Document:

exv10w3

 

Exhibit 10.3

CONSENT TO ASSIGNMENT

     This Consent to Assignment (the “Consent”) is given as of this 9th  day
of August, 2006, by Iowa Renewable Energy, LLC (“Iowa Renewable Energy”), located in Washington,
Iowa.

     RECITALS: REG, LLC (f/k/a Renewable Energy Group, LLC) entered into contracts with Iowa
Renewable Energy with respect to the construction of their biodiesel facility as set out on the
Exhibit A attached hereto (collectively “Agreements”).

     REG, LLC, InterWest, L.C., and West Central Cooperative joined their forces to expand upon
their biodiesel construction, management and marketing efforts by creating Renewable Energy Group,
Inc. (“REG, Inc.”) on July 31, 2006. In order to be continuing to fulfill the obligations under
the Agreements, Renewable Energy Group, Inc. would desire to confirm Iowa Renewable Energy’s
consent to an assignment of REG, LLC’s rights in the Agreements to REG, Inc.

     Performance of the Agreements will continue under the same leadership and personnel, supported
by the same strategic partners as were involved previously under REG, LLC. By signature hereto,
Renewable Energy Group, Inc. assumes and agrees to perform and discharge all obligations as set
forth in the Agreements previously entered into by REG, LLC with Iowa Renewable Energy.

	 	 	 	 	 	 	 
	REG, LLC (f/k/a Renewable Energy Group, LLC)	 	RENEWABLE ENERGY GROUP, INC.
	 
	 	 	 	 	 	 
	By

	 	/s/ Nile Ramsbottom
	 	By
	 	/s/ Jeffrey Stroburg
	 

	 	 
	 	 	 	 
	Nile Ramsbottom, President	 	 	 	Jeffrey Stroburg, CEO

CONSENT TO ASSIGNMENT

     Iowa Renewable Energy hereby consents to the assignment of the Agreements to Renewable Energy
Group, Inc.

	 	 	 	 	 
	 	 	IOWA RENEWABLE ENERGY, LLC
	 
	 	 	 	 
	 

	 	By
	 	/s/ Michael J. Bohannan
	 

	 	 	 	 
	 

	 	 	 	President (Title)

 

 

EXHIBIT A

AGREEMENTS BETWEEN REG, LLC and IOWA RENEWABLE ENERGY

Iowa Renewable Energy: AGCA Standard Form of Design Build Agreement and General Conditions
Between Owner and Contractor dated May 2, 2006, by and between Renewable Energy Group and Iowa
Renewable Energy, LLC, with respect to the Iowa Renewable Energy biodiesel facility in Washington,
Iowa; Agreement for Pre-Construction Services dated February 17, 2006, by and between Iowa
Renewable Energy, LLC, and REG, LLC (f/k/a Renewable Energy Group, LLC), joined therein by West
Central Cooperative and Todd & Sargent, Inc., as guarantors; Agreement for Phase 1 Services and
Statement of Intent dated September 22, 2005, by and between Iowa Renewable Energy, LLC, and REG,
LLC (f/k/a Renewable Energy Group, LLC); Agreement for Phase 2 Services dated September 22, 2005,
by and between Iowa Renewable Energy, LLC, and REG, LLC (f/k/a Renewable Energy Group, LLC); and
Addendum to Agreements for Phase 1 and Phase 2 Services and Statement of Intent dated September 29,
2005, by and between Iowa Renewable Energy, LLC, and REG, LLC (f/k/a Renewable Energy Group, LLC).exv10w4

 

Exhibit 10.4

MANAGEMENT AND OPERATIONAL SERVICES AGREEMENT

     This Management and Operational Services Agreement (“Agreement”) is made and entered into as
of the 25th day of August, 2006, by and between Renewable Energy, Inc., a
cooperation organized and existing under the laws of the state of Delaware, with offices at
Ralston, Iowa (“REG, Inc.”), and Iowa Renewable Energy, LLC, a limited liability company organized
and existing under the laws of the state of Iowa, with offices at Washington, Iowa (“Iowa Renewable
Energy”).

     RECITALS: Iowa Renewable Energy and Renewable Energy Group, LLC (“REG”) have entered into a
Design — Build Agreement dated the 2nd day of May, 2006 (“Construction Contract”), with respect to
a biodiesel production facility to be built for Iowa Renewable Energy in Washington, Iowa
(“Biodiesel Facility”). As a new entity without staff, Iowa Renewable Energy has recognized the
importance of drawing upon the experience of REG, Inc. in the initial operation of the Biodiesel
Facility. Iowa Renewable Energy and REG, Inc. have discussed the general terms and conditions
under which REG, Inc. would provide start-up management and operational services to Iowa Renewable
Energy with respect to the Biodiesel Facility, which the parties wish to reduce to this writing.

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

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

	 	A.	 	General Manager. REG, Inc. will provide a General Manager to implement
and oversee the business plan for the Biodiesel Facility, and direct, promote and
coordinate the staff, personnel and plant operations. The General Manager will be an
employee of REG, Inc., but will be assigned to carry out the responsibilities of
General Manager at the Biodiesel Facility. Included among the specific duties to be
accomplished by the General Manager are:

	 	•	 	To utilize their ongoing best efforts to successfully and profitably manage
the Biodiesel Facility in Iowa Renewable Energy’s best interests;

 

 

	 	•	 	Development of an annual budget for presentation to and approval of Iowa
Renewable Energy’s Board of Directors (or other board of governance (“Board”));
	 
	 	•	 	Attend meetings of the Board and provide information upon its request;
	 
	 	•	 	Insure that all raw product costs are minimized and that all finished
product revenues are maximized;
	 
	 	•	 	Work with Iowa Renewable Energy’s Board to formulate Iowa Renewable Energy’s
mission and goals;
	 
	 	•	 	Manage the Biodiesel Facility’s resources to efficiently achieve such
mission and goals;
	 
	 	•	 	Manage Iowa Renewable Energy’s duties and rights under agreements with third
parties relating to the Biodiesel Facility;
	 
	 	•	 	Assist with regulatory affairs monitoring and compliance;
	 
	 	•	 	Hire, terminate and replace Biodiesel Facility personnel (whether Leased
Employees or Iowa Renewable Energy Employees as both terms are defined
hereafter) as necessary and in all cases in accordance with the policies of the
Board;
	 
	 	•	 	Management of governmental relations, including USDA’s biodiesel programs;
and
	 
	 	•	 	Such other duties as may be agreed between REG, Inc. and Iowa Renewable
Energy,

	 	 	 	while acting in compliance with Iowa Renewable Energy’s Operating Agreement and
other governing documents provided to the General Manager by the Board.
	 
	 	 	 	The General Manager will report to such officer of REG, Inc. as REG, Inc. shall from
time to time designate. All employee compensation and employee benefits associated
with the position of General Manager will be paid by REG, Inc.
	 
	 	 	 	The General Manager to be assigned to the Biodiesel Facility shall be subject to the
approval of Iowa Renewable Energy. REG, Inc. agrees not to move a person placed as
General Manager at the Biodiesel Facility to another facility operated by REG, Inc.
during the term of this Agreement (and any extensions thereof) without the written
consent of Iowa Renewable Energy. Subject to the foregoing, REG, Inc. has the right
to hire, fire, and replace persons selected to serve as General Manager at the
Biodiesel Facility.
	 
