Exhibit 10.16


 


Gibson Dunn &
Crutcher LLP


Execution Version


 


LIMITED
LIABILITY COMPANY AGREEMENT 



OF


 


D&W RAILROAD, LLC











 


DATED AS OF DECEMBER 20, 2005


 

















 


TABLE OF CONTENTS


	
  SECTION 1. ORGANIZATION

  	
   

  	
  1

  
	
  1.01

  	
   

  	
  Continuation

  	
   

  	
  1

  
	
  1.02

  	
   

  	
  Name and Principal Place of
  Business.

  	
   

  	
  2

  
	
  1.03

  	
   

  	
  Term

  	
   

  	
  2

  
	
  1.04

  	
   

  	
  Registered Agent and Registered
  Office

  	
   

  	
  2

  
	
  1.05

  	
   

  	
  Purpose

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2. MEMBERS

  	
   

  	
  2

  
	
  2.01

  	
   

  	
  Members

  	
   

  	
  2

  
	
  2.02

  	
   

  	
  Limitation on Liability

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3. CONTRIBUTIONS

  	
   

  	
  3

  
	
  3.01

  	
   

  	
  Capital Contributions

  	
   

  	
  3

  
	
  3.02

  	
   

  	
  Additional Capital Contribution Default
  under Section 3.01(b)(i)

  	
   

  	
  5

  
	
  3.03

  	
   

  	
  Additional Capital Contribution Default
  under Section 3.01(b)(ii)

  	
   

  	
  5

  
	
  3.04

  	
   

  	
  Membership Interest Modifications

  	
   

  	
  5

  
	
  3.05

  	
   

  	
  Capital Accounts

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4. MEMBERSHIP INTERESTS

  	
   

  	
  7

  
	
  4.01

  	
   

  	
  Membership Interests

  	
   

  	
  7

  
	
  4.02

  	
   

  	
  Membership Interest Adjustments

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5. MANAGEMENT

  	
   

  	
  7

  
	
  5.01

  	
   

  	
  Control

  	
   

  	
  7

  
	
  5.02

  	
   

  	
  Joint Management

  	
   

  	
  7

  
	
  5.03

  	
   

  	
  Budget

  	
   

  	
  7

  
	
  5.04

  	
   

  	
  General Manager

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6. OPERATIONS

  	
   

  	
  8

  
	
  6.01

  	
   

  	
  Carrier Service

  	
   

  	
  8

  
	
  6.02

  	
   

  	
  D&W Operating Agreements

  	
   

  	
  8

  
	
  6.03

  	
   

  	
  Service Failures

  	
   

  	
  8

  
	
  6.04

  	
   

  	
  Third-Party Service Costs

  	
   

  	
  9

  
	
  6.05

  	
   

  	
  IANR O&M Agreement Restriction

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7. IMPROVEMENTS AND
  MAINTENANCE

  	
   

  	
  9

  
	
  7.01

  	
   

  	
  Immediate System Upgrades

  	
   

  	
  9

  
	
  7.02

  	
   

  	
  Future Capital Improvement Projects

  	
   

  	
  9

  
	
  7.03

  	
   

  	
  Maintenance Costs for Hawkeye and
  Transco

  	
   

  	
  10

  
	
  7.04

  	
   

  	
  Third-Party Maintenance Costs

  	
   

  	
  11

  
	
  7.05

  	
   

  	
  Union Pacific Trackage Rights
  Maintenance Costs

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8. RAIL TRANSPORTATION
  RATES AND TRACKAGE RIGHTS FEES

  	
   

  	
  11

  
	
  8.01

  	
   

  	
  Rail Transportation Rates

  	
   

  	
  11

  
	
  8.02

  	
   

  	
  UP Trackage Rights Fees

  	
   

  	
  11

  



 


 


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  SECTION 9. OTHER OPERATING EXPENSES

  	
   

  	
  12

  
	
  9.01

  	
   

  	
  Insurance

  	
   

  	
  12

  
	
  9.02

  	
   

  	
  General Operating Expenses

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10. ALLOCATIONS AND TAX MATTERS

  	
   

  	
  12

  
	
  10.01

  	
   

  	
  Allocations

  	
   

  	
  12

  
	
  10.02

  	
   

  	
  Special Allocations

  	
   

  	
  14

  
	
  10.03

  	
   

  	
  Curative
  Allocations

  	
   

  	
  15

  
	
  10.04

  	
   

  	
  Tax Allocations

  	
   

  	
  15

  
	
  10.05

  	
   

  	
  Tax Decisions

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11. DISTRIBUTIONS

  	
   

  	
  16

  
	
  11.01

  	
   

  	
  Annual Distribution

  	
   

  	
  16

  
	
  11.02

  	
   

  	
  Liabilities

  	
   

  	
  17

  
	
  11.03

  	
   

  	
  Derailment Costs and Damages Under
  UP Agreement

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12. TRANSFERABILITY OF
  INTERESTS

  	
   

  	
  18

  
	
  12.01

  	
   

  	
  Transfer of Interest

  	
   

  	
  18

  
	
  12.02

  	
   

  	
  Tag-Along Rights

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13. FURTHER CONSIDERATION
  AND TRANSFERS TO TRANSCO

  	
   

  	
  19

  
	
  13.01

  	
   

  	
  Payments to Transco.

  	
   

  	
  19

  
	
  13.02

  	
   

  	
  Transfer of Certain D&W Yard
  Trackage

  	
   

  	
  19

  
	
  13.03

  	
   

  	
  Hawkeye Railcar Maintenance
  Preference

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14. RECORDS AND ACCOUNTING

  	
   

  	
  20

  
	
  14.01

  	
   

  	
  Records and Accounting

  	
   

  	
  20

  
	
  14.02

  	
   

  	
  Fiscal Year

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 15. ARBITRATION

  	
   

  	
  20

  
	
  15.01

  	
   

  	
  Selection of Single Arbitrator

  	
   

  	
  20

  
	
  15.02

  	
   

  	
  Three Arbitrator Panel

  	
   

  	
  20

  
	
  15.03

  	
   

  	
  Arbitration Procedure and Binding
  Decision

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 16. ADVERSE IMPACT

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 17. CONFIDENTIALITY

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 18. WARRANTIES AND
  REPRESENTATIONS

  	
   

  	
  22

  
	
  18.01

  	
   

  	
  Transco

  	
   

  	
  22

  
	
  18.02

  	
   

  	
  Hawkeye

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 19. TAX PROCEDURES AND
  INDEMNIFICATION

  	
   

  	
  28

  
	
  19.01

  	
   

  	
  Tax Returns

  	
   

  	
  28

  
	
  19.02

  	
   

  	
  Taxes and Other Payments

  	
   

  	
  29

  



 


 


ii

















 


	
  19.03

  	
   

  	
  Indemnification of Hawkeye

  	
   

  	
  29

  
	
  19.04

  	
   

  	
  Post-Closing Taxes

  	
   

  	
  29

  
	
  19.05

  	
   

  	
  Apportionment

  	
   

  	
  29

  
	
  19.06

  	
   

  	
  Tax Sharing Arrangements

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 20. WAIVERS AND REMEDIES

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 21. DEFAULT AND CURES

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 22. ENTIRE AGREEMENT,
  SEVERABILITY AND CONSTRUCTION

  	
   

  	
  31

  
	
  22.01

  	
   

  	
  Entire Agreement

  	
   

  	
  31

  
	
  22.02

  	
   

  	
  Severability

  	
   

  	
  31

  
	
  22.03

  	
   

  	
  Construction of Agreement and Terms

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 23. NOTICES

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 24. DISSOLUTION AND
  TERMINATION

  	
   

  	
  32

  
	
  24.01

  	
   

  	
  Dissolution

  	
   

  	
  32

  
	
  24.02

  	
   

  	
  Termination

  	
   

  	
  33

  
	
  24.03

  	
   

  	
  Liquidating Member

  	
   

  	
  34

  
	
  24.04

  	
   

  	
  Claims of the Members

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 25. MISCELLANEOUS

  	
   

  	
  34

  
	
  25.01

  	
   

  	
  Effective Date

  	
   

  	
  34

  
	
  25.02

  	
   

  	
  Counterparts; Headings

  	
   

  	
  34

  
	
  25.03

  	
   

  	
  Amendment

  	
   

  	
  34

  
	
  25.04

  	
   

  	
  Binding Effect

  	
   

  	
  34

  
	
  25.05

  	
   

  	
  Governing Law

  	
   

  	
  34

  



SCHEDULE
18.01(b)


SCHEDULE
18.01(c)


SCHEDULE
18.01(h)


SCHEDULE
18.01(i)


SCHEDULE
18.01(j)


EXHIBIT
A — DESCRIPTION OF IMMEDIATE SYSTEM UPGRADES


EXHIBIT
B — DESCRIPTION OF D&W RAILROAD LINES


EXHIBIT
C — MAP DESCRIBING THE RAIL LINES BEING TRANSFERRED TO TRANSCO


EXHIBIT
D — SECTION 3.02 CALCULATION


EXHIBIT
E — INITIAL BUDGET


 


iii

















 


LIMITED LIABILITY COMPANY AGREEMENT


This Limited Liability Company Agreement (this “Agreement”) is made as of the 20 day of
December, 2005, by and between Transco Railway Products Inc. (“Transco”), a Delaware corporation,  Hawkeye Renewables, LLC, a Delaware limited
liability company (“Hawkeye”, and
together with Transco, the “Members”)
and D&W Railroad, LLC, a Delaware limited liability company (the “Company” or “D&W”).


RECITALS


WHEREAS, on December 16, 2005, pursuant to Section 266 of the
Delaware General Corporation Law (the “DGCL”)
and Section 18-214 of the Delaware Limited Liability Company Act (as amended,
the “Delaware Act”), the Company
was converted (the “Conversion”)
from a Delaware corporation to a Delaware limited liability company pursuant to
a Certificate of Conversion (the “Certificate
of Conversion”) and a Certificate of Formation (the “Certificate of Formation”), each dated as
of December 15, 2005, and filed with the Secretary of State of Delaware on
December 16, 2005;


WHEREAS, Transco was the sole shareholder of the Company
prior to its conversion into a limited liability company, and Transco is the
sole member of the Company following the Conversion;


WHEREAS, Transco and Hawkeye desire that Hawkeye become a
member of the Company in accordance with the terms contained herein;


WHEREAS, D&W owns approximately 51.95 miles of rail line
and trackage (including incidental trackage rights) between Dewar, Iowa and
Oelwein, Iowa, including all facilities thereon and appurtenances thereto
(collectively the “Line”); and


WHEREAS, Transco and Hawkeye desire to set forth herein
certain agreements and arrangements with respect to the governance and
operation of the Company and improvements of the Line, including track upgrades
to accommodate the rail freight transportation needs of an ethanol production
plant owned by Hawkeye located at Fairbank, Iowa (the “Fairbank Plant”).


NOW, THEREFORE, in consideration of the premises, covenants, and considerations
set out herein, the parties hereto agree as follows:


SECTION
1.


ORGANIZATION


1.01         Continuation.  The Company was converted to a limited
liability company under the Delaware Act by the filing of the Certificate of
Conversion and the Certificate of Formation. 
The Members hereby agree to continue the Company as a limited liability
company under the Delaware Act, upon the terms and subject to the conditions
set forth in this Agreement.  The General
Manager (as hereinafter defined) is hereby authorized to file and record any
amendments to the Certificate of Formation and such other documents as may be
reasonably 


 

















 


required or appropriate under the Delaware Act or the
laws of any other jurisdiction in which the Company may conduct business or own
property.


1.02         Name and Principal Place of Business.


(a)           The name of the Company is D&W
Railroad, LLC.  The Management Committee
(as hereinafter defined) may change the name of the Company or adopt such trade
or fictitious names for use by the Company as the Management Committee may from
time to time determine.  All business of
the Company shall be conducted under such name, and title to all property of
the Company shall be held in such name.


