Document:

Exhibit 10.1

EMPLOYMENT
AGREEMENT

Russell “Rusty” Don Sammons

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of June 13, 2006, by and among NOVA ENERGY HOLDINGS, INC., a Nevada corporation (the “Company”), and Russell “Rusty” Don
Sammons, an individual residing in Houston, Texas (“Partner”).

W I T  N  E  S  S  E  T  H:

WHEREAS, the Company, along
with its wholly owned subsidiary, Biosource America, Inc., is in the business
of the design, engineering, construction and operation of biodiesel refineries,
as well as the production and marketing of biodiesel fuel and glycerin,
including without limitation fuels containing fatty acid esters, with its
headquarters in Houston, Texas, offices in Butte, Montana, and actual and
anticipated operations in the United States, Canada and the member countries of
the European Union, and elsewhere;

WHEREAS, Partner currently is
an at will employee of the Company;

WHEREAS, the Company and
Partner desire to enter into an agreement regarding Partner’s employment with
the Company pursuant to the terms and conditions set forth herein;

NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound hereby, the
parties covenant and agree as follows:

1.                                       Employment.  The Company hereby employs Partner and
Partner hereby accepts employment with the Company on the terms and conditions
set forth in this Agreement.

2.                                       Term of Employment.  The term of Partner’s employment hereunder
(the “Term”) shall commence July 1, 2006, (the
“Commencement Date”) and shall continue
(subject to termination by either the Company or Partner as hereinafter
provided in Section 5) for an initial term (the “Initial Term”)
expiring July 1, 2009 (the “Expiration Date”).
Notwithstanding anything to the contrary, at all times Partner’s employment
shall be on an “at will” basis and shall be terminable at any time and for any
reason at the will of the Company, subject to payment of the severance benefits
set forth in Section 5 of this Agreement. 
Upon termination of Partner’s employment, the Company shall have no
further obligation to Partner other than payment of earned and unpaid
compensation (as hereafter defined) under Section 5, and Partner shall have no
further obligation to the Company except as set forth in Sections 6 and 7.

 

3.                                       Compensation
and Other Benefits.

a.                                       Salary.  As compensation for all services rendered by
Partner in performance of Partner’s duties or obligations under this Agreement,
the Company shall pay Partner an initial base salary in equal amounts on a bi-weekly basis, which
annualizes to the amount of $100,000 (assuming full work during the annual
period), which, upon successful closing of the Company’s private placement that
is anticipated to close in 2006, shall be increased to an amount as set by the
Company’s compensation committee. 
Partner shall be paid in the manner customary for the Company, which is
currently every two weeks, all appropriate deductions for taxes and the
like will be made from the wages stated
herein. 
Partner acknowledges that he or she is being hired as a professional and
is exempt from receipt of overtime pay under the Fair Labor Standards Act.

b.                                      Expenses.  Partner shall be entitled to be reimbursed by
the Company for all reasonable and necessary expenses incurred by Partner in
carrying out Partner’s duties under this Agreement in accordance with the
Company’s standard policies and procedures regarding such reimbursements.

c.                                       Welfare
Benefit Plans.  Partner shall be entitled
during the Term, upon satisfaction of all eligibility requirements, if any, to
participate in all health, dental, disability, life insurance and other welfare
benefit programs now or hereafter established by the Company which cover
substantially all other of the Company’s employees and shall receive such other
benefits as may be approved from time to time by the Company, each to the
extent permitted by law.  To the extent (i)
Company has not, as of the Commencement Date, established health or dental
insurance programs, and (ii) Partner elects continuation coverage for health
and dental insurance under COBRA for Partner and Partner’s immediate family
members who are qualified beneficiaries, Company shall reimburse Partner on a
monthly basis for the cost of such continuation coverage.  Such reimbursement obligation shall terminate
upon termination of Partner’s employment with the Company, but subject to
Partner’s continued employment with the Company, shall continue until such time
as the Company has established health and dental insurance programs, but in no
event to exceed 18 months from the Commencement Date.

