Document:

EXHIBIT 10.17

 

NOTE: THE APPEARANCE OF “[***]” IN THIS EXHIBIT INDICATES MATERIAL
WHICH HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934. A COPY OF THE
EXHIBIT CONTAINING THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

 

SERVICES AGREEMENT

 

THIS SERVICES AGREEMENT (this “Agreement”)
is made and entered into as of May 9, 2008 (the “Effective Date”)
by and between Blackhawk Biofuels, LLC, a Delaware limited liability company (“Producer”),
and Bunge North America, Inc., a New York corporation (“Bunge”)
(each of Producer and Bunge, a “Party” and collectively, the “Parties”).

 

A.                                   A biodiesel plant is
currently under construction by Biofuels Company of America, LLC (“BCA”)
for which BCA and Bunge have an existing Services Agreement dated September 6,
2006.

 

B.                                     As of the Effective Date,
Producer intends to purchase substantially all of the assets of BCA and
Producer will own the biodiesel plant (the “Blackhawk Facility”) located
adjacent to the existing oil processing facility in Danville, Illinois (the “Bunge
Facility”) owned by an Affiliate of Bunge.

 

C.                                     The Blackhawk Facility will
be managed and operated by REG Services Group, LLC (“REG”).

 

D.                                    Producer
desires to retain Bunge to provide certain services to Producer for the
Blackhawk Facility, and Bunge desires to render such services to Producer, all
upon the terms and conditions hereinafter set forth.  In addition, the Parties desire to clarify
Producer’s responsibility in maintaining certain items needed to supply
products for rail loadout.

 

Therefore, the Parties agree:

 

1.                                       Services.  Producer hereby retains, engages, authorizes
and empowers Bunge to render the third-party services for Producer set forth on
Exhibit A attached hereto (“Services”), and Bunge hereby
accepts such retention, engagement, authorization and empowerment, and agrees
to provide the Services.  Bunge shall use
reasonable commercial efforts to provide such Services in a manner consistent
with generally accepted industry standards.

 

2.                                       Subcontracting.  To provide the Services, Bunge may
subcontract with or otherwise retain the services of other Persons, including,
but not limited to, Affiliates of Bunge. 
Producer hereby consents to such subcontracting activities, including
for purposes of Section 18 hereof, to the extent that Bunge
subcontracts with or retains Affiliates of Bunge.  To the extent Bunge subcontracts with or
retains Persons other than Affiliates of Bunge, Bunge shall be required to
obtain Producer’s prior written consent, which consent shall not be
unreasonably withheld.  For purposes of
this Agreement: (a) the term “Affiliate” means a Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the party specified, with “control” or  “controlled”
meaning the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a 

 

 

Person, whether through the ownership of
voting securities or voting interests, by contract or otherwise; and (b) the term “Person” shall mean any individual, general partnership, limited partnership,
limited liability company, joint venture, trust, business trust, cooperative,
association or other entity of whatever nature.

 

 

3.                                       Fee for Services.

 

3.1                                 Services Fees.  In consideration of Bunge providing the
Services, beginning upon the Effective Date, Producer shall pay Bunge the fee
amounts set forth in Exhibit A.

 

3.2                                 Pre-Effective
Service Fee.  In
consideration of Bunge having provided Services to BCA prior to the date of
this Agreement and prior to the Effective Date from which Producer will benefit
after the Effective Date, Producer shall pay to Bunge $240,000 (the “Pre-Effective
Service Fee”), in monthly payments of $13,333.33 beginning seven months
after the Effective Date and continuing until the Pre-Effective Service Fee is
paid in full.  The Pre-Effective Service
Fee shall constitute payment in full for all services performed by Bunge for
BCA prior to the Effective Date and Producer shall have no liability or
obligation for any such services prior to the Effective Date other than to pay
the Pre-Effective Service Fee as provided herein.

 

3.3                                 Hexane Stripper.  In consideration of Bunge having upgraded its
hexane stripper at its existing oil processing facility in Danville, Illinois
in preparation for operations at the Blackhawk Facility, Producer will pay to
Bunge $240,000 (the “HS Amount”), in monthly payments of $5,000
beginning thirteen months after the Effective Date and continuing until the HS
Amount is paid in full.  Bunge shall
retain all ownership and other rights in the upgraded hexane stripper at all
times and Producer shall have no rights therein.