(b)           The principal place of business and
office of the Company shall be located at the offices of Transco, or at such
other place or places as the Management Committee may from time to time
designate.


1.03         Term.  The term of the Company commenced on December
16, 2005, the date of the filing of the Certificate of Conversion and the
Certificate of Formation pursuant to the Delaware Act, and shall have perpetual
duration, unless sooner terminated pursuant to the provisions of this
Agreement.


1.04         Registered
Agent and Registered Office.  The
name of the Company’s registered agent for service of process shall be The
Corporation Trust Company, and the address of the Company’s registered agent
and the address of the Company’s registered office in the State of Delaware
shall be Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801.  Such agent and such office may be
changed from time to time by the Management Committee with written notice to
all Members.


1.05         Purpose.  The purpose of the Company shall be to own,
manage, maintain and operate (or cause the maintenance and operation of) the
Line and to conduct all activities reasonably necessary or desirable to
accomplish the foregoing purposes.


SECTION
2.


MEMBERS


2.01         Members.


(a)           Effective as of the date of this
Agreement, the Members of the Company shall be Hawkeye and Transco.  Except as expressly permitted by this
Agreement, no other person shall be admitted as a Member of the Company, and no
additional Membership Interest (as hereinafter defined) in the Company shall be
issued, without the approval of all of the Members.


(b)           The Members, in the exercise of their
duties hereunder as Members, shall have those fiduciary duties towards the
Company and the other Members, if any, as are set forth in the Delaware Act or
other applicable Delaware law.


 


2

















 


2.02         Limitation
on Liability.  Except as otherwise
expressly provided in the Delaware Act, the debts, obligations and liabilities
of the Company, whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and liabilities of the Company, and no Member shall be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a Member of the Company.  Except as otherwise expressly provided in the
Delaware Act, the liability of each Member shall be limited to the amount of
capital contributions required to be made by such Member in accordance with the
provisions of this Agreement, but only when and to the extent the same shall
become due pursuant to the provisions of this Agreement.


SECTION
3.


CONTRIBUTIONS


3.01         Capital Contributions.


(a)           Initial Contributions.


(i)            As of the date hereof, Hawkeye has
made the necessary capital contributions, totaling $1,740,998, to pay for the
costs of the Immediate System Upgrades (as hereinafter defined) as described on
Exhibit A (the “Description of Immediate System Upgrades”).  All such contributions made in accordance
with the Description of Immediate System upgrades shall be credited to the
Capital Account (as hereinafter defined) of Hawkeye pursuant to Section 3.05
hereof.


(ii)           For income tax purposes, the
conversion of the Company into a limited liability company shall be treated as
a contribution by Transco of the assets of D&W Railroad, Inc. (the “Transferred Assets”) to D&W Railroad,
LLC.  The initial Asset Value (as
hereinafter defined) of the Transferred Assets is set forth on Exhibit A.  As of the date of this Agreement, Transco
shall be deemed to have made an initial capital contribution equal to
$1,200,000.


Accordingly, based upon
the provisions of Section 3.01(a)(i) and (ii), as of the date of this
Agreement, Transco and Hawkeye shall be deemed to have made the initial capital
contributions set forth on Exhibit A.


(b)           Subsequent Capital Contributions.


(i)            The Members will make additional
capital contributions to fund any capital improvements approved by the
Management Committee to or maintenance on the Line, in accordance with
Section 7 of this Agreement.


(ii)           The Members will also make additional
capital contributions to fund other operating expenses pursuant to this
Agreement in accordance with Section 9.


(c)           Asset Value.


 


3

















 


(i)            “Asset
Value” means, with respect to any asset, the asset’s adjusted basis
for federal income tax purposes, except as follows:


(1)           The initial Asset Value of any asset
(other than money) contributed by a Member to the Company shall be the gross
fair market value of such asset as (A) set forth on Exhibit A or
(B) if such asset is not listed on Exhibit A, as agreed to by all of the
Members (which agreement shall not be unreasonably withheld by any Member);


(2)           The Asset Values of all Company
assets shall be adjusted to equal their respective gross fair market values as
determined by agreement among all of the Members (which agreement shall not be
unreasonably withheld by any Member) as of the following times: (a) the
acquisition of an additional interest in the Company by any new or existing
Member, including the grant of a profits interest in the Company; (b) the
distribution by the Company to a Member of more than a de minimis amount of property in respect
of an interest in the Company; or (c) the liquidation of the Company within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the regulations (the “Regulations”) promulgated by the U.S.
Treasury Department pursuant to the Internal Revenue Code of 1986, as amended
(the “Code”); provided, however,
that adjustments pursuant to clauses (a) and (b) above shall be made only if
all of the Members agree that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Members in the Company (which
agreement shall not be unreasonably withheld by any Member); and


(3)           The Asset Value of any Company asset
distributed to any Member shall be the gross fair market value of such asset on
the date of distribution, as determined by agreement among all the Members
(which agreement shall not be unreasonably withheld by any Member).


If the Asset Value of an
asset has been determined or adjusted pursuant to subparagraph (1) or (2)
above, such Asset Value shall thereafter be adjusted by the Depreciation (as
hereinafter defined) taken into account with respect to such asset.


(ii)           “Depreciation”
means, for each fiscal year or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable for
federal income tax purposes with respect to an asset for such fiscal year or
other period; provided, however, that if the Asset Value of an
asset differs from its adjusted basis for federal income tax purposes at the
beginning of such fiscal year or other period, Depreciation shall be an amount
that bears the same ratio to such beginning Asset Value as the federal income
tax depreciation, amortization or other cost recovery deduction with respect to
such asset for such fiscal year or other period bears to such beginning
adjusted tax basis; provided, further, that, if the federal
income tax depreciation, amortization or other cost recovery deduction for such
fiscal year or other period is zero, Depreciation shall be determined with
reference to such beginning Asset Value using any reasonable method selected by
the Members.


4





















 


3.02         Additional
Capital Contribution Default under Section 3.01(b)(i).  If any Member fails to timely make the
capital contributions (or any portions thereof) (the “Non-Contributing Party”) required by
Section 3.01(b)(i) hereof, then any other Member may make such capital
contribution (the “Contributing Party”).  Upon such contribution by the Contributing
Party, the Contributing Party’s Membership Interest shall be increased, and the
Non-Contributing Party’s Membership Interest shall be decreased, to equal the
percentage equivalent of the quotient determined by dividing (1) the sum
of (i) 100% of the aggregate capital contributions (excluding Substituted
Capital Contributions (as defined below)) then and theretofore made by the
Member to the Company, plus (ii) 100% of the Substituted Capital Contributions
then and theretofore made by such Member to the Company by (2) 100% of the
aggregate capital contributions (including without limitation Substituted
Capital Contributions) then and theretofore made by all of the Members to the
Company.  As used herein, the term “Substituted Capital Contribution” shall
mean an additional capital contribution made by a Member pursuant to Section
3.01(b)(i) hereof equal to the capital contribution that the Non-Contributing
Party failed to make.  An example of the
operation of such calculation is set forth on Exhibit D attached hereto.


3.03         Additional
Capital Contribution Default under Section 3.01(b)(ii).  If any Member fails to make a capital
contribution pursuant to Section 3.01(b)(ii), but not Section 3.01(b)(i) (the “Defaulting Member”), then the
non-Defaulting Member (the “Non-Defaulting
Member”) may elect to satisfy the Defaulting Member’s payment
obligation (the “Default Amount”),
following which the Defaulting Member shall be obligated to reimburse the
Non-Defaulting Member within fifteen (15) days of payment by the Non-Defaulting
Member of the Default Amount, with interest at a rate per annum equal to
fifteen percent (15%), from and including the date of funding (the “Funding Date”) by the Non-Defaulting Member
to the date of repayment in full of the Default Amount, including interest
thereon.  If the Defaulting Member fails
to pay the Default Amount, including accrued interest thereon, and the Default
Amount, combined with any and all then outstanding other Default Amounts,
exceeds $100,000 for a period of ninety (90) days, the Non-Defaulting Member
shall have the right to obtain bona fide offers containing commercially
reasonable terms and conditions from any third party (a ”Buyer”) to purchase or otherwise acquire all of the
Defaulting Member’s Membership Interest 
(the “Acquisition”) and
after obtaining an acceptable offer, the Non-Defaulting Member shall promptly
deliver a notice to the Defaulting Member, which notice shall state (i) the
identity of the Buyer and (ii) the terms and conditions offered by the Buyer,
including the consideration to be paid for the Membership Interest.  The Defaulting Member shall execute any
purchase agreements and any other related documents as may be reasonably
required by the parties in such Acquisition in order to carry out the terms and
provisions of such Acquisition.  The
proceeds from the Acquisition shall be applied to the outstanding Default
Amounts and any remaining amount shall be paid to the Defaulting Member.  To the extent the proceeds are not sufficient
to repay the Default Amount, the Non-Defaulting Member shall pay the
deficiency, to the extent such Non-Defaulting Member has not previously paid
such amount, and the Membership Interest of the Non-Defaulting Member shall be
increased pro rata (and the Membership Interest of the Buyer shall be decreased
pro rata) to the percentage that the unpaid Default Amount bears to the total
amount of capital contributions paid to D&W by the Members as of the date
on which the increase is made.


3.04         Membership
Interest Modifications.  No Member’s
Membership Interest shall change in connection with capital contributions made
by the Members hereunder, except as set forth in Sections 3.02 and 3.03.


5

















 


3.05         Capital
Accounts.  A separate capital account
(“Capital Account”) will be
maintained for each Member in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv). 
Consistent therewith, the Capital Account of each Member will be
determined and adjusted as follows:


(a)           Each Member’s Capital Account will be
credited with:


(i)            Any contributions of cash made by
such Member to the capital of the Company plus the Asset Value of any property
contributed by such Member (including the deemed contribution on the Conversion
of the Company) to the capital of the Company (net of any liabilities to which
such property is subject or which are assumed by the Company);


(ii)           The Member’s distributive share of
Net Profit (as hereinafter defined) and any items in the nature of income or
gain specially allocated to such Member pursuant to Section 10; and


(iii)          Any other increases required by
Treasury Regulation Section 1.704-1(b)(2)(iv).


(b)           Each Member’s Capital Account will be
debited with:


(i)            Any distributions of cash made by
the Company to such Member plus the Asset Value of any property distributed in
kind to such Member (net of any liabilities to which such property is subject
or which are assumed by such Member);


(ii)           The Member’s distributive share of Net
Loss (as hereinafter defined) and any items in the nature of expenses or losses
specially allocated to such Member pursuant to Section 10; and


(iii)          Any other decreases required by
Treasury Regulation Section 1.704-1(b)(2)(iv).


(c)           The initial Capital Account balance
of each Member is set forth in Schedule 3.05.


The provisions of this Section 3.05 and any other
provisions of this Agreement relating to the maintenance of Capital Accounts
have been included in this Agreement to comply with Section 704(b) of the
Code and the Regulations promulgated thereunder and will be interpreted and
applied in a manner consistent with those provisions, provided that nothing in
this sentence shall be deemed to alter the provisions herein pertaining to
distributions (including but not limited to liquidating distributions) by the
Company.


6

















SECTION
4.


MEMBERSHIP
INTERESTS


4.01         Membership
Interests.  Subject to Section 4.02,
each Member’s ownership interest in D&W (“Membership
Interest”) is :


(a)           Transco:  36.48%.


(b)           Hawkeye:  63.52%.


4.02         Membership
Interest Adjustments.  The Membership
Interests set forth in Section 4.01 are subject to adjustment  pursuant to Sections 3.02 and 3.03 of this
Agreement and upon the admission of a new Member in accordance with this
Agreement.


