Document:

EXHIBIT 10.9

 

MANAGEMENT AND OPERATIONAL SERVICES AGREEMENT

 

This Management and Operational Services
Agreement (“Agreement”) is made and entered into as of the 14th day
of March, 2008, by and between REG Services Group, LLC, a limited liability
company organized and existing under the laws of the state of Iowa, with
offices at Ames, Iowa (“REG Services”), REG Marketing & Logistics
Group, LLC, a limited liability company organized and existing under the laws
of the state of Iowa, with offices at Ames, Iowa (“REG Marketing”), and
Blackhawk Biofuels, LLC, a limited liability company organized and existing
under the laws of the state of Delaware, with offices at 22 South Chicago
Avenue, Freeport, Illinois 61032 (“Blackhawk Biofuels”).

 

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Agreement originally made and entered into as of August 4, 2006, between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

 

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

 

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

 

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

 

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

 

 

 

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

 

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

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

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

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

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

·                                          Work towards
achievement of such mission and goals;

·                                          Assist with
regulatory affairs monitoring and compliance;

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

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

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

 

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

 

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

 

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

·                                          Monitor and
improve quality control;

·                                          Oversee
facility and equipment maintenance;

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

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

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

 

 

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

 

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

 

·                                          Provide
analysis and audit of feed stock suppliers;

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

·                                          Negotiate for
discounts where obtainable on feed stocks;

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

·                                          Provide
analysis and audit of bulk transportation providers.

 

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

 

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

·                                          Provide
analysis and audit of chemical suppliers;

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

·                                          Negotiate for
discounts where obtainable on chemicals;

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

·                                          Provide
analysis and audit of bulk transportation suppliers; and

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

 

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

 

·                                          Accounting

·                                          Human Resources

·                                          Information
Technology

·                                          Insurance
Administration

 

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·                                          Payroll

·                                          Communications

 

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

 

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

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

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

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

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

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

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

·                                          Analyze and
audit bulk transportation providers;

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

·                                          Provide
invoicing and accounts receivable management for biodiesel shipments.

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

D.                                    Provide funds
for:

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5.                                       Other
Operational Understandings & Agreements:

 

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

 

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

12

 

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

 

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

 

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

 

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

14

 

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

 

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

 

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

 

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

 

After two (2) years from the substantial
completion of the Facility, Section 5E of the original Agreement shall be
the only alternative available to Blackhawk Biofuels.

 

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

 

 

15

 

For
purposes of this Agreement, “Cost of Capital” shall be a variable interest rate
adjusted daily equal to the cost of equity and short term debt capital for REG
Services or REG Marketing, based upon the weighted average of the components of
equity and debt used by REG Services or by REG Marketing (whichever is
applicable) to provide trade credit to Blackhawk Biofuels.  The charge for credit extended from equity
shall be equal to 15% on an annual basis. 
The charge for credit extended from debt shall be equal to the highest
interest rate paid by REG Services or REG Marketing for short term debt plus
105 basis points on an annual basis.

 

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

 

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

 

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

 

7.                                       Confidentiality.  Blackhawk Biofuels agrees that in the
performance of this Agreement, Blackhawk Biofuels may receive or otherwise
learn of certain items of information that are non-public, proprietary, or
confidential to REG Services or to parties with whom REG Services has entered
into contractual relationships (herein “Confidential Information” with respect
to REG Services), to include but not be limited to information 

 

 

16

 

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

 

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

 

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

 

 

17

 

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

 

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

 

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

 

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

 

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

 

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

 

 

18

 

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.

 

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

 

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

 

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

 

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

 

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

 

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

 

D.                                    Without
limiting the generality thereof, if termination is due to a breach by a party
(the “Breaching Party”), then the Breaching Party shall indemnify the other
party

 

 

19

 

(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.

 

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

 

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

 

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

 

16.                                 Remedies in the
Event of Default.  Where the
Breaching Party commits a material breach of this Agreement, and: (a) if
except as set out herein such material breach continues beyond the allowable cure
period after the receipt of written demand for cure of such breach by the
Non-Breaching Party as set out in Section 14 hereof ; or (b) if such
material breach cannot be cured within such period and the Breaching Party does
not within such cure period start to cure the breach and thereafter proceed
diligently with the cure thereof, then the Non-Breaching Party may terminate
this Agreement and may recover its money damages caused by such material breach
(including arbitration fees, court costs, litigation expenses, and reasonable
attorney fees) on written notice and demand to the Breaching 

 

 

20

 

Party for 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 Blackhawk Biofuels by which the Biodiesel Facility is
bound), nor, to the best of such party’s knowledge, shall they violate any
statute, regulation, judgment or decree of any court in which such party may be
bound (or in the case of Blackhawk Biofuels by which the Biodiesel Facility may
be subject).