 

3.4                                 Payment Terms.  To the extent that Producer is obligated to
pay any fees pursuant to Exhibit A on a monthly basis, Producer
will pay such fees in arrears not later than the tenth day of each month.  Producer will pay the monthly payments of the
Pre-Effective Service Fee and the HS Amount not later than the tenth day of
each month.  All payments hereunder shall
be made by Automated Clearing House (ACH) transfer of funds to a bank account
to be designated by Bunge.  All amounts
not paid when due shall bear interest at a rate equal to the lesser of (a) 18%
per annum, or (b) the maximum rate allowed by applicable law.

 

4.                                       Access to Information.  Producer will provide Bunge and its duly
authorized representatives with reasonable access at Producer’s offices to such
information and records reasonably necessary to discharge Bunge’s
responsibilities hereunder.

 

5.                                       Right to Receive Advice.  At any time, Bunge may require Producer to
provide specific reasonable direction and/or advice regarding any action to be
taken or omitted by it, and it may request, and shall receive, from Producer
reasonable directions or advice.  Bunge
shall not be liable to Producer with respect to any action or inaction which it
takes in reliance on any directions or advice received pursuant to this
Section.  However, nothing in this Section shall
be construed as imposing upon Bunge any obligation (a) to seek such
directions or advice, or (b) to act in accordance with such directions or
advice when received.

 

6.                                       Compliance with
Laws.  Producer assumes full
responsibility for ensuring compliance in all material respects with all
foreign, federal, state and local laws, rules and regulations applicable
to Producer and the Blackhawk Facility. 
Bunge reserves the right to take any actions or omit to take any
actions, including, without limitation, termination of any particular service,
that Bunge reasonably believes to be necessary or appropriate to ensure
compliance with applicable laws, rules and regulations.  Notwithstanding anything in the Agreement to the 

 

 

contrary, in the
event the emissions from either the Bunge Facility or the Blackhawk Facility
violate any applicable air quality law, regulation, license or permit, Bunge
with respect to the Bunge Facility and Producer with respect to the Blackhawk
Facility, shall defend, indemnify and hold the other Party harmless from and
against any liability, claim, loss, damage, fee, fine, penalty or expense,
including, but not limited to, reasonable attorneys’ fees and other costs of
defense, arising in connection with such violation at such facility.  Bunge and Producer shall exercise their
respective commercially reasonable efforts and cooperate with each other in
attempting to obtain separate air quality permits for the Bunge Facility and
Blackhawk Facility.

 

7.                                       Term and
Termination.

 

7.1                                 Term.  The “Term” of this Agreement will
begin upon the Effective Date and, unless earlier terminated in accordance with
the terms hereof, will expire upon the sixth anniversary of the Effective Date;
provided that this Agreement shall thereafter automatically renew for
successive two-year terms unless either Party gives written notice to the other
Party of its intention not to allow renewal no later than one year prior to
expiration of the initial or renewal term, as applicable.

 

7.2                                 Termination Rights.

 

(a)                                  Either Party
may terminate this Agreement immediately upon notice to the other Party if such
other Party has (i) materially breached any representation, warranty, or
obligation under this Agreement, and (ii) failed to remedy such breach
within 30 days after the terminating Party has given notice of such breach, or
if such breach cannot reasonably be cured within such 30-day period, such other
Party has failed to commence and diligently pursue remedy of the breach and
failed to remedy such breach not later than 120 days after the terminating
Party has given notice of such breach.

 

(b)                                 Bunge may
terminate this Agreement (i) immediately upon notice to Producer if
Producer fails to pay any amount due under this Agreement within seven days
after Bunge gives Producer notice of such nonpayment; and/or (ii) immediately
upon notice to Producer upon termination of that certain Oil Feedstock Supply
Agreement between Bunge and Producer.

 

(c)                                  Either Party
may terminate this Agreement immediately upon notice to the other Party if (i) such
other Party files a petition for adjudication as a bankrupt, for reorganization
or for an arrangement under any bankruptcy or insolvency law, (ii) an
involuntary petition under such law is filed against such other Party and is
not dismissed, vacated or stayed within 60 days thereafter, or (iii) such
other Party makes an assignment of all or substantially all of its assets for
the benefit of creditors.

 

(d)                                 Either Party
may terminate this Agreement in accordance with Section 10.3
hereof.

 

7.3                                 Survival.  The provisions of this Agreement which
expressly or by their nature survive expiration or termination of this
Agreement will remain in effect after the expiration or termination of this
Agreement.