	 	B.	 	Operations Manager. REG, Inc. will provide an Operations Manager to
oversee the operation of the Biodiesel Facility. The Operations Manager will be an
employee of REG, Inc., but will be assigned to carry out the responsibilities of
Operations Manager at the Biodiesel Facility. Included among the specific duties to be
accomplished by the Operations Manager are:

	 	•	 	Planning and scheduling biodiesel production to meet customer needs and
marketing goals;
	 
	 	•	 	Monitor and improve quality control;

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	 	•	 	Oversee facility and equipment maintenance;
	 
	 	•	 	Assist with budgeting and the monitoring of labor and other expenses in the
operation;
	 
	 	•	 	Implement processing changes and new technologies as they evolve, and plan
for new projects relating to biodiesel production; and
	 
	 	•	 	Such other duties as may be agreed to between REG, Inc. and Iowa Renewable
Energy.

	 	 	 	The Operations Manager to be assigned to the Biodiesel Facility shall be subject to
the approval of Iowa Renewable Energy. The Operations Manager will report to the
General Manager. All employee compensation and employee benefits associated with
the position of Operations Manager will be paid by REG, Inc.
	 
	 	C.	 	Feed Stocks Procurement. REG, Inc. will be responsible for arranging
the purchase of soybean oil, together with other feed stocks as may be needed in the
future. REG, Inc. will procure all feed stocks necessary for production at the
Biodiesel Facility; and will:

	 	•	 	Provide analysis and audit of feed stock suppliers;
	 
	 	•	 	Purchase feed stocks at competitive prices meeting specifications and in
adequate quantities to fill the production schedule of the Biodiesel Facility;
	 
	 	•	 	Negotiate for discounts where obtainable on feed stocks (with all applicable
price discounts, rebates or other incentives passed through to Iowa Renewable
Energy);
	 
	 	•	 	Arrange for transportation, logistics, and scheduling of feed stock
deliveries by suppliers based upon competitive bidding, with local haulers
having an equitable chance to bid; and
	 
	 	•	 	Provide analysis and audit of bulk transportation providers.

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

	 	•	 	Perform due diligence requirements for investigation of suppliers of the
chemical inputs;
	 
	 	•	 	Provide analysis and audit of chemical suppliers;
	 
	 	•	 	Purchase chemical inputs at competitive prices meeting specifications for
use in the Biodiesel Facility;
	 
	 	•	 	Negotiate for discounts where obtainable on chemicals (with all applicable
price discounts, rebates or other incentives passed through to Iowa Renewable
Energy);
	 
	 	•	 	Procure adequate chemical inputs to meet production schedules for the
Biodiesel Facility;

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	 	•	 	Provide analysis and audit of bulk transportation suppliers; and
	 
	 	•	 	Arrange for transportation, logistics, and scheduling services for chemical
input deliveries by suppliers based upon competitive bidding, with local
haulers having an equitable chance to bid.

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

	 	•	 	Accounting
	 
	 	•	 	Human Resources
	 
	 	•	 	Information Technology
	 
	 	•	 	Insurance Administration (unless Iowa Renewable Energy elects in writing to
fulfill such services itself, in which case REG, Inc. would have no
responsibility after receipt of notice of such election to perform any of the
Insurance Administration services as further outlined on Exhibit A hereto).
	 
	 	•	 	Payroll
	 
	 	•	 	Communications

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

	 	•	 	Market analysis of biodiesel supply and demand, utilizing non-proprietary,
public information;
	 
	 	•	 	Opportunities for participation in a trade association to access additional
historical data regarding prices, costs, and other analysis, contributed and
disseminated to members on an aggregated basis;
	 
	 	•	 	Enhanced access to biodiesel markets with REG, Inc.’s established
distribution channels and transportation at pass through costs;
	 
	 	•	 	Marketing specialists to serve as Iowa Renewable Energy’s representatives to
identify potential customers and attain and establish sales opportunities for
the Products at the prices and terms as established by Iowa Renewable Energy;
	 
	 	•	 	Analysis and audit of biodiesel customers desiring to purchase Iowa
Renewable Energy Product, including credit analysis;
	 
	 	•	 	Arrangements for transportation, logistics, and scheduling of biodiesel
shipments;
	 
	 	•	 	Where advantageous, arrange for leased tankers for rail shipments;
	 
	 	•	 	Analyze and audit bulk transportation providers;

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	 	•	 	Oversee reconciliation of shipments, invoicing and payments on a weekly
basis; and
	 
	 	•	 	Provide invoicing and accounts receivable management for biodiesel
shipments.

	 	G.	 	Provision of Leased Employees. In addition to furnishing the above
services, (unless otherwise elected by Iowa Renewable Energy as provided for in Section
5(H) hereafter) REG, Inc. shall lease to Iowa Renewable Energy at Iowa Renewable
Energy’s expense those employees as are necessary to fill the remaining personnel needs
to operate the Biodiesel Facility. Based upon the Biodiesel Facility and operation
planned as of the execution of this Agreement, the lease will cover the listing of job
descriptions as set out on Exhibit B hereto, but the employees being leased and their
job descriptions will be changed from time to time by the General Manager as necessary
to best operate the Biodiesel Facility.
	 
	 	H.	 	Additional Services Described. A further description of services to be
provided is attached hereto as Exhibit C.

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

	 	A.	 	Monthly Fee. Iowa Renewable Energy shall pay to REG, Inc., on a
monthly basis, a fee determined as follows:

	 	(i)	 	During Initial Period of Production. For the initial
period of production as defined hereafter, Iowa Renewable Energy shall pay to
REG, Inc. a fee equal to 5.7¢ times the number of gallons of biodiesel for
which Iowa Renewable Energy has received sale proceeds during the month for
which the fee is computed (the rate per gallon herein the “Fee Rate,” and the
payment per month the “Monthly Fee”). For purposes of this section 3(A), the
“Initial Period of Production” shall commence upon the sale of biodiesel
produced from the Biodiesel Facility, and continue for a period of six (6)
months after the end of the month in which such sales commence.
	 
	 	(ii)	 	Balance of Term After Initial Period of Production.
After the Initial Period of Production, the Monthly Fee shall be based upon
gallons produced rather than the gallons for which sale proceeds have been
received. For the first month after the Initial Period of Production, Iowa
Renewable Energy shall pay to REG, Inc. a fee equal to 5.7¢ per gallon of all
biodiesel produced from the Biodiesel Facility from the commencement of
production through the end of such month, less the total of all Monthly Fees
billed to Iowa Renewable Energy during the Initial Period of Production.
Beginning after the first such month of transition, Iowa Renewable Energy shall
pay to REG, Inc. a fee equal to 5.7¢ per

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	 	 	 	gallon of biodiesel produced from the Biodiesel Facility during the month
for which the fee is computed (the rate per gallon herein the “Fee Rate,”
and the payment per month the “Monthly Fee”). Further information with
respect to the “Monthly Fee” is attached hereto as Exhibit D. For purposes
of the Agreement, determination of the biodiesel produced from the Biodiesel
Facility for a month shall be based upon a compilation of the daily
production reports for the Biodiesel Facility for such month, and references
to a “gallon” shall be to the U.S. liquid measure of capacity, 231 cubic
inches, corrected to 60 degrees Fahrenheit.

