Document:

Exhibit 10.2

 

 

Agreement

for

Pre-Construction Services

between

Blackhawk Biofuels, LLC

and

Renewable Energy Group, LLC

 

WHEREAS, Blackhawk Biofuels, LLC
(OWNER) has made a commitment to develop a 30 million gallon per year Biodiesel
Plant to utilize soybean oil and similar vegetable oil feedstocks and rendered
animal fats and is diligently pursuing full funding that will move this project
forward, and

 

WHEREAS, Renewable Energy Group,
LLC (REG) was formed to provide turn-key engineering and construction (design-build)
services for biodiesel facilities, which; are designed for product to meet ASTM
D6751 biodiesel specifications. and

 

WHEREAS, both parties are
targeting a field construction start date in the Fourth Quarter of 2006 and
recognize that time is of the essence and to meet that projected start date
certain Engineering and long lead time activities need to progress,

 

NOW THEREFORE, IT IS AGREED by
and between OWNER and REG as follows:

 

1.               In recognition of REG’s expertise and
technical assistance capabilities, OWNER will retain REG to complete
Pre-Construction Services, including the following:

 

A.           Additional engineering consisting of:

•                  Crown Iron Works
Process and Instrumentation Diagrams (P&IDs).

•                  Crown Iron Works
Piping Isometric drawings (ISOs).

•                  Expanded General
Arrangement drawings (GARs).

•                  Expanded
Architectural drawings (ARCs) as required.

•                  Site Civil
drawings (CIVs - drawing index, final grading, drainage and site utility
plans).

 

	
   

  	
  406 First
  Street

  
	
   

  	
  PO Box 68

  
	
   

  	
  Ralston, IA 51459

  
	
  CONFIDENTIAL

  	
  (712) 667-3500

  
	
   

  	
  Fax(712) 667-3599

  
	
   

  	
  www.renewable-energy-group.com

  

 

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•                  Initial
engineering for structural drawings - anchor bolts down (STRs - drawing index,
foundations, embeds and anchor bolts).

•                  Initial
engineering for tank drawings (TNKs).

•                  Initial
engineering for electrical drawings (ELEs - drawing index, legends and symbols,
temporary power for construction, permanent power distribution one-lines,
underground runs, grounding, and panel board details).

•                  Initial
engineering for mechanical drawings (MECs - drawing index, legends and symbols,
underground site utilities, P&IDs, tank drawings and utility rough-ins).

B.             Assistance with
additional permitting.

C.             Establish final
Project Specifications, Contract Documents and Contract Pricing.

D.            Place orders for long
lead time equipment and make required down payments on equipment. This will be
done at the discretion of REG based on both schedule and money’s
available.

 

2.               In consideration of REG’s agreement to
provide the foregoing services, OWNER agrees to pay REG the sum of $2,500,000. If
OWNER proceeds with the construction of a biodiesel facility, REG agrees that
the foregoing payment, as well as any previous payments to REG shall be
included in the final Design-Build Agreement Contract Price.

 

3.               Both parties acknowledge that any down
payments on equipment obligate REG to accept delivery and make final payment on
this equipment. Should OWNER not be in a position to accept delivery and make
final payment within 30 days of the targeted field construction start date,
then REG shall take steps to place this equipment on another REG project and
this Pre-Construction Services Agreement shall terminate.

 

4.               OWNER has the right to terminate this
Pre-Construction Services Agreement at any time by giving written notice to
REG.

 

5.               It is the intent of both OWNER and REG to
proceed directly from this Pre-Construction Services Agreement to a
Design-Build Agreement based on the Standard Form of Design-Build Agreement
and General Conditions Between Owner and Design-Builder (AGC Document No. 415).
Both parties agree to negotiate in good faith towards the execution of this
Design-Build Agreement no later than 30 days before the targeted field
construction start date. Should the parties, for whatever reason, be unable to
execute a Design-Build Agreement within 30 days after the targeted field
construction start date then this Pre-Construction Services Agreement shall
terminate.

 

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6.               Should this Agreement be terminated under
Article 3, Article 4, or Article 5 above, then REG shall
immediately take steps to stop the work and mitigate any further costs against
this Agreement. Should the final actual costs to REG (plus markup of 15%) be
less than the $2,500,000 payment then REG will reimburse the difference to
OWNER. Should the final actual costs to REG (plus markup of 15%) be higher than
the $2,500,000 payment then REG shall bear those additional costs and OWNER
shall have no further obligation to REG.