 

 

8.                                       Limitation of
Liability; General Disclaimer.  EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, BUNGE MAKES NO STATUTORY, WRITTEN, ORAL, EXPRESSED OR IMPLIED
WARRANTIES, REPRESENTATIONS OR GUARANTEES OF ANY KIND CONCERNING THE SERVICES
PROVIDED BY BUNGE, ITS AFFILIATES OR SUBCONTRACTORS UNDER THIS AGREEMENT.  EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER BUNGE, ITS AFFILIATES NOR ITS SUBCONTRACTORS WILL BE LIABLE
TO PRODUCER OR ANY OTHER PERSON OR ENTITY FOR DAMAGES ARISING OUT OF, RELATING
TO OR RESULTING FROM SERVICES PROVIDED UNDER THIS AGREEMENT OR THE FAILURE TO
PROVIDE SERVICES UNDER THIS AGREEMENT, EXCEPT TO THE EXTENT SUCH DAMAGES ARISE
OUT OF OR RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BUNGE, ITS
AFFILIATES OR SUBCONTRACTORS; PROVIDED, THAT THE AGGREGATE AMOUNT OF ALL SUCH
DAMAGES UNDER THIS AGREEMENT IN ANY CALENDAR YEAR WILL NOT EXCEED THE AMOUNT OF
THE SERVICE FEE IN SUCH CALENDAR YEAR. 
THE REMUNERATION TO BE PAID FOR THE SERVICES TO BE PERFORMED REFLECTS
THIS LIMITATION OF LIABILITY.  IN NO
EVENT WILL BUNGE (OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
AFFILIATES OR SUBCONTRACTORS) BE LIABLE TO PRODUCER FOR ANY SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT (INCLUDING,
BUT NOT LIMITED TO, DAMAGES FOR LOST PROFITS OR INCOME).

 

9.                                       Remedies.

 

9.1                                 Suspension of Performance.  Bunge may suspend its performance under this
Agreement until Producer has paid all amounts due under this Agreement if
Producer fails to pay any amount within seven days after the date when such
amount is due under this Agreement.

 

9.2                                 Non-exclusive Right.  No right, power or remedy conferred by this
Agreement will be exclusive of any other right, power or remedy now or
hereafter available to Bunge at law, in equity, by statute or otherwise.

 

10.                                 Force Majeure.

 

10.1                           Definition of Force Majeure
Event.  Each Party is excused from
performing its obligations under this Agreement to the extent that such
performance is prevented by an act or event (a “Force Majeure Event”)
whether or not foreseen, that: (i) is beyond the reasonable control of,
and is not due to the fault or negligence of, such Party, and (ii) could not have been avoided by such Party’s
exercise of due diligence, including, but not limited to, a labor controversy,
strike, lockout, boycott, transportation stoppage, action of a court or public
authority, fire, flood, earthquake, storm, war, civil strife, terrorist action,
epidemic, or act of God; provided that a Force Majeure Event will not
include economic hardship, changes in market conditions, or insufficiency of
funds.  Notwithstanding the foregoing
sentence, a Force Majeure Event does not excuse any obligation to make any
payment required by this Agreement (including but not limited to Sections
3.1, 3.2 and 3.4) and will not affect Bunge’s right to terminate this
Agreement pursuant to Section 7.2(b)(ii).

 

 

10.2                           Conditions Regarding Force Majeure Event.  A Party claiming a Force Majeure Event must: (i) use
commercially reasonable efforts to cure, mitigate, or remedy the effects of its
nonperformance; provided that neither Party will have any obligation
hereunder to settle a strike or labor dispute; (ii) bear the burden of
demonstrating its existence; and (iii) notify the other Party of the occurrence
of the Force Majeure Event as quickly as reasonably possible, but no later than
five business days after learning of the occurrence of the Force Majeure
Event.  Any Party that fails to notify
the other Party of the occurrence of a Force Majeure Event as required by this Section 10
will forfeit its right to excuse performance of its obligations due to such
Force Majeure Event.  When a Party
claiming a Force Majeure Event is able to resume performance of its obligations
under this Agreement, it will immediately give the other Party notice to that
effect and resume performance.

 

10.3                           Third Parties; Termination.  During any period that a Party claiming a
Force Majeure Event is excused from performance under this Agreement, the other
Party may accept performance from other parties as it may reasonably determine
under the circumstances.  If a Party has
not performed under this Agreement due to a Force Majeure Event for six
consecutive months or more, the other Party may terminate this Agreement
immediately upon notice to the non-performing Party.

 

11.                                 Insurance.

 

11.1                           Workers’ Compensation.  Each Party warrants to the other that all of
its employees that provide services under this Agreement will be covered by
workers’ compensation insurance as required by law and by employer’s liability
insurance.