	 	B.	 	Net Income Bonus. As an incentive to REG, Inc., and as additional
compensation for the services being rendered, Iowa Renewable Energy agrees to pay a
bonus to REG, Inc. on a yearly basis equal to an amount tied to the Net Income of Iowa
Renewable Energy’s Biodiesel Facility (“Net Income Bonus), as determined hereafter, the
amount of such bonus as computed under the table set out below. For purposes of this
Agreement, Iowa Renewable Energy’s “Net Income” shall be the net income for its fiscal
year before any deduction or allowance for federal or state income taxes, determined in
accordance with generally accepted accounting principles applied on a consistent basis
by the independent CPA firm engaged by Iowa Renewable Energy, and then adjusted as
necessary to: (i) include the receipt of government payments such as under the federal
excise tax credit program or similar federal or state payments; (ii) exclude any gains
or losses realized on the sale or disposition of capital assets; (iii) adjust
depreciation to utilize Internal Revenue Service Class lives depreciated on a straight
line, mid-month basis (with no bonus depreciation, Section 179 expense (election to
expense certain depreciable assets) or any other method of accelerated depreciation,
first year write-off or expensing to be taken), and (iv) exclude any reduction for the
Net Income Bonus paid or accrued to REG, Inc. as a result of this subsection. For any
partial fiscal year for Iowa Renewable Energy occurring during the term of this
Agreement, REG, Inc. shall receive a Net Income Bonus, if any, computed for that period
of the fiscal year in which REG, Inc. provides services hereunder.
	 
	 	 	 	Table: The Net Income Bonus shall be determined by adding the amounts determined by
reference to the following (except that REG, Inc. agrees any one yearly Net Income
Bonus shall not exceed $1,000,000):

	 	 	 	 	 
	Net Income of Iowa Renewable Energy’s	 	Amount to be Paid    
	Biodiesel Facility	 	as Net Income Bonus
	$0 to $1,000,000
	 	No Bonus
	2nd Million Dollars
	 	 	2	%
	3rd Million Dollars
	 	 	4	%
	4th Million Dollars
	 	 	6	%
	All Net Income in Excess of $4,000,000
	 	 	6	%

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	 	 	 	Example: Iowa Renewable Energy’s Net Income equals $8,000,000. The Net Income
Bonus would be $360,000, computed as follows:

	 	 	 	 	 
	1st $1,000,000 in Net Income
	 	No Bonus
	2nd $1,000,000 times 2% equals
	 	$	20,000	 
	3rd $1,000,000 times 4% equals
	 	$	40,000	 
	4th $1,000,000 times 6% equals
	 	$	60,000	 
	Balance of $4,000,000 times 6% equals
	 	$	240,000	 
	 
	Total Net Income Bonus equals
	 	$	360,000	 

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

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

	 	A.	 	Establish a Board of Directors or similar group to provide governance of Iowa
Renewable Energy, and input and guidance to the General Manager regarding the Biodiesel
Facility, and to take action upon recommendations of the General Manager.
	 
	 	B.	 	Establish on a monthly basis (or more often as needed), the price for which
REG, Inc., as Iowa Renewable Energy’s sales representative, is to sell Iowa Renewable
Energy’s Product, and review and determine production levels to be maintained at the
Biodiesel Facility.
	 
	 	C.	 	Provide the names of several persons who would be authorized on Iowa Renewable
Energy’s behalf to establish Product Prices, approve special prices, agree to the
handling of off-grade Product, approve off-site storage arrangements, and approve the
write off of accounts receivable, and further to notify REG, Inc. of any changes in
such designees (such designees to be reasonably available for contact by REG, Inc., and
able to respond in a timely fashion).

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	 	D.	 	Provide funds for:

	 	(i)	 	purchase, installation and maintenance of software, hardware,
and related equipment, together with utilities and related charges, in order
to accomplish the necessary communication of voice and data between the
parties, and conduct Iowa Renewable Energy’s business at and operate the
Biodiesel Facility.
	 
	 	(ii)	 	the cost of acquisition and implementation of newly evolving
technologies (and including those developed by REG, Inc. or its affiliates) at
the Biodiesel Facility, which have been approved by the Board.
	 
	 	(iii)	 	offices, computers, cell phones, and other facilities,
services and support for the personnel needed to operate the Biodiesel Facility
(and including the General Manager and Operations Manager) and appropriate for
the performance of their duties for Iowa Renewable Energy.
	 
	 	(iv)	 	payment or reimbursement for reasonable travel and other
similar out of pocket expenses incurred in furtherance of the business of Iowa
Renewable Energy and in fulfillment of the duties of the personnel needed to
operate the Biodiesel Facility (and including the General Manager and
Operations Manager), upon submission and substantiation of such expenses as may
be required for tax or auditing purposes.
	 
	 	(v)	 	payment of the costs of legal counsel and outside auditors as
may be determined necessary by the Board, and including for the examination of
financial records, preparation of income tax returns for Iowa Renewable Energy
and related reports to its owners and third parties, securities filings, and
similar reports.
	 
	 	(vi)	 	in general, the purchase and delivery of all feed stocks,
chemical and other inputs, all staff and personnel costs (other than those of
the General Manager and Operations Manager) necessary to operate the Biodiesel
Facility (whether such staff and personnel costs are incurred for Leased
Employees or Iowa Renewable Energy Employees as both terms are defined
hereafter, depending upon whether Iowa Renewable Energy exercises its option to
directly employ such personnel), and all other expenses of doing business at
the Biodiesel Facility not specifically being assumed by REG, Inc. as a part of
the furnishing of services hereunder, as well as all required capital
expenditures to maintain the Biodiesel Facility in a condition capable of
producing Product acceptable to the market place,

	 	 	 	all of which are to be paid in accordance with applicable policies established by
the Board.

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	 	E.	 	Iowa Renewable Energy shall select, engage and terminate outside accountants,
auditors and attorneys as it shall see fit, with such professionals reporting directly
to the Board of Iowa Renewable Energy.
	 
	 	F.	 	Perform such other tasks and duties as have been separately set out hereunder
and agreed to by Iowa Renewable Energy.

	5.	 	Other Operational Understandings & Agreements:

	 	A.	 	Risk Management Program. Iowa Renewable Energy agrees to consider
adoption of the risk management program used by REG, Inc. which supports the
procurement of feed stocks and chemical inputs hereunder (“Risk Management Program”).
The objective of the program is to manage the commodity price risk resulting from
fluctuating prices of feedstock (oils and fats), chemical inputs (methanol and
catalysts), and the finished Products (biodiesel and glycerin) due to changing market
conditions. Under the Risk Management Program, REG, Inc. will utilize the Chicago
Board of Trade, New York Mercantile Exchange, and other exchanges as warranted to
establish an account or accounts in Iowa Renewable Energy’s name, and acquire
instruments as necessary to implement risk management strategies. Such account(s) and
instruments would be funded by Iowa Renewable Energy, with all resulting gains and
losses from the purchase and sale transactions of any futures contracts, options, and
cash instruments associated with the Risk Management Program to flow to the benefit of
or be borne by Iowa Renewable Energy. If approved, Iowa Renewable Energy agrees to
adopt such resolutions and execute such agreements as are reasonably necessary to
implement the Risk Management Program, and pay transactional costs incurred to carry
out such program.
	 
	 	B.	 	Plant Information Program. In its management of the Biodiesel
Facility, REG, Inc. shall utilize a software program (“PI System”) interfacing with
the computer control system running the Biodiesel Facility, making available
production data for operations, engineering, sales, marketing, logistics and
management to better make informed decisions with respect to production processes.
During the term of this Agreement, the PI System will also allow for REG, Inc.’s
remote access to information on the operation of the Biodiesel Facility to provide for
data collection, monitoring, benchmarking and trouble shooting, all to better aid
performance for Iowa Renewable Energy.
	 
