EXHIBIT 10.18

 

MANAGEMENT AND OPERATIONAL SERVICES AGREEMENT

 

This Management and Operational Services Agreement (“Agreement”) is made and
entered into as of the 9th day of May, 2008, by and between REG Services Group,
LLC, a limited liability company organized and existing under the laws of the
state of Iowa, with offices at Ames, Iowa (“REG Services”), REG Marketing &
Logistics Group, LLC, a limited liability company organized and existing under
the laws of the state of Iowa, with offices at Ames, Iowa (“REG Marketing”), and
Blackhawk Biofuels, LLC, a limited liability company organized and existing
under the laws of the state of Delaware, with offices at 22 South Chicago
Avenue, Freeport, Illinois 61032 (“Blackhawk Biofuels”).

 

RECITALS:  A biodiesel production facility is currently under construction by
Biofuels Company of America, LLC (“BCA”) in Danville, Illinois (“Biodiesel
Facility”). Blackhawk Biofuels intends to purchase substantially all of the
assets of BCA and will own the Biodiesel Facility pursuant to that certain Asset
Purchase Agreement of even date herewith by and between Blackhawk Biofuels,
Bunge North America, Inc., a New York Corporation (“Bunge”), BCA, Renewable
Energy Group, Inc. (“REG”), and Biodiesel Investment Group, LLC (the “Purchase
Agreement”). Blackhawk Biofuels and REG Services have discussed the general
terms and conditions under which REG Services would provide start-up management
and operational services to Blackhawk Biofuels with respect to the Biodiesel
Facility, which the parties wish to reduce to this writing. This Agreement
amends, restates and is hereby substituted for that Management and Operational
Services Agreement originally made and entered into as of August 4, 2006,
between West Central Cooperative and Blackhawk Biofuels, as assigned to and
assumed by REG October 26, 2006, and as revised by the First Amendment to
Management and Operational Services Agreement made and entered into as of the
15th day of December, 2007, by and between REG, REG Services, REG Marketing, and
Blackhawk Biofuels.

 

IT IS THEREFORE AGREED by and between the parties as follows:

 

1.                                       General Scope. Subject to the terms of
this Agreement, and in consideration of the fee for such services to be paid by
Blackhawk Biofuels as set out herein, REG Services will provide for the overall
management of the Biodiesel Facility, place a general manager and an operations
manager at the Biodiesel Facility, acquire feed stocks and the basic chemicals
necessary for the operation of the Biodiesel Facility, perform the
administrative, sales and marketing functions for the Biodiesel Facility, and
fulfill the remaining personnel needs of the Biodiesel Facility by the leasing
of employees to Blackhawk Biofuels. In fulfilling its duties and obligations
hereunder, REG Services shall cooperate with Blackhawk Biofuels and act in a
manner to maximize the long-term success and profitability of Blackhawk
Biofuels.

 

2.                                       Responsibilities of REG Services. Under
this Agreement, REG Services agrees to provide the following:

 

A.                                   General Manager. REG Services will provide
a General Manager to implement and oversee the business plan for the Biodiesel
Facility, and direct, promote and coordinate the staff, personnel and plant
operations. The General Manager will be

 

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an employee of REG Services, but will be assigned to carry out the
responsibilities of General Manager at the Biodiesel Facility. Included among
the specific duties to be accomplished by the General Manager are:

 

·                                          To utilize their ongoing best efforts
to successfully and profitably manage the Biodiesel Facility in Blackhawk
Biofuels’ best interests;

·                                          Development of an annual budget for
presentation to and approval of Blackhawk Biofuels’ Board of Managers (or other
board of governance (“Board”));

·                                          Attend meetings of the Board and
provide information upon its request;

·                                          Insure that all raw product costs are
minimized and that all finished product revenues are maximized;

·                                          Work with Blackhawk Biofuels’ Board
to formulate Blackhawk Biofuels’ mission and goals;

·                                          Work towards achievement of such
mission and goals;

·                                          Assist with regulatory affairs
monitoring and compliance;

·                                          Hire, terminate and replace Biodiesel
Facility personnel as necessary;

·                                          Management of governmental relations,
including USDA’s biodiesel programs; and

·                                          Such other duties as may be agreed
between REG Services and Blackhawk Biofuels.

 

The General Manager will report to such officer of REG Services as REG Services
shall from time to time designate. All employee compensation and employee
benefits associated with the position of General Manager will be paid by REG
Services.

 

B.                                     Operations Manager. REG Services will
provide an Operations Manager to oversee the operation of the Biodiesel
Facility. The Operations Manager will be an employee of REG Services, but will
be assigned to carry out the responsibilities of Operations Manager at the
Biodiesel Facility. Included among the specific duties to be accomplished by the
Operations Manager are:

 

·                                          Planning and scheduling biodiesel
production to meet customer needs and marketing goals;

·                                          Monitor and improve quality control;

·                                          Oversee facility and equipment
maintenance;

·                                          Assist with budgeting and the
monitoring of labor and other expenses in the operation;

·                                          Implement processing changes and new
technologies as they evolve, and plan for new projects relating to biodiesel
production; and

·                                          Such other duties as may be agreed to
between REG Services and Blackhawk Biofuels.

 

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The Operations Manager will report to the General Manager. All employee
compensation and employee benefits associated with the position of Operations
Manager will be paid by REG Services.

 

C.                                     Feed Stocks Procurement. REG Services
will be responsible for arranging the purchase of soybean oil, together with
other feed stocks as may be needed in the future. REG Services will procure all
feed stocks necessary for production at the Biodiesel Facility; and will:

 

·                                          Provide analysis and audit of feed
stock suppliers;

·                                          Purchase feed stocks at competitive
prices meeting specifications and in adequate quantities to fill the production
schedule of the Biodiesel Facility;

·                                          Negotiate for discounts where
obtainable on feed stocks;

·                                          Arrange for transportation,
logistics, and scheduling of feed stock deliveries; and

·                                          Provide analysis and audit of bulk
transportation providers.

 

D.                                    Chemical Inputs Procurement. REG Services
will be responsible for purchasing methanol, sodium methylate, hydrochloric
acid, and caustic soda, together with such other chemical inputs as may be
needed in the future. REG Services will procure all basic chemical inputs
necessary for production at the Biodiesel Facility; and will:

 

·                                          Perform due diligence requirements
for investigation of suppliers of the chemical inputs;

·                                          Provide analysis and audit of
chemical suppliers;

·                                          Purchase chemical inputs at
competitive prices meeting specifications for use in the Biodiesel Facility;

·                                          Negotiate for discounts where
obtainable on chemicals;

·                                          Procure adequate chemical inputs to
meet production schedules for the Biodiesel Facility;

·                                          Provide analysis and audit of bulk
transportation suppliers; and

·                                          Arrange for transportation,
logistics, and scheduling services for chemical input deliveries by suppliers.

 

E.                                      Administrative Services. REG Services
shall provide administrative services to support the operation of the Biodiesel
Facility, agreeing to provide assistance within the following areas as more
fully described on Exhibit A hereto (and at REG Services’ expense except for
those materials and items noted on such Exhibit A):

 

·                                          Accounting

·                                          Human Resources

·                                          Information Technology

·                                          Insurance Administration

 

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·                                          Payroll

·                                          Communications

 

F.                                      Sales and Marketing. REG Services will
utilize its best efforts as Blackhawk Biofuels’ sale representative to market
all biodiesel, glycerin and fatty acids produced at the Biodiesel Facility
(“Products”) at the Product Prices (as defined below). With respect to such
services, REG Services agrees to provide:

 

·                                          Market analysis of biodiesel supply
and demand, utilizing non-proprietary, public information;

·                                          Opportunities for participation in a
trade association to access additional historical data regarding prices, costs,
and other analysis, contributed and disseminated to members on an aggregated
basis;

·                                          Enhanced access to biodiesel markets
with REG Services’ established distribution channels and transportation at pass
through costs;

·                                          Analysis and audit of biodiesel
customers desiring to purchase Blackhawk Biofuels Product, including credit
analysis;

·                                          Marketing specialists to serve as
Blackhawk Biofuels’ representatives to identify potential customers and attain
and establish sales opportunities for the Products at the prices and terms as
established by Blackhawk Biofuels;

·                                          Arrangements for transportation,
logistics, and scheduling of biodiesel shipments;

·                                          Where advantageous, arrange for
leased tankers for rail shipments;

·                                          Analyze and audit bulk transportation
providers;

·                                          Oversee reconciliation of shipments,
invoicing and payments on a weekly basis; and

·                                          Provide invoicing and accounts
receivable management for biodiesel shipments.