SECTION
5.


MANAGEMENT


5.01         Control.  D&W shall be managed by a management
committee composed of two Members, one appointed by Transco and one appointed
by Hawkeye (the “Management Committee”).  Any decision taken by the Management
Committee shall be made by unanimous decision.


5.02         Joint
Management.  The Management Committee
shall manage D&W and shall have the authority to appoint  a general manager (the “General Manager”) and any other
individuals, as necessary, to act on behalf of D&W in carrying out the
day-to-day management responsibilities. 
The Management Committee shall meet at least once each calendar quarter,
in person or telephonically.


5.03         Budget.  A budget (the “Budget”) for the Company shall be prepared and submitted
annually by the Management Committee to Hawkeye and Transco for approval at
least sixty (60) calendar days prior to the end of each fiscal year with
respect to the following fiscal year. 
The Members agree that they have acknowledged and approved the current
year’s budget attached hereto as Exhibit E. 
If at the beginning of any fiscal year the Budget for such upcoming year
or any item or portion thereof shall not have been approved by both Hawkeye and
Transco, then:


(a)           Any items or portions of the Budget
and amounts of expenses provided therein which have been so approved shall
become operative immediately and the General Manager shall be entitled to
expend funds in accordance with those operative portions;


(b)           With respect to the Budget, the
General Manager shall be entitled to, and shall, expend with respect of
noncapital, recurring expenses in any month of the then-current fiscal year, an
amount equal to the budgeted amount for the corresponding month of the
immediately preceding fiscal year, as set forth on the immediately preceding
fiscal year Budget, after giving effect to any dispositions or other material
changes to the Company property during the prior or current fiscal year; provided,
however, that if any contract approved by the 


7

















Management Committee or entered into pursuant to the
provisions hereof provides for an automatic increase in costs thereunder after
the beginning of the then current fiscal year, then the General Manager shall
be entitled to expend the amount of such increase; and


(c)           The General Manager shall be entitled
to, and shall, expend funds in respect of debt service on the Company’s
financing (including the expense of curing any defaults thereunder), utilities,
real estate taxes and assessments, emergency repairs, or other expenditures
which the Management Committee reasonably determines are necessary for the
continued ordinary operation of the Company property, including, without
limitation, uninsured losses or deductibles, operating shortfalls, repairs,
additions or modifications to comply with applicable laws or insurance
requirements, insurance premiums for insurance policies approved by the
Management Committee, and any final orders, judgments, or other proceedings and
all costs and expenses related thereto, regardless of whether such expenditures
exceed the amounts provided for in the applicable Budget for the preceding
fiscal year.


5.04         General
Manager.  The General Manager shall
be responsible for the day-to-day management of D&W, and shall have the
authority to take actions as authorized by the Management Committee or as
provided for in the Budget approved by the Management Committee.  The General Manager shall be appointed
annually by the Management Committee and can be removed at any time by the
Management Committee for any reason.  The
General Manager may be an employee of either Member or an affiliate
thereof.  The General Manager shall not
be entitled to any compensation from D&W on account of the performance of
the duties specified in this Section 5. 
The initial General Manager shall be Steve Masters.


SECTION
6.


OPERATIONS


6.01         Carrier
Service.  D&W shall continue to
be operated as a common carrier railroad, consistent with the rights and
obligations of a rail carrier subject to the jurisdiction of the Surface
Transportation Board, the Federal Railroad Administration, and other railroad
governing bodies, over the entirety of the Line as described in Exhibit B
attached hereto as amended from time to time by the Management Committee.


6.02         D&W
Operating Agreements.  The Members
shall ensure that D&W maintains, amends, renegotiates, supplements,
terminates and/or replaces any operating agreements to which D&W is a
party, including, but not limited to, the Agreement for Train Operations and
Track Maintenance dated September 24, 2003 between D&W and the Iowa
Northern Railway Company (“IANR”)
(the “IANR O&M Agreement”),
(i) to accommodate the rail transportation needs of Transco, Hawkeye and any
other users of rail services that are or come to be located on the Line, (ii)
to facilitate all necessary upgrades and improvements to the Line and (iii) to
further D&W’s fulfillment of its common carrier obligations.


6.03         Service
Failures.  If either Member deems any
counterparty to an agreement to which D&W is a party to be in default under
such agreement, the Members shall consider the effect of such default and
whether any proposed action would have a negative economic impact on either
Member.  Costs incurred by D&W in
pursuing remedial actions, to the extent they are 


8





















 


not recovered from the defaulting counterparty or
otherwise payable from D&W’s revenue, shall be reimbursed by the Member(s)
that deemed the counterparty to be in default. 
If the Members elect to cause the termination of any agreement providing
for railroad operations over the Line, the Members shall jointly (i) negotiate
separate service agreements with IANR or another party, or (ii) operate its own
locomotives and rail cars to provide service to their respective facilities, provided
such operations are consistent with (x) the Members’ other obligations under
this Agreement and (y) all other agreements to which D&W is or becomes a
party.


6.04         Third-Party
Service Costs.  Notwithstanding the
provisions of Section 7.03(b) hereof, in the event that third-party
service takes place over the Line, D&W shall enter into an agreement with
such third party so that such third party will reimburse D&W (i) for such
party’s pro rata share of total D&W operations and maintenance costs during
the relevant time period, based upon the total ton-miles of service provided to
that party over the Line, provided, that such costs shall still be
limited by the geographical boundaries of Section 7.03 of this Agreement
and (ii) for any track usage and interchange fees incurred with respect to cars
transported under the UP Trackage Rights Agreement (as hereinafter defined).


6.05         IANR
O&M Agreement Restriction. 
Notwithstanding the provisions of Section 6.03, any changes to or
termination of the IANR O&M Agreement or any successor arrangement shall
require the consent of all Members.


SECTION
7.


IMPROVEMENTS
AND MAINTENANCE


7.01         Immediate
System Upgrades.  “Immediate System Upgrades” shall mean the
necessary track and facilities upgrades on the Line as determined by Hawkeye in
consultation with Transco for the provision of rail service to the Fairbank
Plant as further described under the heading “Track Work” in Exhibit A attached
hereto.  The Immediate System Upgrades
and any other upgrades to the track and facilities on the Line shall be
coordinated in good faith between the Members to minimize disruption to D&W’s
operations.  If the Members have
coordinated in good faith to schedule upgrades and the installation of the
upgrades (including the Immediate System Upgrades) results in any financial
loss to the other Member, the Member requesting the upgrade shall reimburse the
actual financial losses suffered by the non-requesting Member.  The Members agree that any rail that must be
replaced during the Immediate System Upgrades to upgrade the rail for ethanol
tank service shall be set aside in an orderly fashion, shall be the property of
Transco exclusively and shall not be considered a distribution reducing Transco’s
Membership Interest in the Company.


Hawkeye shall provide the Company and Transco, as soon as practicable
following receipt thereof, copies of all final invoices or other similar
documents evidencing the total amount paid by Hawkeye for the Immediate System
Upgrades.


7.02         Future
Capital Improvement Projects.  The
Management Committee shall determine when upgrades are necessary for the
D&W tracks and facilities and such capital upgrades shall be funded by the
Members in the form of capital contributions to D&W as set forth
below.  Whether an expenditure is
considered a capital improvement or a maintenance 


9





















 


expense shall be determined by the Management
Committee in accordance with the United States generally accepted accounting
principles and practices in effect on the date of such determination.


(a)           Transco shall be solely responsible
for any additional capital contribution needed to fund future upgrades to the
D&W line segment between the Fairbank Plant at milepost 346 and
milepost 354.3 at Oelwein, IA; provided, however, that if a
future upgrade to that line segment is made at the request of or solely to meet
the needs of Hawkeye or a third party, Transco shall have no obligation to make
an additional capital contribution in connection with such upgrade.


(b)           In addition to the Immediate System
Upgrades, Hawkeye shall be solely responsible for any additional capital
contributions needed to fund future upgrades to the D&W line segment between
milepost 332 at Dewar, IA and the Fairbank Plant at milepost 346; provided,
however, that if a future upgrade to that line segment is made at the
request of or solely to meet the needs of Transco or a third party, Hawkeye
shall have no obligation to make an additional capital contribution in
connection with such upgrade.


Any Member who is responsible for a capital improvement in accordance
with this Section 7.02 shall provide the Company and the other Member, as soon
as practicable following receipt thereof, a copy of the final invoice or other
similar document evidencing the total amount paid in connection with such
capital improvement.


7.03         Maintenance
Costs for Hawkeye and Transco. 
Responsibility for payment or reimbursement (as the case may be) of maintenance
expenses billed to D&W by IANR or a successor contractor for track
maintenance and related services under the IANR O&M Agreement or successor
arrangement shall be apportioned between the Members as set forth below.  D&W shall provide a monthly invoice to
each of the Members for the maintenance costs incurred hereunder by the fifth
(5th) calendar day following the day D&W receives the
corresponding invoice from IANR or any successor.  At the request of a Member, the other Member
shall provide information with respect to such Member’s car transportation
information in order for the requesting Member to confirm its costs relating to
track maintenance.


(a)           Expenses related to the D&W
tracks between the Fairbank Plant at milepost 346 and milepost 354.3
at Oelwein, IA shall be the sole responsibility of Transco; provided, however,
that if Hawkeye stores and/or stages railcars on the segment between
milepost 346 and milepost 354.3, Hawkeye shall be solely responsible
for the expenses related to that segment attributable to its freight traffic.


(b)           Expenses related to the D&W
tracks between the Fairbank Plant at milepost 346 and milepost 332 at
Dewar, IA shall be apportioned pro rata between the Members, based upon the
respective share of the total ton-miles of transportation service provided over
the Line during the relevant time period attributable to each Member’s freight
traffic; provided, however, that if the freight traffic
attributable to Transco is less than twenty percent (20%) of the total freight
traffic handled over the segment between milepost 346 and
milepost 332, then Hawkeye shall be solely responsible for all of the
expenses related to that segment attributable to the freight traffic of both
Hawkeye and Transco.


10





















 


7.04         Third-Party
Maintenance Costs.  In the event that
D&W, its agent or contract operator serves any customers on the Line other
than the Members, D&W will enter into a third-party customer’s agreement
such that expenses billed to D&W by IANR or a successor contractor for
track maintenance and related services shall be apportioned such that the
contract operator or new user is responsible for, and D&W provides an
invoice to such party for its respective share of, the total ton-miles of
transportation service provided over the Line during the relevant time period
attributable to the contract operator’s or new user’s freight traffic.


7.05         Union
Pacific Trackage Rights Maintenance Costs. 
Track maintenance and capital expenses assessed to D&W by the Union
Pacific Railroad Company (“UP”)
under the Trackage Rights Agreement between UP and D&W dated as of
September 26, 2003 (the “UP Trackage
Rights Agreement”) and the Interchange Agreement between UP and
D&W dated September 26, 2003 (the “UP
Interchange Agreement”) or any
successor agreements will be apportioned between the Members pro rata based
upon the respective ton-miles of service provided to each of them by D&W
over the lines covered by the UP Trackage Rights Agreement and the UP Interchange
Agreement during the time period corresponding to the invoice received by
D&W from UP.  D&W shall provide
an invoice to each of the Members for the costs incurred in connection with the
UP Trackage Rights Agreement and the UP Interchange Agreement or any successor
agreements by the fifth (5th) calendar day following the day D&W
receives the corresponding invoice from UP or the counterparty to any
agreement.


SECTION
8.