	 	C.	 	Product Pricing. On at least a monthly basis (or more often as
needed), REG, Inc. shall identify and provide publicly available marketing information
to Iowa Renewable Energy with respect to Products. Iowa Renewable Energy will
establish the Product prices for REG, Inc. to use in selling Products (“Product
Prices”), based upon market place conditions. Any change in Product Prices shall be
effective for Product sales made beginning the seventh (7th) calendar day after REG,
Inc.’s receipt of notice of new Product Prices, except for quotations still open and
extended prior to the change in the Product Prices, or unless otherwise

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	 	 	 	agreed to by the parties (Iowa Renewable Energy and REG, Inc. to honor all
pre-existing contracts and agreements with respect to price). All Product sales by
REG, Inc. as Iowa Renewable Energy’s sales agent shall be at or above the Product
Prices then in effect, unless written consent is received from Iowa Renewable Energy
for special prices due to volume commitments, Iowa Renewable Energy storage
constraints, or other reasons approved by Iowa Renewable Energy. REG, Inc.
specifically states that it will not sell the Product at prices less than the
Product Prices without Iowa Renewable Energy’s prior written approval, and that if
REG, Inc. is able to sell Products at prices above the Product Prices, Iowa
Renewable Energy would nonetheless receive all proceeds of any such sales. REG,
Inc. will in any event use its best efforts, as Iowa Renewable Energy’s sales agent,
to maximize the sales revenues received by Iowa Renewable Energy.
	 
	 	D.	 	Off Site Storage. In order to maximize profit potential, and
including taking advantage of regional marketing opportunities, there will be times in
the marketing of Product that REG, Inc. will recommend the storage of Iowa Renewable
Energy’s Product in third party locations. In such case, Iowa Renewable Energy agrees
that it will be responsible for transportation costs for its Product to the storage
facility, in and out charges, such Product’s prorated share of storage, and other
related expense, so long as approved by Iowa Renewable Energy prior to use of off-site
storage.
	 
	 	E.	 	Product Sales, Handling of Proceeds. It is expected that sales of
Products will be made in REG, Inc.’s name. REG, Inc. shall take title to the Product
when loaded for delivery FOB the Biodiesel Facility, unless otherwise agreed. REG,
Inc. will carry Property in Transit insurance for all Product in shipment. If while
Product is in transit a claim were to occur the proceeds from settlement would be due
the title holder at the time of the loss event. REG, Inc. will pay over to Iowa
Renewable Energy all Product proceeds received from sales of Iowa Renewable Energy
Products. REG, Inc. shall remit by electronic transfer to Iowa Renewable Energy by the
close of business each Wednesday all such proceeds received during the previous seven
(7) days.
	 
	 	F.	 	Off-Grade Product. In the event off-grade Product is produced at the
Biodiesel Facility that is not marketable at the Product Prices then in effect, REG,
Inc. will nonetheless use its best efforts to sell such Product for Iowa Renewable
Energy at the highest prices reasonably obtainable. With respect to biodiesel, and for
purposes of this Agreement, off-grade Product shall include biodiesel which fails to
meet the specifications contained in ASTM D6751 as it may be amended or modified (or
such other standards for biodiesel as may in the future develop in the biodiesel
industry) or if for any other reason a customer reasonably rejects biodiesel. With
respect to Products other than biodiesel, for purposes of this Agreement, off-grade
Product shall include Product which fails to meet specifications mutually agreed upon
by the parties, or if for any other reason a customer reasonably rejects such Product.
In the event off-grade Product is sold,

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	 	 	 	REG, Inc. shall work to minimize any loss to Iowa Renewable Energy for returned
Product, cost of cover, and related expenses. REG, Inc. shall advise Iowa Renewable
Energy of Product complaints, and shall not accept the return of, or make any
allowance with respect to any Product, without Iowa Renewable Energy’s prior written
approval. REG, Inc. and Iowa Renewable Energy shall work together to determine the
resolution of customer complaints and off-grade Product sales. Iowa Renewable Energy
shall pay for any costs associated with resolution of customer complaints or
returned Product, including freight costs, cover, and related expenses, unless such
Product deficiencies were caused by the negligence or willful misconduct of REG,
Inc., in which event REG, Inc. will be responsible for such costs. Except where
caused by REG, Inc.’s negligence or willful misconduct, Iowa Renewable Energy agrees
to indemnify REG, Inc. from any loss, claim or damage (including reasonable attorney
fees) incurred as a result of the sale of off-grade Product.
	 
	 	 	 	REG, Inc. agrees to credit against future payments owed by Iowa Renewable Energy
under Section 3(C) herein an amount equal to 5.7¢ times the number of gallons of
biodiesel produced at Iowa Renewable Energy which failed at the time it was shipped
from the Biodiesel Facility to meet the specifications then contained in ASTM D6751
as it may be amended or modified (or such other standards for biodiesel as may in
the future develop in the biodiesel industry).
	 
	 	G.	 	Credit Risk. REG, Inc. agrees to manage the accounts receivable and
work to minimize bad debt losses. REG, Inc. shall pursue all reasonable efforts at
collecting accounts, Iowa Renewable Energy agreeing to pay for third party collection
costs including attorney fees (Collection Costs“) except as may be subsequently shared
as set out hereafter. The write off of accounts receivable shall be as mutually agreed
by the parties. Iowa Renewable Energy understands that losses on accounts receivable
due to bad debt up to one-half per cent of Product sales will be borne entirely by Iowa
Renewable Energy as a cost of doing business. REG, Inc. agrees to share losses
equally with Iowa Renewable Energy with respect to accounts receivable for Product
sales (including Collection Costs) to the extent that the total of such losses (not
previously shared by the parties) incurred from the commencement of the term of this
Agreement to the date of computation of such losses exceed one half of one percent of
Iowa Renewable Energy’s total sales made under this Agreement for the same period.
Should Iowa Renewable Energy desire REG, Inc. to sell Product to buyers not approved by
REG, Inc., REG, Inc. shall make such sale in Iowa Renewable Energy’s name, and provide
normal invoicing and billing services. However, any risk of receipt or collection of
such sale shall remain with Iowa Renewable Energy, and shall not be included in the
total of losses which might be shared by the parties as set out above.
	 
	 	H.	 	Leased Employees. During the term of this Agreement, REG, Inc. and
Iowa Renewable Energy agree that unless otherwise elected by Iowa Renewable Energy as
provided for hereafter, REG, Inc. shall lease to Iowa Renewable

- 11 -

 

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

	 	(i)	 	The Leased Employees assigned to perform the services
contemplated by this Agreement are or will be and shall remain common law
employees of REG, Inc.
	 
	 	(ii)	 	REG, Inc. has sole responsibility for determining the rate of
pay, hours and other terms and conditions of employment of the Leased
Employees. REG, Inc. has sole responsibility for providing compensation and
benefits to the Leased Employees, including without limitation: wages,
withholding and remitting taxes, and payments for wages, vacation and paid time
off as required by state and federal law.
	 
	 	(iii)	 	REG, Inc. bears sole responsibility for statutory insurance
for the Leased Employees, for FICA, unemployment, and workers’ compensation in
accordance with applicable statutory requirements and limits.
	 
