execution of this Amended Real Estate Option
Agreement, the prior Real Estate Option Agreement between the parties dated March 10,
2006, shall be null and void and of no further force and effect.

 

 

IN
WITNESS WHEREOF, the parties have executed this Option the day and year first
above written.

 

	
   

  	
  OPTIONOR:

  
	
   

  	
   

  
	
   

  	
  FREEPORT AREA
  ECONOMIC

  
	
   

  	
  DEVELOPMENT
  FOUNDATION

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Robert Skurla,
  Executive Director

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
  BLACKHAWK
  BIOFUELS, LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Member

  

 

Instrument
Prepared by:

Attorney Dan G.
Fishburn

Snow, Hunter,
Whiton & Fishburn, Ltd.

8 East Stephenson
Street

Freeport, IL  61032 (815-235-2511)

 

 

EXHIBIT A

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