d.                                      Vacation
and Paid Time Off.  Partner shall
be entitled to take 120 hours of paid vacation/personal time (prorated based on
the number of days worked in the first calendar year of employment) in
accordance with the vacation policy of the Company.  This
time can be used in advance of accrual, subject to repayment by Employee if,
when Employee’s employment terminates, time has been used in excess of the
accrual of that time.  Vacation/personal time shall accrue at the
rate of 10 hours per month of employment, and there will be no payment for
unused accrual of paid time.  This
vacation/personal time will not be subject to carryover from year to year or
payment for unused accrual during Partner’s employment, and such time will
begin to accrue anew on January 1 of each year of employment.  Partner also shall be entitled to paid time
off with respect to such holidays as are designated by the Company as being
generally available to employees in accordance with the holiday policy of the
Company in effect from time to time. 
Partner shall be entitled

 

to payment for accrued and unused vacation/personal
time in the given calendar year upon termination of this Agreement after all
extensions.

e.                                       Profit Share.  Partner shall be entitled to participate in a
profit sharing plan as will be hereafter established by the Company or Nova
(the “Profit
Share Plan”).  The
Profit Share Plan will be applied on a per project basis and be based on
elements of profitability, schedule and performance criteria that, when met,
will result in a distribution of money amongst the various project team members
as determined by the administrator of the Profit Share Plan.

f.                                         Equity
Incentive Plan.  During the Term of this
Agreement, Partner shall be entitled to participate in the Nova Energy Holding,
Inc. 2006 Equity Incentive Plan (the “Equity Incentive Plan”).  To the extent not heretofore granted, no
later than the Commencement Date of this Agreement, the Company shall grant to
Partner under the Equity Incentive Plan an Award consisting of Non-Qualified
Stock Options to acquire not less than 250,000 shares of common stock of Nova
at an exercise price equal to the Fair Market Value of such shares of common
stock on the date such Stock Options are granted.  Such Stock Options shall have a term of ten
years from the date of grant and vest monthly in approximately equal amounts
over a period of 36 months, provided that no Stock Options shall vest until
such time as shares of common stock issuable upon exercise thereof have been
registered on Form S-8 whereupon all Stock Options that would have vested prior
to such date but for this proviso shall immediately vest.  Partner acknowledges that, if granted prior
to June 1, 2006 and the filing of a registration statement on Form S-8, such
Award will have been issued without registration under the Securities Act of
1933, as amended, pursuant to an exemption therefrom and that, accordingly, the
agreement evidencing such Award will bear a restrictive legend pertaining to
Rule 144 and that such Award and any shares of common stock obtained upon
exercise thereof will not be transferable unless registered except in
accordance the applicable rules and regulations of the Securities and Exchange
Commission.  Partner represents that he
or she is acquiring the Award for his or her own account without a view
to distribution within the meaning of the Securities Act; (ii) has obtained or
received from Nova its filings with the Securities and Exchange Commission and
all other information that he or she has deemed necessary to make an informed
investment decision with respect to an investment in Nova in general and the
Award and shares of common stock obtained upon exercise thereof in particular;
(iii) is financially able to bear the economic risks of an investment in Nova;
and (iv) has such knowledge and experience in financial and business
matters in general and with respect to investments of a nature similar to the
securities of Nova so as to be capable, by reason of such knowledge and
experience, of evaluating the merits and risks of, and making an informed
business decision with regard to, the acquisition of shares of common stock of
Nova upon exercise of the Award.  The
Company shall use commercially reasonable efforts to cause a registration
statement on Form S-8 to be filed with the Securities and Exchange Commission
and to be made effective as soon as practicable on or after the date Nova first
become eligible to use such form, which registration statement shall provide
for the registration of shares of common stock of Nova issuable upon exercise
of such Award or for the resale of such shares of common stock.  Capitalized terms used but

 

not defined in this Section 3.f shall have the
meaning given to such terms in the Equity Incentive Plan.

4.                                 Duties.

a.                                       Partner is employed as Vice
President of Operations.  Partner shall
also serve in such other offices or positions as shall be assigned to Partner
from time to time by the Company and perform such other duties, commensurate
with Partner’s position with the Company, as may be assigned by the Company
from time to time.  Partner shall
initially be involved in the Company’s operations, activities, services and
technologies relating to the production of biofuels containing fatty acid
esters.  Specifically, Partner’s initial
duties shall include those specified on Exhibit A attached hereto.

b.                                      Partner agrees that during
the period of employment, Partner shall devote full-time efforts to Partner’s
duties as an employee of the Company, Partner shall use his or her best efforts
to perform the duties of his or her position in an efficient and competent
manner and shall use his or her best efforts to promote the interests of the
Company and any affiliated companies.

c.                                       During the period of
employment, Partner agrees not to (i) undertake or engage in any planning for
or organization of, whether solely or jointly with others, any business
activity competitive with the business activities of the Company, and (ii)
directly or indirectly, engage or participate in any other activities in
conflict with the best interests of the Company.

d.                                      Partner agrees that
during the period of employment Partner shall refer to the Company all
opportunities in the Company’s industry to which Partner might become exposed
in carrying out his or her duties and responsibilities hereunder.