	 	(iv)	 	Iowa Renewable Energy shall reimburse REG, Inc. for costs
associated with the services being provided by such Leased Employees to Iowa
Renewable Energy (“Cost of Services”) in the manner set forth in this
paragraph. On a monthly basis, REG, Inc. shall submit to Iowa Renewable Energy
an invoice detailing the Cost of Services attributable to the Leased Employees
for such month. Within ten (10) days of receipt of such invoice, Iowa
Renewable Energy shall remit payment in full to REG, Inc.. The Cost of
Services paid or incurred by REG, Inc. shall be based on the wages, payroll
taxes, government mandated costs, including workers’ compensation, benefit
costs, expenses charged to REG, Inc. on a per employee basis, and any other
costs mutually agreed upon as being appropriate for reimbursement, which REG,
Inc. paid to or incurred on behalf of the Leased Employees for the payment
period covered by the statement.
	 
	 	(v)	 	All work and services shall be performed by Leased Employees at
the Biodiesel Facility unless otherwise agreed.
	 
	 	(vi)	 	The General Manager shall retain and exercise supervisory
responsibilities with respect to the Leased Employees, including without
limitation, their day to day control and supervision, performance reviews and
evaluations, and hiring and firing.
	 
	 	(vii)	 	REG, Inc. shall accept Iowa Renewable Energy’s reasonable
recommendations regarding the discontinuation of services of any

- 12 -

 

	 	 	 	particular Leased Employee. Iowa Renewable Energy shall not be responsible
for any financial obligation of REG, Inc. to a Leased Employee accruing
after such discontinuation becomes effective, by reason of the services
performed pursuant to this Agreement. Any Leased Employee that ceases to
provide the services covered by this Agreement shall no longer be a Leased
Employee, but will remain an employee of REG, Inc. subject to retention or
termination as REG, Inc. may determine in its sole discretion.
	 
	 	(viii)	 	In performing the services hereunder, REG, Inc. shall see to the Leased
Employees using their best efforts to perform their duties for the benefit of
Iowa Renewable Energy, and with such care as an ordinarily prudent person in a
like position would use under similar circumstances.

	 	 	 	Iowa Renewable Energy shall have the option to directly employ personnel to fulfill
the operational needs at the Biodiesel Facility (other than the General Manager and
Operations Manager) which would otherwise be met by the Leased Employees provided by
REG, Inc. pursuant to the foregoing provisions of this Section 5(H). Iowa Renewable
Energy shall have the right to exercise such option by delivering written notice to
REG, Inc. of Iowa Renewable Energy’s desire to directly employ such personnel during
the period commencing upon signature of this Agreement as set out above, and ending
two (2) months thereafter.
	 
	 	 	 	Upon timely notice of Iowa Renewable Energy’s election, REG, Inc. agrees to assist
Iowa Renewable Energy in hiring and training such personnel (“Iowa Renewable Energy
Employees”), and to continue to provide associated human resource and payroll
handling assistance. However, Iowa Renewable Energy understands and agrees that
Iowa Renewable Energy would have sole responsibility for determining the rate of
pay, hours, benefits, and other terms and conditions of employment of the Iowa
Renewable Energy Employees. Iowa Renewable Energy would be responsible for all
staff and personnel costs associated with Iowa Renewable Energy Employees, including
paying compensation, selecting and paying for benefits and benefit plans for the
Iowa Renewable Energy Employees, paying for vacation and paid time off as required
by state and federal law, providing statutory insurance for the Iowa Renewable
Energy Employees, for FICA, unemployment, and workers’ compensation in accordance
with applicable statutory requirements and limits, and withholding and remitting
related taxes.
	 
	 	I.	 	Software to Operate Plant Equipment. Upon termination of this
Agreement, REG, Inc. agrees to transfer REG, Inc.’s operational rights to Iowa
Renewable Energy in the necessary software (or assist Iowa Renewable Energy in
obtaining any necessary licensing arrangements for software from third parties) to
operate the equipment in the Biodiesel Facility. Iowa Renewable Energy understands
this shall not include the PI System, or administrative or accounting software
developed or utilized by REG, Inc.

- 13 -

 

	 	J.	 	Access to Biodiesel Facility. Iowa Renewable Energy agrees during the
term of this Agreement to provide access to the Biodiesel Facility by REG, Inc. for
purposes of training employees regarding the operation of biodiesel plants and
equipment, and to provide for tours by prospective customers of REG, Inc., subject to
reasonable advance notice to allow for appropriate scheduling and to minimize
disruption to the Biodiesel Facility’s production.

	6.	 	Term of Agreement. This Agreement is effective as of the date of its execution by
the parties (with services to commence by REG, Inc. hereunder at such time or times as
appropriate based upon construction progress of the Biodiesel Facility), and shall remain in
force for three (3) years after the end of the first month in which the Biodiesel Facility is
producing Product for sale (subject to early termination due to default as set out hereafter).
This Agreement shall continue after the initial term unless and until one party gives written
notice of termination to the other of a proposed termination date at least twelve (12) months
in advance of a proposed termination date. The initial term or any subsequent term may also
be modified upon the mutual written consent of the parties.
	 
	7.	 	Confidentiality. Iowa Renewable Energy agrees that in the performance of this
Agreement, Iowa Renewable Energy may receive or otherwise learn of certain items of
information that are non-public, proprietary, or confidential to REG, Inc. or to parties with
whom REG, Inc. has entered into contractual relationships (herein “Confidential Information”
with respect to REG, Inc.), to include but not be limited to information concerning REG,
Inc.’s operations, processes, methods and accumulated experience incidental to the processing,
sale and distribution of Products, and including supplier and customer lists, the disclosure
of which to third parties would be injurious to REG, Inc. or to parties with whom REG, Inc.
has entered into contractual relationships. REG, Inc. agrees that in the performance of this
Agreement, REG, Inc. will receive financial information including the results of Iowa
Renewable Energy’s operations, and may otherwise learn of certain items of information that
are non-public, proprietary, or secret to Iowa Renewable Energy or to parties with whom Iowa
Renewable Energy has entered into contractual relationships (herein “Confidential Information”
with respect to Iowa Renewable Energy), the disclosure of which to third parties would be
injurious to Iowa Renewable Energy or to parties with whom Iowa Renewable Energy has entered
into contractual relationships. Each party as recipient (the “Recipient”) agrees not to use
the Confidential Information of the other party (the “Provider”) for any purpose other than as
required to perform this Agreement. Recipient agrees to disclose the Confidential Information
of the Provider only to such directors, officers, employees, affiliates, consultants, agents,
and third parties (“Representatives”) as are required to allow Recipient to perform under this
Agreement, who are first informed of the restrictions upon use of the Confidential Information
and who agree to keep such information confidential and who agree to be bound by the terms of
these confidentiality provisions to the same extent as if they were parties hereto. Recipient
will be responsible for any breach of these confidentiality provisions by any of its
Representatives and agrees to take all reasonable measures to restrain its Representatives
from prohibited or unauthorized disclosure or use of the Confidential Information. Recipient
agrees that the actual or threatened disclosure of the Confidential Information would cause
the Provider

- 14 -

 

	 	 	immediate and irreparable harm, which may not be adequately compensated by money damages.
Accordingly, in the event of a breach of these confidentiality provisions by Recipient or
its Representatives, the Recipient specifically agrees, that in addition to all other
remedies available at law or in equity, the Provider shall be entitled to equitable relief,
including an injunction to limit or prevent such actual or threatened disclosure, together
with recovery of costs of litigation from Recipient as a result of breach, including
reasonable attorney fees. These obligations of confidentiality shall not apply to any
information which: (a) was known to Recipient or was in the public domain prior to
disclosure hereunder; or (b) becomes known to the public from a source other than Recipient;
or (c) is disclosed to Recipient by a third party having a legal right to make such
disclosure.
	 