 

7.               Any and all designs, plans,
specifications, processes and other engineering or technical information or
data (herein referred to as “Confidential Information”) which are delivered to
OWNER in connection with this Agreement are confidential and proprietary to REG
and shall at all times remain the sole and exclusive property of REG. OWNER
shall not directly or indirectly be permitted, nor shall OWNER permit any other
party, to use, transfer, assign, disclose, divulge or publish any such
Confidential Information to any third party for any reason or purpose
whatsoever without the prior written consent of REG. OWNER may disseminate
Confidential Information to parties such as its employees, agents and
representatives (“Consultants”) as may need to know to aid OWNER in
analyzing for the purposes as set out above, but not until such Consultants are
aware of these provisions with respect to confidentiality, and the need to
prevent further dissemination of Confidential Information. All Confidential
Information shall be returned to REG at its request.

 

8.               REG’s obligations under this Agreement
are additionally guaranteed to OWNER by both West Central Coop and Todd &
Sargent, Inc.

 

This Agreement shall not be construed to convey any rights in REG’s
intellectual properties, including intellectual properties included in or
related to the Confidential Information. OWNER may acquire only such
rights in these intellectual properties as may be conveyed under the terms
of further construction agreements entered into between the parties, if any.

 

Entered
into as of the 26th day of April, 2006.

 

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  OWNER

  	
  RENEWABLE ENERGY GROUP, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By

  	
   

  	
  /s/ Ronald L. Mapes

  	
   

  	
  By

  	
   

  	
  /s/ Philip Sargent

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print Name

  	
   

  	
  Ronald L. Mapes

  	
   

  	
  Print Name

  	
   

  	
  Philip Sargent

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print Title

  	
   

  	
  Chairman

  	
   

  	
  Print Title

  	
   

  	
  Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  WEST CENTRAL COOP

  	
  TODD & SARGENT, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By

  	
   

  	
  /s/ Jeffrey Stroburg

  	
   

  	
  By

  	
   

  	
  /s/ Paul Sondgeroth

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Jeffrey Stroburg

  	
   

  	
  Print Name

  	
   

  	
  Paul Sondgeroth

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print Title

  	
   

  	
  President

  	
   

  	
  Print Title

  	
   

  	
  Vice President

  	
   

  
													

 

4Exhibit 10.3

 

MANAGEMENT AND OPERATIONAL SERVICES AGREEMENT

 

This
Management and Operational Services Agreement (“Agreement”) is made and entered
into as of the 4th day of August, 2006, by and between West Central
Cooperative, a cooperative association organized and existing under the laws of
the state of Iowa, with offices at Ralston, Iowa (“West Central”), 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:  Blackhawk Biofuels and Renewable Energy
Group, Inc. (“REG”) have entered into preliminary agreements concerning design
and construction, with respect to a biodiesel production facility to be built
for Blackhawk Biofuels in Freeport, Illinois (“Biodiesel Facility”). Blackhawk
Biofuels and West Central have discussed the general terms and conditions under
which West Central 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.

 

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, West
Central 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, West Central shall cooperate
with Blackhawk Biofuels and act in a manner to maximize the long-term success
and profitability of Blackhawk Biofuels.

 

2.                                       Responsibilities
of West Central. Under this Agreement, West Central agrees to provide the
following:

 

A.                                   General
Manager. West Central 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 West Central, 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 West Central and Blackhawk Biofuels.

 

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

 

B.                                     Operations
Manager. West Central will provide an Operations Manager to oversee the
operation of the Biodiesel Facility. The Operations Manager will be an employee
of West Central, 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 West Central and Blackhawk Biofuels.

 

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 West Central.

 

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

 

•                                          Provide
analysis and audit of feed stock suppliers;

 

2

 

•                                          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. West Central 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. West Central 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. West Central 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 West
Central’s expense except for those materials and items noted on such Exhibit
A):

 

•                                          Accounting

•                                          Human
Resources

•                                          Information
Technology

•                                          Insurance
Administration

•                                          Payroll

•                                          Communications

 

F.                                      Sales
and Marketing. West Central 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, West Central agrees to provide:

 

3

 

•                                          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 West Central’s 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, West
Central 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. West Central 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.

 

I.                                         Capital
Costs. West Central 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, West Central 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.