 

G.                                     Provision of Leased Employees. In
addition to furnishing the above services, REG Services shall lease to Blackhawk
Biofuels at Blackhawk Biofuels’ expense those employees as are necessary to fill
the remaining personnel needs to operate the Biodiesel Facility. Based upon the
Biodiesel Facility and operation planned as of the execution of this Agreement,
the lease will cover the listing of job descriptions as set out on Exhibit B
hereto, but the employees being leased and their job descriptions will be
changed from time to time by the General Manager as necessary to best operate
the Biodiesel Facility.

 

H.                                    Information for the Board. REG Services
shall provide Blackhawk Biofuels access to and make available all information
regarding Blackhawk Biofuels performance, including but not limited to all
financial, and production information, in addition to any information Blackhawk
Biofuels board may need to perform its duties.

 

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I.                                         Capital Costs. REG Services shall
provide to the Board of Managers of Blackhawk Biofuels for board approval any
capital costs it deems necessary prior to incurring said costs.

 

J.                                        Employee Dismissal. Should dismissal
of an employee whether leased, or the General Manager or Operations Manager
become necessary, REG Services will make its best effort to use other staff
including staff of other facilities it manages to continue operations of
Blackhawk Biofuels. Appropriate dismissal will not be delayed by staffing
concerns.

 

3.                                       Compensation for Services. In
consideration of the services to be rendered during the term of this Agreement:

 

A.                                   Monthly Fee. Blackhawk Biofuels shall
initially pay to REG Services, on a monthly basis:

 

(i)                                   Commencing with the month during which
substantial completion of the animal fat phase is achieved, or when the
Biodiesel Facility begins production of biodiesel from soy oil (or from other
feed stocks), which ever shall occur first, a flat fee of $75,000.00  to be paid
regardless of the gallons of biodiesel produced from the Biodiesel Facility
(“Flat Fee”) (the first month prorated for the fraction of the month after such
event occurs); and

 

(ii)                                A fee equal to 4.25¢ per gallon of biodiesel
produced from the Biodiesel Facility during the month for which the fee is
computed (the rate per gallon herein the “Fee Rate”). For purposes of this
Agreement, determination of the biodiesel produced from the Biodiesel Facility
for a month shall be based upon a compilation of the daily production reports
for the Biodiesel Facility for such month, and references to a “gallon” shall be
to the U.S. liquid measure of capacity, 231 cubic inches, corrected to 60
degrees Fahrenheit.

 

The Flat Fee and the payment amount resulting from the computation utilizing the
Fee Rate and the gallons of biodiesel produced in a month are referred to herein
collectively as the “Monthly Fee.”

 

The Flat Rate and Fee Rate shall be adjusted for the month following the third
anniversary of the Biodiesel Facility first producing Product for sale (“First
Production Month”), and annually for such month thereafter, according to the
movement in the Consumer Price Index for all-urban consumers, U.S. City Average,
All Items published by the Department of Labor (the “CPI”) in the following
manner. The CPI for the Twenty-fifth Production Month shall be used as the
denominator and the CPI for the month preceding the month for which the adjusted
Flat Rate and Fee Rate are being computed shall be used as the numerator. This
fraction shall be multiplied by $75,000.00, with the resulting amount being the
new Flat Fee. Such fraction shall then be used to multiply times

 

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the initial 4.25¢ Fee Rate, resulting in the new Fee Rate. The new Flat Rate and
new Fee Rate shall then be used to compute the Monthly Fee for twelve (12)
months beginning with the month for which the adjusted Flat Fee and Fee Rate
were computed, except that in no event shall the adjusted Flat Fee and the Fee
Rate be less than the $75,000.00 Flat Fee and the 4.25¢ Fee Rate as set out
above. The Flat Fee and the Fee Rate for each subsequent year of the term shall
be adjusted in a similar manner, with the CPI for the First Production Month
being used as the denominator and the CPI for the month preceding the month for
which the adjusted Flat Fee and Fee Rate are being computed being used as the
numerator, and such fraction being multiplied by the respective $75,000.00 Flat
Rate and the initial 4.25¢ Fee Rate, such adjusted Flat Fee and Fee Rate in no
event to be less than the $75,000.00 Flat Fee and the 4.25¢ Fee Rate as set out
above. If CPI information is not yet available when payment of the Monthly Fee
is due, the Monthly Fee shall be paid based upon the Flat Rate and the Fee Rate
in effect prior to adjustment, the parties agreeing upon receipt of the CPI
information and calculation of the adjusted Flat Rate and Fee Rate to make any
necessary adjustment in payment so that the correct Monthly Fees have been paid.
If the Department of Labor’s method of computing the CPI is substantially
modified or ceases, the parties agree to adopt another measure of the cost of
living for these purposes.

 

B.                                     Net Income Bonus. As an incentive to REG
Services, and as additional compensation for the services being rendered,
Blackhawk Biofuels agrees to pay a bonus to REG Services on a yearly basis equal
to six percent (6%) of the Net Income of Blackhawk Biofuels’ Biodiesel Facility
(“Net Income Bonus), as determined hereafter. For purposes of this Agreement,
Blackhawk Biofuels’ “Net Income” shall be the net income for its fiscal year
before any deduction or allowance for federal or state income taxes, determined
in accordance with generally accepted accounting principles applied on a
consistent basis by the independent CPA firm engaged by Blackhawk Biofuels, and
then adjusted as necessary to: (i) include the receipt of government payments
such as under the federal excise tax credit program or similar federal or state
payments; (ii) exclude any gains or losses realized on the sale or disposition
of capital assets; (iii) adjust depreciation to utilize Internal Revenue Service
Class lives depreciated on a straight line, mid-month basis (with no bonus
depreciation, Section 179 expense (election to expense certain depreciable
assets) or any other method of accelerated depreciation, first year write-off or
expensing to be taken), and (iv) exclude any reduction for the Net Income Bonus
paid or accrued to REG Services as a result of this subsection, and (v) exclude
any income from grant programs Blackhawk Biofuels may receive from state and
federal programs. For any partial fiscal year for Blackhawk Biofuels occurring
during the term of this Agreement, REG Services shall receive a Net Income
Bonus, if any, computed for that period of the fiscal year in which REG Services
provides services hereunder.