	 	 	In the management and operation of the Biodiesel Facility, REG, Inc. will direct the General
Manager, Operations Manager, and Leased Employees (as such term is defined hereafter) to
hold competitively sensitive information of Iowa Renewable Energy confidential and not
disclose such information to REG, Inc. and its other employees without the consent of Iowa
Renewable Energy.
	 
	 	 	The parties acknowledge that in order to comply with certain statutory or regulatory
requirements, this Agreement may need to be disclosed to the Securities Exchange Commission,
the Iowa Securities Bureau or other regulators, and agree to allow such disclosure upon
receipt of appropriate request.
	 
	8.	 	Intellectual Property Rights. Iowa Renewable Energy shall have no right under the
Agreement to make use of any brand names trademarked by REG, Inc., nor any of the intellectual
properties or know-how developed by REG, Inc. in conjunction with the operation of plants
similar to the Biodiesel Facility, or to use any of REG, Inc.’s intellectual properties and
know-how other than pursuant to such separate licensing arrangements as may be entered into by
the parties (if any), but the parties expressly agree that no such rights are being conveyed
by virtue of the execution or performance of this Agreement.
	 
	 	 	REG, Inc. shall have no right under the Agreement to make use of any brand names trademarked
by Iowa Renewable Energy, nor any intellectual properties or know-how developed separately
by Iowa Renewable Energy, other than pursuant to such separate licensing arrangements as may
be entered into by the parties (if any), but the parties expressly agree that no such rights
are being conveyed by virtue of the execution or performance of this Agreement.
	 
	9.	 	Non-Solicitation of Employees. Each party agrees that during the term of this
Agreement neither party (nor any affiliate, successor or permitted assign thereof) shall
solicit for employment or consulting an employee of the other while such employment by the
other continues. REG, Inc. does agree that, at the termination of this Agreement, Iowa
Renewable Energy shall have the right to hire the General Manager, Operations Manager, and
Leased Employees assigned by REG, Inc. to the Biodiesel Facility.

- 15 -

 

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

	 	A.	 	Except as to matters for which REG, Inc. is required to defend, indemnify and
hold harmless Iowa Renewable Energy under Section 10.B below, and provided that REG,
Inc. and its directors, officers and employees, have otherwise satisfied and performed
their duties and obligations in accordance with this Agreement, Iowa Renewable Energy
shall defend, indemnify and hold REG, Inc., and its directors, officers and employees,
harmless from and against any and all claims, suits, losses, liabilities, costs,
damages and expenses, including reasonable attorneys’ fees and court costs, suffered or
incurred by any such party in defending any legal action or claim arising out of this
Agreement, or REG, Inc.’s actions or inactions taken thereunder.
	 
	 	B.	 	REG, Inc. shall defend, indemnify and hold Iowa Renewable Energy, and its
directors, officers and employees, harmless from and against any and all claims, suits,
losses, liabilities, costs, damages and expenses, including reasonable attorneys’ fees
and court costs, suffered or incurred by any such party arising from or as a result of:
(i) breach by REG, Inc. or any representative, agent, officer or employee of REG,
Inc., of any warranty, representation, term, covenant or condition of this Agreement;
or (ii) negligence, fraud or willful misconduct by REG, Inc. or any representative,
agent, officer or employee of REG, Inc..

	11.	 	Access to Books and Records. This Agreement provides for the payment by Iowa
Renewable Energy to REG, Inc. of a sum dependent upon the amount of production of biodiesel at
the Biodiesel Facility, and the Net Income of Iowa Renewable Energy’s Biodiesel Facility. For
that reason Iowa Renewable Energy agrees to make available its books and records for
inspection and copying which are reasonably necessary for purposes of providing information
with respect to biodiesel production, and verifying the computation of the Net Income Bonus,
to the extent not already available to REG, Inc. in performance of its duties hereunder. REG,
Inc. agrees to treat information received under such access rights as Confidential Information
with respect to Iowa Renewable Energy.
	 
	 	 	This Agreement provides for reimbursement by Iowa Renewable Energy of various expenses of
REG, Inc., including with respect to the cost of providing Leased Employees hereunder. For
that reason REG, Inc. agrees to make available those portions of its books and records for
inspection and copying which are reasonably necessary for purposes of verifying appropriate
amounts of reimbursement, and REG, Inc.’s compliance with its obligations set forth
hereunder. Iowa Renewable Energy agrees to treat information received under such access
rights as Confidential Information with respect to REG, Inc.
	 
	 	 	If any such inspection or audit shall reveal a need for a material correction resulting in
payment owing by one party to the other, the party determined to owe additional payment
shall immediately pay the amount owed, together with interest from the date that such
payment should have been made at the prime rate in effect on the date of the underpayment as
reported in the Wall Street Journal. The expense of any such inspection or audit shall be
borne by the party making such inspection, unless the need for a material

- 16 -

 

	 	 	correction to payment is revealed, in which case the reasonable expense of such inspection
or audit shall be borne by the party whose books and records are being audited.
	 
	12.	 	Force Majeure. Neither party hereto shall be liable for any delay arising from
circumstances beyond its control including (but not limited to) acts of God, riot or civil
commotion, industrial dispute, fire, flood, drought, shortage of material or labor or act of
government, terrorist acts, war, or sabotage, provided that the party seeking to be excused
shall make every reasonable effort to minimize the delay resulting therefrom, and shall give
prompt written notice of the force majeure event to the other party. The obligations of the
party giving notice, so far as they are affected by the force majeure event, will be suspended
during, but not longer than, the continuance of the force majeure event. The affected party
must act with commercially reasonable diligence to resume performance and notify the other
party that the force majeure event no longer affects its ability to perform under the
Agreement.
	 
	13.	 	Arbitration. Should any controversy, claim, dispute or difference arise between the
parties hereunder, out of or relating to this Agreement, including, without limitation, its
formation, validity, binding effect, interpretation, performance, breach or termination, then
each and every such controversy, claim, dispute or difference shall be submitted and settled
by arbitration in accordance with the Commercial Arbitration Rules then in effect of the
American Arbitration Association, and shall be conducted in Des Moines, Iowa. Judgment upon
the award rendered by the arbitrator or arbitrators may be entered in any court of competent
jurisdiction.
	 
	14.	 	Independent Status. Subject to the terms and conditions of this Agreement, REG, Inc.
is authorized to perform services for Iowa Renewable Energy as set out in the Agreement as an
independent contractor and as an agent with such authority as is necessary to carry out the
services herein provided. Nothing in this Agreement or in the course of dealing by the
parties shall be construed to constitute Iowa Renewable Energy and REG, Inc. as partners,
joint venturors, or as guarantors for one another or as authorizing either party to obligate
the other in any manner except as is necessary for REG, Inc. to fulfill the services provided
for hereunder.
	 
	15.	 	Early Termination. Notwithstanding the provisions of Section 6 hereof, this
Agreement may be terminated in accordance with the following provisions:

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

- 17 -

 

	 	 	 	its debts as they mature or admits in writing its inability to pay its debts as they
mature, (ii) makes a general assignment for the benefit of its creditors, (iii)
files a voluntary petition for bankruptcy, or (iv) applies for the appointment of a
receiver or trustee for all or substantially all of its assets or permits the
appointment of any such receiver or trustee who is not discharged within a period of
sixty (60) days after such appointment.
	 