 

11.2                           Other Required Coverage.

 

(a)                                  Each Party will maintain
automobile liability insurance against claims for bodily injury, death and
property damage, with limits of not less than $1,000,000 per person and not less
than $1,000,000 per accident or occurrence; alternatively, combined single
limits of not less than $1,000,000.  Such
insurance will name the other Party, its parents, subsidiaries and Affiliates
and their respective employees and agents as additional insureds thereunder.

 

(b)                                 Each Party will maintain
commercial general liability insurance (including, without limitation, coverage
for Contractual Liability and, for Producer only, Products/Completed
Operations) against claims for bodily injury, death and property damage, with
limits of not less than $10,000,000 in one accident or occurrence;
alternatively, combined single limits of not less than $10,000,000 each
accident or occurrence, $10,000,000 Products/Completed Operations aggregate
(for Producer only) and $10,000,000 general aggregate. Such insurance will name
the other Party, its parents, subsidiaries and Affiliates and their respective
employees and agents as additional insureds thereunder.

 

(c)                                  The minimum limits of
coverage required by this Agreement may be satisfied by a combination of
primary and excess or umbrella insurance policies; provided that any such
excess or umbrella insurance policies follow the form of or provide broader
coverages than the primary insurances and contain a drop down provision in case
of exhaustion or unavailability of underlying limits and/or aggregates.

 

 

11.3                           Policy Requirements.  All insurance policies required by this
Agreement will (a) provide coverage on an “occurrence” basis; (b) provide
that no cancellation, non-renewal or material change will be effected without
giving the other Party at least ten days’ prior written notice; and (c) be
valid and enforceable policies issued by insurers of recognized responsibility,
properly licensed in the State where the Blackhawk Facility is located, with an A.M.
Best’s Rating of A- or better and Class VII or better.  Such insurance policies will not contain a
cross-liability exclusion or an exclusion for punitive or exemplary damages
where insurable under law.  Prior to the
Effective Date and, thereafter, within five business days of renewal,
certificates and endorsements of such insurance will be delivered to the other
Party, as appropriate, as evidence of the specified insurance coverage.  From time to time, upon a Party’s request,
the other Party will provide the requesting Party, within five business days, a
certified duplicate original of any policy required to be maintained hereunder.

 

12.                                 Relationship of
Parties.  This Agreement creates no
relationship other than with Bunge serving as an independent contractor of
Producer.  Specifically, there is no
agency, partnership, joint venture or other joint or mutual enterprise or
undertaking created hereby and neither Party, or any of such Party’s
representatives, agents or employees, will be deemed to be the representative,
agent or employee of the other Party. 
Neither Party will have authority to act on behalf of or bind the other
Party, except as otherwise specifically agreed.

 

13.                                 Confidentiality.

 

13.1                           Definition of Confidential
Information.  The term “Confidential
Information” means all material or information relating to a Party’s
business operations and affairs (including trade secrets) that such Party
treats as confidential.

 

13.2                           Use of Confidential
Information.  During the Term
and for two years thereafter, neither Party will (a) use any Confidential
Information of the other Party for any purpose other than in accordance with
this Agreement or for its and its Affiliates’ internal business purposes, or (b) disclose
Confidential Information to any person, except to its personnel who are subject
to nondisclosure obligations comparable in scope to this Section 13
and who have a need to know such Confidential Information in order to perform
under this Agreement.

 

13.3                           Disclosure of Confidential
Information. 
Notwithstanding Section 13.2, either Party may use for any
purpose or disclose any material or information that it can demonstrate (i) is
or becomes publicly known through no act or fault of such Party; (ii) is
developed independently by such Party without reference to the other Party’s
Confidential Information; (iii) is known by such Party when disclosed by
the other Party, and such Party does not then have a duty to maintain its
confidentiality; or (iv) is rightfully obtained by such Party from a third
party not obligated to preserve its confidentiality who did not receive the
material or information directly or indirectly from the other Party.  A Party also may disclose the other Party’s
Confidential Information to the extent required by a court or other
governmental authority, provided that the disclosing Party (a) gives the
other Party advance written notice of the disclosure, (b) uses reasonable
efforts to resist disclosing the Confidential Information, (c)  cooperates
with the other Party on request to obtain a protective order or otherwise limit
the disclosure, and (d) as soon as reasonably possible, provides a letter
from its counsel confirming that such Confidential Information is, in fact,
required to be disclosed.

 

 

13.4                           Injunctive Relief.  Each Party acknowledges and agrees that its
breach or threatened breach of any provision of this Section 13
would cause the other Party irreparable injury for which it would not have an
adequate remedy at law.  In the event of
a breach or threatened breach, the nonbreaching Party will be entitled to
injunctive relief in addition to all other remedies it may have at law or in
equity.