 

4

 

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 West Central, on a monthly
basis, a fee equal to 6.25¢ 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,” and the payment per month the “Monthly Fee”). 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 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 Fee Rate is
being computed shall be used as the numerator. This fraction shall be
multiplied by the amount of the initial Fee Rate, and the resulting amount
shall be the new Fee Rate to be used  to
compute the Monthly Fee for twelve (12) months beginning with the month for which
the adjusted Fee Rate was computed, except that in no event shall the adjusted
Fee Rate be less than the initial Fee Rate as set out above. The Fee Rate for
each subsequent year of the term shall be adjusted in a similar manner, with
the CPI for the Twenty-fifth Production Month being used as the denominator and
the CPI for the month preceding the month for which the adjusted Fee Rate is
being computed being used as the numerator, and such fraction being multiplied
by the initial Fee Rate, such adjusted Fee Rate in no event to be less than the
initial 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 at the Fee
Rate in effect prior to adjustment, the parties agreeing upon receipt of the
CPI information and calculation of the adjusted 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 West Central, and as additional
compensation for the services being rendered, Blackhawk Biofuels agrees to pay
a bonus to West Central 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

 

5

 

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 West
Central 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, West Central shall receive 
a Net Income Bonus, if any, computed for that period of the fiscal year
in which West Central provides services hereunder.

 

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 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.

 

D.                                    Direct
Marketing. West Central 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 to West
Central 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.

 

4.                                       Responsibilities
of Blackhawk Biofuels. Concurrent with performance of the obligations of
West Central as previously set out in this Agreement, Blackhawk Biofuels
understands and recognizes that upon completion of the Biodiesel Facility by
REG, 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.

 

6

 

B.                                     Confer
with West Central on a monthly basis (or more often as needed) to discuss and
establish the price for which West Central 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 West Central of any changes in such designees
(such designees to be reasonably available for contact by West Central, 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 West Central or its affiliates) at the Biodiesel
Facility, which have been approved by the Board. If technologies are purchased
from REG or West Central, Blackhawk Biofuels’ cost will not exceed REG/West
Central 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. West
Central 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

 

7

 

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 West Central 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
or REG employees, or employees of REG customers.

 

(ii)                                  Tours
for REG customers.

 

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 West Central to adopt the risk management
program agreeable to both parties, 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, West Central 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
West Central, 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, West
Central 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
West Central’s remote access to information on the operation of the Biodiesel

 

8

 

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), West Central
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
West Central 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 West Central’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 agreed
to by the parties (Blackhawk Biofuels and West Central to honor all pre-existing
contracts and agreements with respect to price). All Product sales by West
Central 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. West
Central 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 West Central is able to sell Products at prices above the Product
Prices, Blackhawk Biofuels would nonetheless receive all proceeds of any such
sales. West Central will in any 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 West Central will recommend the storage of Blackhawk
Biofuels’ Product in third party locations. In such cases West Central 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 West Central’s name. West Central shall take title to the Product when
loaded for delivery FOB the Biodiesel Facility, unless otherwise agreed. West
Central 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. West Central will
pay over to Blackhawk Biofuels all Product proceeds received from sales of
Blackhawk Biofuels Products. West Central shall remit by electronic transfer to
Blackhawk Biofuels all such proceeds Tuesday and Friday of each week. This
payment schedule will be re-evaluated if EFT payments for biodiesel produced by

 

9

 

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

 

G.                                     Credit
Risk. West Central agrees to manage the accounts receivable and work to
minimize bad debt losses. West Central 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. West Central 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 West Central to sell Product to buyers not approved
by West Central, West Central shall make such sale in Blackhawk Biofuels’ name,
and provide normal invoicing and billing services. However, any risk of receipt
or collection of such

 

10

 

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, West Central and Blackhawk Biofuels
agree that West Central shall lease to Blackhawk Biofuels those of its
employees identified in each monthly report prepared by West Central (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 West Central.
West Central 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. West Central is responsible for all labor
negotiations, grievances and collective bargaining agreements regarding the
Leased Employees.

 

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

 

11

 

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. West Central 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, West
Central shall be solely responsible for verifying such licensure or providing
such required supervision.

 

(iv)                              Blackhawk
Biofuels shall reimburse West Central 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, West
Central 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 West Central. The Cost of Services paid or incurred by West Central shall be
based on the wages, payroll taxes, government mandated costs, including
workers’ compensation, benefit costs, expenses charged to West Central on a per
employee basis, and any other costs mutually agreed upon as being appropriate
for reimbursement, which West Central 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. West Central 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)                              West
Central 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)                           West
Central 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 West Central
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

 

12

 

longer be a
Leased Employee, but will remain an employee of West Central subject to
retention or termination as West Central may determine in its sole discretion.

 

(viii)                        In
performing the services hereunder, West Central 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, West
Central agrees to transfer West Central’s 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 West Central.