 

C.                                     Testing and Start-Up Fees. In order to
prepare for and perform production testing of the Biodiesel Facility being
constructed by Fagen, Inc. with equipment from DeSmet Ballestra North
America, Inc. and to ready the Biodiesel Facility to begin

 

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full-scale production operations as a biodiesel production plant capable of
utilizing soy oil feedstocks (“Testing and Start-Up Services”), REG Services has
been performing and agrees to perform the remaining Testing and Start-Up
Services required by Blackhawk Biofuels and its Biodiesel Facility. Blackhawk
Biofuels agrees to pay additional compensation for the Testing and Start-Up
Services to REG Services in the amount of $483,000. Recognizing that a
significant portion of the Testing and Start-Up Services have already been
provided by REG Services, upon closing of the Purchase Agreement, REG Services
shall issue an invoice to Blackhawk Biofuels for that portion of Testing and
Start-Up Services performed prior to closing, Blackhawk Biofuels agreeing to pay
such invoice within ten (10) days after receipt. Thereafter, REG Services shall
bill Blackhawk Biofuels on a monthly basis for Testing and Start-Up Services
performed during such month, such to be paid by Blackhawk Biofuels within ten
(10) days of receipt of such invoice, such performance of services and payment
therefor to continue until the total fee of $483,000 has been paid by Blackhawk
Biofuels to REG Services. Blackhawk Biofuels understands and agrees that similar
services may be required for testing and start up of upgrades planned for by
Blackhawk Biofuels, including addition of animal fats processing capabilities,
the compensation for which will be provided for in separate agreements.

 

D.                                    Payment. The Monthly Fee shall be due on
the tenth (10th) of the month following the month for which such fees are
computed and payable. The Net Income Bonus shall be paid within ten (10) days
after Blackhawk Biofuels’ Board accepts the audit report for the fiscal year for
which such Net Income Bonus is computed, except that if the Net Income Bonus is
not paid within three (3) months of the close of Blackhawk Biofuels’ fiscal year
because the audit has not been received (or within three (3) months of the end
of the term of this Agreement in the event of the computation of an Income Bonus
for a partial fiscal year), Blackhawk Biofuels shall compute and pay an
estimated Net Income Bonus (if any is due) based on its internal figures on or
before the end of such three (3) month period, the parties agreeing upon receipt
of the audited figures to make any necessary adjustment in such estimated
payment so that the correct Net Income Bonus has been paid.

 

E.                                      Direct Marketing. REG Services agrees to
let Blackhawk Biofuels direct market up to 4% of annual production. Blackhawk
Biofuels will supply on an annual basis the proposed sales schedule for this
direct-marketed Product. The Fee Rate to REG Services on this direct-marketed
Product shall be limited to an initial rate of 3¢ per gallon, and adjusted
thereafter as outlined in Section 3(A) above.

 

F.                                      Additional Compensation. The foregoing
compensation would be for the normal scope of responsibilities to be performed
by REG Services for the benefit of Blackhawk Biofuels with respect to the
Biodiesel Facility. In the event REG Services is required to perform services
beyond the scope of this Agreement, and REG Services is willing to perform such
additional services, the parties shall agree upon the tasks to be undertaken,
the time frame for their performance, and

 

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how REG Services shall be compensated for such additional responsibilities.
Additionally, if in order to increase revenue opportunities, constrain costs or
otherwise enhance services for network plants such as Blackhawk Biofuels (and
without limiting the generality thereof including assuring necessary feedstocks
or other supplies, storage or transportation or obtaining more favorable pricing
therefore), REG Services incurs liability by entering into long term commitments
or otherwise guarantying contractual performances which benefit Blackhawk
Biofuels, REG Services shall be entitled to additional reasonable compensation
to be agreed upon by the parties, commensurate with the risks undertaken and/or
services made available.

 

4.                                       Responsibilities of Blackhawk Biofuels.
Concurrent with performance of the obligations of REG Services as previously set
out in this Agreement, Blackhawk Biofuels understands and recognizes that upon
completion of the Biodiesel Facility, it shall be the obligation of Blackhawk
Biofuels to:

 

A.                                   Establish a Board of Managers or similar
group to provide governance of Blackhawk Biofuels, and input and guidance to the
General Manager regarding the Biodiesel Facility, and to take action upon
recommendations of the General Manager, and approve for implementation
reasonable suggestions of the General Manager. Not withstanding anything to the
contrary in this agreement, Blackhawk Biofuels Board of Managers is the final
authority in regards to this Agreement and all areas of Biodiesel Facility not
included in this Agreement.

 

B.                                     Confer with REG Services on a monthly
basis (or more often as needed) to discuss and establish the price for which REG
Services is to sell the Product for Blackhawk Biofuels.

 

C.                                     Provide the names of several persons who
would be authorized on Blackhawk Biofuels’ behalf to establish Product Prices,
approve special prices, agree to the handling of off-grade Product, and approve
the write off of accounts receivable, and further to notify REG Services of any
changes in such designees (such designees to be reasonably available for contact
by REG Services, and able to respond in a timely fashion).

 

D.                                    Provide funds for:

 

(i)                                   Purchase, installation and maintenance of
software, hardware, and related equipment, together with utilities and related
charges, in order to accomplish the necessary communication of voice and data
between the parties, and conduct Blackhawk Biofuels’ business at and operate the
Biodiesel Facility.

 

(ii)                                The cost of acquisition and implementation
of newly evolving technologies (and including those developed by REG Services or
its affiliates) at the Biodiesel Facility, which have been approved by the

 

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Board. If technologies are purchased from  REG Services or its affiliates,
Blackhawk Biofuels’ cost will not exceed REG Services’ cost plus 10%.

 

(iii)                             Offices,  computers, cell phones, and other
facilities, services and support for the personnel needed to operate the
Biodiesel Facility (and including the General Manager and Operations Manager)
and appropriate for the performance of their duties for Blackhawk Biofuels. REG
Services to supply an estimated annual budget of these items for Blackhawk
Biofuels’ approval.

 

(iv)                              Payment or reimbursement for reasonable travel
and other similar out of pocket expenses incurred in furtherance of the business
of Blackhawk Biofuels and in fulfillment of the duties of the personnel needed
to operate the Biodiesel Facility (and including the General Manager and
Operations Manager), upon submission and substantiation of such expenses as may
be required for tax or auditing purposes.

 

(v)                                 Payment of the costs of legal counsel and
outside auditors as may be determined necessary by the Board, and including for
the examination of financial records, preparation of income tax returns for
Blackhawk Biofuels and related reports to its owners and third parties,
securities filings, and  similar reports.

 

(vi)                              In general, the purchase and delivery of all
feed stocks, chemical and other inputs, all staff and personnel costs (other
than those of the General Manager and Operations Manager) necessary to operate
the Biodiesel Facility, and all other expenses of doing business at the
Biodiesel Facility not specifically being assumed by REG Services as a part of
the furnishing of services hereunder, as well as all required capital
expenditures to maintain the Biodiesel Facility in a condition capable of
producing Product acceptable to the market place.

 

E.                                      To make available for, and allow access
to Biodiesel Facility for the purpose of:

 

(i)                                     Training of employees of REG Services or
its affiliates or customers.

 

(ii)                                  Tours for customers of REG Services or its
affiliates.

 

F.                                      Perform such other tasks and duties as
have been separately set out hereunder and agreed to by Blackhawk Biofuels.

 

5.                                       Other Operational Understandings &
Agreements:

 

A.                                   Risk Management Program. After review by
Blackhawk Biofuels’ Board of Managers, with sufficient information to make
decision and lender concurrence, Blackhawk Biofuels agrees to negotiate with REG
Services to adopt the risk management program agreeable to both parties, which
supports the procurement of feed stocks and chemical inputs hereunder (“Risk
Management Program”).

 

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The objective of the program is to manage the commodity price risk  resulting
from fluctuating prices of feedstock (oils and fats), chemical inputs (methanol
and catalysts), and the finished Products (biodiesel and glycerin) due to
changing market conditions. Under the Risk Management Program, REG Services will
utilize the Chicago Board of Trade, New York Mercantile Exchange, and other
exchanges as warranted to establish an account or accounts in Blackhawk
Biofuels’ name, and acquire instruments as necessary to implement risk
management strategies. Such account(s) and instruments would be funded by
Blackhawk Biofuels and managed by REG Services, with all resulting gains and
losses from the purchase and sale transactions of any futures contracts,
options, and cash instruments associated with the Risk Management Program to
flow to the benefit of or be borne by Blackhawk Biofuels. If approved, Blackhawk
Biofuels agrees to adopt such resolutions and execute such agreements as are
reasonably necessary to implement the Risk Management Program, and pay
transactional costs incurred to carry out such program.