 

14.                                 Governing Law;
Disputes.

 

14.1                           Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Illinois, excluding any applicable conflicts-of-law rule or
principle that might refer the construction or interpretation of this Agreement
to the laws of another state.

 

14.2                           Notice of Dispute.  If any dispute shall arise under or in
connection with this Agreement, the Parties hereto agree to follow the
procedures set forth in this Section 14 in an effort to resolve the
dispute prior to the commencement of any formal proceedings; provided, however, that either Party may institute judicial
proceedings seeking equitable relief or remedies without following the
procedures set forth herein.  The Parties
shall attempt in good faith to resolve any dispute arising out of or relating
to this Agreement, the breach, termination, or validity hereof, or the
transactions contemplated herein promptly by negotiation between
representatives who have authority to settle the controversy.  Any Party may give the other Party written
notice that a dispute exists (a “Notice of Dispute”) setting forth a
statement of such Party’s position. 
Within 20 business days of the delivery of the Notice of Dispute,
representatives of the Parties shall meet at a mutually acceptable time and
place, and thereafter as long as they both reasonably deem necessary, to
exchange relevant information and attempt to resolve the dispute.  If the matter has not been resolved within 30
days of the disputing party’s delivering its Notice of Dispute, the dispute
shall be referred to the respective presidents, general managers or comparable
senior executives of Producer and Bunge who shall within 20 additional days
meet to attempt in good faith to resolve the dispute.

 

14.3                           Mediation.  If the matter still has not been resolved
within 60 days of the delivery of the Notice of Dispute, then any Party may
seek to resolve the dispute through mediation administered by the Commercial
Mediation Rules of the American Arbitration Association.  If the Parties fail to resolve the dispute
within 21 days after starting mediation, then either Party may initiate
appropriate proceedings to obtain a judicial resolution of the dispute.

 

14.4                           Negotiations; Jurisdictional
Matters.  If a representative of any
Party intends to be accompanied at a meeting by an attorney, the other
negotiator shall be given at least three business days’ notice of such
intention and may also be accompanied by an attorney.  All negotiations pursuant to this clause are
confidential and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and similar state rules of
evidence.  Any proceeding initiated by
either Party hereto shall be commenced and prosecuted in the United States
District Courts for the Eastern District of Missouri or the state courts in St.
Louis County, Missouri, and any courts to which an appeal may be taken, and
each Party hereby consents to and submits to the personal jurisdiction of each
of such courts.

 

14.5                           Waiver of Jury Trial.  EACH PARTY IRREVOCABLY WAIVES ANY AND ALL
RIGHTS TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF 

 

 

OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

15.                                 Notices.  All notices required or permitted under this
Agreement will be in writing and will be deemed given and made: (i) if by
personal delivery, on the date of such delivery, (ii) if by facsimile, on
the date sent (as evidenced by confirmation of transmission by the transmitting
equipment), (iii) if by nationally recognized overnight courier, on the
next business day following deposit, and (iv) if by certified mail, return
receipt requested, postage prepaid, on the third business day following such
mailing; in each case addressed to the address or facsimile number shown below
for such Party, or such other address or facsimile number as such Party may
give to the other Party by notice:

 

In
the case of Bunge:

 

Bunge North America, Inc.

11720 Borman Drive

St. Louis, Missouri  63146

Attn:  Senior Vice President –
Oilseed Processing

Facsimile: (314) 292-2146

 

with a copy to:

 

Bunge North America, Inc.

11720 Borman Drive

St. Louis, Missouri  63146

Attn:  General Counsel

Facsimile:  (314) 292-2521

 

In
the case of Producer:

 

Blackhawk Biofuels, LLC

22 Chicago Avenue

Freeport, IL 61032-4230

Attn: Ron Meyers

Facsimile: (815) 235-4727

 

With a copy to:

 

Lindquist &
Vennum, PLLP

4200 IDS Center

80 South Eighth
Street

Minneapolis, MN
55402-2274

Attn: Dean Edstrom

Facsimile: 612-371-3207

 

and a copy to:

 

REG Services, LLC

 

 

c/o Renewable Energy Group, Inc.

416 S. Bell Avenue

PO Box 888

Ames, IA 50010

Attn:
Nile Ramsbottom

Facsimile: 515-239-8009

 

and a copy to:

 

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

115 E. Lincolnway, Suite 200

Jefferson, IA 50129

Attn:  John
Gerken

Facsimile: 
515-386-8531

 

16.                                 Entire Agreement; No Third Party Beneficiaries.  This
Agreement constitutes the entire agreement between the Parties with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, between the Parties with respect to the
subject matter hereof.  This Agreement
does not, and is not intended to, confer any rights or remedies upon any person
other than the Parties.