	 	C.	 	Iowa Renewable Energy may terminate this Agreement effective immediately upon
delivery of written notice to REG, Inc., if REG has defaulted under the Construction
Contract with regard to the Biodiesel Facility, and fails to remedy such default within
the cure period provided under such Construction Contract.
	 
	 	D.	 	REG, Inc. may terminate this Agreement effective immediately upon delivery of
written notice to Iowa Renewable Energy, if Iowa Renewable Energy has defaulted under
the Construction Contract with regard to the Biodiesel Facility, and failed to remedy
such default within the cure period provided under such Construction Contract.
	 
	 	E.	 	Notwithstanding any termination of this Agreement, the obligations and rights
of the parties which have accrued as of the time of such termination shall survive.
	 
	 	F.	 	Without limiting the generality thereof, if termination is due to a breach by a
party (the “Breaching Party”), then the Breaching Party shall indemnify the other party
(the “Non-Breaching Party”) against any loss, claim or damages (including reasonable
attorney fees) resulting from such breach or termination, and shall pay the costs of
satisfying any obligations arranged by the Non-Breaching Party on behalf of the
Breaching Party prior to such termination, including commitments for raw materials,
transportation, sales, and hedging transactions; provided, however, if an act or
omission of the Non-Breaching Party or one or more employees, agents, or affiliates of
the Non-Breaching Party in the performance of their obligations pursuant to this
Agreement caused the breach of the Agreement by the Breaching Party, that the
Non-Breaching Party will waive and release the Breaching Party from any and all claims
resulting from such act or omission of the Non-Breaching Party or its employees, agents
or affiliates.

	16.	 	Remedies in the Event of Default. Where the Breaching Party commits a material
breach of this Agreement (or of the Construction Contract as set out under subsections 15(C)
or (D)), and: (a) if except as set out herein such material breach continues beyond the
allowable cure period after the receipt of written demand for cure of such breach by the
Non-Breaching Party as set out in Section 15 hereof (or the allowable cure period under the
Construction Contract); or (b) if such material breach cannot be cured within such period and
the Breaching Party does not within such cure period start to cure the breach and thereafter
proceed diligently with the cure thereof, then the Non-Breaching Party may terminate this
Agreement and may recover its money damages caused by such material breach (including
arbitration fees, court costs, litigation expenses, and reasonable attorney fees) on written
notice and demand to the Breaching Party for

- 18 -

 

	 	 	payment. Such payment shall be without prejudice to any other right or remedy that the
Non-Breaching Party may have against the Breaching Party under this Agreement, at law or in
equity, including injunctive relief and rights of specific performance.
	 
	17.	 	Representations and Warranties. As a material inducement to the other party to enter
into this Agreement and with the understanding that the other party shall be relying thereon
in consummating the transaction contemplated hereunder, each party hereby represents and
warrants to the other party as follows:

	 	A.	 	Authorization. The execution of this Agreement has been duly
authorized by the appropriate owners and board of governance as may be required for
such party to proceed.
	 
	 	B.	 	Standing. Such party is duly organized, validly existing and in good
standing under the laws of the state of formation and such other states as may be
required for this transaction, and has all requisite power and authority to consummate
the transactions contemplated hereunder.
	 
	 	C.	 	Consents. No approval or consent is needed from any third party with
respect to the performance of obligations hereunder by such party.
	 
	 	D.	 	Breaches. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby do not and shall not
result in any material breach of any terms or conditions of any mortgage, agreement or
contract or obligation entered in to by such party (or in the case of Iowa Renewable
Energy by which the Biodiesel Facility is bound), nor, to the best of such party’s
knowledge, shall they violate any statute, regulation, judgment or decree of any court
in which such party may be bound (or in the case of Iowa Renewable Energy by which the
Biodiesel Facility may be subject).
	 
	 	E.	 	Litigation. There is no action, suit or proceeding pending, or to the
best of such party’s knowledge, threatened against such party which might prevent or
delay such party’s performance of its obligations hereunder.
	 
	 	F.	 	Ownership and Operation. Iowa Renewable Energy (by its duly authorized
representative signing below) further represents and warrants that it will be the owner
of the Biodiesel Facility upon completion of its construction.

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

	 	 	 	 	 	 	 
	To Iowa Renewable Energy:	 	Iowa Renewable Energy, LLC	 	 
	 	 	Production Facility Site	 	 
	 	 	1701 East 7th Street	 	 

- 19 -

 

	 	 	 	 	 	 	 
	 	 	Washington, IA 52353	 	 
	 

	 	Attention:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 
	With copy to:

	 	Brown, Winick, Graves, Gross, Baskerville & Schoenebaum, P.L.C.
	 

	 	666 Grand Avenue, Suite 2000
	 

	 	Des Moines, IA 50309-2510
	 

	 	Attention: William E. Hanigan
	 
	 	 
	To REG, Inc.:

	 	Renewable Energy Group, Inc.
	 

	 	406 1st Street, PO Box 128
	 

	 	Ralston, IA 51459
	 

	 	Attention: Nile Ramsbottom
	 
	 	 
	With copy to:

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

	 	115 East Lincolnway, Suite 200
	 

	 	Jefferson, IA 50129
	 

	 	Attention: John A. Gerken

	 	 	Any notice or other communications made shall be deemed to have been given when received or
refused. A party may change its address for notice by giving notice of such address as
provided in this Section.
	 
	19.	 	Annual Review of Agreement. This Agreement will be reviewed annually by the parties,
as they determine the best procedures for accomplishing such services, define their roles, and
react to changes in the industry. Any changes to the Agreement shall require the mutual
written consent of Iowa Renewable Energy and REG, Inc.
	 
	20.	 	Miscellaneous.

	 	A.	 	Benefits. This Agreement shall bind and benefit the parties and their
permitted successors and assigns.
	 
	 	B.	 	Assignment. Neither party may assign any of its rights in or delegate
any of its duties under this Agreement without the prior written consent of the other
party. Notwithstanding the foregoing, a party (“Assignor”) may without the need for
consent from the other party assign any or all of its rights, duties and obligations
under this Agreement to such party’s affiliate (“Assignee”), if such Assignee expressly
assumes all obligations not otherwise remaining with Assignor hereunder, and Assignor
nonetheless remains responsible hereunder.
	 
	 	C.	 	Governing Law. Iowa law shall govern the construction and enforcement
of this Agreement.
	 
	 	D.	 	Entire Agreement; Amendment. This Agreement contains the entire
agreement of the parties with respect to the subject matter and supersedes all prior
oral or

- 20 -

 

	 	 	 	written agreements and understandings. This Agreement may not be amended or
modified except in writing signed by both parties.
	 
	 	E.	 	Execution and Delivery. This Agreement may be executed in counterparts
and delivered by facsimile, which, taken together, shall be considered one instrument
and deemed an original.
	 
	 	F.	 	No Inference from Drafting. The parties both acknowledge that they
have been represented by counsel, and that this Agreement has resulted from extended
negotiations between the parties. No inference in favor of or against any party shall
be drawn from the fact that such party has drafted any portion of this Agreement.
	 
	 	G.	 	Waiver. The waiver by either party of a breach of any provision of
this Agreement will not constitute or be construed as a waiver of any future breach of
any provision of this Agreement.
	 
	 	H.	 	Survival. The provisions of Sections 7, 8, 10, 11 and 13 of this
Agreement shall indefinitely survive the expiration and termination of this Agreement.
	 