 

B.                                     Plant Information Program. In its
management of the Biodiesel Facility, REG Services shall utilize a software
program (“PI System”) interfacing with the computer control system running the
Biodiesel Facility, making available production data for operations,
engineering, sales, marketing, logistics and management to better make informed
decisions with respect to production processes. During the term of this
Agreement, the PI System will also allow for REG Services’ remote access to
information on the operation of the Biodiesel Facility to provide for data
collection, monitoring, benchmarking and trouble shooting, all to better aid
performance for Blackhawk Biofuels.

 

C.                                     Product Pricing. On at least a monthly
basis (or more often as needed), REG Services shall identify and provide
publicly available marketing information to Blackhawk Biofuels with respect to
Products. Information supplied will be in written form and relayed at least
three (3) business days prior to when a decision is required. Blackhawk Biofuels
will establish the Product prices for REG Services to use in selling Products
(“Product Prices”), based upon market place conditions. Any change in Product
Prices shall be effective for Product sales made beginning the seventh (7th)
calendar day after REG Services’ receipt of notice of new Product Prices, except
for quotations still open and extended prior to the change in the Product
Prices, or unless otherwise agreed to by the parties (Blackhawk Biofuels and REG
Services to honor all pre-existing contracts and agreements with respect to
price). All Product sales by REG Services as Blackhawk Biofuels’ sales agent
shall be at or above the Product Prices then in effect, unless written consent
is received from Blackhawk Biofuels for special prices due to volume
commitments, Blackhawk Biofuels storage constraints, or other reasons approved
by Blackhawk Biofuels. REG Services specifically states that it will not sell
the Product at prices less than the Product Prices without Blackhawk Biofuels’
prior written approval, and that if REG Services is able to sell Products at
prices above the Product Prices, Blackhawk Biofuels would nonetheless receive
all proceeds of any such sales. REG Services will in any

 

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event use its best efforts, as Blackhawk Biofuels’ sales agent, to maximize the
sales revenues received by Blackhawk Biofuels.

 

D.                                    Off-Site Storage. In order to maximize
profit potential, and including taking advantage of regional marketing
opportunities, there will be times in the marketing of Product that REG Services
will recommend the storage of Blackhawk Biofuels’ Product in third party
locations. In such cases REG Services will provide data to evaluate the cost
effectiveness of storage in order for Blackhawk Biofuels’ Board of Managers to
make decision in a timely manner. In such case, Blackhawk Biofuels agrees that
it will be responsible for transportation costs for its Product to the storage
facility, in and out charges, such Product’s prorated share of storage, and
other related expense.

 

E.                                      Product Sales, Handling of Proceeds. It
is expected that sales of Products will be made in REG Services’ name. REG
Services shall take title to the Product when loaded for delivery FOB the
Biodiesel Facility, unless otherwise agreed. REG Services will carry Property in
Transit insurance for all Product in shipment. If while Product is in transit a
claim were to occur the proceeds from settlement would be due the title holder
at the time of the loss event. REG Services will pay over to Blackhawk Biofuels
all Product proceeds received from sales of Blackhawk Biofuels Products. REG
Services shall remit by electronic transfer to Blackhawk Biofuels by the close
of business each Wednesday all such proceeds received during the previous seven
(7) days. This payment schedule will be re-evaluated if EFT payments for
biodiesel produced by Blackhawk Biofuels received by REG Services exceeds 50% of
the total payments being received for Product from Blackhawk Biofuels.

 

F.                                      Off-Grade Product. In the event
off-grade Product is produced at the Biodiesel Facility that is not marketable
at the Product Prices then in effect, REG Services will nonetheless use its best
efforts to sell such Product for Blackhawk Biofuels at the highest prices
reasonably obtainable. With respect to biodiesel, and for purposes of this
Agreement, off-grade Product shall include biodiesel which fails to meet the
specifications contained in ASTM D6751 as it may be amended or modified (or such
other standards for biodiesel as may in the future develop in the biodiesel
industry) or if for any other reason a customer reasonably rejects biodiesel.
With respect to Products other than biodiesel, for purposes of this Agreement,
off-grade Product shall include Product which fails to meet specifications
mutually agreed upon by the parties, or if for any other reason a customer
reasonably rejects such Product. In the event off-grade Product is sold, REG
Services shall work to minimize any loss to Blackhawk Biofuels for returned
Product, cost of cover, and related expenses. REG Services shall advise
Blackhawk Biofuels of Product complaints, and shall not accept the return of, or
make any allowance with respect to any Product, without Blackhawk Biofuels’
prior written approval. REG Services and Blackhawk Biofuels shall work together
to determine the resolution of customer complaints and off-grade Product sales.
Blackhawk Biofuels shall pay for any costs associated with resolution of
customer complaints or returned Product, including freight costs, cover, and

 

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related expenses, unless such Product deficiencies were caused by the negligence
or willful misconduct of REG Services, in which event REG Services will be
responsible for such costs. Except where caused by REG Services’ negligence or
willful misconduct, Blackhawk Biofuels agrees to indemnify REG Services from any
loss, claim or damage (including reasonable attorney fees) incurred as a result
of the sale of off-grade Product.

 

G.                                     Credit Risk. REG Services agrees to
manage the accounts receivable and work to minimize bad debt losses. REG
Services shall pursue all reasonable efforts at collecting accounts, Blackhawk
Biofuels agreeing to pay for third party collection costs including attorney
fees (“Collection Costs”) except as may be subsequently shared as set out
hereafter. The write off of accounts receivable shall be as mutually agreed by
the parties. Blackhawk Biofuels understands that losses on accounts receivable
due to bad debt up to one-half per cent of Product sales will be borne entirely
by Blackhawk Biofuels as a cost of doing business. REG Services agrees to share
losses equally with Blackhawk Biofuels with respect to accounts receivable for
Product sales (including Collection Costs) to the extent that the total of such
losses (not previously shared by the parties) incurred from the commencement of
the term of this Agreement to the date of computation of such losses exceed one
half of one percent of Blackhawk Biofuels’ total sales made under this Agreement
for the same period. Should Blackhawk Biofuels desire REG Services to sell
Product to buyers not approved by REG Services, REG Services shall make such
sale in Blackhawk Biofuels’ name, and provide normal invoicing and billing
services. However, any risk of receipt or collection of such sale shall remain
with Blackhawk Biofuels, and shall not be included in the total of losses which
might be shared by the parties as set out above.

 

H.                                    Leased Employees. During the term of this
Agreement, REG Services and Blackhawk Biofuels agree that REG Services shall
lease to Blackhawk Biofuels those of its employees identified in each monthly
report prepared by REG Services (each a “Leased Employee,” herein collectively
the “Leased Employees”), and filling operational needs at the Biodiesel
Facility. Such monthly reports will indicate an effective date for each
employee. The arrangement with respect to such Leased Employees shall be upon
the following terms:

 

(i)                                   The Leased Employees assigned to perform
the services contemplated by this Agreement are or will be and shall remain
common law employees of REG Services. REG Services hereby assumes responsibility
for all administrative and personnel matters for Leased Employees relating to
their services provided to Blackhawk Biofuels including, but not limited to,
compliance with all laws and regulations affecting employees. REG Services is
responsible for all labor negotiations, grievances and collective bargaining
agreements regarding the Leased Employees.

 

(ii)                                REG Services has sole responsibility for
determining the rate of pay, hours and other terms and conditions of employment
of the Leased Employees.