5.                                       Termination
of Employment.

a.                                       Termination by the Company for Cause.  The Company may terminate Partner’s
employment for Cause without thereby giving rise to a breach of this Agreement
solely as a result of such termination.  “Cause” means the commission of an act of fraud, theft,
wrongful diversion of funds or dishonesty against the Company; conviction for
any felony; willful or repeated tardiness or absenteeism; insubordination;
self-dealing; willful or repeated violation of Company policy; willful or
repeated non-performance or substandard performance of duties; willful
violation of this Agreement or the Partner Confidentiality and Invention
Assignment Agreement between the Company and Partner in the form separately
provided to Partner (the “Employee Confidentiality
Agreement”); or violation of any state or federal laws, rules or
regulation in connection with or during performance of work.

b.                                      Termination by the Company without Cause.  The Company may terminate Partner’s
employment hereunder without Cause at any time upon thirty (30) days notice to
Partner without thereby giving rise to a breach of this Agreement

 

solely as a result
of such termination.  In the event of
receipt of such notice, Partner may elect to terminate Partner’s employment
immediately.  Upon termination of Partner’s
employment without Cause pursuant to this Section 5.b, the Company shall pay
Partner his or her base salary accrued through the date of termination plus a
severance benefit equal to the per diem rate of base salary multiplied by the
number of calendar days between such date of termination of employment and the
Expiration Date and, until the Expiration Date, Partner shall continued to be
entitled to participate in any Company welfare benefit plans that Partner was
entitled to participate in prior to such termination of employment to the
extent permitted by such applicable law or the terms of such plan.

c.                                       Death.  Partner’s employment hereunder shall be
terminated (without thereby giving rise to a breach of this Agreement solely as
a result of such termination) automatically upon Partner’s death during the
Term.  In the event of such termination,
the Company shall pay to Partner’s estate within 60 days after the date of
Partner’s death, all benefits and compensation accrued hereunder prior to the
date of Partner’s death.

d.                                      Disability.  Partner’s employment hereunder shall be
terminated (without thereby giving rise to a breach of this Agreement solely as
a result of such termination) automatically upon Partner’s Total Disability
during the Term.  In the event of such
termination, the Company shall pay to Partner within 60 days after the date of
termination under this Paragraph 5.d, all benefits and compensation accrued
hereunder prior to the date of such termination plus a severance benefit equal
to the per diem rate of base salary multiplied by 30 days.  “Total Disability”
means the physical or mental inability (excluding infrequent and temporary absences due to
ordinary illness) to perform Partner’s duties under this Agreement as
determined by the President of the Company upon the advice of a qualified
physician.  Before making any termination
decision pursuant to this Section 5.d, the Company shall determine whether
there is any reasonable accommodation (within the meaning of the Americans with
Disabilities Act) which would enable Partner to perform the essential functions
of Partner’s position under this Agreement despite the existence of any such
disability.  If such a reasonable
accommodation is possible, the Company shall make that accommodation and shall
not terminate Partner’s employment hereunder based on such disability.  Partner shall submit to such medical
examinations as the Company may request to determine whether a Total Disability
exists and shall authorize his or her physician or physicians to discuss his or
her physical or mental condition, test results, medical records, diagnosis and
prognosis with such representatives of the Company as the President may
designate, subject to the agreement of the Company to maintain the
confidentiality of such information pursuant to applicable law.

6.                                       Inventions
and Creations Belong to the Company; Non-Disclosure of Confidential
Information; Non-Solicitation of Employees.  In connection with the execution of this
Agreement and in consideration of becoming or remaining employed by the Company
and the Company’s entering into this Agreement and providing the benefits
hereunder, Partner shall, to the extent not already done, enter into the
Employee Confidentiality Agreement and Partner agrees to comply with all terms
and conditions of such Employee Confidentiality Agreement.