RAIL
TRANSPORTATION RATES AND TRACKAGE RIGHTS FEES


8.01         Rail
Transportation Rates.  Notwithstanding the other provisions of this
Agreement, Hawkeye, Transco and any other purchasers of rail service from
D&W or its agent or contractor shall be separately responsible for
transportation rates and charges payable to D&W or its agent or contractor
for freight transportation service provided to each of them over the Line.  Each Member shall separately negotiate its
own agreement with D&W or its agent or contractor for freight
transportation service and transportation rates.


8.02         UP
Trackage Rights Fees.  Payment or
reimbursement (as the case may be) of track usage and interchange fees payable
by D&W to UP with respect to cars transported for Transco or Hawkeye under
the UP Trackage Rights Agreement shall be the sole responsibility of Hawkeye; provided,
however, that if more than 200 loaded cars are moved for the account of
Transco or its successor(s) on an annual basis over the line covered by the UP
Trackage Rights Agreement, then Transco and/or its successor(s) shall be solely
liable for track usage and interchange fees attributable to such excess loaded
Transco cars.  D&W shall provide an
invoice to each of the Members for the track usage and interchange fees
incurred under the UP Trackage Rights Agreement by the fifth (5th)
calendar day following the day D&W receives the corresponding invoice from
UP.


11

















 


SECTION
9.


OTHER
OPERATING EXPENSES


9.01         Insurance.


(a)           Responsibility for expenses for
insurance maintained by D&W shall be apportioned between the Members
pro rata, based upon their respective Membership Interests.


(b)           For a period of seven (7) years from
the date of this Agreement, if the rail freight traffic over the Line
attributable to Transco is less than twenty percent (20%) of the total freight
traffic moving over the Line in a given year (on a ton-mile basis), then
Transco’s reimbursement obligation for insurance expenses for such year shall
be limited to an amount no greater than $58,419.


9.02         General
Operating Expenses.  All expenses incurred
by D&W or the Members that are not covered by other provisions of this
Agreement, including, but not limited to, accounting services, legal fees and
supplies, shall be paid from D&W’s revenue and, if such revenue is
insufficient, from unexpended capital of the Company.  If unexpended capital is insufficient,
D&W shall issue a notice to the Members indicating the amounts owing with
respect to such expenses based on each Member’s Membership Interest as
determined in Section 4 and each Member shall make such capital contribution
within ten (10) days of receipt of such notice.


SECTION
10.


ALLOCATIONS
AND TAX MATTERS


10.01       Allocations.


(a)           The Company’s Net Profits and Net
Losses, subject to the special allocations pursuant to Sections 10.02 and
10.03, shall be allocated for each fiscal year to the Members as follows:


(i)            Net Profits shall be allocated:


(1)           first, to offset previous allocations
of Net Loss pursuant to Sections 10.01(a)(ii)(2) and (3)) hereof on a
cumulative basis, in reverse order of the priorities described therein; and


(2)           second, the balance to the Members in
proportion to their respective Membership Interests;


(ii)           Net Losses shall be allocated:


(1)           first, to offset previous allocations
of Net Income pursuant to Section 10.01(a)(i)(2), to the extent such Net
Income has not been distributed;


12





















 


(2)           second, to the Members in proportion
to their positive Capital Account balances until such Capital Account balances
have been reduced to zero; and


(3)           third, the balance to the Members in
proportion to their respective Membership Interests.


(b)           Notwithstanding anything to the
contrary in Section 10.01(a), in the event of the winding up and
termination of the Company pursuant to Section 24 hereof, Net Profit and
Net Loss (and items of gross income, loss or deduction, if necessary),
including gain or loss realized by the Company upon the sale (or deemed sale)
of its property or assets, shall be allocated to the extent possible, subject
to the special allocations of Sections 10.02 and 10.03, in a manner so as to
cause the Capital Accounts of the Members to equal the amounts due the
respective Members in accordance with the provisions of Section 24.


(c)           “Net
Profits” and “Net Losses”
mean, for each fiscal year, an amount equal to the Company’s taxable income or
loss for such fiscal year, determined in accordance with Section 703(a) of
the Code (but including in taxable income or loss, for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code), with the following adjustments:


(i)            any income of the Company exempt
from federal income tax and not otherwise taken into account in computing Net
Profits or Net Losses pursuant to this definition shall be added to such
taxable income or loss;


(ii)           any expenditures of the Company
described in Section 705(a)(2)(B) of the Code (or treated as expenditures
described in Section 705(a)(2)(B) of the Code pursuant to
Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not otherwise
taken into account in computing Net Profits or Net Losses pursuant to this
definition shall be subtracted from such taxable income or loss;


(iii)          in the event the Asset Value of any
asset of the Company is adjusted in accordance with subparagraph (2) or
subparagraph (3) of the definition of “Asset Value” set forth in Section 3.01,
the amount of such adjustment shall be taken into account as gain or loss from
the disposition of such asset for purposes of computing Net Profits or Net
Losses;


(iv)          gain or loss resulting from any
disposition of any asset of the Company with respect to which gain or loss is
recognized for federal income tax purposes shall be computed by reference to
the Asset Value of the asset disposed of, notwithstanding that the adjusted tax
basis of such asset differs from its Asset Value;


(v)           in lieu of the depreciation,
amortization and other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account Depreciation for
such fiscal year or other period, computed in accordance with the definition of
“Depreciation” set forth in Section 3.01; and


 


13

















 


(vi)          any items which are specially
allocated pursuant to Sections 10.02 and 10.03 shall not be taken into
account in computing Net Profits or Net Losses.


The amounts of the items of Company income, gain, loss
or deduction available to be specially allocated pursuant to Sections 10.02 and
10.03 shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (v) above.


(d)           Any Company item of deduction
attributable to a deemed payment to a Member that has provided goods or
services to the Company shall be allocated to such Member, and, for Capital
Account purposes, such Member shall be deemed to have made a capital
contribution to the Company in an amount equal to the amount of such deemed
payment.


10.02       Special Allocations.


(a)           Notwithstanding
anything else contained in this Section 10, if any Member has a deficit Capital
Account for any fiscal period as a result of any adjustment of the type
described in Section 1.704-1(b)(2)(ii)(d)(4) through (6) of the Regulations,
then the Company’s income and gain will be specifically allocated to such
Member in an amount and manner sufficient to eliminate such deficit as quickly
as possible.  Any special allocation of
items of income or gain pursuant to this Section 10.02(a) shall be taken
into account in computing subsequent allocations pursuant to Section 10 so that
the cumulative net amount of all items allocated to each Member shall, to the
extent possible, be equal to the amount that would have been allocated to such
Member if there had never been any allocations pursuant to this Section 10.02(a).  This Section 10.02(a) is intended to comply
with, and shall be interpreted to be consistent with, the qualified income
offset requirement of Section 1.704-1(b)(2)(ii) of the Regulations.


(b)           Gross deductions which are Member
nonrecourse deductions (as defined in Section 1.704-2(b)(1) of the Regulations)
for any taxable year shall be allocated to the Member that bears the economic
risk of loss with respect to the loan to which such Member nonrecourse
deductions are attributable in accordance with Section 1.704-2(i) of the
Regulations.  Nonrecourse deductions
shall be allocated to the Members in accordance with their respective
Membership Interests.


(c)           If during any taxable year there is a
net decrease in minimum gain (as such term is defined by Sections 1.704-2(b)(2)
and (d) of the Regulations) with respect to partnership minimum gain, then each
Member shall be allocated gross income for such taxable year (and, if
necessary, for subsequent taxable years) in the manner provided in Sections
1.704-2(f) and (j) of the Regulations. 
Likewise, if there is a net decrease during any taxable year in the
minimum gain attributable to Member nonrecourse debt (as defined in Section
1.704-2(i)(3) of the Regulations with respect to Member nonrecourse debt), then
any Member with a share of the minimum gain attributable to such debt at the
beginning of such taxable year shall be allocated items of gross income for
such taxable year (and, if necessary, for subsequent taxable years) in the
manner provided in Section 1.704-2(i)(4) of the Regulations.  This Section 10.02(c) is intended to comply
with, and shall be interpreted to be consistent with, the minimum gain
chargeback requirements of Sections 1.704-2(b)(2) and 1.704(2)(i) of the
Regulations.


 


14

















 


(d)           Solely for purposes of allocating
excess nonrecourse liabilities of the Company among the Members, the Members
agree that their respective interests in the profits of the Company are equal
to their respective Membership Interests, unless otherwise agreed upon by all
of the Members.


10.03       Curative Allocations.  The
allocations set forth in Section 10.02 hereof (the “Regulatory Allocations”) are intended to
comply with certain requirements of the Regulations.  It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gain, loss or deduction pursuant to this Section 10.03.  Therefore, notwithstanding any other
provision of this Section 10 (other than the Regulatory Allocations), the
Members shall make such offsetting special allocations of Company income, gain,
loss or deduction in whatever manner they determine appropriate so that, after
such offsetting allocations are made, each Member’s Capital Account balance is,
to the extent possible, equal to the Capital Account balance such Member would
have had if the Regulatory Allocations were not part of this Agreement and all
Company items were allocated pursuant to this Section 10 without regard to
the Regulatory Allocations.  In
exercising their discretion under this Section 10.03, the Members shall
take into account future Regulatory Allocations under Section 10.02 that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Section 10.02.


10.04       Tax Allocations.  


(a)           In accordance with
Section 704(c) of the Code and the Regulations thereunder, income, gain,
loss and deduction with respect to any property contributed to the capital of
the Company shall, solely for tax purposes, be allocated among the Members
using the traditional method with curative allocations so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its initial Asset Value (computed in accordance
with the definition of Asset Value).


(b)           In the event the Asset Value of any
Company asset is adjusted pursuant to subparagraph (2) of the definition of
Asset Value, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Asset Value in the
same manner as under Section 704(c) of the Code and the Regulations
thereunder.


(c)           Any elections or other decisions
relating to such allocations shall be made by the Tax Matters Member (as
hereinafter defined) in any manner that reasonably reflects the purpose and
intention of this Agreement.  Allocations
pursuant to this Section 10.04 are solely for purposes of federal, state
and local taxes and shall not affect, or in any way be taken into account in
computing, any Member’s Capital Account or share of Net Profit, Net Loss, other
items, or distributions pursuant to any provision of this Agreement.


(d)           Except as otherwise provided in this
Agreement, all items of Company gain, loss, deduction and any other allocations
not otherwise provided for shall be divided among the Members in the same
proportions as they share Net Profit or Net Loss, or amounts specially
allocated pursuant to Section 10.02 or 10.03 hereof, as the case may be,
for the fiscal year.


 


15

















 


10.05       Tax
Decisions.  The Company shall file
its returns as a partnership for federal and state income tax purposes.  All elections required or permitted to be
made by the Company, and all other tax decisions and determinations relating to
federal, state or local tax matters, shall be made by the Tax Matters Member,
in consultation with the Management Committee and the Company’s attorneys
and/or accountants.  Tax audits,
controversies and litigations shall be conducted under the direction of the Tax
Matters Member.  The Tax Matters Member
shall submit to the Management Committee, for their review and approval, any
settlement or compromise offer with respect to any disputed item of income,
gain, loss, deduction or credit of the Company. 
The General Manager shall be the initial “tax matters partner” (referred
to herein as the “Tax Matters Member”)
within the meaning of Section 6231(a)(7) of the Code.  A different Tax Matters Member may be
selected at any time by Members representing 51% of the outstanding Membership
Interests.  The Tax Matters Member shall
furnish to the Company, which shall furnish to the other Members, a copy of all
notices or other written communications received by the Tax Matters Member from
the Internal Revenue Service or any state of local taxing authority.  The Tax Matters Member shall distribute to
the Company, which shall distribute to each of the Members, as soon a
practicable after the end of the fiscal year of the Company, information with
respect to the Company necessary for each Member to prepare its federal, state
and local tax returns.  In addition, the
Tax Matters Member shall keep the other Members informed of any administrative
or judicial proceeding, as required by Section 6223(g) of the Code.