 

17.                                 Amendments; Waiver.  The
Parties may amend this Agreement only by a written agreement of the
Parties.  No provision of this Agreement
may be waived, except as expressly provided herein or pursuant to a writing
signed by the Party against whom the waiver is sought to be enforced.  No failure or delay in exercising any right
or remedy or requiring the satisfaction of any condition under this Agreement,
and no “course of dealing” between the Parties, operates as a waiver or
estoppel of any right, remedy or condition. 
A waiver made in writing on one occasion is effective only in that
instance and only for the purpose that it is given and is not to be construed
as a waiver on any future occasion or against any other person.

 

18.                                 Assignment.  Subject to the explicit other terms of this
Agreement, Producer may not assign this Agreement, or assign or delegate any of
its rights, interests, or obligations under this Agreement, voluntarily or
involuntarily, whether by merger, consolidation, dissolution, operation of law,
or any other manner, without the prior written consent of Bunge, and any
purported assignment or delegation without such consent will be void.  Subject to the preceding sentence in this Section 18,
this Agreement binds and benefits the Parties and their respective permitted
successors and assigns.

 

19.                                 Severability.  If a court or arbitrator with proper
jurisdiction determines that any provision of this Agreement is illegal,
invalid, or unenforceable, the remaining provisions of this Agreement remain in
full force.  The Parties will negotiate
in good faith to replace such illegal, invalid, or unenforceable provision with
a legal, valid, and enforceable provision that carries out the Parties’
intentions to the greatest lawful extent under this Agreement.

 

20.                                 Interpretation.  Each Party has been represented by counsel
during the negotiation of this Agreement and agrees that any ambiguity in this
Agreement will not be construed against one of the Parties.

 

 

21.                                 Further Assurances.  Each
Party will execute and cause to be delivered to the other Party such
instruments and other documents, and will take such other actions, as the other
Party may reasonably request for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.

 

22.                                 Counterparts.  This Agreement may be executed by the Parties
by facsimile and in separate counterparts, each of which when so executed will
be deemed to be an original and all of which together will constitute one and
the same agreement.

 

23.                                 Maintenance of
Loadout Equipment; Title to Loaded Products.  Producer will deliver to the Bunge Facility
any products to be loaded pursuant to Exhibit A solely via
pipelines (the “Pipelines”) from the Blackhawk Facility.  Producer shall be responsible for the design
and installation of the entirety of the Pipelines, including any pumps needed
to convey products via the Pipelines; provided that Bunge shall have the right
to review and approve the design, specifications and time for installation of
any portion of the Pipeline’s on property owned by Bunge.  Producer will maintain (at its own expense)
the entirety of the Pipelines, including the portion of the Pipelines on the
property owned by Bunge, in accordance with applicable laws and regulations and
in safe operating condition in accordance with normal industry standards.  Bunge hereby grants Producer and its agents
and designees all necessary rights of access across the property owned by Bunge
in order to permit Producer to meet its obligations under this Section 23.  If Producer becomes aware of any leaks in or
from the Pipelines, Producer will immediately notify Bunge.  Title to the products conveyed via the
Pipelines will remain with Producer at all times.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed the day and year first above written.

 

 

	
  BUNGE NORTH AMERICA, INC.

  	
   

  	
  BLACKHAWK BIOFUELS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /S/    Eric
  Hakmiller

  	
   

  	
  By:

  	
   

  	
  /S/ Ronald L. Mapes

  
	
  Name:

  	
   

  	
  Eric Hakmiller

  	
   

  	
   

  	
  Ronald L. Mapes, Chair

  
	
  Title:

  	
   

  	
  VP Bunge Biofuels

  	
   

  	
   

  
									

 

 

Exhibit A -      Services

 

Schedule 1 -    Form of Gas Pipeline Easement

Schedule 2 -    Form of Staging and Access
Right of Way Easement

Schedule 3 -    Form of Oil Pipeline Easement

Schedule 4 -    Form of Biodiesel Pipeline
Easement

 

 

SERVICES AGREEMENT SIGNATURE PAGE

 

 

EXHIBIT A

SERVICES

 

1.               Bunge will provide rail
loadout services in accordance with the following procedures:

 

(a)          REG, as manager and operator
of the Blackhawk Facility, is responsible for placing orders for railcars to be
switched with Bunge’s Traffic Department.