 

7.                                       Limited
Non-Competition Covenant.

Partner acknowledges
that, although Partner is an at will employee, the Company is hereby providing
Partner with an employment agreement for a definite Initial Term and
restricting its ability to terminate Partner during this Initial Term, has agreed to grant Partner Awards under the
Equity Incentive Plan, and also has provided, will provide and hereby agrees to provide Partner
with access to Confidential Information of the Company throughout the Term of
this Agreement’ each in reliance upon Partners’ agreement to enter into
and comply with the limited non-competition covenant set forth in this Section
7.  Partner acknowledges that the Company has
legitimate interests in protecting such information and its investment in the
Partner through the imposition of a limited covenant not to compete. Partner
acknowledges that the limited non-competition covenant set forth herein is the
least restrictive and most reasonable covenant available to adequately protect
the Company’s interest.

“Subject Client”
means any person or entity who is an existing client of the Company as of the
date Partner’s employment with the Company terminates for any reason and (i)
with whom Partner has had personal contact during the term of Partner’s
employment with the Company, or (ii) as to whom Partner has received
Confidential Information during the term of Partner’s employment with the
Company.  A client of the Company shall
be considered “existing” from the date of initiation of any business
relationship with the Company, including a request for bid, until such time as
the client has notified the Company that such business relationship has been
terminated, regardless of whether the client’s actual use of the Company’s
services has temporarily ceased.

“Covenant Term”
means a period commencing on the date hereof and expiring two (2) years after
the date Partner’s employment with the Company terminates, regardless of the
reason (subject to being extended due to Partner’s breach under Section 7(f)
below).

“Competitive Services or
Activities” means engaging in the design, engineering, or
construction or operation of refineries for biofuels containing or derived from
fatty acid esters, or engaging in the marketing or production of biodiesel fuel
and glycerin containing or derived from fatty acid esters, or engaging in
consulting with regard to the foregoing.

“Territory”
means the area within each city, county and parish of each state and territory
of the United States and the District of Columbia, each province and territory
of Canada and the member countries of the European Union.

a.                                       Partner agrees that
Partner will not, during the term of Partner’s employment with the Company or
during the Covenant Term, individually or as an employee, owner, employer,
consultant, agent, principal, partner, stockholder, director, officer, lender,
or any other individual or representative capacity for another, call upon,
solicit, offer, sell or provide Competing Services or Activities, or assist with
calling upon, soliciting, offering, selling or providing Competing Services or
Activities to, any Subject Client located in whole or in part in the Territory.

 

b.                                  Partner agrees that
Partner will not, during the term of Partner’s employment with the Company or
during the Covenant Term, whether individually or as an employee, owner,
employer, consultant, agent, principal, partner, stockholder, director,
officer, lender, or any other individual or representative capacity for
another, approach any Subject Client for the purpose of soliciting employment
or accept employment with any Subject Client to the extent such employment
involves performing or providing Competing Services or Activities in the
Territory, unless Partner obtains prior written permission from the Board of
Directors of the Company.

c.                                   Partner agrees that
Partner will not, during the term of Partner’s employment with the Company or
during the Covenant Term, individually or as an employee, owner, employer,
consultant, agent, principal, partner, stockholder, director, officer, lender,
or any other individual or representative capacity for another, engage in any
Competing Services or Activities in the Territory or provide services to any
person or entity engaged in any Competing Services or Activities in the
Territory.

d.                                      Partner agrees that
Partner will not, during the term of Partner’s employment with the Company or
during the Covenant Term, whether individually or as an employee, employer,
consultant, agent, principal, partner, stockholder, lender, corporate officer
or other representative of another, receive any remuneration in any form as a
result of any conduct described in Section 7(a), (b) or (c) above.

e.                                       The ownership by
Partner of stock of any company listed on a national securities exchange shall
not be deemed a violation of this Agreement provided Partner and Partner’s
associates (as that term is defined in Regulation 14A of the Securities
Exchange Act of 1934 as in effect on the date hereof) collectively do not own
more than 1% of the stock of such company.