SECTION
11.


DISTRIBUTIONS


11.01       Annual Distribution.


(a)           Beginning in the first fiscal year following the date
hereof, the Company shall make annual cash distributions to each Member, pro
rata in accordance with their respective Membership Interests, of at least 2/3
of the net distributable profit (defined to be all profits of the Company, less
capital needs set forth in the Budget for the following year) of the Company
earned in the year concerned (the “Annual
Distribution”).  In addition
to the Annual Distribution, the Management Committee may make additional
distributions to the Members, pro rata in accordance with their respective
Membership Interests.


(b)           Distributions made upon liquidation
of the Company shall be made as provided in Section 24.


(c)           Distribution Rules.


(i)            All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment,
distribution or allocation by the Company to the Members shall be treated as
amounts distributed to the Members pursuant to this Section 11 for all purposes
of this Agreement.  The Company is
authorized and directed to withhold from distribution, or with respect to
allocations, to the Members and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provision of any other federal, 


 


16

















 


state or local law and shall allocate such amounts to
those Members with respect to which such amounts were withheld.  Promptly upon learning of any requirement
under any provision of the Code or any other applicable law requiring the
Company to withhold any sum from a distribution to a Member or to make any
payment to any taxing authority in respect of such Member, the Company shall
give written notice to such Member of such requirement and, if practicable and
if requested by such Member, shall cooperate with such Member in all lawful
respects to minimize or to eliminate any such withholding or payment.


(ii)           A Member shall not have the status of, and is not
entitled to the remedies available to, a creditor of the Company with regard to
distributions that such Member becomes entitled to receive pursuant to this
Agreement and the Delaware Act.


11.02       Liabilities.  As between Hawkeye and Transco, liability for
property losses, damages, third party claims, environmental damage and any
other liabilities of whatever source or cause which arise in connection with
D&W, its assets or operations shall be apportioned as follows:


(a)           If the liability or claim is
attributable to an event or condition occurring prior to September 30,
2003, Transco and Hawkeye will each be responsible for the percentage of such
liability or claim equal to its Membership Interest in D&W.


(b)           If the liability or claim is
attributable to an event or condition occurring after September 30, 2003,
but prior to the Effective Date (as hereinafter defined), such liability or
claim shall be the sole responsibility of Transco.


(c)           If the liability or claim is
attributable to an event or condition occurring after the Effective Date:


(i)            if the event or condition occurred
or exists between the Fairbank Plant at milepost 346 and milepost 354.3 at
Oelwein, IA, such liability or claim shall be the sole responsibility of
Transco; and


(ii)           if the event or condition occurred or
exists between milepost 332 at Dewar, IA and the Fairbank Plant at milepost
346, such liability or claim shall be the sole responsibility of Hawkeye.


(d)           If the liability or claim is
attributable to an event or condition occurring after the Effective Date, and
arises solely from the operation of trains or transportation of freight for the
exclusive benefit of one Member, such liability or claim shall be the sole
responsibility of that Member.


(e)           If the liability or claim is
attributable to an event or condition occurring after the Effective Date and
arises from the operation of trains or transportation of freight for the
benefit of more than one Member, responsibility for such liability or claim
shall be apportioned among the Members according to each Member’s Membership
Interest as set forth in Section 4. 
Notwithstanding the foregoing, except to the extent that it arises from
an act, omission or gross negligence of Transco, its employees, agents or
assignees, any liability or environmental claims 


 


17

















 


arising from spills or other releases of ethanol or
ethanol plant raw materials or by-products at or from Fairbank Plant shall be
the sole responsibility of Hawkeye or its successors.


(f)            The Members will cooperate in good
faith in the mounting of any defenses against third party liability in
conjunction with their respective insurance carriers.  However, each Member has the right to
exercise its own defense with respect to liability for which it is responsible,
in its sole judgment and discretion.


(g)           Nothing contained in this
Section 11.02 shall be considered to limit any right that Transco or
Hawkeye may have under applicable law or otherwise with respect to third
parties relating to any liability or claim.


11.03       Derailment
Costs and Damages Under UP Agreement. 
In the event of a derailment on the UP railroad tracks described in the
UP Trackage Rights Agreement and the UP Interchange Agreement, as between
Hawkeye and Transco, the Member responsible for the origination of the train
shall be responsible for any property or other damage charges assessed by UP; provided,
however, that if the derailed train is a mixed car train (includes cars
providing service for both Hawkeye and Transco), the damages shall be shared
pro rata between Hawkeye and Transco based on the percentage of cars in the
mixed car train used by each Member; provided, further, that if
such damage is the result of work performed, or a failure to perform required
work, by Transco on Hawkeye railcars pursuant to an agreement reached under
Section 13.03, Transco shall be responsible for any such charges.


SECTION
12.


TRANSFERABILITY
OF INTERESTS


12.01       Transfer
of Interest.  No Member shall sell or
otherwise transfer (voluntarily or involuntarily) its Membership Interest in
D&W to a third party without first offering such interest for sale to the
remaining Members at the lesser of (i) the bona fide purchase price offered by
the third party; or (ii) the amount of the capital contribution credited to the
transferring Member; provided, however, that each Member may
assign its Membership Interest to a successor in interest to all or a
substantial part of the assets of such Member by way of merger, consolidation,
intra-corporate transfer, sale, divestiture pursuant to an order or decree of a
court, or similar reorganization, provided that such transferee shall be
at least as credit worthy as the transferor and shall not be a competitor to
D&W or the non-transferring Member. 
No transfer of a Membership Interest shall be effective unless and until
such transferee shall assume in writing the obligations of the transferor under
this Agreement and shall execute a counterpart hereof.  Subject to the provisions of this Section
12.01, this Agreement will be binding upon and inure to the benefit of the
Members, their successors and permitted assigns.  Notwithstanding anything contained herein,
Hawkeye may pledge or otherwise assign its interest and rights hereunder and
its Membership Interest to Credit Suisse First Boston, as lender, or any
successor thereto or assignee thereof (“CSFB”).


12.02       Tag-Along
Rights.  Except with respect to CSFB
exercising any rights it may have in connection with a pledge by Hawkeye of its
Membership Interest, if at any time a Member desires to sell or otherwise transfer
all or any portion of its Membership Interest to a 


18

















 


third party and has satisfied the requirements of
Section 12.01 hereof, such Member shall not consummate the sale or
transfer of such Membership Interest unless the third party transferee agrees
to purchase from the other Member(s) at least the same portion of its (their)
respective Membership Interest(s) on the same terms and conditions, subject to
the same agreements and at the same price and at the same time as the sale by
the transferring Member.  The rights
secured by this Section 12.02 may be waived by the beneficiary Member(s), by
written notice to the transferring Member.


SECTION
13.


FURTHER
CONSIDERATION AND TRANSFERS TO TRANSCO


13.01       Payments
to Transco.


(a)           Upon execution of this Agreement,
independent of its capital contributions pursuant to Section 3, Hawkeye
shall contribute to the Company and the Company shall distribute to Transco the
sum of $100,000.00 as reimbursement for certain pre-formation expenditures (as
such terms are defined in Treasury Regulation Section 1.707-4(d)).  Such distribution of the Company to Transco
shall not affect Transco’s Membership Interest set forth in this Agreement.


(b)           Within twelve (12) months from the
date of execution of this Agreement, Hawkeye shall contribute to the Company
and the Company shall distribute to Transco an additional $100,000.00, as
reimbursement for certain pre-formation expenditures (as such terms are defined
in Treasury Regulation Section 1.707-4(d)). 
Such payment shall not be subject to offset.  Such distribution of the Company to Transco
shall not affect Transco’s Membership Interest set forth in this Agreement.


(c)           In addition to the payments described
in Sections 13.01(a) and (b), Hawkeye shall pay Schwartz, Cooper, Greenberger
and Krauss, Transco’s legal counsel, for legal fees reasonably incurred by
Transco in connection with the negotiation and execution of this Agreement,
subject to a maximum of $25,000.00.  


Transco shall provide to Hawkeye any documentation
reasonably requested in connection with the payments described in
paragraphs (a), (b) and (c) of this Section 13.01.


13.02       Transfer
of Certain D&W Yard Trackage.  As
soon as practicable following execution of this Agreement, and subject to all
necessary regulatory approvals, including necessary Surface Transportation
Board authorization, D&W shall discontinue common carrier service over the
yard tracks and sidings located within the industrial boundaries of the Transco
facilities in the vicinity of Oelwein, Iowa, which is marked on the map
attached hereto as Exhibit C, and following such discontinuance, shall transfer
ownership of such assets to Transco in the form of a distribution from D&W
to Transco.  D&W shall execute and
file any filings or documents necessary to effect such transfer.  Such distribution from D&W to Transco
shall not affect Transco’s Membership Interest set forth in this Agreement.


13.03       Hawkeye
Railcar Maintenance Preference.  In
consideration of this Agreement, Hawkeye shall give Transco preferential
consideration in the awarding of any contract for the 


19

















 


maintenance or servicing of railcars owned, leased or
utilized by Hawkeye for use in rail transportation service over the Line, so
long as the terms proposed by Transco are at least as favorable to Hawkeye as
those proposed by a third party.  This
preference includes, but is not limited to, any requirements for pre- or
post-loading service while the cars are in Hawkeye’s control.


SECTION
14.


RECORDS
AND ACCOUNTING


14.01       Records
and Accounting.  Accounting and other
administrative records relating to D&W and its activities shall be kept and
maintained by Hawkeye, at no cost to D&W, consistent with generally
accepted accounting principles, business record retention practices and the
Delaware Act.  All Members shall have
access to, and may inspect and copy, any and all such books and records during
regular business hours.  The General
Manager promptly shall send to each Member copies of all reports,
correspondence, documents and other information sent or received by D&W,
other than routine shipping or inter-carrier documents, which nevertheless
shall be provided promptly upon request.


14.02       Fiscal
Year.  D&W’s fiscal year shall
end March 31, unless otherwise agreed to by the Members.


SECTION
15.


ARBITRATION


15.01       Selection
of Single Arbitrator.  Any dispute
between the Members that relates to the interpretation, application or
enforcement of this Agreement and that cannot be resolved by negotiation shall
be submitted for resolution by binding arbitration.  Arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(the “AAA Rules”) in effect at the
time of the arbitration; provided, however, that to the extent
that the AAA Rules are inconsistent with the terms of this Agreement or the
terms of this Agreement are more specific than the AAA Rules, the terms of this
Agreement will govern.


The question or controversy upon which the Members cannot agree shall
be submitted for arbitration to a single, competent disinterested arbitrator if
the Members are able to agree upon such single arbitrator within thirty (30)
days after the Member desiring such arbitration notifies the other Member of
such desire.


15.02       Three
Arbitrator Panel.  If a single
arbitrator cannot be agreed upon within the thirty (30) day period provided in
Section 15.01, a board of three (3) arbitrators shall be used.  Such arbitrators shall be selected as
follows:


(a)           The Member demanding arbitration
shall give the other Member notice of such demand stating specifically the
question or questions to be submitted for decision and nominating a person to
act as one arbitrator (who shall be non-neutral for purposes of AAA Rules R-12
and R-17).


 


20

















 


(b)           The Member to whom such notice is
given shall appoint a second arbitrator (who shall be non-neutral for purposes
of AAA Rules R-12 and R-17) and give the Member demanding
arbitration notice of such appointment within thirty (30) days from the time of
receipt of the demanding Member’s notice.


(c)           If the responding Member does not
timely notify the Member demanding arbitration of its nomination of a second
arbitrator, the Member making the demand may select the second arbitrator.