 

(b)         After receiving an
appropriate order, Bunge will order the railcars identified by REG to be
switched from the Norfolk Southern railroad (NS), and to the extent that the NS
properly switches such railcars, Bunge will:

 

(i)                                    inspect any
such railcar in accordance with standard BQ-9000 procedures;

(ii)                                 empty the
contents of such railcar into heal tanks, as required;

(iii)                              position the
loading arm into such railcar;

(iv)                             set the
selector switch to Biodiesel, Biodiesel Blend, or Glycerin, as applicable;

(v)                                complete the
appropriate pre-loading paper work (car #, seal #, etc.);

(vi)                             enter
information into REG’s “One Weigh” computer system; and

(vii)                          communicate to
REG that the railcar is ready to load via “ready-to-load light.”

 

(c)          After Bunge has complied
with the procedures set forth in Section 1(b) for a given railcar,
REG will:

 

(i)                                    set into the
meter system the quantity
of biodiesel or glycerin (as applicable) to be loaded into such
railcar; and

(ii)                                 communicate to
Bunge that the railcar is ready to load via “ready-to-start light.”

 

(d)         After REG has complied with
the procedures set forth in Section 1(c) for a given railcar, Bunge
will:

 

(i)                                    start REG’s
pump;

(ii)                                 pump the
applicable product through the loading arm;

(iii)                              monitor the
filling, simultaneously with REG;

(iv)                             obtain a sample
of the applicable product, label the sample appropriately, and provide the
sample to REG for storage;

(v)                                remove the
loading arm from the railcar;

(vi)                             seal the
railcar;

(vii)                          complete the
railcar loading information on “One Weigh”; and

(viii)                       print the
railcar loading information.

 

(e)          After Bunge has completed
the steps in Section 1(d), Bunge will transfer all printed documents and
the Oil sample to the Bunge Traffic Department. 
After the Bunge Traffic Department has checked and approved all of the
information, it will release the railcar to the NS.

 

(f)            Bunge will have no
obligation to load any railcars (including railcars to be loaded with
biodiesel, biodiesel blend, or glycerin) pursuant to this Section 1 in
excess of the following limits (where such railcars have a capacity of at least
25,000 gallons):

 

 

(i)                                   A total of [***] railcars
during any 12-month period;

 

(ii)                                A total of [***] railcars
during any day during a Half Month (as defined below) if Producer received and
paid for a daily average of less than 665,000 pounds of soybean oil from Bunge
pursuant to that certain Oil Feedstock Supply Agreement between Bunge and
Producer, dated as of even date herewith (the “Supply Agreement”) during
the immediately preceding Half Month;

 

(iii)                             A total of [***] railcars
during any day during a Half Month if Producer received and paid for a daily
average of more than 665,000 pounds and less than 850,000 pounds of soybean oil
from Bunge pursuant to the Supply Agreement during the immediately preceding
Half Month; and

 

(iv)                            A total of [***] railcars during
any day during a Half Month if Producer received and paid for a daily average
of more than 850,000 pounds of soybean oil from Bunge pursuant to the Supply
Agreement during the immediately preceding Half Month.

 

(v)                               A total of [***] railcars during any day during any time that
Bunge has been called upon to load cars against CBOT/CME delivery receipts.

 

(vi)                            A “Half
Month” is (a) the period beginning on the first day of a month and
ending at the end of the 15th day of such month; and (b) the
period beginning on the 16th day of a month and ending at the end of
the last day of such month.

 

(g)         Producer will pay Bunge for
each railcar loaded pursuant to this Section 1 in accordance with the
following procedures:

 

(i)                                   Prior to the
Effective Date, and on or around each anniversary of the Effective Date
thereafter, Producer and Bunge will agree upon an estimate of the per railcar
cost to load railcars pursuant to this Section 1 (the “Estimated Per
Car Cost”).

 

(ii)                                Producer will
pay Bunge monthly (in accordance with Section 3.3 of the Agreement) the
Estimated Per Car Cost for all railcars loaded by Bunge pursuant to this Section 1
during the month.

 

(iii)                             On the last day
of each calendar quarter (March 31, June 30, September 30 and December 31),
Bunge will notify Producer of its actual per railcar cost during such
just-completed quarter to load railcars pursuant to this Section 1 (the “Actual
Per Car Cost”).  If the Actual Per
Car Cost for such quarter exceeds the Estimated Per Car Cost that the Parties
utilized during such quarter, then Producer will pay Bunge within five days an
amount equal to the product of such difference multiplied by the number of
railcars loaded by Bunge during such quarter. 
If the Estimated Per Car Cost that the Parties utilized during such
quarter exceeds the Actual Per Car Cost for such quarter, 

 

 

then Bunge will pay Producer
within five days an amount equal to the product of such difference multiplied
by the number of cars loaded during such quarter.