f.                                     If Partner violates any
covenant contained in this Section and the Company brings legal action for
injunctive or other relief, the Company shall not, as a result of the time
involved in obtaining the relief, be deprived of the benefit of the full period
of any such covenant. Accordingly, in the event the Company brings legal action
for injunctive or other relief to enforce the rights granted under this
Section 7, the Covenant Term shall be extended by the period of time specified
as the Covenant Term from the later of (i) the date of the termination of
Partner’s employment with the Company, or (ii) the date of entry by a court of
competent jurisdiction of a final judgment enforcing the covenants of Partner
in this Section 7.

g.                                      Partner acknowledges
that in the event Partner willfully or intentionally breaches the provisions of
this Section 7 or otherwise renders services for any organization, or engages directly or indirectly in any
business, that is or becomes competitive with Nova, the Company or any
subsidiary of Nova, such action shall
constitute “Detrimental Activity” pursuant to the Equity Incentive Plan and, if
such event occurs prior to or within two years after any exercise, payment or
delivery of an Award under such Equity Incentive Plan, such exercise,
payment or delivery may be rescinded by

 

the Company within two years thereafter.  In the event of any such rescission, Partner
shall pay to the Company the amount of any gain realized or payment received as
a result of the rescinded exercise, payment or delivery, in such manner and on
such terms and conditions as may be required, and the Company shall be entitled
to set-off against the amount of any such gain any amount owed to Partner by
the Company or any subsidiary of the Company.

h.                                    Partner acknowledges
that this Section 7 contains independent covenants that shall be operative
regardless of the reasons for termination of his employment or the performance
or nonperformance of any obligations of the Company.

8.                                       Partner’s Acknowledgement.  It is the express intention of Partner and
the Company to comply with the laws of the State of Texas and Montana, and the
laws of any other jurisdiction in which Partner may engage in activities
prohibited by this Agreement and the Employee Confidentiality Agreement, with
regard to non-competition agreements in effect as of the date of execution
hereof.  Partner stipulates that the
provisions of this Agreement and the Employee Confidentiality Agreement are not
oppressive or overly burdensome to Partner and will not prevent Partner from
earning an income following termination of this Agreement.  Partner warrants and represents that:

a.                                       Partner is familiar
with non-compete and non-solicitation covenants;

b.                                      Partner has discussed
or acknowledges the opportunity to discuss the provisions of the non-compete
and non-solicitation covenants contained herein with Partner’s attorney and has
concluded that such provisions (including, without limitation, the right to
equitable relief and the length of time provided for herein) are fair,
reasonable and just under the circumstances;

c.                                       Partner is fully aware
of the obligations, limitations and liabilities included in the non-compete and
non-solicitation covenants contained in this Agreement and the Employee
Confidentiality Agreement;

d.                                      The scope of activities
covered hereby are substantially similar to those activities to be performed by
Partner under this Agreement and the Employee Confidentiality Agreement;

e.                                       The non-compete and
non-solicitation periods are reasonable restrictions, giving consideration to
the following factors:  (1) Partner and
the Company reasonably anticipate that this Agreement and the Employee
Confidentiality Agreement, although terminable under certain provisions, will
continue in effect for sufficient duration to allow Partner to attain superior
bargaining strength and an ability for unfair competition with respect to the
customers covered hereby; (2) the duration of such periods are reasonably
necessary period to allow the Company to restore its position of equivalent
bargaining strength and fair competition with respect to those customers
covered hereby; and (3) historically, employees of all types have remained with
Partner for a duration of longer than the duration of the non-compete and
non-solicitation periods; and

 

f.                                         The limitations
contained in this Agreement with respect to geographic area, duration and scope
of activity are reasonable; however, if any court shall determine that the
geographic area, duration or scope of activity of any restriction contained in
this Agreement is unenforceable, it is the intention of the parties that such
restrictive covenants set forth herein shall not thereby be terminated, but
shall be deemed amended to the extent required to render such covenants valid
and enforceable.

9.                                       Remedies;
Injunction.  In the event of a breach or
threatened breach by Partner of any of the provisions of this Agreement,
Partner agrees that the Company, in addition to and not in limitation of any
other rights, remedies or damages available to the Company at law or in equity,
shall be entitled to temporary and permanent injunctive orders without the
necessity of proving actual monetary loss, in order to prevent or restrain any
such breach by Partner or by Partner’s partners, agents, representatives,
servants, employees and/or any and all persons directly or indirectly acting
for or with Partner and without the necessity of posting any bond with respect
to such injunctive relief.  It is
expressly understood between the parties that this injunctive or other
equitable relief shall not be the Company’s exclusive remedy for any breach of
this Agreement, and the Company shall be entitled to seek any other relief or
remedy which it may have by contract, statute, law or otherwise for any breach
hereof.