(d)           The first and second arbitrators so
chosen shall select a third arbitrator, but if the arbitrators are unable to
agree upon such a third arbitrator within a period of thirty (30) days from the
day of appointment of the second arbitrator, the third arbitrator shall be
appointed upon application of either Member to the AAA.


15.03       Arbitration
Procedure and Binding Decision.


(a)           Upon selection of the arbitration
board of either one or three members, the board shall proceed with reasonable
diligence to inquire into and determine the questions or controversies at
issue, as disclosed in the demanding Member’s notice and any responses
thereto.  The board shall give the
Members reasonable notice of the time and place (of which the board shall be
the judge) at which the board will take such evidence as it may deem
reasonable, or as either Member may submit, and may hear arguments of counsel
or others.  Discovery shall be available
to each Member with respect to the relevant, non-privileged documents, books,
papers or information in the possession or control of the other Member, in the
discretion of the board.


(b)           If any arbitrator shall decline or
fail to act, the Member (or Members in the case of a single arbitrator) by whom
he or she was chosen, or the AAA (in the case of an arbitrator selected through
application to it), shall appoint another to act in his or her place.


(c)           After hearing the evidence and
arguments submitted by the Members, the board shall state a decision and award
in writing within forty-five (45) days of the final submission by the Members,
which decision and award, when delivered to both Members, shall be final and
binding.  The board shall not have the
authority to assess punitive or exemplary damages against either Member, or to
change any term of this Agreement.  The
Members expressly agree to be bound conclusively by any such decision and award
and judgment may be entered upon such decision and award in any court of
competent jurisdiction.  The Members
shall each bear the expense of their respective designated arbitrator as well
as their own fees and costs.  The expense
of the third neutral arbitrator, or single arbitrator if applicable, shall be
shared equally by the Members.


SECTION
16.


ADVERSE
IMPACT


The Members agree to act in good faith to further the purposes of
D&W as set forth in this Agreement, and to refrain from taking actions
adversely impacting their ability to carry out those purposes or the ability of
the other Member(s) to fulfill its (their) obligations hereunder.


21

















 


SECTION
17.


CONFIDENTIALITY


This Agreement and information concerning its terms shall be strictly
confidential between the Members.  Except
when required by law, no Member shall disclose the terms hereof or any
information developed in connection with this Agreement without the express
written approval of the other Member; provided, however, that no
Member shall be precluded from using this Agreement or any such information in
obtaining or attempting to obtain financing or in response to a request from
current or future  lenders.  The Members hereto may use this Agreement in
connection with filing reports with any appropriate governmental authorities,
provided such filing is made with a request for appropriate confidentiality
assurances.  The Members also may submit
this Agreement, or when possible, limited information about this Agreement to
consultants and contractors performing work on or related to the subject matter
of this Agreement who agree in writing to protect the confidentiality of such
information.


SECTION
18.


WARRANTIES
AND REPRESENTATIONS


18.01       Transco.  For purposes of this Section 18.01, the
phrase “to the knowledge of Transco” means the actual knowledge of J. Robert
Nelson, Charles Andersen and Steve Masters. 
Transco represents and warrants to Hawkeye that, on the day of the
execution of this Agreement:


(a)           Organization and Authorization.  Transco is a corporation duly organized and
incorporated and is validly existing as a corporation in good standing under
the laws of the State of Delaware with the corporate power and authority to
execute, deliver and perform this Agreement, to own its properties and carry on
its business in the manner in which such business is now being conducted.  This Agreement has been duly executed and
delivered by Transco, has been effectively authorized by all necessary action,
corporate or otherwise, by Transco and constitutes a legal, valid and binding obligation
of Transco enforceable in accordance with its terms, except as the same may be
limited by (i) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors’ rights generally, or (ii)
general principles of equity, whether considered in a proceeding in equity or
at law.


(b)           No Liens.  Except as otherwise set forth on Schedule
18.01(b), to the knowledge of Transco, D&W’s property is free and clear of
all mortgages, deeds of trust and other like financial liens, restrictions,
reservations, encroachments, or encumbrances, and there is no material defect
or encumbrance in title to D&W’s property or environmental condition that
would preclude D&W from using its property in connection with operating a
line.


(c)           No Conflict.  The execution, delivery and performance by
Transco of this Agreement and the consummation of the transactions contemplated
hereby, do not and will not:  (i)
conflict with or violate the certificate of incorporation or bylaws or
equivalent organizational documents of Transco; (ii) except for necessary
government approvals listed on Schedule 18.01(c), conflict with or violate any
law applicable to Transco or D&W by which any property or asset of Transco
or D&W is bound or affected; (iii) violate any judgment, order, writ, 


 


22

















 


injunction or decree of any United States federal,
national, supranational, state, provincial, local or similar government,
governmental, regulatory or administrative authority, branch, agency or
commission or any court, tribunal, or arbitral or judicial body (including any
grand jury) (each, a “Governmental Authority”)
except for necessary government approvals listed on Schedule 18.01(c); or (iv)
except for necessary government approvals listed on Schedule 18.01(c), result
in a material breach of any of the terms or conditions of, or constitute a
material default under, require any consent of any person pursuant to, give to
others any right of termination, amendment, modification, acceleration or
cancellation of, or otherwise adversely affect any rights of Transco or D&W
under, or result in the creation of any charge, claim, limitation, condition,
equitable interest, mortgage, lien, option, pledge, security interest,
easement, encroachment, right of first refusal, adverse claim or restriction of
any kind, including any restriction on or transfer or other assignment, as
security or otherwise, of or relating to use, quiet enjoyment, voting,
transfer, receipt of income or exercise of any other attribute of ownership
(each, an “Encumbrance”) on any
property, asset or right of Transco or D&W pursuant to, any note, bond,
mortgage, indenture, agreement, lease, license, permit, franchise, instrument,
obligation or other contract to which Transco or D&W is a party or by which
Transco or D&W or any of their respective properties, assets or rights are
bound or affected.


(d)           Required Filings and Consents.  Except as may be required to comply with
Section 13.02, Transco is not required to file, seek or obtain any notice,
authorization, approval, order, permit or consent of or with any Governmental
Authority in connection with the execution, delivery and performance by Transco
of this Agreement or the consummation of the transactions contemplated hereby
or in order to prevent the termination of any right, privilege, license or
qualification of D&W.


(e)           Compliance with Law; Permits.  To the knowledge of Transco, each of Transco
and D&W is and has been in compliance in all material respects with all laws
applicable to it.  Transco has not
received during the past three (3) years, nor is there any known basis for, any
notice, order, complaint or other communication from any Governmental Authority
or any other person that D&W is not in compliance in any material respect
with any Law applicable to it.  To the
knowledge of Transco, D&W is in possession of all material permits,
licenses, franchises, approvals, certificates, consents, waivers, concessions,
exemptions, orders, registrations, notices or other authorizations of any
Governmental Authority necessary for it to own, lease and operate its
properties and to carry on its business in all material respects as currently
conducted (the “Permits”).  To the knowledge of Transco, D&W is and
has been in compliance in all material respects with all such Permits.  As of the date hereof, no suspension,
cancellation, modification, revocation or non-renewal of any Permit is pending
or, to the knowledge of Transco, threatened. 
D&W has not received any notice relating to any proposed change in
zoning or other use restrictions.


(f)            Litigation.  There is no pending or, to the knowledge of
Transco, threatened material litigation, labor dispute, condemnation, eminent
domain or administrative proceeding or real estate tax protest or proceeding
against or affecting the Line, D&W or arising from any of the Material
Contracts (as hereinafter defined), which would have a materially adverse
effect on the Line or D&W.  There is
no litigation or administrative proceeding pending or, to the knowledge of
Transco, threatened seeking to prevent, hinder, modify, delay or challenge the
transactions contemplated by this Agreement.


 


23

















 


(g)           Sufficiency of Assets.  None of the assets owned or leased by D&W
is subject to any Encumbrance, other than (i) liens for current taxes and
assessments not yet past due, (ii) mechanics’, workmen’s, repairmen’s,
warehousemen’s and carriers’ liens arising in the ordinary course of business
of D&W consistent with past practice and (iii) any such matters of record,
Encumbrances and other imperfections of title that do not, individually or in
the aggregate, materially impair the continued ownership, use and operation of
the assets to which they relate in the business of D&W as currently
conducted.  To the knowledge of Transco,
D&W has not received notice relating to the curtailment of any utility
service supplied to the Line.


(h)           Real Property.  Other than as set forth on Part A of Schedule
18.01(h), there are no material documents affecting title on any part of the
Line.  Other than as set forth on Part B
of Schedule 18.01(h), there are currently no other material agreements
affecting any part of the Line.  To the
knowledge of Transco, neither Transco nor D&W (i) has received any written
notice or claim challenging the ownership of its real property or (ii) taken
any action that may affect the ownership of D&W’s real property.


(i)            Taxes.


(i)            D&W, or the affiliated, combined
or unitary group of which D&W is or was a member, as the case may be
(collectively, the “Tax Affiliates”),
in a timely manner have filed all federal and all material state, local and
foreign tax returns required to be filed by them and have paid all taxes shown
due on such returns.  All such returns
and reports are true, correct and complete in all material respects and
accurately set forth all items to the extent required to be reflected or
included in such returns by applicable federal, state, local or foreign tax
laws, regulations or rules.  D&W and
the Tax Affiliates have paid in full or set up an adequate reserve in respect
of all material taxes for the periods covered by such returns, as well as all
other material taxes, penalties, interest, fines, deficiencies, assessments and
governmental charges that have become due or payable, including, without
limitation, all taxes that D&W is obligated to withhold from amounts paid
or payable to or benefits conferred upon employees, creditors and third
parties.  Neither D&W nor any Tax
Affiliate has any tax liability for which D&W could be liable and for which
an adequate tax reserve has not been established on the consolidated balance
sheet of D&W and the Tax Affiliates as at March 31, 2005 (the “Balance Sheet” and such date, the “Balance Sheet Date”), whether or not
disputed, including any interest and penalty in connection therewith, for all
periods ending on or prior to the Balance Sheet Date.


(ii)           Set forth on Schedule 18.01(i) is a
complete list of income and other tax returns filed by D&W, and income tax
returns filed by any of the Tax Affiliates, in D&W’s last ten (10) taxable
years pursuant to the laws or regulations of any federal, state, local or
foreign tax authority that have been examined or audited by the Internal
Revenue Service (the “IRS”) or
other appropriate authority.  Also set
forth on Schedule 18.01(i) is a complete list of all adjustments resulting from
each such examination or audit.  No tax
examination or audit of D&W is in progress. 
No changes proposed by a taxing authority in an audit (other than
changes disclosed in Schedule 18.01(i)) can reasonably be expected to affect
the amount of tax liability for D&W in the future.  All deficiencies proposed as a result of such
examinations or audits have been paid or finally 


 


24

















 


settled and no issue has been raised in any such
examination or audit that, by application of similar principles, reasonably can
be expected to result in the assertion of a deficiency for any other year not
so examined or audited.  The results of
any settlement and the necessary adjustments resulting therefrom properly are
reflected in the Balance Sheet.  There
are no grounds for any further material tax liability with respect to the years
that have not been examined or audited. 
There is no outstanding agreement or waiver made by or on behalf of
D&W or, in the case of income taxes, any of the Tax Affiliates for the
extension of time for any applicable statute of limitations, and neither
D&W nor, in the case of income taxes, any Tax Affiliate has requested any
extension of time in which to file any tax return, except as set forth on
Schedule 18.01(i).


(iii)          Except for taxes for the payment of
which an adequate reserve has been established on the Balance Sheet and for
property taxes that are not delinquent, there is no tax lien, whether imposed
by any federal, state, local or foreign taxing authority, outstanding against
any of the assets or properties of D&W.


(iv)          Neither D&W nor any Tax Affiliate
has executed any closing agreement pursuant to Section 7121 of the Code, or any
predecessor provision thereof, or any similar provision of state or local law.