 

2.              For a period of one year from
the Effective Date, Bunge will permit Producer to weigh trucks on the scale
located at Bunge’s electrical generation facility adjacent to Bunge’s oil
processing facility in Danville, Illinois; provided that (a) Producer
must propose and receive approval from Bunge for any such weighing at least 24
hours in advance; (b) Producer will not propose to weigh more than two
trucks per week during the first two months after the Effective Date; (c) Producer
will not propose to weigh more than 2 trucks per week during the following ten
months; and (d) Producer will not be entitled to weigh any trucks pursuant
to this Section 2 after the first anniversary of the Effective Date.

 

Producer will indemnify and hold harmless Bunge and its parents,
subsidiaries and affiliates and its and their directors, employees and agents
from and against any claim, loss, cost, expense, liability, fine, penalty,
interest, payment or damage, including but not limited to reasonable attorneys’
fees, accountants’ fees and any cost and expense of litigation, negotiation,
settlement or appeal arising from or relating to any negligence or willful
misconduct by Producer or its agents related to use of the Bunge scale.

 

3.              Bunge will execute and grant
to Producer an easement for a utility gas line in the form attached hereto as Schedule 1
to the Services Agreement.

 

4.              Bunge will execute and grant
to Producer a right-of-way in the form attached hereto as Schedule 2
to the Services Agreement.

 

5.              Bunge will execute and grant
to Producer an easement for an oil pipeline in the form attached hereto as Schedule
3 to the Services Agreement.

 

6.              Bunge will execute and grant
to Producer an easement for a biodiesel pipeline in the form attached hereto as
Schedule 4 to the Services Agreement.EXHIBIT 10.18

 

MANAGEMENT AND OPERATIONAL SERVICES AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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.

 

2

 

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

 

3

 

·                                          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.

 

4

 

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 

 

5

 

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 

 

6

 

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 

 

7

 

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 

 

8

 

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”).

 

9

 

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 

 

10

 

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 

 

11

 

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.

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

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

 

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

 

18

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

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

 

20

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

	
  To Blackhawk Biofuels:

  	
   

  	
  Blackhawk Biofuels, LLC

  
	
   

  	
   

  	
  22 South Chicago Avenue

  
	
   

  	
   

  	
  Freeport, IL 61032

  
	
   

  	
   

  	
  Attention: Ronald Mapes

  
	
  With copy to:

  	
  Lindquist & Vennum PLLP

  
				

 

21

 

	
   

  	
   

  	
  4200 IDS Center

  
	
   

  	
   

  	
  80 South 8th Street

  
	
   

  	
   

  	
  Minneapolis, MN 55402-2274

  
	
   

  	
   

  	
  Office: 612-371-3955

  
	
   

  	
   

  	
  Fax: 612-371-3207

  
	
   

  	
   

  	
  Attention: Dean R. Edstrom

  
	
   

  	
   

  	
   

  
	
  To REG Services :

  	
   

  	
  REG Services Group, LLC

  
	
   

  	
   

  	
  416 South Bell Avenue

  
	
   

  	
   

  	
  Ames, IA 50010

  
	
   

  	
   

  	
  Attention: Nile Ramsbottom

  
	
   

  	
   

  	
   

  
	
  With copy to:

  	
   

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

  
	
   

  	
   

  	
  115 East Lincolnway, Suite 200

  
	
   

  	
   

  	
  Jefferson, IA 50129

  
	
   

  	
   

  	
  Attn: John A. Gerken

  

 

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

 

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

 

20.                                 Miscellaneous.

 

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

 

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

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

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

 

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

 

[Signature page follows]

 

23

 

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
(AAgreement@)

REG Services and Blackhawk Biofuels

 

Listing of Administrative Services to be
Provided

 

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

 

Accounting:

$                                          Financial
Statements

$                                          General
Ledger Maintenance

$                                          Cash
Management

$                                          Customer
Statements

$                                          Accounts
Receivable

$                                          Accounts
Payable

$                                          Bank
Reconciliation

$                                          Depreciation

$                                          Audit
Preparation

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

 

Human Resources:

$                                          Hiring

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

$                                          Employee
hand book, policies/procedures

$                                          Workers
Comp

 

Information Technology:

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

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

$                                         Backup
for Network

$                                         Backup
for AS400 Files

$                                         Web
Site Hosting

 

 

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.

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