10.                                 Notices.  Any notice, demand or request which may be
permitted, required or desired to be given in connection therewith shall be
given in writing and directed to the Company and Partner as follows:

	
  If to the Company, at:

  	
  Nova Energy Holdings, Inc.

  
	
   

  	
  2777 Allen
  Parkway, Suite 860

  
	
   

  	
  Houston, Texas
  77019

  
	
   

  	
  Attn: J.D.
  McGraw

  
	
   

  	
  Facsimile No.
  (713) 869-6682

  
	
   

  	
   

  
	
  with a copy to:

  	
  Bohreer & Zucker LLP

  
	
   

  	
  2777 Allen
  Parkway, Suite 865

  
	
   

  	
  Houston, Texas
  77019

  
	
   

  	
  Attention: E.
  Michelle Bohreer

  
	
   

  	
  Facsimile No.:
  (713) 526-8100

  

 

or, if to Partner, at the address and facsimile
number indicated on the signature page hereof.

Notices shall be deemed properly delivered and
received when and if either:  (i) personally
delivered; (ii) delivered by nationally-recognized overnight courier; (iii)
when deposited in the U.S. Mail, by registered or certified mail, return
receipt requested, postage prepaid; or (iv) sent via facsimile transmission
with confirmation mailed by regular U.S. mail. 
Any party may change its notice address for purposes hereof to any
address within the continental United States by giving written notice of such
change to the other parties hereto at least fifteen days prior to the intended
effective date of such change.

 

11.                                 Severability.  If any provision of this Agreement is
rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by decree of a court of last resort, the
Company and Partner shall promptly meet and negotiate substitute provisions for
those rendered or declared illegal or unenforceable, but all the remaining
provisions of this Agreement shall remain in full force and effect.

12.                                 Assignment.  This Agreement may not be assigned by any
party without the prior written consent of the Company.

13.                                 Binding
Agreement.  This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, and their
respective legal representatives, heirs, successors and permitted assigns.

 

14.                                 Governing
Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
principles of conflicts of law that would apply any other law.  Partner agrees that the non-exclusive venue
and jurisdiction for litigation or arbitration of any disputes relating to this
Agreement shall be Houston, Harris County, Texas, and Partner irrevocably
consents to personal jurisdiction of the Courts in Houston, Texas, and waives
any forum non convenience rights. 
Notwithstanding the foregoing, the Company shall have the right, at its
election, to bring litigation or arbitration relating to Partner’s
non-competition, non-solicitation and confidentiality obligations in any forum
having personal jurisdiction over employee.

15.                                 Agreement
Read, Understood and Fair.  Partner has
carefully read and considered all provisions of this Agreement, agrees that all
of the restrictions set forth are fair and reasonable and are reasonably
required for the protection of the interests of the Company and understands and
will faithfully comply with all such provisions.

IN WITNESS WHEREOF, the parties have
executed this Agreement as of the date first above written, effective as of the
Commencement Date.

	
   

  	
  EMPLOYER:

  
	
   

  	
   

  
	
   

  	
  NOVA
  ENERGY HOLDINGS, INC.,

  
	
   

  	
  a Texas
  corporation

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ JD McGraw

  
	
   

  	
   

  	
   

  
	
   

  	
  Printed Name:

  	
    JD McGraw

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
  PARTNER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Rusty Don Sammons

  
	
   

  	
  Russell “Rusty”
  Don Sammons

  
	
   

  	
   

  
	
   

  	
  Address for
  Notices:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile:Exhibit
10.2

 

International Banking
Group

 

IRREVOCABLE STANDBY
LETTER OF CREDIT NO: SB260118

 

	
  

  	
  DATE: JUNE 15,
  2006

  
	
   

  	
   

  
	
  BENEFICIARY:

  	
  APPLICANT:

  
	
  QUAD CITY BANK AND TRUST COMPANY,

  	
  BIOSOURCE AMERICA, INC.