 

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

 

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

 

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

 

	
  To
  Blackhawk Biofuels:

  	
  Blackhawk
  Biofuels, LLC

  
	
   

  	
  22
  South Chicago Avenue

  
	
   

  	
  Freeport,
  IL 61032

  
	
   

  	
  Attention:
  Ronald Mapes

  
	
   

  	
   

  

 

 

21

 

	
  With
  copy to:

  	
  Lindquist &
  Vennum PLLP

  
	
   

  	
  4200
  IDS Center

  
	
   

  	
  80
  South 8th Street

  
	
   

  	
  Minneapolis,
  MN 55402-2274

  
	
   

  	
  Office:
  612-372-3955

  
	
   

  	
  Fax:
  612-371-3207

  
	
   

  	
  Attention:
  Joe Thompson

  
	
   

  	
   

  
	
  To
  REG Services :

  	
  REG
  Services Group, LLC

  
	
   

  	
  416
  South Bell Avenue

  
	
   

  	
  Ames,
  IA 50010

  
	
   

  	
  Attention:
  Nile Ramsbottom

  
	
   

  	
   

  
	
  With
  copy to:

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

  
	
   

  	
  115
  East Lincolnway, Suite 200

  
	
   

  	
  Jefferson,
  IA 50129

  
	
   

  	
  Attn:
  John A. Gerken

  

 

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

 

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

 

20.                           Miscellaneous.

 

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

 

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

 

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

 

D.                                    Entire
Agreement; Amendment.  This
Agreement contains the entire agreement of the parties with respect to the
subject matter and supersedes all prior oral or 

 

 

22

 

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, 9, 10 and 12
of this Agreement shall indefinitely survive the expiration and termination of
this Agreement.

 

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

 

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

 

[Signature page follows]

 

 

23

 

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

 

	
  REG
  SERVICES GROUP LLC

  
	
   

  
	
  By

  	
  /S/
  Nile Ramsbottom

  
	
   

  	
  Nile
  Ramsbottom, President

  
	
   

  	
   

  
	
   

  	
   

  
	
  REG MARKETING & LOGISTICS GROUP, LLC

  
	
   

  
	
  By

  	
  /S/
  Nile Ramsbottom

  
	
   

  	
  Nile
  Ramsbottom, President

  
	
   

  	
   

  
	
   

  	
   

  
	
  BLACKHAWK
  BIOFUELS, LLC

  
	
   

  
	
  By

  	
  /S/
  Ronald Mapes

  
	
   

  	
  Ronald
  Mapes, Chairman

  

 

 

24

 

Exhibit A to

Management and Operational Services Agreement (“Agreement”)

REG Services and Blackhawk Biofuels

 

Listing of Administrative Services to be Provided

 

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

 

Accounting:

$                                          Financial
Statements

$                                          General Ledger
Maintenance

$                                          Cash Management

$                                          Customer
Statements

$                                          Accounts
Receivable

$                                          Accounts
Payable

$                                          Bank
Reconciliation

$                                          Depreciation

$                                          Audit
Preparation

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

 

Human
Resources:

$                                          Hiring

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

$                                          Employee hand
book, policies/procedures

$                                          Workers Comp

 

Information
Technology:

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

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

$                                          Backup for
Network

$                                          Backup for
AS400 Files

$                                          Web Site
Hosting

 

 

 

Insurance
Administration:

$                                          Compile Initial
Insurance Specifications

$                                          Solicit
Coverage Bids

$                                          Review
Bids/Coverage Issues

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

$                                          Review Policies

$                                          Compile
Insurance Summaries

$                                          COI setup dbase
review

$                                          Certificate of
Insurance Follow up

$                                          Claim Reporting
Procedure

$                                          Claims Tracking

$                                          Claims Review

$                                          Claim reporting
Follow up

$                                          Answer Coverage
Questions

 

Communications:

$                                          Press Releases

$                                          Writing for
Website

$                                          Media Relations

$                                          Publicity for
Annual Meeting

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

 

 

 

Exhibit B

Listing of Job Descriptions to be Filled by Leased Employees

 

Referenced at Section 2(G) of the Agreement

 

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

 

                For clarification purposes, the
salary and benefit costs of the General Manager and Operations Manager are
being borne by REG Services and not passed thru to Blackhawk Biofuels.Exhibit
4.14

 

AMENDMENT
NUMBER 1

TO
BINA ENTERPRISES

WARRANT TO PURCHASE SHARES OF COMMON STOCK

OF

PROUROCARE MEDICAL INC.

 

The warrant
agreement made as of April 5, 2004, by and between ProUroCare Inc., a
Minnesota corporation (the “Company”), and BINA Enterprises (the “Agreement”)
is hereby amended as follows:

 

The final sentence of the
first paragraph of the Agreement is hereby deleted and replaced with the
following sentence:

 

This Warrant may be
exercised by Holder at any time after the date hereof; provided,
however, that, Holder shall in no event have the right to exercise
this Warrant or any portion thereof after six years from the date hereof, at
which time all of Holder’s rights hereunder shall expire.

 

IN WITNESS WHEREOF, the
parties have executed this Amendment No. 1 to the Agreement effective as
of April 5, 2007.

 

	
   

  	
  PROUROCARE
  MEDICAL INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Richard C. Carlson

  
	
   

  	
  Its:

  	
  Chief
  Executive Officer

  

 

 

	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   RICHARD THON, Chief
  Financial Officer

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