 

J.                                        Access
to Biodiesel Facility. Blackhawk Biofuels agrees during the term of this
Agreement to provide access to the Biodiesel Facility by West Central for
purposes of training employees regarding the operation of biodiesel plants and
equipment, and to provide for tours by prospective customers of West Central,
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 West Central 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 West Central or to parties with
whom West Central has entered into contractual relationships (herein
“Confidential Information” with respect to West Central), to include but not be
limited to information concerning West Central’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 West Central or to parties with whom
West Central has entered into contractual relationships. West Central agrees
that in the performance of this Agreement, West Central 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

 

13

 

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, West Central will direct
the General Manager, Operations Manager, and Leased Employees (as such term is
defined hereafter) to hold competitively sensitive information of Blackhawk
Biofuels confidential and not disclose such information to West Central 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, the Iowa Securities Bureau or other regulators, and agree
to allow such disclosure upon receipt of appropriate request.

 

8.                                       Intellectual
Property Rights. Blackhawk Biofuels shall have no right under the Agreement
to make use of any brand names trademarked by West Central, nor any of the
intellectual properties or know-how developed by West Central in conjunction
with the operation of plants similar to the Biodiesel Facility, or to use any
of West Central’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.

 

14

 

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 West Central 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 West Central in performance of its duties hereunder. West Central
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 West
Central, including with respect to the cost of providing Leased Employees
hereunder. For that reason West Central 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
West Central’s compliance with its obligations set forth hereunder. Blackhawk
Biofuels agrees to treat information received under such access rights as
Confidential Information with respect to West Central.

 

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

 

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

 

15

 

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, West Central
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 West Central 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 West Central 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 West Central 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.                                     Blackhawk
Biofuels may terminate this Agreement effective immediately upon delivery of
written notice to West Central, if REG has defaulted under the construction
contract as defined and referred to in Section 20 (“Construction Contract”)
with regard to the Biodiesel Facility, and fails to remedy such default within
the cure period provided under such Construction Contract.

 

D.                                    West
Central may terminate this Agreement effective immediately upon delivery of
written notice to Blackhawk Biofuels, if Blackhawk Biofuels 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.

 

16

 

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.

 

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

 

A.                                   West
Central 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 West Central, its employees or agents, (ii)
West Central’s breach of any provision of this Agreement; (iii) West Central’s
failure to meet its obligations to or perform any acts required under its
agreements with any third party, (iv) the relationship between the West Central
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 West Central 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 (or of the Construction Contract as set out under
subsections 14(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
14 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

 

17

 

and thereafter
proceed diligently with the cure thereof, then the Non-Breaching Party may
terminate this Agreement and may recover its money damages caused by such
material breach (including arbitration fees, court costs, litigation expenses,
and reasonable attorney fees) on written notice and demand to the Breaching
Party for payment. Such payment shall be without prejudice to any other right
or remedy 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:

 

18

 

	
  To Blackhawk
  Biofuels:

  	
  Blackhawk
  Biofuels, LLC

  
	
   

  	
  22 South
  Chicago Avenue

  
	
   

  	
  Freeport, IL
  61032

  
	
   

  	
  Attention:
  Ron Mapes

  
	
   

  
	
  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 West
  Central :

  	
  West Central
  Cooperative

  
	
   

  	
  406 1st
  Street, PO Box 68

  
	
   

  	
  Ralston, IA
  51459

  
	
   

  	
  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
West Central.

 

20.                                 Condition
Precedent to West Central’s Performances. West Central’s obligations and
performance under the Agreement are expressly conditioned upon Blackhawk
Biofuels entering into a Design – Building Agreement with REG for construction
of the Biodiesel Facility.

 

21.                                 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

 

19

 

(collectively
herein “Assignee”), if such Assignee expressly assumes all obligations not
otherwise remaining with Assignor hereunder, and Assignor nonetheless remains
responsible hereunder.

 

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

 

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

 

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]

 

20

 

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

 

 

	
   

  	
  WEST CENTRAL
  COOPERATIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Jeffrey Stroburg

  
	
   

  	
   

  	
  Jeffrey
  Stroburg, President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BLACKHAWK
  BIOFUELS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Ronald Mapes

  
	
   

  	
   

  	
  Ron Mapes,
  Chairman

  

 

21

 

Exhibit A to

Management and Operational Services Agreement (AAgreement@)

West Central 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, West Central 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 (West Central to be reimbursed by Blackhawk
Biofuels for West Central’s costs (including employee expenses) for preparation
of any special requested applications.)

$                                          Telephone/Network
Services (Blackhawk Biofuels to reimburse West Central 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 West Central 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 WCC, 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 West Central and not passed thru to Blackhawk
Biofuels.

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