 

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REG Services has sole responsibility for providing compensation and benefits to
the Leased Employees, including without limitation: wages, withholding and
remitting all federal, state and local payroll taxes, and payments for wages,
vacation and paid or unpaid time off as required by state and federal law. On an
annual basis estimated payroll expenses per employee for the subsequent year
will be represented to Blackhawk Biofuels’ Board of Managers for budgeting
purposes and review and approval.

 

(iii)                             REG Services bears sole responsibility for
statutory insurance for the Leased Employees, for FICA, unemployment, and
workers’ compensation in accordance with applicable statutory requirements and
limits. With respect to the Leased Employees regarding their services to
Blackhawk Biofuels, REG Services has sole responsibility for complying with the
state and federal employment laws, wage and hour laws, civil rights laws,
including but not limited to defamation, invasion of privacy, negligence,
emotional distress, improper discharge (based on contract, common law, or
statute, including any federal, state or local statute or ordinance prohibiting
discrimination or retaliation in employment), alleged violation of the United
States Constitution, Title VII of the Civil Rights Act, 42 U.S.C. § 2000 et
seq., the Americans with Disabilities Act, 42 U.S.C. §12101 et seq., the
Employment Retirement Income Security Act of 1976, 29 U.S.C. § 1001 et seq., any
claim for discrimination, harassment or retaliation based on sex, race, color,
creed, religion, age, national origin, or any other protected status under
state, federal or local law, the Immigration Reform and Control Act, providing
non-obligatory fringe benefit programs for Leased Employees, and complying with
COBRA or state continuation coverage rights for qualified Leased Employees and
dependents. REG Services shall be responsible for obtaining and maintaining all
prehire and applicant documentation and other employment records for the Leased
Employees, in accordance with state and federal law. If Leased Employees are
required to be licensed or to act under the supervision of a licensed person or
entity, REG Services shall be solely responsible for verifying such licensure or
providing such required supervision.

 

(iv)                            Blackhawk Biofuels shall reimburse REG Services
for costs associated with the services being provided by such Leased Employees
to Blackhawk Biofuels (“Cost of Services”) in the manner set forth in this
paragraph. On a monthly basis, REG Services shall submit to Blackhawk Biofuels
an invoice detailing the Cost of Services attributable to the Leased Employees
for such month. Within ten (10) days of receipt of such invoice, Blackhawk
Biofuels shall remit payment in full to REG Services. The Cost of Services paid
or incurred by REG Services shall be based on the wages, payroll taxes,
government mandated costs, including workers’ compensation, benefit costs,
expenses charged to REG Services on a per employee basis, and any other costs
mutually agreed upon as being

 

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appropriate for reimbursement, which REG Services paid to or incurred on behalf
of the Leased Employees for the payment period covered by the statement.

 

(v)                                 All work and services shall be performed by
Leased Employees at the Biodiesel Facility unless otherwise agreed. REG Services
shall comply with any requirements of Blackhawk Biofuels with respect to
confidential information and shall institute procedures, including obtaining
confidentiality agreements from its Leased Employees, as requested by Blackhawk
Biofuels.

 

(vi)                              REG Services shall have the ultimate authority
and control over hiring, evaluating, supervising, disciplining and termination
of all Leased Employees. The General Manager shall retain and exercise
supervisory responsibilities with respect to the Leased Employees, including
without limitation, their day-to-day control and supervision, performance
reviews and evaluations, and hiring and firing.

 

(vii)                         REG Services shall accept Blackhawk Biofuels’
reasonable recommendations regarding the discontinuation of services of any
particular Leased Employee. Blackhawk Biofuels shall not be responsible for any
financial obligation of REG Services to a Leased Employee accruing after such
discontinuation becomes effective, by reason of the services performed pursuant
to this Agreement. Any Leased Employee that ceases to provide the services
covered by this Agreement shall no longer be a Leased Employee, but will remain
an employee of REG Services subject to retention or termination as REG Services
may determine in its sole discretion.

 

(viii)                      In performing the services hereunder, REG Services
shall see to the Leased Employees using their best efforts to perform their
duties for the benefit of Blackhawk Biofuels, and with such care as an
ordinarily prudent person in a like position would use under similar
circumstances.

 

I.                                         Software to Operate Plant Equipment.
Upon termination of this Agreement, REG Services agrees to transfer REG
Services’ operational rights to Blackhawk Biofuels in the necessary software (or
assist Blackhawk Biofuels in obtaining any necessary licensing arrangements for
software from third parties) to operate the equipment in the Biodiesel Facility.
Blackhawk Biofuels understands this shall not include the PI System, or
administrative or accounting software developed or utilized by REG Services.

 

J.                                        Access to Biodiesel Facility.
Blackhawk Biofuels agrees during the term of this Agreement to provide access to
the Biodiesel Facility by REG Services for purposes of training employees
regarding the operation of biodiesel plants and equipment, and to provide for
tours by prospective customers of REG Services,

 

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subject to reasonable advance notice to allow for appropriate scheduling and to
minimize disruption to the Biodiesel Facility’s production.

 

K.                                    Product Sales, Financing Assistance. In
the event Blackhawk Biofuels reaches a point in which it does not have unused
capacity available on a line of credit or working capital credit facility, and
desires to make use of the following, then in addition to Section 5E of the
Agreement, for a period of two (2) years after substantial completion of the
Facility, Blackhawk Biofuels may elect the following terms:

 

(i)                                   Sales of Finished Inventory where there is
a known third party buyer will be made in REG Marketing’s name. REG Marketing
shall take title to the Finished Inventory where there is a known buyer when
loaded for delivery FOB the Biodiesel Facility, unless otherwise agreed. REG
Marketing will carry Property in Transit insurance for all Finished Inventory
where there is a known third party buyer in shipment. If while Finished
Inventory where there is a known third party buyer is in transit a claim were to
occur the proceeds from settlement would be due the title holder at the time of
the loss event.

 

(ii)                                REG Marketing shall remit by electronic
transfer to Blackhawk Biofuels by the close of business each Wednesday funds in
an amount equal to the following:  (a) the amount of Finished Inventory where
there is a known third party buyer sales made during Sunday through Saturday of
the preceding week, less (b) a discount fee that reflects the Cost of Capital
(as defined hereafter) incurred as a result of making payment for such Finished
Inventory where there is a known third party buyer sales before collecting
proceeds from ultimate customers, and less (c) any amounts then due from
Blackhawk to REG Services or REG Marketing or any of their Affiliates pursuant
to this Agreement which REG Marketing elects to deduct. The amount of the
discount fee under (b) above will be based on REG Service’s Cost of Capital, and
the expected average period of time elapsing between the time of payment by REG
Marketing to Blackhawk Biofuels and collection of proceeds by REG Marketing from
ultimate customers for the respective preceding week’s sales.

 

Sales made after the two (2) year period from substantial completion of the
Facility shall be made under the terms of Section 5E of the Agreement.

 

Provided that all obligations under this Section 5K owing by Blackhawk Biofuels
hereunder are fully satisfied through the date of termination, Blackhawk
Biofuels shall have the right to terminate the credit arrangements, covenants
and agreements under Section 5K upon written notice to REG Services and REG
Marketing.

 

For purposes of this Agreement, “Cost of Capital” shall be a variable interest
rate adjusted daily equal to the cost of equity and short term debt capital for
REG

 

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Services or REG Marketing, based upon the weighted average of the components of
equity and debt used by REG Services or by REG Marketing (whichever is
applicable) to provide trade credit to Blackhawk Biofuels. The charge for credit
extended from equity shall be equal to 15% on an annual basis. The charge for
credit extended from debt shall be equal to the highest interest rate paid by
REG Services or REG Marketing for short term debt plus 105 basis points on an
annual basis.