(v)           D&W is not a party to, and is not
bound by, a tax sharing agreement or similar arrangement, except as set forth
on Schedule 18.01(i).


(vi)          Except as otherwise set forth on
Schedule 18.01(i)(vi), neither D&W nor any Tax Affiliate has agreed, and
none is required, to make any adjustments pursuant to Section 481(a) of the
Code or any similar provision of state or local law by reason of a change in
accounting method initiated by it or any other relevant party, none of them has
any knowledge that the IRS has proposed any such adjustment or change in
accounting method, and there is no application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or assets of D&W or any Tax Affiliate.


(vii)         D&W has not made any payments, is
not obligated to make any payments, and is not a party to any agreement that
under any circumstances could obligate it to make payments, in each case that
would result in tax pursuant to Section 409A of the Code.


(viii)        As used in this Agreement, the term “tax
return” includes any material report, statement, form, return or other document
or information required to be supplied to a taxing authority in connection with
taxes.  As used in this Agreement, the
term “taxes” means any federal, state, local and foreign income or gross
receipts tax, alternative or add-on minimum tax, sales and use tax, customs
duty and any other tax, charge, fee, levy or other assessment including,
without limitation, property, transfer, occupation, service, license, payroll,
franchise, excise, withholding, ad valorem, severance, stamp, premium, windfall
profit, employment, rent or other tax, governmental fee or like assessment or
charge of any kind whatsoever, together with any interest, fine 


 


25

















 


or penalty thereon, addition to tax, additional
amount, deficiency, assessment or governmental charge imposed by any federal,
state, local or foreign taxing authority.


(ix)           Neither D&W nor any of its Tax
Affiliates is or has been a party to any “listed transaction” as defined in
Treasury Regulation Section 1.6011-4(b)(2) or to any other transaction that is
a “reportable transaction” pursuant to Treasury Regulation Section 1.6011-4(b).


(j)            Environmental Matters.  To the knowledge of Transco, D&W is and
has been in compliance with all applicable Environmental Laws.  D&W has not received during the past five
years nor, to the best knowledge of Transco, is there any basis for, any
communication or complaint from a Governmental Authority or other person
alleging that D&W has any liability under any Environmental Law or is not
in compliance with any Environmental Law. 
To the knowledge of Transco, no Hazardous Substances are or have been
present, and there is and has been no Release or threatened Release of
Hazardous Substances nor any clean-up or corrective action of any kind relating
thereto, on any properties (including any buildings, structures, improvements,
soils and surface, subsurface and ground waters thereof) currently or formerly
owned, leased or operated by D&W or at any location to which D&W has
sent any Hazardous Substances for treatment, storage or disposal, except as
listed on Schedule 18.01(j) and except in material compliance with applicable
Environmental Laws.  To the knowledge of
Transco, no underground improvement, including any treatment or storage tank or
water, gas or oil well, is or has been located on any property described in the
foregoing sentence.  To the knowledge of
Transco, D&W is not actually, contingently, potentially or allegedly liable
for any Release of, threatened Release of or contamination by Hazardous
Substances or otherwise under any Environmental Law.  There is no pending or, to the knowledge of
Transco, threatened investigation by any Governmental Authority with respect to
D&W relating to Hazardous Substances or otherwise under any Environmental
Law.  D&W has provided to the
Contributor all “Phase I”, “Phase II” or other environmental assessment reports
in their possession or to which they have reasonable access addressing
locations ever owned, operated or leased by D&W.


For purposes of this Agreement:


“Environmental Laws”
means:  any Laws of any Governmental
Authority relating to (i) releases or threatened releases of Hazardous
Substances or materials containing Hazardous Substances; (ii) the manufacture,
handling, transport, use, treatment, storage or disposal of Hazardous
Substances or materials containing Hazardous Substances; or (iii) pollution or
protection of the environment, health, safety or natural resources.


“Hazardous Substances”
means:  (i) those substances defined in
or regulated under the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act (“CERCLA”),
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act, and
their state counterparts, as each may be amended from time to time, and all
regulations thereunder; (ii) petroleum and petroleum products, including crude
oil and any fractions thereof; (iii) natural gas, synthetic gas, and any
mixtures thereof; (iv) polychlorinated biphenyls, asbestos and radon; (v) any
other pollutant or 


26

















 


contaminant; and (vi) any substance, material or waste
regulated by any Governmental Authority pursuant to any Environmental Law.


“Release” has the meaning
set forth in Section 101(22) of CERCLA.


(k)           Material Contracts.  Except for the UP Trackage Rights Agreement,
the UP Interchange Agreement, the IANR O&M Agreement and the Rail Storage
Agreement dated as of September 23, 2003 between D&W and UP, D&W is not
a party to or bound by any Contract that is material to the business,
operations, assets, financial condition, results of operations or prospects of
D&W (the “Material Contracts”).  Each Material Contract is a legal, valid,
binding and enforceable agreement and is in full force and effect.  Neither D&W nor, to the knowledge of
Transco, any other party is in breach or violation of, or (with or without
notice or lapse of time or both) default under, any Material Contract, nor has
D&W received any claim of any such breach, violation or default.  D&W has delivered or made available to
the Contributor true and complete copies of all Material Contracts, including
any amendments thereto.


(l)            Affiliate Transactions.  Except for administrative and accounting
services provided by Transco, for D&W, there are no contracts or agreements
by and between D&W, on the one hand, and any affiliate of D&W, on the
other hand, pursuant to which such party provides or receives any information,
assets, properties, support or other services to or from D&W (including
contracts relating to billing, financial, tax, accounting, data processing,
human resources, administration, legal services, information technology and
other corporate overhead matters). 
Subsequent to the Closing, D&W will possess all assets, properties
and rights currently used in the conduct or operation of their business.  There are no outstanding notes payable to,
accounts receivable from or advances by D&W to, and D&W is not
otherwise a debtor or creditor of, or has any liability or other obligation of
any nature to, any affiliate of D&W.


(m)          Material Facts.  D&W has not misstated any material fact
or failed to disclose any material fact relating to D&W or its business
necessary to make the representations and warranties contained herein not
misleading.  The obligations of UP set
forth in Section 7.A.1 (q) of the Line Sale Contract between UP and D&W
dated as of September 26, 2003 (the “UP Line Sale Contract”), have been
satisfactorily completed in accordance with the terms thereof.


(n)           No Other Representations.  Except for the representations and warranties
contained in this Section 18.01, neither D&W nor Transco or any other person
or entity makes any other express or implied representation or warranty on
behalf of D&W or Transco, and D&W and Transco hereby disclaim any such
representation or warranty, with respect to (i) the execution and delivery of
this Agreement, (ii) the consummation of the transactions contemplated hereby
or (iii) the Line including merchantability and all other express and implied
warranties and representations concerning condition, title and use of the Line.


(o)           Key Persons.  J. Robert Nelson, Charles Anderson and Steve
Masters are and, since Transco’s acquisition of D&W, have been, the persons
primarily responsible for the operations of D&W.


 


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18.02       Hawkeye.  Hawkeye represents and warrants to Transco
that, on the day of the execution of this Agreement:


(a)           Organization.  It is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.


(b)           Authorization.  The execution and delivery by Hawkeye of this
Agreement and the performance by Hawkeye of its obligations hereunder are
within its powers and authority and have been duly authorized by all necessary
action.


(c)           Valid Obligation.  This Agreement is a legal, valid and binding
obligation of Hawkeye and enforceable against it in accordance with its terms,
except as the enforceability thereof may be limited by applicable law.


(d)           No Conflict.  The execution, delivery and performance by
Hawkeye of this Agreement and the consummation of the transactions contemplated
hereby, do not and will not:  (i)
conflict with or violate the certificate of incorporation or bylaws or
equivalent organizational documents of Hawkeye; (ii) conflict with or violate
any Law applicable to Hawkeye or by which any property or asset of Hawkeye is
bound or affected; (iii) violate any judgment, order, writ, injunction or
decree of any Governmental Authority; and (iv) or result in a material breach
of any of the terms or conditions of, or constitute a material default under,
require any consent of any person pursuant to, give to others any right of
termination, amendment, modification, acceleration or cancellation of, or
otherwise adversely affect any rights of Hawkeye under, or result in the
creation of any Encumbrance on any property, asset or right of Hawkeye pursuant
to, any note, bond, mortgage, indenture, agreement, lease, license, permit,
franchise, instrument, obligation or other contract to which Hawkeye is a party
or by which Hawkeye or any of its respective properties, assets or rights are
bound or affected.


(e)           Filings.  Hawkeye is not required to file, seek or
obtain any notice, authorization, approval, order, permit or consent of or with
any Governmental Authority in connection with the execution, delivery and
performance by Hawkeye of this Agreement or the consummation of the
transactions contemplated hereby or thereby.


(f)            Due Diligence. 
Hawkeye has conducted a satisfactory due diligence investigation and
review of D&W and has received answers satisfactory to it to all inquiries
it has made with respect to D&W.


SECTION
19.


TAX
PROCEDURES AND INDEMNIFICATION


19.01       Tax
Returns.


(a)           Except as provided in Section
19.01(b) below, D&W shall prepare, or cause to be prepared, and shall file,
or cause to be filed, all tax returns of D&W required to be filed after the
Effective Date.  Transco shall prepare,
or cause to be prepared, and shall file, or cause to be filed, all tax returns
of D&W required to be filed on or before the Effective Date.


 


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(b)           Hawkeye shall cause D&W to
consent to join, for all taxable periods of D&W ending on or before the
Effective Date for which D&W is eligible to do so, in any consolidated,
combined or unitary federal, state, local or foreign income tax returns that a
Tax Affiliate shall request it to join. 
Such Tax Affiliate shall cause to be prepared and filed all such
consolidated, combined or unitary returns. 
D&W shall cooperate with the Tax Affiliates in the preparation of
portions of such returns pertaining to D&W. 
Except as required by applicable law, all such returns shall be prepared
on a basis consistent with past practice.


19.02       Taxes
and Other Payments.  All accrued but
unpaid property taxes, special assessments, insurance, and charges for utilities
assessed or payable in respect of the Line and facilities as of and after the
Effective Date shall be prorated, adjusted and apportioned as follows:


(a)           Property taxes, special assessments,
insurance and utilities related to the D&W trackage from milepost 332
at Dewar, IA to the Fairbank Plant at milepost 346 shall be the
responsibility of Hawkeye; and


(b)           Property taxes, special assessments,
insurance and utilities related to the D&W trackage from the Fairbank Plant
at milepost 346 to milepost 354.3 at Oelwein, IA shall be the
responsibility of Transco.


With respect to the foregoing payments or
reimbursements, D&W shall issue, at least twenty (20) days prior to the
applicable due date, a notice of the applicable taxes, assessments,
insurance  and utilities, including any
documentation relating to such taxes, assessments, insurance and utilities to
each Member, indicating each Member’s share of the total amount.  Each Member shall pay such amount to D&W
within ten (10) days of receipt of such notice.


19.03       Indemnification
of Hawkeye.  Except to the extent
that taxes are accrued on the Balance Sheet, or governed by Section 19.02,
Transco shall be responsible for and pay and shall indemnify and hold harmless
Hawkeye with respect to (i) any and all taxes imposed on D&W, or for which
D&W is liable, with respect to any periods ending on or before the
Effective Date or to the extent apportioned to such periods pursuant to Section
19.05, including the Effective Date, (ii) any and all taxes of any member (other
than D&W) of a consolidated, combined or unitary group of which D&W was
a member on or prior to the Effective Date, by reason of the liability of
D&W pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous or
similar state, local or foreign law or regulation, (iii) all taxes arising out
of a breach of the representations, warranties or covenants contained in
Section 18.01(i) hereof, and (iv) any costs or expenses with respect to taxes
indemnified hereunder.  Any indemnity
required to be made by Transco pursuant to this Section 19.03 shall be made
within thirty (30) days of written notice from Hawkeye.