  
	
  AS ESCROW AGENT, 3551 7TH STREET,

  	
  2777 ALLEN PARKWAY #800

  
	
  SUITE 100, MOLINE, IL 61265-9973

  	
  HOUSTON, TX 77019-9129

  
	
   

  	
   

  
	
  AMOUNT: USD3,000,000.00 (UNITED STATES

  	
   

  
	
  DOLLARS THREE MILLION AND NO/100)

  	
  EXPIRY DATE: OCTOBER 1, 2006

  
	
   

  	
  AT OUR COUNTERS

  

 

WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. SB260118
(“LETTER OF CREDIT”) IN YOUR FAVOR, WHICH IS AVAILABLE AT SIGHT UP TO THE
AMOUNT OF USD3,000,000.00 (THE “MAXIMUM AMOUNT”), UPON PRESENTATION OF THE
FOLLOWING DOCUMENTS:

 

A)   THIS ORIGINAL LETTER OF CREDIT AND ANY SUBSEQUENT AMENDMENT(S).
ALL AMENDMENT(S) MUST INDICATE WHETHER THEY ARE ACCEPTED OR REFUSED BY THE
BENEFICIARY AT TIME OF DRAWING, AND

B)    BENEFICIARY’S STATEMENT, ON ITS LETTERHEAD, COMPLETED, DATED AND
SIGNED BY AN AUTHORIZED INDIVIDUAL STATING: “THE AMOUNT REQUESTED IS PAYABLE
PURSUANT TO SECTION 5 OF THAT CERTAIN ESCROW AGREEMENT BY AND AMONG QUAD CITY
BANK AND TRUST COMPANY, AS ESCROW AGENT, KENOSHA BEEF INTERNATIONAL, LTD.,
BIOSOURCE AMERICA, INC. AND CLINTON COUNTY BIO ENERGY, LLC. WE ARE DRAWING FOR
USD              , UNDER LETTER OF CREDIT NO. SB260118
PROVIDED THAT SUCH AMOUNT SHALL NOT EXCEED USD3,000,000.00. PLEASE WIRE
PROCEEDS TO US; QUAD CITY BANK AND TRUST COMPANY, AS ESCROW AGENT.”

 

MULTIPLE DRAWINGS ARE ALLOWED. IF A DRAWING IS PRESENTED AND PAID, THE
ORIGINAL LETTER OF CREDIT WILL BE ENDORSED AND RETURNED TO YOU. IF YOUR DRAWING
EXHAUSTS THE MAXIMUM AMOUNT, WE WILL RETAIN THE LETTER OF CREDIT.

 

THIS LETTER OF CREDIT SHALL BE SURRENDERED TO STERLING BANK.  THIS LETTER OF CREDIT IS INTENDED TO SERVE AS
“SUBSTITUTE COLLATERAL” FOR THE LETTER OF CREDIT ISSUED BY M&I MARSHALL
& ILSLEY BANK, AS PROVIDED IN SECTION 6 OF THE ESCROW AGREEMENT.  IF YOU RETURN THIS ORIGINAL LETTER OF CREDIT
AND AMENDMENT(S) PRIOR TO THE THEN CURRENT EXPIRATION DATE WITH YOUR INTENT TO
TERMINATE SAME, IT MUST BE ACCOMPANIED BY YOUR ORIGINALLY SIGNED LETTER,
ADDRESSED AND SENT DIRECTLY TO STERLING BANK, INDICATING YOU NO LONGER REQUIRE
THIS LETTER OF CREDIT NO. SB260118 OF OUR OBLIGATION HEREUNDER.

 

THIS LETTER OF CREDIT SETS FORTH IN FULL OUR UNDERTAKING, AND SUCH
UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMPLIFIED OR LIMITED BY REFERENCE
TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO IN THIS LETTER OF CREDIT,
EXCEPT ONLY THE UNIFORM CUSTOMS AND PRACTICE REFERRED TO HEREIN, AND ANY SUCH
REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN ANY REFERENCE TO A
DOCUMENT, INSTRUMENT OR AGREEMENT.

 

THIS CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES ISP98.

 

STERLING BANK

 

	
  BY:

  	
  /s/ Anna Rodriguez

  	
   

  
	
  AUTHORIZED SIGNATURE

  

 

 

	
  840 Gessner, Suite 150 ·  Houston, Texas 77024

  	
  Member FDIC

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