 

L.                                      Designation of Manager. In consideration
of the credit to be extended to Blackhawk Biofuels as outlined above, and in
consideration of the management and operational services to be provided
hereunder by REG Services, during the term of the Agreement and including any
extensions or renewals thereof, REG Services shall have the right to designate
one (1) member of Blackhawk Biofuels’ Board of Managers with full voting rights
as provided for under Blackhawk Biofuels’ Amended and Restated Limited Liability
Company Agreement (“LLC Agreement”), REG Services to have such further rights to
remove such designee, and to designate successor(s) thereto for such period of
time. Blackhawk Biofuels agrees to place REG Services’ designee upon the Board
of Managers upon closing of the Purchase Agreement.

 

M.                                 Release of Liability. By signature hereto,
Blackhawk Biofuels hereby confirms that neither West Central Cooperative nor REG
have any further liability or responsibility for performance under the
Management and Operational Services Agreement dated August 4, 2006, or the First
Amendment to Management and Operational Services Agreement dated December 15,
2007, both of said agreements being replaced and substituted for by this
Agreement. The parties understand that while REG Services shall remain liable
for their performance, the obligations as set out under Section 5C, D, E, F and
G of the Agreement will be performed by REG Marketing.

 

6.                                       Term of Agreement. This Agreement is
effective as of the date of its execution by the parties (with services to
commence by REG Services hereunder at such time or times as appropriate based
upon construction progress of the Biodiesel Facility), and shall remain in force
for five (5) years after the end of the first month in which the Biodiesel
Facility is producing Product for sale (subject to early termination due to
default as set out hereafter). This Agreement shall continue after the initial
term unless and until one party gives written notice of termination to the other
of a proposed termination date at least twenty-four (24) months in advance of a
proposed termination date. The initial term or any subsequent term may also be
modified upon the mutual written consent of the parties.

 

7.                                       Confidentiality. Blackhawk Biofuels
agrees that in the performance of this Agreement, Blackhawk Biofuels may receive
or otherwise learn of certain items of information that are non-public,
proprietary, or confidential to REG Services or to parties with whom REG
Services has entered into contractual relationships (herein “Confidential
Information” with respect to REG Services), to include but not be limited to
information concerning REG Services’ operations, processes, methods and
accumulated experience incidental to the processing, sale and distribution of
Products, and including supplier and

 

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customer lists, the disclosure of which to third parties would be injurious to
REG Services or to parties with whom REG Services has entered into contractual
relationships. REG Services agrees that in the performance of this Agreement,
REG Services will receive financial information including the results of
Blackhawk Biofuels’ operations, and may otherwise learn of certain items of
information that are non-public, proprietary, or secret to Blackhawk Biofuels or
to parties with whom Blackhawk Biofuels has entered into contractual
relationships (herein “Confidential Information” with respect to Blackhawk
Biofuels), the disclosure of which to third parties would be injurious to
Blackhawk Biofuels or to parties with whom Blackhawk Biofuels has entered into
contractual relationships. Each party as recipient (the “Recipient”) agrees not
to use the Confidential Information of the other party (the “Provider”) for any
purpose other than as required to perform this Agreement. Recipient agrees to
disclose the Confidential Information of the Provider only to such directors,
officers, employees, affiliates, consultants, agents, and third parties
(“Representatives”) as are required to allow Recipient to perform under this
Agreement, who are first informed of the restrictions upon use of the
Confidential Information and who agree to keep such information confidential and
who agree to be bound by the terms of these confidentiality provisions to the
same extent as if they were parties hereto. Recipient will be responsible for
any breach of these confidentiality provisions by any of its Representatives and
agrees to take all reasonable measures to restrain its Representatives from
prohibited or unauthorized disclosure or use of the Confidential Information.
Recipient agrees that the actual or threatened disclosure of the Confidential
Information would cause the Provider immediate and irreparable harm, which may
not be adequately compensated by money damages. Accordingly, in the event of a
breach of these confidentiality provisions by Recipient or its Representatives,
the Recipient specifically agrees, that in addition to all other remedies
available at law or in equity, the Provider shall be entitled to equitable
relief, including an injunction to limit or prevent such actual or threatened
disclosure, together with recovery of costs of litigation from Recipient as a
result of breach, including reasonable attorney fees. These obligations of
confidentiality shall not apply to any information which: (a) was known to
Recipient or was in the public domain prior to disclosure hereunder; or
(b) becomes known to the public from a source other than Recipient; or (c) is
disclosed to Recipient by a third party having a legal right to make such
disclosure.

 

In the management and operation of the Biodiesel Facility, REG Services will
direct the General Manager, Operations Manager, and Leased Employees (as such
term is defined herein) to hold competitively sensitive information of Blackhawk
Biofuels confidential and not disclose such information to REG Services and its
other employees without the consent of Blackhawk Biofuels.

 

The parties acknowledge that in order to comply with certain statutory or
regulatory requirements, this Agreement may need to be disclosed to the
Securities Exchange Commission, state securities bureaus or other regulators,
and agree to allow such disclosure upon receipt of appropriate request.

 

8.                                       Intellectual Property Rights. Blackhawk
Biofuels shall have no right under the Agreement to make use of any brand names
trademarked by REG Services or any of its

 

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affiliates, nor any of the intellectual properties or know-how developed by REG
Services or any of its affiliates in conjunction with the operation of plants
similar to the Biodiesel Facility, or to use any of the intellectual properties
and know-how of REG Services or any of its affiliates other than pursuant to
such separate licensing arrangements as may be entered into by the parties (if
any), but the parties expressly agree that no such rights are being conveyed by
virtue of the execution or performance of this Agreement.

 

9.                                       Non-Solicitation of Employees. Each
party agrees that neither party (nor any affiliate, successor or permitted
assign thereof) shall solicit for employment or consulting an employee of the
other while such employment by the other continues, and for a period of three
(3) years thereafter. This clause does not apply to Leased Employees of
Blackhawk Biofuels should this Agreement be terminated.

 

10.                                 Access to Books and Records. This Agreement
provides for the payment by Blackhawk Biofuels to REG Services of a sum
dependent upon the amount of production of biodiesel at the Biodiesel Facility,
and the Net Income of Blackhawk Biofuels’ Biodiesel Facility. For that reason
Blackhawk Biofuels agrees to make available its books and records for inspection
and copying which are reasonably necessary for purposes of providing information
with respect to biodiesel production, and verifying the computation of the Net
Income Bonus, to the extent not already available to REG Services in performance
of its duties hereunder. REG Services agrees to treat information received under
such access rights as Confidential Information with respect to Blackhawk
Biofuels.

 

This Agreement provides for reimbursement by Blackhawk Biofuels of various
expenses of REG Services, including with respect to the cost of providing Leased
Employees hereunder. For that reason REG Services agrees to make available those
portions of its books and records for inspection and copying which are
reasonably necessary for purposes of verifying appropriate amounts of
reimbursement, and REG Services’ compliance with its obligations set forth
hereunder. Blackhawk Biofuels agrees to treat information received under such
access rights as Confidential Information with respect to REG Services.

 

The expense of any such inspection or audit shall be borne by the party making
such inspection, unless the need for a material correction to payment is
revealed, in which case the reasonable expense of such inspection or audit shall
be borne by the party whose books and records are being audited.

 

11.                                 Force Majeure. Neither party hereto shall be
liable for any delay arising from circumstances beyond its control including
(but not limited to) acts of God, riot or civil commotion, industrial dispute,
fire, flood, drought, shortage of material or labor or act of government,
terrorist acts, war, or sabotage, provided that the party seeking to be excused
shall make every reasonable effort to minimize the delay resulting therefrom,
and shall give prompt written notice of the force majeure event to the other
party. The obligations of the party giving notice, so far as they are affected
by the force majeure event, will be suspended during, but not longer than, the
continuance of the force majeure event. The affected party must act with
commercially reasonable diligence to resume performance

 

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and notify the other party that the force majeure event no longer affects its
ability to perform under the Agreement.