	 	I.	 	Covenant of Further Cooperation. Each of the parties agrees to execute
and deliver such further documents and to cooperate in such manner as may be necessary
to implement and give effect to the provisions contained herein.
	 
	 	J.	 	Enforcement and Interpretation. It is the desire and intent of the
parties hereto that this Agreement be enforced to the fullest extent possible under the
laws and public policies of the state of Iowa. Accordingly, if any particular
provision of this Agreement is adjudicated to be invalid or unenforceable, such portion
shall be deleted, and such deletion shall apply only to such provision with the
remainder of the Agreement remaining valid and enforceable, to be construed in
conformity with the parties’ initial intent. Further, to the extent any provision
hereof is deemed unenforceable by virtue of its scope or terms with respect to
geographical area or length of time, but may be enforceable by limitations thereon, the
parties agree that this Agreement shall remain enforceable to the fullest extent
possible after the application of such limitations.

	 	 	 	 	 	 	 	 	 
	RENEWABLE ENERGY GROUP, INC.	 	 	 	IOWA RENEWABLE ENERGY, LLC
	 
	 	 	 	 	 	 	 	 
	By

	 	/s/ Nile D. Ramsbottom, President
	 	 	 	By
	 	/s/ Michael J. Bohannan, President
	 

	 	 
	 	 	 	 	 	 
	 

	 	(Title)          
	 	 	 	 	 	Michael J. Bohannan            (Title)

- 21 -

 

Exhibit A to

Management and Operational Services Agreement (“Agreement”)

REG, Inc. and Iowa Renewable Energy

Listing of Administrative Services to be Provided

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

     Accounting:

	 	•	 	Financial Statements
	 
	 	•	 	General Ledger Maintenance
	 
	 	•	 	Cash Management
	 
	 	•	 	Customer Statements
	 
	 	•	 	Accounts Receivable
	 
	 	•	 	Accounts Payable
	 
	 	•	 	Bank Reconciliation
	 
	 	•	 	Depreciation
	 
	 	•	 	Audit Preparation
	 
	 	•	 	External Audit (providing assistance to external auditors, the expense of
the external auditor to be paid by Iowa Renewable Energy)

     Human Resources:

	 	•	 	Hiring
	 
	 	•	 	Training, Job Descriptions, Government Reporting with respect to personnel
	 
	 	•	 	Employee hand book, policies/procedures
	 
	 	•	 	Workers Comp

     Information Technology:

	 	•	 	AS400 Software/Application Maintenance (REG, Inc. to be reimbursed by Iowa
Renewable Energy for REG, Inc.’s costs (including employee expenses) for
preparation of any special requested applications.)
	 
	 	•	 	Telephone/Network Services (Iowa Renewable Energy to reimburse REG, Inc. for
the cost of all equipment required and utility expenses incurred.)
	 
	 	•	 	Backup for Network
	 
	 	•	 	Backup for AS400 Files
	 
	 	•	 	Web Site Hosting

     Insurance Administration:

	 	•	 	Compile Initial Insurance Specifications

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	 	•	 	Solicit Coverage Bids
	 
	 	•	 	Review Bids/Coverage Issues
	 
	 	•	 	Select Carriers to be Utilized (Subject to approval of Iowa Renewable
Energy, with Cost of Coverage to be paid by Iowa Renewable Energy)
	 
	 	•	 	Review Policies
	 
	 	•	 	Compile Insurance Summaries
	 
	 	•	 	COI setup dbase review
	 
	 	•	 	Certificate of Insurance Follow up
	 
	 	•	 	Claim Reporting Procedure
	 
	 	•	 	Claims Tracking
	 
	 	•	 	Claims Review
	 
	 	•	 	Claim reporting Follow up
	 
	 	•	 	Answer Coverage Questions

	 	 	Communications:

	 	•	 	Press Releases
	 
	 	•	 	Writing for Website
	 
	 	•	 	Media Relations
	 
	 	•	 	Publicity for Annual Meeting
	 
	 	•	 	Newsletters (Iowa Renewable Energy to reimburse REG, Inc. for supply costs,
postage if applicable, and any outside printing services utilized.)

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Exhibit B

Listing of Job Descriptions to be Filled by Leased Employees

Referenced at Section 2(G) of the Agreement

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

     For clarification purposes, the salary and benefit costs of the General Manager and Operations
Manager are being borne by REG, Inc. and not passed thru to Iowa Renewable Energy.

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Exhibit C to

Management and Operational Services Agreement (“Agreement”)

REG, Inc. and Iowa Renewable Energy

Listing of Services to be Provided

     As further description of the services to be provided under the Agreement to which this is
attached, REG, Inc. sets out the following:

     Management:

	 	•	 	General Manager with total compensation and benefits paid by REG, Inc.
	 
	 	•	 	Operations Manager with total compensation and benefits paid by REG, Inc.
	 
	 	•	 	Leasing of all other employees (unless otherwise elected by Iowa Renewable Energy under
the Agreement) at pass through cost
	 
	 	•	 	Safety training and inspection
	 
	 	•	 	BQ9000 training, accreditation and program maintenance support
	 
	 	•	 	Consulting services for quality control and laboratory support
	 
	 	•	 	Consulting services for technical process support
	 
	 	•	 	Installation of Plant Information software program
	 
	 	•	 	Offering of new technologies to Iowa Renewable Energy as they become available

     Procurement of Feed Stocks and Chemical Inputs, Risk Management:

	 	•	 	Arrange the purchase and delivery of all feed stocks and chemical inputs for account of
Iowa Renewable Energy
	 
	 	•	 	Recommend, oversee and manage Risk Management Program on behalf of and for account of
Iowa Renewable Energy
	 
	 	•	 	Submit periodic review of procurement program upon request
	 
	 	•	 	Leverage volume buying whenever possible for discounts
	 
	 	•	 	Establish long term supply arrangements with major processors
	 
	 	•	 	Provide commodity and raw materials market intelligence and information

     Sales and Marketing:

	 	•	 	Sales and marketing of product through REG, Inc.’s nationwide sales, distribution and
off-site storage terminal channels
	 
	 	•	 	Invoicing and accounts receivable management
	 
	 	•	 	Customer servicing and arranging transportation, logistics and scheduling of shipments
for account of Iowa Renewable Energy
	 
	 	•	 	Monitoring of regulatory affairs affecting biodiesel industry
	 
	 	•	 	Attendance at regional and national shows and conventions to promote products
	 
	 	•	 	Utilization of viable advertising and promotion campaigns
	 
	 	•	 	Establishment of long terms sales contracts with large customers

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Exhibit D to

Management and Operational Services Agreement (“Agreement”)

REG, Inc. and Iowa Renewable Energy

Breakout of Compensation for Services

     Under the Agreement, Iowa Renewable Energy agrees at section 3(A) to pay a Monthly Fee to REG,
Inc., all as set out under the Agreement.

	 	 	 	 	 
	The following additional information is provided with respect to the Monthly Fee:
	 	 	 	 
	 
	Provision of General Manager and Operations Manager
	 	2¢ per gallon
	For providing feed stocks procurement, chemical inputs
procurement, and risk management program
	 	1.5¢ per gallon
	For providing sales and marketing of all biodiesel
	 	2¢ per gallon
	For providing all sales and marketing of glycerin and fatty acids
	 	.2¢ per gallon
	 
	 	 	 
	Total
	 	5.7¢ per gallon

     Iowa Renewable Energy nonetheless understands and agrees that it is contracting for all
services under the Agreement, and will be paying the Monthly Fee as set out under the Agreement.

- 26 -

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