19.04       Post-Closing
Taxes.  After the Effective Date,
D&W shall be solely responsible for the payment or discharge of (i) all
taxes imposed on D&W for all periods ending after the Effective Date not
apportioned to a taxable period ending on the Effective Date pursuant to
Section 19.05 and (ii) any costs or expenses with respect to such taxes.


19.05       Apportionment.  For the sole purpose of appropriately
apportioning any taxes relating to a period that includes (but that would not
end on) the Effective Date, D&W will, to the extent permitted by applicable
law, elect with the relevant taxing authority to treat for all 


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purposes the Effective Date as the last day of a
taxable period of D&W.  In the case
where applicable law does not permit D&W to treat the Effective Date as the
last day of a taxable period, then for purposes of this Agreement, the portion
of such tax that is attributable to D&W for the part of such taxable period
that ends on the Effective Date shall be (i) except for property tax governed
by Section 19.02, in the case of a tax that is not based on net income, the
total amount of such tax for the full taxable period that includes the
Effective Date multiplied by a fraction, the numerator of which is the number
of days from the beginning of such taxable period to and including the
Effective Date and the denominator of which is the total number of days in such
full taxable period, and (ii) in the case of a tax that is based on net income,
the tax that would be due with respect to such partial period if such partial
period were a full taxable period, apportioning income, gain, expenses, loss, deductions
and credits equitably based on an interim closing of the books.  The benefits of lower tax brackets and other
similar benefits shall be apportioned in making the calculation of such
allocated portions on the basis of the number of days before and including the
Effective Date and the number of days after the Effective Date for
Contests.  For purposes of this
Agreement, a “Contest” is any
audit, court proceeding or other dispute with respect to any tax matter that
affects D&W.  D&W shall, at its
own cost, cooperate with the Tax Affiliates in a prompt and timely manner in
connection with any Contest.  Such
cooperation shall include, but not be limited to, making available to the Tax
Affiliates, during normal business hours, all books, records, returns,
documents, files, other information (including, without limitation, working
papers and schedules), officers or employees (without substantial interruption
of employment) or other relevant information necessary or useful in connection
with any Contest requiring any such books, records and files.  The Tax Affiliates shall, at their election,
have the right to represent D&W’s interests in any Contest relating to a
tax matter arising in a period ending on or before the Effective Date, to
employ counsel of their choice at their expense and to control the conduct of
such Contest, including settlement or other disposition thereof; provided,
however, that D&W shall have the right to consult with the Tax
Affiliates regarding any such Contest that may affect D&W for any periods
ending after the Effective Date at D&W’s own expense and provided, further,
that any settlement or other disposition of any such Contest may only be made
with the consent of D&W, which consent will not be unreasonably
withheld.  D&W shall have the right
to control the conduct of any Contest with respect to any tax matter arising in
a period ending after the Effective Date.


19.06       Tax
Sharing Arrangements.  Each of the
tax sharing agreements or other similar arrangements to which D&W is a
party or by which it is bound shall be terminated by D&W prior to the
Effective Date.


SECTION
20.


WAIVERS
AND REMEDIES


The failure of any party hereto to insist in any one or more instances
upon strict performance of any of the obligations of the other parties pursuant
to this Agreement or to take advantage of any of its rights hereunder shall not
be construed as a waiver of the performance of any such obligation or the
relinquishment of any such rights for the future, but the same shall continue
and remain in full force and effect.


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SECTION
21.


DEFAULT
AND CURES


No default by any party to this Agreement in the performance of such
party’s obligations hereunder, which, except for this Section 21, would be a
legal basis for rescission, cancellation or termination of this Agreement,
shall give or result in such a right unless and until the party(ies) committing
such default shall fail to correct the default within thirty (30) days after
written notice of claim of such default is given to the defaulting member(s) by
the non-defaulting member(s); provided, however, that if such default cannot be
cured within such thirty (30) day period with the exercise of reasonable
diligence, then such cure period will be extended for an additional reasonable
period of time, not to exceed sixty (60) days, so long as the defaulting member
is exercising reasonable diligence to cure such default.


SECTION
22.


ENTIRE
AGREEMENT, SEVERABILITY AND CONSTRUCTION


22.01       Entire
Agreement.  This Agreement comprises
the entire agreement between Transco and Hawkeye concerning the matters set
forth herein, merging and superseding all prior understandings and
representations, whether oral or written.


22.02       Severability.  If any part, term or provision of this
Agreement is held by a court or an agency having or purporting to have
jurisdiction over this Agreement or the parties hereto to be unenforceable,
illegal, against public policy, or in conflict with any federal, state or local
laws, such part, term or provision shall be considered severable from the rest
of this Agreement.  The remaining
portions of this Agreement shall not be affected, and the rights and
obligations of the parties shall be construed as if this Agreement did not
contain the particular term, part or provision held to be invalid, unless the
invalid provisions are material terms of this Agreement or, when considered in
the aggregate, render this Agreement unreasonably burdensome, in which case
this Agreement shall be terminated.


22.03       Construction
of Agreement and Terms.  The terms of
this Agreement have been arrived at after mutual negotiation and, therefore, it
is the intention of the parties that their terms not be construed against any
of the parties by reason of the fact that it was prepared by one of the
parties.


SECTION
23.


NOTICES


Except as otherwise set forth in this Agreement, all notices required
to be given hereunder must be in writing and shall be delivered personally (by
hand delivery or by overnight courier) or by facsimile transmission or mailed
(certified mail, postage prepaid, return receipt requested) to the Members at
the following addresses or facsimile numbers, and shall be effective upon
receipt (when sent by personal delivery or by certified mail), and upon receipt
of transmission confirmation (when sent by facsimile); provided, however, that
any Member may 


31

















 


change the address or facsimile number to which
notices or other communications to it will be sent by giving the other Member
written notice of such change.


If to Hawkeye:


Hawkeye
Renewables, LLC

Attention:  J. D. Schlieman

21050 140th Street

Iowa Falls, IA  50126 

Fax:  (515) 859-7460


If to Transco:


Transco Railway
Products Inc.

Attention:  Charles Andersen

55 East Jackson Boulevard, Suite 2100

Chicago, IL  60604-4166

Fax:  (312) 427-4975


SECTION
24.


DISSOLUTION
AND TERMINATION


24.01       Dissolution.  The Company shall be dissolved and its
business wound up upon the earliest to occur of any of the following events,
unless the Members holding a majority of the Membership Interests vote to
continue the life of the Company upon the occurrence of such an event.


(a)           The sale, condemnation or other
disposition of all property of the Company and the receipt of all consideration
therefor;


(b)           The written determination of the
Management Committee to terminate the Company; or


(c)           The resignation, expulsion,
bankruptcy or dissolution of any Member (which shall not include the occurrence
of such an event with respect to any Member’s underlying members or partners
which does not cause such an event to occur with respect to the Member itself)
or the occurrence of any other event that terminates the continued membership
of any Member in the Company, unless, within ninety (90) days after such event,
each of the remaining Members elects in writing to continue the business of the
Company.


Without limitation on, but subject to, the other
provisions hereof, the assignment of all or any part of a Member’s Membership
Interest permitted hereunder will not result in the dissolution of the
Company.  Except as otherwise
specifically provided in this Agreement, each Member agrees that, without the
consent of the other Members, any Member may not withdraw from or cause a
voluntary dissolution of the Company.  In
the event any Member withdraws from or causes a voluntary dissolution of the
Company in contravention of this Agreement, such withdrawal or 


32

















 


the causing of such voluntary dissolution shall not affect
such Member’s liability for obligations of the Company.


24.02       Termination.  In all cases of dissolution of the Company,
the business of the Company shall be wound up and the Company terminated as
promptly as practicable thereafter, and each of the following shall be
accomplished.


(a)           The Liquidating Member (as defined
herein) shall cause to be prepared a statement setting forth the assets and
liabilities of the Company as of the date of dissolution, a copy of which
statement shall be furnished to all of the Members.


(b)           The property of the Company shall be
liquidated by the Liquidating Member as promptly as possible, but in an orderly
and businesslike and commercially reasonable manner and subject to the
provisions of a liquidating plan approved by the Management Committee.  The Liquidating Member may distribute
property of the Company in kind only with the consent of all of the Members.


(c)           The proceeds of sale and all other
assets of the Company shall be applied and distributed as follows and in the following
order of priority.


(i)            To the payment of (A) the debts and
liabilities of the Company (including any outstanding amounts due on any
indebtedness encumbering the property of the Company, or any part thereof) and
(B) the expenses of liquidation.


(ii)           To the setting up of any reserves
which the Liquidating Member and the Management Committee shall determine to be
reasonably necessary for contingent, unliquidated or unforeseen liabilities or
obligations of the Company or any Member arising out of or in connection with
the Company.  Such reserves may, in the
discretion of the Liquidating Member, be paid over to a national bank or
national title company selected by it and authorized to conduct business as an
escrow agent to be held by such bank or title company as escrow agent for the
purposes of disbursing such reserves to satisfy the liabilities and obligations
described above, and at the expiration of such period as the Liquidating Member
may reasonably deem advisable, distributing any remaining balance as provided
in Section 24.02(c)(iii); provided, however, that, to the extent that it
shall have been necessary, by reason of applicable law or regulation, to create
any reserves prior to any and all distributions which would otherwise have been
made under Section 24.02(c)(i) and, by reason thereof, a distribution
under Section 24.02(c)(i) has not been made, then any balance remaining
shall first be distributed pursuant to Section 24.02(c)(i).


(iii)          If the Company is dissolved within
twelve (12) months from the date of execution of this Agreement, to Transco to
the extent the amount payable to Transco under Section 13.01(b) has not been
paid.


(iv)          The balance, if any, to the Members in
accordance with their Membership Interests.


 


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24.03       Liquidating
Member.  The Management Committee
shall designate a Member to serve as liquidating member (the “Liquidating Member”), and the Liquidating
Member is hereby irrevocably appointed as the true and lawful attorney in the
name, place and stead of each of the Members, such appointment being coupled
with an interest, to make, execute, sign, acknowledge and file with respect to
the Company all papers which shall be necessary or desirable to effect the
dissolution and termination of the company in accordance with the provisions of
this Section 24.  Notwithstanding the
foregoing, each Member, upon the request of the Liquidating Member or the
Management Committee, shall promptly execute, acknowledge and deliver all such
documents, certificates and other instruments as the Liquidating Member or the
Management Committee shall reasonably request to effectuate the proper
dissolution and termination of the Company, including the winding up of the
business of the Company.


24.04       Claims
of the Members.  Members and former
Members shall look solely to the Company’s assets for the return of their
capital contributions, and if the assets of the Company remaining after payment
of or due provision for all debts, liabilities and obligations of the Company
are insufficient to return such capital contributions, the Members and former
Members shall have no recourse against the Company or any other Member.


SECTION
25.


MISCELLANEOUS


25.01       Effective
Date.  This Agreement shall be
effective upon its execution by Hawkeye and Transco (the “Effective Date”).


25.02       Counterparts;
Headings.  This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument.  Headings in this Agreement are for reference
purposes only and shall not be deemed to have any substantive effect.


25.03       Amendment.  This Agreement and any provisions hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the Member against which an enforcement of the same is sought.


25.04       Binding
Effect.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto, their permitted
successors and assigns.


25.05       Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.


 


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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date last signed
below.


 


	
   

  	
  HAWKEYE
  RENEWABLES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  
	
   

  	
   

  
	
   

  	
  TRANSCO
  RAILWAY PRODUCTS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  D&W
  RAILROAD, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  



 


 


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