 

12.                                Arbitration. Should any controversy, claim,
dispute or difference arise between the parties hereunder, out of or relating to
this Agreement, including, without limitation, its formation, validity, binding
effect, interpretation, performance, breach or termination, then each and every
such controversy, claim, dispute or difference shall be submitted and settled by
arbitration in accordance with the Commercial Arbitration Rules then in effect
of the American Arbitration Association, and shall be conducted in Des Moines,
Iowa. Judgment upon the award rendered by the arbitrator or arbitrators may be
entered in any court of competent jurisdiction.

 

13.                                Independent Status. Subject to the terms and
conditions of this Agreement, REG Services is authorized to perform services for
Blackhawk Biofuels as set out in the Agreement as an independent contractor and
as an agent with such authority as is necessary to carry out the services herein
provided. Nothing in this Agreement or in the course of dealing by the parties
shall be construed to constitute Blackhawk Biofuels and REG Services as
partners, joint venturors, or as guarantors for one another or as authorizing
either party to obligate the other in any manner except as is necessary for REG
Services to fulfill the services provided for hereunder.

 

14.                                Early Termination. Notwithstanding the
provisions of Section 6 hereof, this Agreement may be terminated in accordance
with the following provisions:

 

A.                                  A party hereto may (but is not required to)
terminate this Agreement if the other party breaches any provision of this
Agreement and fails to remedy such breach within thirty (30) days after delivery
of written notice from the non-breaching party describing the alleged breach and
the proposed remedy. However, if the breach is non-payment by Blackhawk Biofuels
under Section 3, or REG Services of proceeds of sale under Section 5(E), the
cure period shall be ten (10) days after delivery of written notice by the
non-breaching party.

 

B.                                   Either party hereto may terminate this
Agreement effective immediately upon delivery of written notice to the other
party, if the other party (i) is unable to pay its debts as they mature or
admits in writing its inability to pay its debts as they mature, (ii) makes a
general assignment for the benefit of its creditors, (iii) files a voluntary
petition for bankruptcy, or (iv) applies for the appointment of a receiver or
trustee for all or substantially all of its assets or permits the appointment of
any such receiver or trustee who is not discharged within a period of sixty (60)
days after such appointment.

 

C.                                   Notwithstanding any termination of this
Agreement, the obligations and rights of the parties which have accrued as of
the time of such termination shall survive.

 

D.                                  Without limiting the generality thereof, if
termination is due to a breach by a party (the “Breaching Party”), then the
Breaching Party shall indemnify the other party (the “Non-Breaching Party”)
against any loss, claim or damages (including

 

19

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reasonable attorney fees) resulting from such breach or termination, and shall
pay the costs of satisfying any obligations arranged by the Non-Breaching Party
on behalf of the Breaching Party prior to such termination, including
commitments for raw materials, transportation, sales, and hedging transactions.

 

15.                                 Indemnification. The parties shall have the
following indemnification/hold harmless rights and obligations hereunder:

 

A.                                   REG Services shall indemnify, defend and
hold Blackhawk Biofuels and its officers, directors and employees (each an
“Indemnitee”) harmless from and against all liabilities, obligations, claims
damages, penalties, causes of action, costs and expenses (including, without
limitation, attorneys’ fees and expenses) imposed upon, incurred by or asserted
against the Indemnitee that are caused by, are attributable to, result from or
arise out of (i) acts of gross negligence or willful misconduct by REG Services,
its employees or agents, (ii) REG Services’ breach of any provision of this
Agreement; (iii) REG Services’ failure to meet its obligations to or perform any
acts required under its agreements with any third party, (iv) the relationship
between REG Services and any of its employees, agents, and servants, whether
under industrial accident laws, workers’ compensation laws or any other laws
applicable to employers and employees. The provisions of this paragraph shall
survive the termination of this Agreement.

 

B.                                     Blackhawk Biofuels shall indemnify,
defend and hold REG Services and its officers, directors and employees (each an
“Indemnitee”) harmless from and against all liabilities, obligations, claims
damages, penalties, causes of action, costs and expenses (including, without
limitation, attorneys’ fees and expenses) imposed upon, incurred by or asserted
against the Indemnitee that are caused by, are attributable to, result from or
arise out of (i) acts of gross negligence or willful misconduct by Blackhawk
Biofuels, its employees or agents, (ii) Blackhawk Biofuels’ breach of any
provision of this Agreement; (iii) Blackhawk Biofuels’ failure to meet its
obligations to or perform any acts required under its agreements with any third
party, (iv) the relationship between the Blackhawk Biofuels and any of its
employees, agents, and servants, whether under industrial accident laws,
workers’ compensation laws or any other laws applicable to employers and
employees. The provisions of this paragraph shall survive the termination of
this Agreement.

 

16.                                 Remedies in the Event of Default. Where the
Breaching Party commits a material breach of this Agreement, and: (a) if except
as set out herein such material breach continues beyond the allowable cure
period after the receipt of written demand for cure of such breach by the
Non-Breaching Party as set out in Section 14 hereof ; or (b) if such material
breach cannot be cured within such period and the Breaching Party does not
within such cure period start to cure the breach and thereafter proceed
diligently with the cure thereof, then the Non-Breaching Party may terminate
this Agreement and may recover its money damages caused by such material breach
(including arbitration fees, court costs, litigation expenses, and reasonable
attorney fees) on written notice and demand to the Breaching Party for payment.
Such payment shall be without prejudice to any other right or remedy

 

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that the Non-Breaching Party may have against the Breaching Party under this
Agreement, at law or in equity, including injunctive relief and rights of
specific performance.

 

17.                                Representations and Warranties. As a material
inducement to the other party to enter into this Agreement and with the
understanding that the other party shall be relying thereon in consummating the
transaction contemplated hereunder, each party hereby represents and warrants to
the other party as follows:

 

A.                                   Authorization. The execution of this
Agreement has been duly authorized by the appropriate owners and board of
governance as may be required for such party to proceed.

 

B.                                     Standing. Such party is duly organized,
validly existing and in good standing under the laws of the state of formation
and such other states as may be required for this transaction, and has all
requisite power and authority to consummate the transactions contemplated
hereunder.

 

C.                                     Consents. No approval or consent is
needed from any third party with respect to the performance of obligations
hereunder by such party.

 

D.                                    Breaches. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby do not and shall not result in any material breach of any
terms or conditions of any mortgage, agreement or contract or obligation entered
in to by such party (or in the case of Blackhawk Biofuels by which the Biodiesel
Facility is bound), nor, to the best of such party’s knowledge, shall they
violate any statute, regulation, judgment or decree of any court in which such
party may be bound (or in the case of Blackhawk Biofuels by which the Biodiesel
Facility may be subject).

 

E.                                      Litigation. There is no action, suit or
proceeding pending, or to the best of such party’s knowledge, threatened against
such party which might prevent or delay such party’s performance of its
obligations hereunder.

 

F.                                      Ownership and Operation. Blackhawk
Biofuels (by its duly authorized representative signing below) further
represents and warrants that it will be the owner of the Biodiesel Facility upon
completion of its construction.

 

18.                                 Notices. All notices required or desired to
be given under this Agreement must be given in writing, and shall be sent by
registered or certified mail, return receipt requested, or by courier service,
addressed to the parties at their addresses set forth below, or such other
addresses as may subsequently be designated in writing by such party:

 

To Blackhawk Biofuels:

 

Blackhawk Biofuels, LLC

 

 

22 South Chicago Avenue

 

 

Freeport, IL 61032

 

 

Attention: Ronald Mapes

With copy to:

Lindquist & Vennum PLLP

 

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4200 IDS Center

 

 

80 South 8th Street

 

 

Minneapolis, MN 55402-2274

 

 

Office: 612-371-3955

 

 

Fax: 612-371-3207

 

 

Attention: Dean R. Edstrom

 

 

 

To REG Services :

 

REG Services Group, LLC

 

 

416 South Bell Avenue

 

 

Ames, IA 50010

 

 

Attention: Nile Ramsbottom

 

 

 

With copy to:

 

Wilcox, Polking, Gerken, Schwarzkopf & Copeland, P.C.

 

 

115 East Lincolnway, Suite 200

 

 

Jefferson, IA 50129

 

 

Attn: John A. Gerken

 

Any notice or other communications made shall be deemed to have been given when
received or refused. A party may change its address for notice by giving notice
of such address as provided in this Section.

 

19.                                 Annual Review of Agreement. This Agreement
will be reviewed annually by the parties, as they determine the best procedures
for accomplishing such services, define their roles, and react to changes in the
industry. Any changes to the Agreement shall require the mutual written consent
of Blackhawk Biofuels and REG Services.

 

20.                                 Miscellaneous.

 

A.                                   Benefits. This Agreement shall bind and
benefit the parties and their permitted successors and assigns.

 

B.                                     Assignment. Neither party may assign any
of its rights in or delegate any of its duties under this Agreement without the
prior written consent of the other party. Notwithstanding the foregoing, a party
(“Assignor”) may without the need for consent from the other party assign any or
all of its rights, duties and obligations under this Agreement to another
entity, or to such party’s affiliate or successor (collectively herein
“Assignee”), if such Assignee expressly assumes all obligations not otherwise
remaining with Assignor hereunder, and Assignor nonetheless remains responsible
hereunder.

 

C.                                     Governing Law. Iowa law shall govern the
construction and enforcement of this Agreement.

 

D.                                    Entire Agreement; Amendment. This
Agreement contains the entire agreement of the parties with respect to the
subject matter and supersedes all prior oral or written agreements and
understandings. This Agreement may not be amended or modified except in writing
signed by both parties.

 

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E.                                      Execution and Delivery. This Agreement
may be executed in counterparts and delivered by facsimile, which, taken
together, shall be considered one instrument and deemed an original.

 

F.                                      No Inference from Drafting. The parties
both acknowledge that they have been represented by counsel, and that this
Agreement has resulted from extended negotiations between the parties. No
inference in favor of or against any party shall be drawn from the fact that
such party has drafted any portion of this Agreement.

 

G.                                     Waiver. The waiver by either party of a
breach of any provision of this Agreement will not constitute or be construed as
a waiver of any future breach of any provision of this Agreement.

 

H.                                    Survival. The provisions of Sections 7, 8,
9, 10, 12 and 15 of this Agreement shall indefinitely survive the expiration and
termination of this Agreement.

 

I.                                         Covenant of Further Cooperation. Each
of the parties agrees to execute and deliver such further documents and to
cooperate in such manner as may be necessary to implement and give effect to the
provisions contained herein.

 

J.                                        Enforcement and Interpretation. It is
the desire and intent of the parties hereto that this Agreement be enforced to
the fullest extent possible under the laws and public policies of the state of
Iowa. Accordingly, if any particular provision of this Agreement is adjudicated
to be invalid or unenforceable, such portion shall be deleted, and such deletion
shall apply only to such provision with the remainder of the Agreement remaining
valid and enforceable, to be construed in conformity with the parties’ initial
intent. Further, to the extent any provision hereof is deemed unenforceable by
virtue of its scope or terms with respect to geographical area or length of
time, but may be enforceable by limitations thereon, the parties agree that this
Agreement shall remain enforceable to the fullest extent possible after the
application of such limitations.

 

[Signature page follows]

 

23

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IN WITNESS WHEREOF the parties have signed this Management and Operational
Services Agreement effective as of the above written date.

 

 

 

REG SERVICES GROUP LLC

 

 

 

 

 

 

 

 

By

/S/   Nile Ramsbottom

 

 

 

  Nile Ramsbottom, President

 

 

 

 

 

 

 

 

REG MARKETING & LOGISTICS GROUP,
LLC

 

 

 

 

 

 

 

 

By

/S/ Nile Ramsbottom

 

 

 

  Nile Ramsbottom, President

 

 

 

 

 

 

 

 

BLACKHAWK BIOFUELS, LLC

 

 

 

 

 

 

 

 

By

/S/ Ronald Mapes

 

 

 

  Ronald Mapes, Chairman

 

24

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Exhibit A to

Management and Operational Services Agreement (AAgreement@)

REG Services and Blackhawk Biofuels

 

Listing of Administrative Services to be Provided

 

Pursuant to the Agreement to which this is attached, and as a part of the
services it will perform thereunder, REG Services will provide to Blackhawk
Biofuels the administrative services as set out hereafter. Such services will be
included at no additional cost to Blackhawk Biofuels other than the compensation
set out under Section 3 of the Agreement, unless otherwise noted hereafter or
separately in the Agreement.

 

Accounting:

$                                          Financial Statements

$                                          General Ledger Maintenance

$                                          Cash Management

$                                          Customer Statements

$                                          Accounts Receivable

$                                          Accounts Payable

$                                          Bank Reconciliation

$                                          Depreciation

$                                          Audit Preparation

$                                          External Audit (providing assistance
to external auditors, the expense of the external auditor to be paid by
Blackhawk Biofuels)

 

Human Resources:

$                                          Hiring

$                                          Training, Job Descriptions,
Government Reporting with respect to personnel

$                                          Employee hand book,
policies/procedures

$                                          Workers Comp

 

Information Technology:

$                                         AS400 Software/Application Maintenance
(REG Services to be reimbursed by Blackhawk Biofuels for REG Services’ costs
(including employee expenses) for preparation of any special requested
applications.)

$                                         Telephone/Network Services (Blackhawk
Biofuels to reimburse REG Services for the cost of all equipment required and
utility expenses incurred.)

$                                         Backup for Network

$                                         Backup for AS400 Files

$                                         Web Site Hosting

 

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Insurance Administration:

$                                          Compile Initial Insurance
Specifications

$                                          Solicit Coverage Bids

$                                          Review Bids/Coverage Issues

$                                          Select Carriers to be Utilized (Cost
of Coverage to be paid by Blackhawk Biofuels)

$                                          Review Policies

$                                          Compile Insurance Summaries

$                                          COI setup dbase review

$                                          Certificate of Insurance Follow up

$                                          Claim Reporting Procedure

$                                          Claims Tracking

$                                          Claims Review

$                                          Claim reporting Follow up

$                                          Answer Coverage Questions

 

Communications:

$                                          Press Releases

$                                          Writing for Website

$                                          Media Relations

$                                          Publicity for Annual Meeting

$                                          Newsletters (Blackhawk Biofuels to
reimburse REG Services for supply costs, postage if applicable, and any outside
printing services utilized.)

 

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Exhibit B

Listing of Job Descriptions to be Filled by Leased Employees

 

Referenced at Section 2(G) of the Agreement

 

A list will be developed of the expected numbers and job descriptions of
personnel needed to fill remaining tasks to be accomplished at the “Blackhawk
Biofuels” Biodiesel Facility, who will be hired by REG Services, but reimbursed
for all costs related thereto by Blackhawk Biofuels. The numbers and
descriptions are dependent upon the size of the operation at the Blackhawk
Biofuels Biodiesel Facility as finally designed.

 

For clarification purposes, the salary and benefit costs of the General Manager
and Operations Manager are being borne by REG Services and not passed thru to
Blackhawk Biofuels.

 

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